UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
---------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-14082
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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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5200 S. WASHINGTON AVENUE, TITUSVILLE, FLORIDA 32780 (407)269-9680
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (ISSUER'S TELEPHONE
NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK BOSTON STOCK EXCHANGE
REDEEMABLE COMMON STOCK BOSTON STOCK EXCHANGE
PURCHASE WARRANTS
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [ X ] NO [ ]
<PAGE>
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ X ]
AGGREGATE MARKET VALUE OF THE COMMON EQUITY HELD BY NON-AFFILIATES OF THE
REGISTRANT $53,657,108.75 AS OF APRIL 9, 1998.
AS OF APRIL 9, 1998, 12,264,482 SHARES OF THE REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
THE REGISTRANT'S DEFINITIVE PROXY STATEMENT WITH RESPECT TO ITS 1998
ANNUAL MEETING OF SHAREHOLDERS IS INCORPORATED HEREIN BY REFERENCE.
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<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Smart Choice Automotive Group, Inc. ("Smart Choice" or the "Company") is an
integrated retailer of new and used cars and related services, focusing
primarily on selling reliable, quality used cars to its buy here-pay here
customers. Buy here-pay here customers are typically persons who have limited
credit histories, low incomes, or past credit problems. Under the "First Choice"
name, the Company owns and operates one of the largest chains of buy here-pay
here used car dealerships in the Southeastern United States with 22 used car
locations throughout Florida. The Company also owns and operates two new car
dealerships which sell mid-priced new cars and late model used cars to more
creditworthy customers. These new car dealerships also provide the Company with
an additional source of inventory for its used car operations through quality
trade-ins, access to an additional customer base, and a diversified source of
revenue. The Company also provides financing for its buy here-pay here
customers, manufactures and retails licensed Corvette parts and accessories
through its subsidiary, Eckler Industries, Inc. ("Eckler"), and provides
training and insurance services to automobile dealers.
The Company's integrated approach to automobile retailing consists of
selling, sourcing and financing used cars and selling new cars through a
combination of used and new car dealerships. The Company primarily competes with
independent used car dealerships through the use of cost-effective advertising,
leveraging overhead and centralized purchasing. The Company further
distinguishes its used car dealerships from those of its competitors through (i)
comprehensive inspection and refurbishment of its inventory, (ii) value-added
marketing programs and (iii) dedication to customer service. The Company's buy
here-pay here dealerships sell cars that are generally three to six years old
with less than 80,000 miles and an average retail purchase price of
approximately $9,500. The Company reconditions its used car inventory at one
reconditioning facility that is separate from its retail dealerships and two
locations that are part of retail dealerships. Management believes that the
quality and reliability of its used cars reduce the probability of product
failure, and in turn, increase the likelihood that customers will continue
payments on their finance contracts. The Company also distinguishes itself from
used car "superstores" by its wider coverage of a targeted market area through
multiple locations (resulting in more convenient locations for consumers and
more visibility for the Company) and the flexibility to more easily relocate a
dealership in response to changes in demographics.
The Company was established in January of 1997 by a merger of various
companies involved in the sale and financing of new and used cars with Eckler.
Since the combination, the Company has grown its operations by acquiring five
used car dealerships with 13 locations in central and southern Florida and
opening 9 additional buy here-pay here locations. The Company has also acquired
two new car dealerships. The Company intends to continue its expansion as its
capital resources and available acquisition opportunities permit.
OPERATING STRATEGY
The Company seeks to establish and maintain customer loyalty to the
Company's First Choice name by offering a diverse range of quality products and
emphasizing customer service while taking advantage of economies of scale by
concentration of facilities in targeted geographic areas. The Company seeks to
realize these goals through the following operating strategies.
OFFER RELIABLE TRANSPORTATION. The Company's management believes that most
defaults of buy here-pay here customers result from product failure. The Company
offers reliable quality used cars at its First Choice buy here-pay here
dealerships. Generally, these cars are makes and models with a good or superior
reputation for quality and reliability, are between three to six years old, have
been driven less than 80,000 miles and have undergone thorough inspection,
reconditioning and, if needed, repair, before being placed on a dealership lot.
Because of the quality, reliability, condition and age of the vehicles, the
<PAGE>
Company (i) has in the past offered and beginning April 1, 1998 provides a
24-month/24,000 mile service agreement on cars sold at its First Choice
dealerships and (ii) offers longer term financing which may not be available at
other car dealerships.
EMPHASIZE CUSTOMER SERVICE. The Company offers its customers multiple
locations and a diverse selection of vehicles for convenient shopping. In
addition to the 24-month/24,000 mile service agreement, the Company makes
available to its customers other value-added programs such as rapid credit
evaluations for financing and a toll-free telephone number potential customers
can call for financing pre-qualification. By developing customer loyalty, the
Company hopes to develop repeat and referral business.
CREATE DISTINCT IDENTITY. The Company attempts to maintain a consistency
between its buy here-pay here facilities through the use of standardized signage
and a white, blue and yellow color theme, utilized at each of its locations and
in marketing materials. On placing a buy here-pay here location in service, the
Company upgrades the facilities which includes painting the buildings white with
blue and yellow trim or installing blue awnings. The Company's salespeople are
required to wear tan pants and a blue dress shirt. The Company's buy here-pay
here dealerships operate under the trade name First Choice Auto Finance and each
of the Company's facilities has the Company's blue and yellow First Choice sign.
Through such consistency in appearance of multiple locations in the same market
area, the Company hopes to establish name recognition in these markets.
ACHIEVE ECONOMIES OF SCALE. The Company expects that it will achieve
certain economies of scale by having multiple dealerships within a market area.
Car sales are enhanced by each dealership having on-line access to the entire
used vehicle inventory of the Company's other dealerships within the same market
area. In addition, vehicles that may not sell within a prescribed time period at
one dealership are moved to another dealership within the same market area for
an additional period of time. Further, the Company's advertising is maximized by
advertising vehicle inventory in each market under a single, regional trade
name.
EMPLOY INTEGRATED MANAGEMENT INFORMATION SYSTEMS. The Company has an
integrated computer-based management information system that allows the Company
to obtain current information on operations in order to manage its operations
uniformly and efficiently. Through its accounting software, the Company is able
to operate from one accounting platform, bar code inventory, track sales, and
provide a network for its dealerships to access inventory available at its other
dealerships locations. The Company currently utilizes financing software that
allows the Company to rapidly transmit to its dealerships and receive finance
contracts and all required state motor vehicle forms and to track customer
payments.
CENTRALIZED CREDIT APPROVAL. The Company maintains a separation between the
credit approval process for its used cars and its sales department by utilizing
separate corporate subsidiaries. Credit review and approval is conducted by
experienced finance personnel at the Company's headquarters, exclusive of the
sales function. The Company employs credit approval criteria which it applies to
its credit decisions and evaluation of the credit risks associated with the
loans.
DEVELOP AND RETAIN QUALIFIED MANAGEMENT AND EMPLOYEES. The Company
continually seeks to develop and retain qualified personnel and promote talented
employees to assume more responsible positions in the Company's organization.
The Company employs an incentive based compensation program to motivate and
retain quality personnel, such as equity sharing through a stock option plan,
bonuses, and a competitive benefit package.
<PAGE>
ACQUISITIONS
Acquisitions have been a key element in the Company's growth strategy. The
Company completed the acquisitions described below in 1997.
<TABLE>
<CAPTION>
1996
DATE REVENUES
COMPANY ACQUIRED (IN THOUSANDS) PRIMARY BUSINESS
<S> <C> <C> <C>
PREDECESSOR COMPANIES
Smart Choice Holdings, Inc. 1/28/97 -- Formation stage company
Eckler Industries, Inc.
Titusville, Florida 1/28/97 $14,893 Sale of Corvette parts and accessories
Florida Finance Group, Inc. and affiliates
St. Petersburg, Florida 1/28/97 $ 6,130 Used vehicle sales and financing
Palm Beach Finance and Mortgage Company and
affiliates 2/14/97 $11,999 Used vehicle sales and financing
West Palm Beach, Florida
Liberty Finance, Inc. and affiliates
Orlando, Florida 2/12/97 $21,687 Used vehicle sales and financing
OTHER ACQUISITIONS
Dealers Insurance Services, Inc.
Tampa, Florida 1/28/97 $ 812 Insurance broker for auto dealerships
Dealers Development Services, Inc.
Tampa, Florida 1/28/97 $ 698 Auto dealership training services
Ready Finance, Inc. and affiliates
West Palm Beach, Florida 6/27/97 $11,621 Used vehicle sales and financing
Fedo Finance, Inc. and affiliates
West Palm Beach, Florida 6/30/97 $ 3,465 Used vehicle sales and financing
Jack Winters Enterprises, Inc.
Stuart, Florida 8/21/97 $21,149 New vehicle dealership (Volvo)
B & B Florida Enterprises, Inc.
Stuart, Florida 8/29/97 $24,473 New vehicle dealership (Nissan)
</TABLE>
<PAGE>
AUTO RETAIL OPERATIONS
BUY HERE-PAY HERE USED CAR DEALERSHIPS. The Company currently owns and
operates 19 buy here-pay here used car dealerships under the "First Choice" name
and three used car dealerships under the "Team Auto Sales" name. Vehicles with
mileage of 80,000 miles or less are placed at First Choice locations. Vehicles
with mileage that exceeds 80,000 miles (usually repossessions or trade-ins) are
placed at Team Auto Sales locations. The Company's buy here-pay here dealerships
are divided into three regions (the Tampa-St. Petersburg, Orlando, and West Palm
Beach, Florida metropolitan areas), and each region is managed by a regional
manager. Each dealership is managed by a sales manager who oversees a sales
staff. On acquired dealerships, the Company upgrades the facilities it acquires
with fresh exterior and interior paint and new signage (with an emphasis on the
blue and yellow colors of First Choice); replaces furniture and fixtures as
necessary; reconditions existing inventory of the acquired dealership; increases
inventory; and installs upgraded computer systems.
The Company's First Choice dealerships generally maintain an average of 50
to 125 used cars and feature a wide variety of makes and models (with ages
generally ranging from three to six years) and a range of sale prices, all of
which enable the Company to meet the preferences and budgets of a wide range of
potential customers. The Company has in the past offered and now provides a 24
month/24,000 mile service agreement with each used car sold at a First Choice
dealership, making the vehicle more attractive for the buyer. In the past,
approximately 65% of the Company's customers purchased the service agreement. As
of April 1998, the Company included a service agreement with each car sold. The
Company believes that by selling higher quality used cars and providing a
service agreement to cover major repairs, improved customer satisfaction and
fewer defaults on finance contracts result.
The Company acquires most of its used vehicles through auto auctions. All
vehicles are processed through one of the Company's reconditioning facilities
and are subjected to a 110 point inspection program and reconditioning, as
necessary. The Company outsources painting and body work. The Company invests
approximately $300 per vehicle in repairs prior to delivering the vehicles to
the individual dealerships for sale. The regional managers determine the number
and types of vehicles for the dealerships in their regions. If the vehicle is
not sold in 90 days, it is rotated to another First Choice dealership in the
same region for an additional 90 days after which, if not sold, it is sold
wholesale to other dealers.
NEW CAR DEALERSHIPS. The Company owns and operates two new car dealerships,
one with Nissan and the other with Volvo factory franchises. These new car
dealerships also sell late-model used vehicles (between one to three years old).
These dealerships operate under the name of the city where they are located plus
the franchise brand name (e.g. Stuart Volvo). The Company anticipates that the
new car dealerships will be an additional source of quality used cars for its
used car business and will provide additional lots for its used car dealerships.
The Company's new car dealerships are managed by a general manager who
oversees a sales staff, finance department and service department. The Company
does not finance its new vehicle sales, although it arranges third party
financing through banks, credit unions or manufacturers' captive finance
companies.
Substantially all of the Company's new vehicles are acquired from
manufacturers. Allocation of vehicle inventory from manufacturers is based
primarily on sales volume and input from dealers. Vehicle purchases are financed
through revolving (floorplan) credit facilities. New vehicle sales include
retail lease transactions and lease-type transactions, both of which are
arranged by the Company with third-party lenders. New vehicle leases generally
have short terms. Lease customers, therefore, return to the new vehicle market
more frequently. Leases also provide a source of late-model, generally low
mileage, vehicles for the Company's used vehicle inventory.
BUY HERE-PAY HERE FINANCE
The Company offers financing to its buy here-pay here customers. The
Company does not acquire any loans from third parties. It provides financing
only for its own buy here-pay here customers, thereby relying on its own
underwriting standards and not those of third parties. Sales and financing are
separate functions performed by different Company subsidiaries. All credit and
financing review and decisions are made by experienced financing personnel at
the Company's headquarters. The Company's buy here-pay here used car dealerships
use a standardized sales contract that typically provides for down payments of
approximately 10% of the purchase price with the balance of the purchase price
financed at an average annual percentage rate of approximately 26% over periods
ranging from 12 to 48 months. The Company finances approximately 95.0% of the
used car sales at its buy here-pay here dealerships through retail installment
contracts that the Company originates and services. The Company does not
purchase third-party finance contracts, except for finance contracts purchased
in the Company's acquisitions.
CUSTOMER CREDIT PROFILE. The Company targets the buy here-pay here
customers with "C" and "D" credit profiles. A "C" rated consumer may have an
inconsistent employment record or unresolved problems with credit in the past.
This borrower will generally not be able to obtain a loan to finance a
late-model or older used car purchase from a captive finance subsidiary or a
bank otherwise available to customers with "A" or "B" credit ratings. A "D"
rated consumer has an unfavorable employment history and serious credit
problems, such as personal bankruptcy. This borrower's only choice is to finance
his or her used car purchase, which is often from an independent as opposed to a
franchise dealer, through an independent finance company that is active in this
market segment. Based on a random sample by the Company of its loan portfolio in
October, 1997, the Company's average customer (at the time such customer applies
for or is approved for credit) has gross annual household income of
approximately $30,000, has an average length of employment at his or her current
job of approximately 3.2 years and has resided in the same area for
approximately 4.9 years.
CREDIT EVALUATION PROCEDURES. The Company applies uniform underwriting and
credit approval standards in originating its used car loans. The most important
criteria the Company uses in evaluating a loan are the applicant's
creditworthiness, the collateral value of the vehicle, employment and resident
histories, income information, personal references, income and expenses
information, credit bureau reports, and other information regarding the
customer's credit history. The sales managers at the Company used car
dealerships submit the customer's credit application to the Company's
headquarters in Titusville, Florida, where the customer's creditworthiness is
reviewed. The Company utilizes a credit evaluation system it developed to assist
in determining a customer's creditworthiness. Financing decisions are made by an
experienced loan staff with a minimum of five years experience, and overall an
average of 10 years experience in car financing. For applicants who fall outside
of the guidelines, the ultimate financing determination is made by senior
management. Further, members of senior management regularly review credit
decisions made by the Company's employees to assure uniformity in underwriting
standards. Periodically, the Company retains credit underwriting consultants to
review the Company's loan quality, collection and underwriting procedures and
recommend areas for improvement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Allowance for Credit Losses" for
information about the Company's loan loss and delinquency experience.
CONTRACT SERVICING. The Company services its finance contracts. The
servicing procedures have been specifically tailored to buy here-pay here
customers and include (i) monitoring loans and related collateral, (ii)
accounting for and posting all payments received, (iii) responding to borrowers'
inquiries, (iv) taking all necessary action to maintain the security interest
granted in the financed automobile, (v) investigating delinquencies and
communicating with borrowers to obtain timely payments, (vi) pursuing
deficiencies on loans and (vii) when necessary, contracting licensed, bonded and
insured third-party agents to repossess the financed automobile.
COLLECTION POLICY. The Company is aggressive in its collection policies,
believing that by acting promptly and working with the customers, the Company is
able to minimize its loss exposure. The Company employs a credit counselor in
each of its major market areas to work directly with delinquent customers, and
the Company also maintains regional payment centers so customers can pay by cash
rather than send checks through the mail. Approximately 60% of the customer
payments are received through the regional payment centers. The Company begins
collection efforts when an account balance becomes one day past due. Generally,
the Company's policy is to work with the customer to permit the customer to keep
the automobile and continue making payments, and to take more aggressive action
if the customer fails to continue making payments. Generally, the Company begins
the process of repossession when two payments are past due. Repossessions are
handled by independent licensed, bonded and insured repossession firms engaged
by the Company.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information system (the "MIS System") allows the
Company to manage its operations uniformly and efficiently through "real time"
information. Utilizing its MIS System, the Company is able to operate from one
accounting platform, bar code inventory, track sales and costs, and provide its
dealerships access to inventory available at other Company dealerships. The
Company also employs financial software to facilitate the Company's underwriting
and credit approval process, track collections and monitor its loan portfolio.
The Company has assimilated loan tracking software utilized by the finance
companies it acquired in connection with acquisitions of buy here-pay here
dealerships. The Company is installing financial software for its finance
contracts that will integrate into one uniform system all loan monitoring and
servicing functions. The Company intends to place in service within the next 60
days a recovery system in the event of a natural disaster (i.e., hurricanes,
tornadoes, fire, lightning) under which all systems can be rerouted to a remote
location and fully operational within 24 hours. The Company has the ability to
customize and upgrade its software in-house with its own staff of MIS personnel
and to trouble-shoot any interruptions that may occur.
ADVERTISING AND MARKETING
In general, the Company's advertising campaigns for its used car
dealerships emphasize its multiple locations, wide selection of quality used
cars, and ability to provide financing to most buy here-pay here borrowers, and
value-added programs such as service agreements and loan pre-qualifications. The
Company's used car advertising campaign revolves around a series of radio and
television commercials, as well as complementary print advertisements. The
television spots appear at targeted television hours (early evening, three
minute "infomercials" late at night, as well as televised sporting events).
However, the Company receives its best response from radio ads in which it
advertises specific sales in addition to the Company's value-added programs.
Moreover, the Company's upgraded facilities also provide effective advertising.
The facilities' fresh and inviting appearance fosters the image of a dealership
that offers quality cars and encourages drive-by traffic to visit dealerships.
The Company believes that its marketing approach creates brand name recognition
and promotes its image as a professional, customer oriented business, in
contrast to the lack of name recognition and generally unfavorable public image
of used car dealerships.
A primary focus of the Company's marketing strategy for its used car
dealerships is its ability to finance consumers with poor credit histories. The
Company has initiated marketing programs designed to attract buy here-pay here
customers, assist such customers in reestablishing their credit, reward those
customers who pay on time, develop customer loyalty and increase referral and
repeat business. The Company created for its customers such value-added programs
as providing quality vehicles through a comprehensive inspection and
refurbishment program, providing a 24-month/24,000 mile service agreement on
cars sold at First Choice dealerships, rapid loan application processing, and
pre-qualification over the telephone by calling an "800" number. The Company
reports monthly to credit bureaus, allowing customers the opportunity to work
toward reestablishing their credit, and providing an avenue for them to purchase
newer cars as their credit improves.
The Company advertises extensively in the print, radio and television
media. The Company also utilizes various telemarketing programs. For example,
potential customers are contacted within several days of their visit to a
Company dealership to follow up on leads and obtain information regarding their
experience while at a Company dealership. In addition, used car customers with
satisfactory payment histories are contacted several months before contract
maturity and are offered an opportunity to purchase another vehicle with a
nominal down payment requirement or to move up to a newer vehicle at one of the
Company's new car dealerships if the customer has improved credit.
COMPETITION
The used and new automobile business in which the Company competes is
highly fragmented and very competitive. Each Company dealership competes with a
myriad of new car dealerships and independent used automobile dealers, ranging
in size from the independent dealer with less than 20 cars on a lot to the
large, well-capitalized new car dealership chains. The Company may face
increased competition from automobile consolidators such as Ugly Duckling
Corporation and "superstores" such as CarMax, AutoNation USA and Driver's Mart
Worldwide, Inc. Others, such as Auto By Tel, are marketing vehicles on the
Internet. In addition, certain regional and national car rental companies have
begun to operate retail used car lots to dispose of their used rental cars. Many
of these competitors have significantly greater financial, marketing and other
resources than the Company.
The used car "superstores" typically use a mega-dealer approach with
substantial investments in real estate and extensive inventory at each
dealership. In contrast, the Company maintains several medium to large
dealerships in each of its marketing areas. The Company believes that by
covering more territory with multiple locations in a market area rather than
having one superstore serving a large geographic area, the Company's dealerships
are more easily accessible to a wider population and the Company benefits from
more visibility in its market area. Also, the existence of multiple locations
gives the Company greater flexibility in responding to a change in demographics.
The Company's buy here-pay here dealerships do not directly compete with
superstores such as CarMax or AutoNation which inventory newer, more expensive
vehicles than the Company and do not target buy here-pay here borrowers. Of the
large companies that have entered the buy here-pay here car business, thus far
only Ugly Duckling has announced an intention to focus on the buy here-pay here
borrower. However, the Company believes that it competes effectively with the
independent Buy Here-Pay Here Dealers and could compete effectively with Ugly
Duckling because the Company's vehicles are generally newer, lower mileage cars.
Further, the Company now provides each customer with a 24-month/24,000 mile
service agreement on each used car sold at a First Choice dealership. The
Company distinguishes its direct sales and financing operations from those of
typical buy here-pay here dealers by providing multiple locations, upgraded
facilities, large inventories of used automobiles, centralized purchasing,
value-added marketing programs, and dedication to customer service. In addition,
the Company has developed underwriting guidelines and techniques to facilitate
rapid credit decisions, as well as an integrated, technology-based corporate
infrastructure that enables the Company to monitor and service its finance
contracts. The Company believes that it is the largest buy here-pay here
dealership in Florida.
The buy here-pay here segment of the used car financing business is also
highly fragmented and very competitive. In recent periods, several consumer
finance companies have completed public offerings in order to raise the capital
necessary to fund expansion and support increased purchases of used car retail
installment contracts. In addition, there are numerous financial services
companies serving, or capable of serving, this market. While traditional
financial institutions, such as commercial banks, savings and loans, credit
unions and captive finance companies of major automobile manufacturers have not
consistently serviced buy here-pay here borrowers, the high rates of return
earned by companies involved in buy here-pay here financing have encouraged
certain of these traditional institutions to enter, or contemplate entering,
this market.
CORVETTE PARTS AND ACCESSORIES
The Company, through its Eckler subsidiary, is a manufacturer and supplier
of aftermarket Corvette parts and accessories. For the year ended December 31,
1997, Eckler accounted for approximately 21.7% of the Company's revenues. The
Company expects that Eckler's revenues, as a percentage of overall revenue, will
decrease as the Company expands its vehicle dealership business.
In December, 1993, the Company entered into a Reproduction and Service Part
Tooling License Agreement with General Motors Corporation, Service Parts
Operations ("GM") (the "GM Agreement"). Under the GM Agreement, the Company is
licensed to manufacture, sell, distribute and market numerous parts discontinued
by GM which the Company may sell under the GM Restoration Parts trademark for
various Corvette model years. The initial term of the GM Agreement continues
through December 31, 2001 with two consecutive five-year renewal options to
December 31, 2011. As consideration for the GM Agreement, the Company paid GM an
advance of $1,000,000 against future royalties on sales of licensed parts
through December 31, 1999. The renewal options are subject to the Company making
certain minimum net royalty payments to GM of at least $750,000 during the 12
months immediately preceding the first renewal term and at least $1,000,000
during the 12 months immediately preceding the second renewal term.
For each twelve month period commencing January 1, 2000 through December
31, 2001, and annually thereafter during any renewal term, the Company is
obligated to pay to GM a percentage royalty up to a maximum of 8% on net sales,
with a minimum of $500,000 annually in royalties for net sales of the licensed
parts (i.e., gross sales of licensed parts less quantity discounts and returns
for damaged goods). For each twelve month period commencing January 1, 2002
through December 31, 2006, the annual minimum royalty is $750,000 and for
January 1, 2007 through December 31, 2011 the annual minimum royalty is
$1,000,000.
SALES AND DISTRIBUTION METHODS. The Company typically generates its
revenues through catalog sales (including mail-in orders) and showroom sales.
The Company markets its Corvette products primarily through the distribution of
the "Eckler's" catalog which markets approximately 17,000 items and historically
has generated most of Eckler's revenues. In 1996 and 1997, respectively, the
Company distributed over 325,000 and 400,000 copies of its catalog, and the
Company intends to distribute in 1998 over 725,000 copies of its catalog, to
existing and prospective customers, both retail and wholesale by two (instead of
the traditional one) mailings. The Company's telemarketing staff is principally
an inbound, order-taking department, although in recent months more out calling
has occurred. In each of the fiscal years ended December 31, 1997, 1996, and
1995, catalog sales accounted for approximately 93% of Eckler's revenues. In
addition to its catalog, the Company markets Corvette products from its 5,000
square foot Titusville showroom, advertises in magazines and trade publications,
and sponsors various promotional programs. The Company also distributes
approximately 30,000 copies of its catalog through newsstands.
In each of the three fiscal years ended December 31, 1997, domestic sales
accounted for approximately 97% of the Company's total Corvette product sales,
with the States of Florida, Pennsylvania, New Jersey, New York, Indiana,
Illinois, Ohio, Texas, Michigan and California constituting approximately 50% of
total sales. International sales accounted for approximately 3% of total sales
in those years.
SOURCING AND PRODUCTION. A substantial majority of the Company's Corvette
products are obtained from many independent manufacturers and distributors. The
Company sources its GM Restoration Parts by having them made by third party
manufacturers and by purchasing inventory of discontinued parts directly from
GM. The Company has over 400 Corvette product suppliers with no single source
accounting during each of the fiscal years 1997, 1996, and 1995 for more than 5%
of purchases, except for Bob Steele Chevrolet, which accounted for approximately
14% of purchases in 1996. Of the Company's approximately 95,000 customers, no
single customer accounted for more than 5% of Eckler's total revenues during
1997.
COMPETITION. The Company competes directly with a number of local, regional
and national suppliers of aftermarket Corvette automotive parts. The Company has
identified seven primary competitors, five of which are located in the mid-west,
one in Pennsylvania and one in Virginia.
DEALER TRAINING AND INSURANCE SERVICES
The Company's subsidiary Dealers Insurance Services, Inc. ("DIS") provides
a full range of insurance services to the franchised automobile dealer market.
DIS currently provides various insurance products to over half of the franchised
dealers in Florida.
The Company's subsidiary, Dealer Development Services, Inc. ("DDS")
provides sales training to franchised dealership employees and business
consulting to such dealerships. DDS is an authorized training vendor for the
over 3,500 Chevrolet dealerships nationwide and has provided training and
consulting to over 200 dealerships representing nearly every manufacturer.
REGULATION, SUPERVISION, AND LICENSING
The Company's operations are subject to ongoing regulation, supervision,
and licensing under various federal, state and local statutes, ordinances, and
regulations. Among other things, these laws require that the Company obtain and
maintain certain licenses and qualifications, limit or prescribe terms of the
contracts that the Company originates and/or purchases, require specified
disclosures to customers, limit the Company's right to repossess and sell
collateral, and prohibit the Company from discriminating against certain
customers. The Company is also subject to federal and state franchising and
insurance laws.
The Company typically charges interest rates ranging from 25.0% to 29.9%
per annum on the finance contracts originated at its used car dealerships.
Currently, all of the Company's used car sales activities are conducted in, and
its finance contracts are originated in, Florida, which limits the interest rate
that a lender may charge. The Company may expand its operations into other
states that also impose interest rate limits.
TRADEMARKS AND PROPRIETARY RIGHTS
The Company does not have any registered trademarks or service marks other
than "Eckler's." Under certain license agreements with GM, the Company licensed
the right to use the GM Restoration Parts label on discontinued Corvette parts
it manufactures or acquires under the GM Agreement. The Company also has the
non-exclusive right to use certain GM trademarks (i.e., "CORVETTE," "VETTE" and
Corvette body designs) under certain trademark and licensing agreements, in
connection with the manufacture, sale, promotion and distribution of
pre-approved accessory, novelty, gift and apparel items.
EMPLOYEES
At December 31, 1997, the Company employed 436 persons, of which 50 were
employed in the Company's executive and administrative offices, 254 were
employed in its Company dealership operations, 53 were employed in the Company's
credit and collection activities, and 79 were employed by Eckler. None of the
Company's employees are covered by a collective bargaining agreement. The
Company considers its relations with its employees to be good.
ITEM 2. PROPERTIES.
The Company owns approximately 5.57 acres of real property at its main
facilities (the "Main Facility") in Titusville, Florida. Three buildings
comprise the Company's Main Facility as follows: one building of approximately
33,000 square feet housing the Company's main office and showroom; a building of
approximately 30,000 square feet housing the Company's manufacturing facilities
where the Company manufactures Corvette body parts; and a third building of
approximately 24,825 square feet serving as the Company's warehouse and shipping
and receiving facilities. The Company also owns additional undeveloped acreage
adjacent to its Main Facility, comprising approximately 5.3 acres (the
"Undeveloped Property").
The Main Facility and the Undeveloped Property are subject to a mortgage
and security agreement with an outstanding principal balance of approximately
$2.5 million. The Company is obligated to make monthly payments of $13,333
principal plus interest at 1.5% above the prime rate as quoted by the lender
from time to time. The loan matures on July 1, 1998, at which time the Company
intends to negotiate a later maturity.
As of December 31, 1997, the Company leased 25 facilities including 21 used
car dealerships, two new car dealerships, office space in Tampa, Florida and two
vehicle reconditioning facilities. The locations and annual lease payments on
the existing properties are as follows:
APPROX. SIZE ANNUAL LEASE
NAME AND LOCATION (ACRES) RENT EXPIRES(1)
Lakeland Reconditioning Center 6.7 $ 212,844 5/12/1998
310 County Line Road
Lakeland, FL 33809
Stuart Nissan 9.25 $ 346,680 8/31/2002
4313 S. Federal Highway
Stuart, FL 34997
Stuart Volvo 9.0 $ 250,380 12/19/2003
4205 S. Federal Highway
Stuart, FL 34997
All other leased facilities(2) - $1,311,000 -
- -----------------------
(1) Does not include renewal options.
(2) Includes 20 buy here-pay here dealerships located throughout Florida, a
four-bay reconditioning facility in West Palm Beach, Florida, and
approximately 2,000 square feet of office space in Tampa, Florida.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is named in claims involving the sale of
automobiles, contractual disputes and other matters arising in the Company's
business. Currently, no legal proceedings are pending against or involve the
Company that, in the opinion of management, could be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET PRICE OF COMMON EQUITY
The Company's Common Stock, $.01 par value per share ("Common Stock"), and
Redeemable Common Stock Purchase Warrants ("Public Warrants") are listed on the
Nasdaq SmallCap Market and the Boston Stock Exchange. There were approximately
1,418 beneficial holders of the Common Stock and 258 beneficial holders of the
Public Warrants. The following table sets forth the high and low closing sale
prices of Common Stock and the Public Warrants, as reported by the Nasdaq
SmallCap Market, for the periods indicated.
1996 HIGH LOW
- ----
COMMON STOCK
First Quarter 5-1/8 3
Second Quarter 4-13/16 3-3/8
Third Quarter 4-1/2 2-7/8
Fourth Quarter 6-1/4 3
PUBLIC WARRANTS
First Quarter 15/16 3/8
Second Quarter 13/16 9/16
Third Quarter 15/16 1/2
Fourth Quarter 1-3/16 7/16
1997
- ----
COMMON STOCK
First Quarter 6-1/8 4-5/8
Second Quarter 6-3/4 4
Third Quarter 7 4-3/16
Fourth Quarter 6-1/4 3-1/2
PUBLIC WARRANTS
First Quarter 1-5/16 3/4
Second Quarter 1-7/8 3/4
Third Quarter 1-1/2 3/4
Fourth Quarter 1-5/32 1/2
1998
- ----
COMMON STOCK
First Quarter 4-9/16 1-15/16
PUBLIC WARRANTS
First Quarter 23/32 5/16
Continued inclusion of the Common Stock and Public Warrants on the Nasdaq
SmallCap Market requires the Company to maintain certain criteria such as market
value, public float, capital and surplus. As of February 23, 1998, the Company
was not in compliance with certain listing criteria which became applicable to
SmallCap Market listed companies on that date. Nasdaq has notified the Company
that the Common Stock and Public Warrants would be scheduled for delisting
unless the Company requested a hearing for an exception from these listing
criteria. The Company has requested a hearing which has stayed the delisting.
The Company has not paid dividends on its Common Stock since its initial
public offering of Common Stock in 1995. The Company has no present plans to pay
cash dividends in the foreseeable future and intends to retain earnings for the
future operation and expansion of the business. Any determination to declare or
pay dividends in the future will be at the discretion of the Company's Board of
Directors and will depend on the Company's results of operations, financial
condition, any contractual restrictions, considerations imposed by applicable
law and other factors deemed relevant by the Board of Directors. The Company's
current obligations to Finova Capital Corporation, Huntington National Bank, and
Sirrom Capital Corporation restrict the Company's ability to declare or pay
dividends.
RECENT SALES OF UNREGISTERED SECURITIES
Described below are all sales of securities by the Company during the
fourth quarter of 1997 that were not registered under the Securities Act of
1933, as amended (the "1933 Act"). On the issuance of these securities the
Company relied on the exemption from registration under the 1933 Act set forth
in Section 4(2) thereof, based on established criteria for effecting a private
offering, including the number of offerees for each transaction, access to
information regarding the Company, disclosure of information by the Company,
restrictions on resale of the securities offered, investment representations by
the purchasers, and the qualification of offerees as "accredited investors."
On September 30, 1997, the Company completed an offering of 300 units of
Series A redeemable convertible preferred stock and warrants at $10,000 per
unit. Proceeds from the offering, net of offering costs, were approximately
$2,965,000. Each unit consists of one share of Series A redeemable convertible
preferred stock and one warrant to acquire 300 shares of common stock for each
preferred share purchased at a price equal to $8.10 per share. The warrants
expire five years after the date of issuance. The preferred stock is convertible
into shares of common stock at a conversion price which, at the option of the
buyer, is either fixed at a rate of 135% of the market price of common stock on
the date of issuance of the preferred stock, or floating at a rate of 100% of
the market price of the common stock if converted during the period 90 days
after the issuance of the preferred stock and 90% of the market price if
converted at any time after that 90-day period. Accordingly, since none of the
preferred stock was converted 90 days after issuance, a preferred stock dividend
of $333,333 ($.04 per share) has been recorded for the year ended December 31,
1997 for the difference between the discounted conversion price of the preferred
stock and the fair market value of the Company's common stock at the time of
issuance. The preferred stock is redeemable at the option of the buyer upon the
occurrence of certain events at a price per share that is also dependent upon
the occurrence of certain events.
On December 10, 1997, the Company issued an additional 100 units of the
Series A redeemable convertible preferred stock and associated warrants for net
proceeds of $1,000,000. Each unit consists of one share of Series A redeemable
convertible preferred stock and one warrant to acquire 300 shares of common
stock for each preferred share purchased at a price equal to $5.23 per share.
The warrants expire five years after the date of issuance. The preferred stock
has features identical to that of the Series A redeemable convertible preferred
stock issued on September 30, 1997.
Subsequent to December 31, 1997, the holders of the preferred stock
converted 245 shares of preferred stock into 1,265,827 shares of common stock.
On December 16, 1997, the Company issued 7,008 shares of Common Stock to
Robert Eckler on the exercise of a stock option held by him for $2.50 per share.
On December 29, 1997, the Company issued 600 shares of Common Stock to
Richard Bogani on exercise of a warrant to purchase Common Stock for $3.00 per
share held by him.
On December 30, 1997 the Company issued the following shares of Common
Stock to the following persons in cancellation of debt owed by the Company to
such persons as indicated:
Debt
Name No. of Shares Cancelled
---- ------------- ------------
Lawrence O'Blander 99,096 $396,385
Albert Klopf 21,200 84,800
Ellen Deane 5,968 23,870
R.C. Hill, II 316,250 1,265,000
On December 31, 1997, the Company issued 5,500 shares of Common Stock to
Greenberg Traurig, a law firm, in payment of $22,000 of legal services.
On the following dates, the Company issued, as compensation to employees,
options to purchase Common Stock for the exercise prices indicated:
No. of Exercise
Employee Date Shares Price
-------- -------- -------- --------
John Zurenda 10/29/97 9,000 $5.63
Erin Burke 10/29/97 12,000 $5.63
Michael Passaro 10/27/97 45,000 $5.88
Jeannette Frazier 11/14/97 10,000 $5.63
Ted Wilhite 11/14/97 10,000 $5.63
All Employees of
the Company at
year end 12/31/97 41,700* $4.00
- --------------
* 100 shares to each employee for 41,700 shares in the aggregate.
On the following dates, the Company issued warrants to purchase Common
Stock for $3.00 per share to the following holders of debentures issued by a
subsidiary of the Company on maturity of such debentures, pursuant to a
contractual requirement under such debentures:
No. of Shares
Person Date Covered by Warrants
------ ---- -------------------
Robert Raw, II 11/19/97 800
Leon J. Cort Trust 11/19/97 800
John S. Petit 11/19/97 800
Robert Lanteri 11/19/97 1,200
Charles S. Joy 11/19/97 1,200
John Thatch 11/19/97 1,200
Edgar J. Rosenberry 11/19/97 16,800
Lee R. Bohner Trust 11/19/97 1,200
John Ward 12/31/97 2,400
Carl A. Alfrey 11/19/97 1,200
Robert O. Baratta 11/19/97 1,320
Charles V. Ditoro 11/19/97 1,200
Michael F. Ciferri 11/19/97 600
Douglas Sampson 11/19/97 1,200
Nicholas Diterlizzi 11/19/97 1,200
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of the
Company and its predecessors as of the dates and for the periods indicated. The
selected financial data of the Company were derived from the audited
consolidated financial statements included herein. The selected financial data
for the predecessors for 1996, 1995, 1994 and 1993 were derived from the audited
combined financial statements of Florida Finance Group, Inc. and affiliates,
Eckler Industries, Inc., Liberty Finance Company and affiliates, and Palm Beach
Finance Mortgage Company and affiliate (collectively referred to as the
"predecessors").
The selected consolidated financial information presented below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements and
related notes thereto of the Company appearing elsewhere herein.
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------
Predecessors (1) Actual(2)
---------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
REVENUES:
Sales at Used Car 22,841 26,043 27,521 33,867 35,279
Dealerships
Sales at New Car 9,863
Dealerships
Corvette Parts and 14,317 13,943 12,973 14,893 15,385
Accessories
Income on Finance 2,624 3,194 4,614 5,949 9,210
Receivables
Income from Insurance
and training -- -- -- -- 1,178
------ ------ ------ ------ ------
Total Revenues 39,782 43,180 45,108 54,709 70,915
====== ====== ====== ====== ======
COSTS AND EXPENSES:
Costs of Sales at New Car 8,618
Dealerships
Cost of Sales at Used 14,611 19,868 21,916 28,338 27,951
Car Dealerships
Cost of Corvette Parts 9,040 9,103 8,429 9,648 10,206
and Accessories Sold
Provision for Credit 2,623 1,475 1,615 2,881 4,942
Losses
Costs of Insurance and 85
Training
Selling, General and 11,349 9,837 10,902 13,236 24,708
Administrative Expenses
Compensation Expense
Related to Employee 4,650
Stock Options
Restructuring Charges 2,118
Interest Expense 1,380 1,409 2,012 2,435 (6,454)
-------- -------- ------ ------- ----------
$39,003 $41,692 $44,874 $56,538 $ 76,824
------- ------- ------- ------- ----------
Net Income (Loss) $ (434) $ 1,549 $ (135) $(1,568) $ (18,649)
========= ======== ======= ======== ===========
Net Income (Loss) Per Share -- -- -- -- (2.14)
Weighted Average Common
Shares Outstanding 8,860,733
During Period
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------
Predecessors (1) Actual(2)
--------------------------------------- ----------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Cash and Cash Equivalents 319 268 364 618 1,067
Finance Receivables, Net 7,608 11,477 16,399 19,825 33,227
Inventories 3,347 3,781 4,899 5,409 15,516
Total Assets 17,942 21,851 28,569 32,327 89,105
Total Debt 12,255 14,583 19,931 23,402 30,138
Shareholders' Equity 3,871 4,143 3,503 6,001 4,520
</TABLE>
- ------------------------
(1) On January 28, 1997, the Company (then known as Eckler Industries,
Inc.) acquired all of the issued and outstanding shares of common stock
of Smart Choice Holdings, Inc. ("SCHI") pursuant to a merger
transaction which resulted in SCHI becoming a subsidiary of the
Company. However, since the shareholders of SCHI obtained a majority of
the voting rights of the Company as a result of the transaction, the
transaction was accounted for as a purchase of Eckler Industries, Inc.
by SCHI (a reverse acquisition in which SCHI is considered the acquiror
for accounting purposes). Accordingly, the financial statements of the
Company for the periods prior to January 28, 1997 are those of SCHI,
which was incorporated on June 21, 1996. Further, between January 28,
1997 and February 14, 1997, the Company acquired the following vehicle
dealerships and related businesses through stock or asset transactions,
all of which were subject to acquisition agreements with SCHI: Florida
Finance Group, Inc. and affiliates, Liberty Finance Company and
affiliates, and Palm Beach Finance and Mortgage Company and affiliate
(collectively the "Acquired Businesses"). For accounting purposes, the
Acquired Businesses and Eckler Industries, Inc. are treated as
predecessors to the Company. The acquisition of each of the
predecessors was recorded as a purchase with the assets and liabilities
assumed recorded at their estimated fair values and their results of
operations included in the consolidated financial statements of the
Company since their respective dates of acquisition. The financial
statements of the predecessors are presented on a combined basis. The
financial data for the period after the acquisitions are presented on a
different cost basis from that for the financial data before the
acquisitions and, therefore, are not comparable.
(2) SCHI was incorporated on June 21, 1996, and was a development stage
corporation prior to January 28, 1997. As more fully discussed in note
(1) above, the financial statements of the Company for the periods
prior to January 28, 1997 are those of SCHI and its predecessors. The
financial statements for the year ended December 31, 1997 are those of
SCHI and the predecessors and recent acquisitions (all of which
occurred in 1997) from the date of acquisition through December 31,
1997. The financial data for the period after the acquisitions are
presented on a different cost basis from that for the financial data
before the acquisitions and, therefore, are not comparable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis of the Company's consolidated
financial position and consolidated results of operations should be read in
conjunction with the Company's Selected Consolidated Financial Information
included and the Consolidated Financial Statements and related Notes thereto
included herein.
FORWARD LOOKING STATEMENTS
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS. ADDITIONAL WRITTEN OR ORAL
FORWARD LOOKING STATEMENTS MAY BE MADE BY THE COMPANY FROM TIME TO TIME IN
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION OR OTHERWISE. SUCH FORWARD
LOOKING STATEMENTS ARE WITHIN THE MEANING OF THE TERM IN SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INCLUDE, BUT NOT BE LIMITED TO,
PROJECTIONS OF REVENUES, INCOME, OR LOSS, ESTIMATES OF CAPITAL EXPENDITURES,
PLANS FOR FUTURE OPERATIONS, PRODUCTS OR SERVICES, AND FINANCING NEEDS OR PLANS,
AS WELL AS ASSUMPTIONS RELATING TO THE FOREGOING. THE WORDS "BELIEVE," "EXPECT,"
"ANTICIPATE," "ESTIMATE," "PROJECT," AND SIMILAR EXPRESSIONS IDENTIFY FORWARD
LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THE STATEMENT WAS MADE.
FORWARD LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES,
SOME OF WHICH CANNOT BE PREDICTED OR QUANTIFIED. FUTURE EVENTS AND ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN, CONTEMPLATED BY, OR
UNDERLYING THE FORWARD LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION
TO PUBLICLY UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS, WHETHER AS A RESULT
OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. THE FOLLOWING DISCLOSURES, AS
WELL AS OTHER STATEMENTS IN THIS REPORT ON FORM 10-K, AND IN THE NOTES TO THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, DESCRIBE FACTORS, AMONG OTHERS,
THAT COULD CONTRIBUTE TO OR CAUSE SUCH DIFFERENCES, OR THAT COULD AFFECT THE
COMPANY'S STOCK PRICE.
RESULTS OF OPERATIONS
The Company was established in the first quarter of 1997 by a merger of
Eckler Industries, Inc. with various companies involved in the sale and
financing of new and used cars. Since the combination, the Company has grown its
operations by acquiring five used car dealerships with 13 locations in central
and southern Florida and opening 9 additional buy here-pay here locations. The
Company has also acquired two new car dealerships. The Company intends to
continue its expansion as its capital resources and available acquisition
opportunities permit.
PREDECESSOR COMPANIES AND LACK OF COMPARABILITY. For accounting purposes,
and as a result of the merger and acquisition transactions in January and
February, 1997, the following companies collectively are treated as the
predecessor companies for purposes of financial statement presentation: Eckler
Industries, Inc., Florida Finance Group, Inc. and affiliates ("FFG"), Liberty
Finance Company and affiliates ("Liberty"), and Palm Beach Finance and Mortgage
Company and affiliate ("PBF"). The predecessor companies lacked a common year
end, had different cost bases, had different elections for income taxation,
grouped and classified some income, expense and balance sheet accounts
differently, had somewhat different markets for used vehicle sales, and had
different credit underwriting and loss reporting policies. Accordingly, the
results of operations for the periods prior to 1997 are not comparable.
Also, Eckler Industries, Inc. previously had a fiscal year ending September
30 for financial reporting purposes and for reporting to the Securities and
Exchange Commission. As a result of the reverse merger in which SCHI was the
accounting acquiror, the Company's year end became December 31, the fiscal year
end of SCHI.
PRESENTATION OF DEALERSHIP REVENUES AND COSTS AND EXPENSES. Revenues from
Company new car dealerships include sales of new and used vehicles, as well as
revenues from repairs and finance and insurance commissions. Revenues from
Company used vehicle car dealership operations consist of sales of used cars and
income on finance receivables. Costs and expenses of used and new car dealership
operations is comprised of the cost of vehicles and other products sold and the
provision for credit losses on finance receivables. The prices at which the
Company sells its used cars at its used car dealerships and the interest rate
that it charges to finance these sales take into consideration that the
Company's primary customers are high-risk borrowers. The provision for credit
losses reflects these factors and it is treated by the Company as a cost of both
the future finance income derived on the contract receivables originated at the
Company's First Choice dealerships, as well as the cost of the sales of the
vehicles themselves. Accordingly, unlike traditional car dealerships, the
Company does not present gross profits in the Statement of Operations calculated
as sales of used cars less cost of used cars sold.
COMPARISON OF COMBINED YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1996
TO CONSOLIDATED YEAR ENDED DECEMBER 31, 1997.
The following table sets forth revenues and expenses in aggregate dollars
and as a percentage of total revenue for the Company and its predecessors,
Eckler, FFG, Liberty, and PBF, for the years ended December 31, 1995, 1996 and
1997. 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 year ended December 31, 1997 are not comparable to those for the years
ended December 31, 1995 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
(Dollars in Thousands)
Combined (1) Consolidated (2)
--------------------------------------------- --------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues 45,108 100.0% $54,708 100.0% $70,915 100.0%
Costs of revenues 31,960 70.9% 40,867 74.7% 51,801 73.0%
Selling, general and
administrative expenses 10,902 24.2% 13,236 24.2% 24,708 34.8%
Compensation expense -- -- - - 4,650 6.6%
related to employee
stock options
Restructuring charges -- -- - - 2,118 3.0%
Operating income (loss) 2,246 5.0% 606 1.1% (12,362) (17.4)%
Interest expense (2,012) (4.5%) (2,435) ( 4.5)% (6,454) (9.1)%
Other income (expense) (369) (0.8%) 262 0.5% 168 0.2%
----- ------ --- --- --- ----
Net loss ( 135) (0.3%) ($ 1,567) ( 2.9%) ($18,649) (26.3)%
====== ====== ======== == ====== ========= =======
</TABLE>
- ------------------------
(1) The financial data for 1995 and 1996 is the sum of the actual results of
the four predecessors for 1995 and for the period from the earlier of
January 1, 1996 or formation through December 31, 1996. Because the
financial data of the predecessors are presented on cost bases different
from those of the Company after the acquisition, the 1995 and 1996 data is
not comparable to the data for 1997.
(2) The financial data for 1997 was derived from the consolidated financial
statements included herein of the Company and all the acquired companies
from the date of acquisition through December 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.
REVENUES. The Company's revenues increased approximately $16.2 million from
$54.7 million for the year ended December 31, 1996, to $70.9 million for the
year ended December 31, 1997. The increase was primarily the result of three
elements: (i) the 1997 amounts include revenues from some additional acquired
companies which are not reflected as predecessors, including $9.9 million in
revenues from the Company's new car dealerships and $1.2 million from the
Company's insurance and dealer training subsidiaries; (ii) income on finance
receivables increased by $3.3 million due to growth of the Company's receivables
portfolio since the merger; and (iii) used car sales increased by approximately
$1.4 million with the acquisition and opening of additional dealership
locations.
Combined revenues of the predecessor companies increased by approximately
21.3 percent from $45.1 million in calendar year 1995 to $54.7 million for the
year ended December 31, 1996, reflecting an increase in the total number of
dealership lots in 1996, a related increase in the number of vehicles sold, and
an increase in prices of the vehicles offered for sale.
COSTS AND EXPENSES. Costs of revenues were $51.8 million for the year ended
December 31, 1997 compared to $40.9 million for the predecessors during the same
period in 1996, representing an increase of $10.9 million, or 26.7%. The cost of
sales in 1997 includes $8.6 million attributable to new car sales which are not
reflected in the 1996 amounts. The cost of sales for the Company's used car
dealerships decreased slightly as the Company achieved profit margins of 20.8%
for the year ended December 31, 1997, compared to 16.3% for the same period in
1996.
The provision for credit losses increased from 8.5% of used car revenues
for the year ended December 31, 1996, to 14.0% for 1997. The increase primarily
reflects management's assessment of finance receivables acquired through
acquisition of additional used vehicle finance companies during 1997.
The cost of vehicle and related revenues increased by approximately $8.9
million, or approximately 27.9 percent, from the year ended December 31, 1995 to
the year ended December 31, 1996. The increase is slightly higher than the 21.3
percent increase in sales for the same period, reflecting (i) an increase in the
quality and price of cars offered for sale in order to attract more creditworthy
customers; and (2) aggressive pricing campaigns associated with the opening of
additional dealerships lots in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses (including depreciation and amortization), were $24.7
million for the year ended December 31, 1997, compared to $13.2 million for
1996. The increase reflects additional expenses related to increased company
dealership activity, and continued development of corporate infrastructure
resulting from the merger. For example, the Company greatly expanded the
headquarters staffing in information systems, credit underwriting, collections
and accounting during the period to provide for current and future growth while
gradually phasing out the related local dealership staffs and equipment. These
costs were offset only partially by certain decreases in costs resulting from
the consolidation of the acquired companies' management functions.
Selling, general and administrative expenses increased to approximately
$13.2 million in 1996 as compared to $10.9 million in 1995. Approximately $1.3
million of the increase was attributed to additional costs at Eckler's
associated with extensive additional printing and advertising costs which helped
contribute to an increase in sales as discussed above, and with the Company
becoming a publicly held company that year. Excluding Eckler's increase,
operating expenses increased approximately 9.5%, reflecting a commensurate
increase in advertising and employment associated with increased sales.
COMPENSATION EXPENSE RELATED TO EMPLOYEE STOCK OPTIONS AND RESTRUCTURING
CHARGES. The Company incurred approximately $6.8 million in charges during the
year ended December 31, 1997 which were not incurred by the predecessor
companies in 1996, and which the Company believes will not recur in the future.
These charges include: (i) the recognition of non-cash compensation expense of
approximately $4.7 million associated with issuance of stock options by an
affiliated trust to attract key management personnel; and (ii) restructuring
charges of approximately $2.1 million associated with the settlement of various
employment and consulting agreements and the Company's shift to focus primarily
on used car sales rather than acquisition of additional new car dealerships.
ALLOWANCE FOR CREDIT LOSSES. The allowance for credit losses on finance
receivables (the "Allowance") at the Company's used vehicle dealerships was
17.1% of the outstanding principal balance as of December 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 fiscal year ended December 31, 1997.
Twelve Months Ended
December 31, 1997
Allowance Activity:
Allowance on acquired finance
receivables at date of
acquisition $ 5,627,937
Provision for credit losses 4,941,983
Net charge offs (3,712,655)
-----------
Balance, end of period $ 6,857,265
===========
Charge off Activity:
Principal Balances:
Collateral Repossessed: $ 7,920,623
Other 36,637
-----------
Total Principal Balances 7,957,260
Recoveries, net 4,244,605
-----------
Net Charge Offs $ 3,712,655
-----------
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 balance as of December 31, 1997.
AGING PERCENTAGES: DECEMBER 31, 1997
Principal balances current 91.11%
Principal balances 31 to 60 days 3.96%
Principal balances over 60 days 4.93%
INTEREST EXPENSE. Interest expense totaled $6.5 million for the year ended
December 31, 1997 compared to $2.4 million for the predecessors during 1996, an
increase of $4.1 million or 171%. This resulted primarily from interest on debt
attributable to the merger and related acquisitions plus interest on financing
the increased finance receivables and inventory as the Company expanded
operations. In addition, the Company incurred substantial non-cash interest
expense associated with the accounting recognition of the conversion features of
certain debt obligations.
Interest expense increased from approximately $2.0 million in 1995 to
approximately $2.4 million in 1996. The annual increase reflects the increased
vehicle sales and finance income discussed earlier. As sales increased,
predecessor companies borrowed more to finance the increased inventory and
finance receivables. Inventories grew from $4.8 million in 1995 to $5.4 million
in 1996, and finance receivables increased from $16.4 million in 1995 to $19.8
million in 1996. Total debt increased from $20.2 million in 1995 to
approximately $23.5 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth the major components of the increase in the
cash and cash equivalents of the combined predecessor companies in thousands:
<TABLE>
<CAPTION>
1997 1996 1995
------------- --------------- --------------
<S> <C> <C> <C>
Net cash provided (used) by operating activities $ (5,943) $ (2,597) $ 469
Net cash used by investing activities (26,583) (3,731) (5,298)
Net cash provided by financing activities 33,593 6,593 4,825
Net increase (decrease) in cash and cash
equivalents (1) $ 1,067 $ 265 $ 4
========= =========== ========
</TABLE>
(1) The financial data for the combined predecessor companies is the sum of
the actual results of the four companies. Because the financial data of
the predecessors are presented on cost bases different from those of
the Company after the acquisitions and different from those of each
predecessor the results are not comparable.
The Company requires capital to support increases in finance receivables,
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. The Company
intends to explore selling (securitizing) its finance receivables in the future.
Net cash flows used by operating activities were approximately $2.6 million
and $5.9 million during 1996 and 1997, respectively. Cash used for operating
activities in 1996 can be primarily attributed to over $700,000 in first year
start-up expenses by SCHI, and by further expansion of inventory and reduction
of payables by the predecessor companies. In addition to a net operating loss in
1997, the Company used nearly $6.6 million to expand inventory and accounts
receivable. The predecessor companies had approximately $469,000 of cash
provided by operating activities, attributable primarily to increases in
accounts payable and deferred.
Cash used in investing activities was approximately $5.3 million, $3.7
million and $26.6 million during 1995, 1996 and 1997, respectively. The 1995 and
1996 amount primarily reflects increases in finance receivables carried by the
companies. The 1997 amount reflects the Company's growth, including a $13.6
million increase to finance receivables, approximately $12.2 million associated
with the acquisition of companies, and $1.3 million to acquire property and
equipment.
Cash provided by financing activities was approximately $4.8 million, $6.6
million and $33.6 million during 1995, 1996 and 1997, respectively.
Approximately $3 million was raised by Eckler Industries, Inc. through sale of
common stock in the Company's initial public offering in 1995. Eckler
Industries, Inc. raised an additional $4 million through the issuance of notes
payable in 1996. The balance of the increase in cash from investing activities
in 1995 and 1996 is attributable to an increase in notes payable by the other
predecessor companies to finance increased inventories and receivables.
In 1997, the Company raised approximately $4.6 million through the sale of
Preferred Stock, and increased its line of credit and floorplan borrowings by
$16.4 million and $4.2 million, respectively, as the Company expanded its auto
sales and financing activities. Notes payable increased by $14.2 million during
1997 with the borrowings primarily used for acquisitions and expansion of
operations.
OPERATIONAL CHANGES. Management undertook a major restructuring of the
Company beginning in late 1997 with the expectation of better meeting future
operational and liquidity needs. Some components of the restructuring include
the following:
Management emphasized its used car operations, which tend to have
higher gross margins than new car dealerships. Acquisition plans for
new car dealerships were curtailed in early December 1997. Management
concentrated on achieving operational efficiencies at the 23 used car
dealerships it had acquired and/or started up during 1997.
Management took one-time charges in the fourth quarter of 1997
relating to acquisition expenses and severance payments.
Staff was reduced by 15% in November and December 1997.
Overhead expenses were reduced over $2 million during late November
and December, 1997 and January, 1998.
A new Chief Financial Officer was retained in September, a new
Vice-President of Finance in November and a significant portion of the
accounting staff was replaced.
A Company-wide budget was prepared and implemented.
"Flash Reports" were developed for the Company's divisions beginning
January 15, 1998. These Flash Reports are used to monitor business
operations and results on a regular basis.
In late 1997, the Company completed a "static pool" analysis that
establishes a benchmark for potential investors and lenders to
determine the quality of the Company's financing portfolio. The static
pool indicated that the actual losses (approximately 12 percent) with
the loan portfolio are substantially less than loss reserves
(approximately 17 percent).
The Company's finance subsidiary, FFG, expanded its loan portfolio to
$71.9 million while establishing and maintaining underwriting
procedures that have resulted in 93.9% of the accounts being current
(30 days or less).
The Eckler subsidiary was revamped to focus on higher customer
service. Inventory carrying costs were reduced by negotiating with
vendors. "Drop ship" delivery is being utilized. As the mail order
business constitutes over 93% Eckler's revenue, two mail order
catalogs are now used, instead of one per year as in the past.
Management also undertook a restructuring of debt obligations in late 1997
and early 1998 in order to better meet its foreseeable liquidity needs. The debt
restructuring included expansion of financings for key areas of the business as
well as negotiating conversions of some debt instruments into equity and
refinancing obligations with maturities in 1998.
REVOLVING CREDIT FACILITIES. The Company's revolving credit facility with
Finova Capital Corporation (the "Finova Revolving Facility") had a maximum
commitment of $35 million at December 31, 1997. The credit line was increased to
a maximum commitment to $42.5 million, effective March 27, 1998. During early
1998, the Company has continued to negotiate an additional increase in the
credit line. Under the Finova Revolving Facility, the Company may borrow up to
60% of the gross balance of eligible finance contracts. The Finova Revolving
Facility expires in December 1999, at which time its renewal will be subject to
renegotiation. The Finova Revolving Facility is secured by substantially all of
the Company's receivables. As of December 31, 1997, the aggregate principal
amount outstanding under the Finova Revolving Facility was $31.4 million. The
Finova Revolving Facility bears interest at the prime rate (currently the
Citibank N.A. prime rate) plus 3%.
The Company currently finances its used car inventory through a line of
credit with Manheim Automotive Financial Services, Inc. (the "Manheim Facility")
which had an outstanding balance at December 31, 1997 of $2.7 million. The
maximum commitment on the Manheim Facility is $3.75 million. The Manheim
Facility is secured by the Company's buy here-pay here used car inventory and
bears interest at 1.5% over the prime rate. The Company is in negotiations with
other lenders to increase its credit line.
The Company finances its new car inventory through manufacturer floorplan
facilities. The Company's floorplan facility with Volvo Finance North America,
Inc. has a maximum commitment of $3.3 million, bears interest at 1% above the
prime rate, and at December 31, 1997 had an outstanding balance of approximately
$1.98 million. The Company's floorplan facility with Nissan Motor Acceptance
Corporation has a $3 million maximum commitment, bears interest at 1% above
prime, and at December 31, 1997 had an outstanding balance of approximately $2.3
million.
LOANS. In March and May 1997, Sirrom Capital Corporation ("Sirrom") loaned
the Company a total of $7.5 million. The Company issued Sirrom a $3.5 million
convertible note, convertible until March 12, 1999 at $3.67 per share and a $4.0
million convertible note, convertible at $7.50 per share until May 12, 2002,
subject to adjustment.
In September 1997, the Company completed the private placement of
convertible notes in the aggregate amount of $1,050,000. The notes mature on
April 15, 1998, bear interest at the rate of 8% per annum, and, since December
14, 1997, have been convertible into Common Stock of the Company at a conversion
price of 66 2/3% of the average closing bid price for the five trading days
immediately preceding the effective date of conversion. Nearly $475,000 of the
debt had been converted into common stock by March 31, 1998. The Company
recorded deferred interest of $525,000 as a result of the discount on the
conversion price which is being amortized from the date of issuance to the first
conversion date of the Notes. In conjunction with the borrowing, the Company
also issued common stock warrants for 52,500 shares of the Company's Common
Stock exercisable at $7.00 per share at any time prior to August 29, 2002.
In December 1997, Raytheon Aircraft Credit Corporation loaned the Company
$2.2 million to finance the purchase of equipment. The loan, which matures in
December, 2009, bears interest at 8.5%, requires monthly payments of $19,995
plus balloon payments of $100,000 in September 1998 and September 1999, and is
secured by equipment.
In September 1997, Eckler borrowed $1.5 million from Stephens Inc.
("Stephens"), an investment banking firm. The loan matures on October 15, 1998,
bears interest at the rate of 10% per annum, and is secured by all of the assets
and common stock of Eckler. The Company guaranteed the debt.
In January 1998, Eckler borrowed $3.0 million from Stephens. The note bears
interest at the rate of 10% per annum, is secured by all of the assets and
common stock of the Eckler subsidiary and is guaranteed by the Company. The note
requires principal payments of $1 million on June 30, 1998 and $2 million on the
earlier of June 30, 1999 or a public offering of equity securities in which the
Company realizes at least $10 million in gross proceeds.
On September 30, 1997, the Company completed an offering of 300 units of
Series A redeemable convertible preferred stock and warrants at $10,000 per
unit. Proceeds from the offering, net of offering costs, were approximately
$2,965,000. Each unit consists of one share of Series A redeemable convertible
preferred stock and one warrant to acquire 300 shares of common stock for each
preferred share purchased at a price equal to $8.10 per share. The warrants
expire five years after the date of issuance. The preferred stock is convertible
into shares of common stock at a conversion price which, at the option of the
buyer, is either fixed at a rate of 135% of the market price of common stock on
the date of issuance of the preferred stock, or floating at a rate of 100% of
the market price of the common stock if converted during the period 90 days
after the issuance of the preferred stock and 90% of the market price if
converted at any time after that 90-day period. Accordingly, since none of the
preferred stock was converted 90 days after issuance, a preferred stock dividend
of $333,333 ($.04 per share) has been recorded for the year ended December 31,
1997 for the difference between the discounted conversion price of the preferred
stock and the fair market value of the Company's common stock at the time of
issuance. The preferred stock is redeemable at the option of the buyer upon the
occurrence of certain events at a price per share that is also dependent upon
the occurrence of certain events.
On December 10, 1997, the Company issued an additional 100 units of the
Series A redeemable convertible preferred stock and associated warrants for net
proceeds of $1,000,000. Each unit consists of one share of Series A redeemable
convertible preferred stock and one warrant to acquire 300 shares of common
stock for each preferred share purchased at a price equal to $5.23 per share.
The warrants expire five years after the date of issuance. The preferred stock
has features identical to that of the Series A redeemable convertible preferred
stock issued on September 30, 1997.
Subsequent to December 31, 1997, the holders of the preferred stock
converted 245 shares of preferred stock into 1,265,827 shares of common stock.
In November 1997, the Company borrowed $750,000 from Bankers Life Insurance
Company. The unsecured loan matures on December 31, 2000, bears interest at the
prime rate (8.5% at December 31, 1997), and is convertible into the Company's
common stock at $9.00 per share.
MORTGAGE LOAN. The Company has a long-term mortgage payable to a bank with
a current principal balance of approximately $2.5 million at a variable rate of
1.5% above prime. The mortgage loan is collateralized by the Company's
headquarters real property and machinery, equipment and fixtures. The loan terms
require monthly principal payments of $13,333, plus interest, and the loan
matures on July 1, 1998, at which time the Company intends to negotiate a later
maturity.
In June, 1997, the Company purchased approximately 2.71 acres of land with
a sales showroom and repair facility to be used as a used car sales dealership
in Melbourne, Florida. The property was purchased for $950,000 and was financed
by a mortgage from the seller of $825,000. The note matures on May 31, 2007,
bears interest at the rate of 8.0% and requires equal monthly payments of
$10,009 for ten years.
In connection with acquisition of one of the predecessor companies in 1997,
the Company acquired approximately 7.92 acres of undeveloped land in Lake Mary,
Florida. The land, held for resale by the Company, is recorded at $1,050,000 on
the Company's books. The property is subject to a first mortgage in favor of
AmSouth Bank and a second mortgage in favor of Barnett Bank. The AmSouth debt
had a principal balance of $498,923 as of December 31, 1997, an interest rate of
7.75%, and monthly payments of $8,683 until December 2003. The Barnett Bank note
has a principal balance of $600,000, bears interest at 1% over Barnett's prime
interest rate and requires quarterly interest payments. The note matures on
April 30, 1998. The Lake Mary property is presently under contract to be sold to
an unrelated party in May 1998 for $1.3 million. Both mortgages will be
satisfied when the property is sold.
ACQUISITION DEBT. Upon the closing of various acquisitions during the year
ended December 31, 1997, the Company incurred debt to certain stockholders of
the acquired companies. The balance as of December 31, 1997 for the acquisition
debt totaled $8.3 million. Of this amount, $4.9 million requires monthly
principal payments of $27,112 plus interest and matures on June 27, 1999.
SEASONALITY. Historically, the Company's predecessors, except for Eckler,
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.
The Eckler business is also subject to seasonal fluctuations. Historically,
Eckler 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 Eckler 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 increase the
interest expense related to the Company's existing debt. The Company cannot seek
to limit this risk by increasing interest rates earned on its finance contracts
since the interest charged is at or near the maximum permitted under Florida
law. Instead, the Company will seek to limit this risk, to the extent market
conditions permit, by increasing the profit margin on the cars sold. To date,
inflation has not had a significant impact on the Company's operations.
YEAR 2000. In the second quarter of 1997, the Company began converting the
Eckler computer systems to be year 2000 compliant. At the beginning of the third
quarter of 1996, the operating system and its peripherals were made year 2000
compliant. Beginning first quarter 1997 and beyond all new software development
on the Eckler computer system was to be developed and tested to be year 2000
compliant. All existing core applications are to be modified and tested for year
2000 compliance no later than the last quarter of 1998. All new systems and
software installations including the other subsidiaries' computer systems are
currently year 2000 compliant. All other systems including the Company's local
and wide area networks, telephone systems, uninterruptible power supply systems,
and historical information are either in compliance or will be compliant no
later than the fourth quarter of 1998. The Company continues to evaluate other
computerized equipment to include security systems, fire control systems, and
power control systems to be year 2000 compliant. The anticipated expense
associated with the year 2000 compliance project will not include additional
hardware cost or external staffing. The majority of the Company is operating on
new systems and software that are already year 2000 compliant. All systems are
expected to be in compliance by the last quarter of 1998.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") and No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("FAS 131"). FAS 130 establishes standards for reporting and
displaying comprehensive income, its components and accumulated balances. FAS
131 establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public. Both FAS 130 and FAS 131 are effective for periods
beginning after December 15, 1997. Adoption of these standards is not expected
to have a material adverse effect on the Company's financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not invest or trade in foreign currency or commodity
transactions which would ordinarily be subject to market risk. The interest rate
on the Company's revolving credit facility with Finova Capital Corporation is
based on the prime rate plus three percent. Accordingly, a significant increase
or decrease in the prime rate could affect the Company's earnings in the future.
The Company believes, however, that its financial instruments are disclosed at
their fair values. Fair value estimates are made at a specific point in time and
are based on relevant market information and information about the financial
instrument; they are subjective in nature and involve uncertainties and matters
of judgment and, therefore, cannot be determined with precision. These estimates
do not reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular instrument. Changes in
assumptions could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1997, the amounts
that will actually be realized or paid in settlement of the instruments could be
significantly different.
The carrying amount of cash and cash equivalents is assumed to be the fair
value because of the liquidity of these instruments. The carrying amount is
assumed to be the fair value because of the relative short maturity and
repayment terms of the portfolio as compared to similar instruments. The
carrying amount of accounts payable and accrued expenses approximates fair value
because of the short maturity of these instruments. The terms of the Company's
notes payable approximates the terms in the market place at which they could be
replaced. Therefore, the fair value approximates the carrying value of these
financial instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of Smart Choice Automotive Group, Inc. are set
forth in Appendix A hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contemplated by this Item is incorporated by reference to
the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information contemplated by this Item is incorporated by reference to
the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contemplated by this Item is incorporated by reference to
the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contemplated by this Item is incorporated by reference to
the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets of Smart Choice Automotive Group,
Inc. and Subsidiaries at December 31, 1997 and 1996
Consolidated Statements of Operations of Smart Choice Automotive
Group, Inc. and Subsidiaries for the year ended December 31, 1997
and for the period from inception (June 21, 1996) through
December 31, 1996
Consolidated Statements of Stockholders' Equity (Capital Deficit)
for the year ended December 31, 1997 and for the period from
inception (June 21, 1996) through December 31, 1996
Consolidated Statements of Cash Flows for the year ended December
31, 1997 and for the period from inception (June 21, 1996)
through December 31, 1996
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
(2) Financial statement schedules
Omitted because not applicable or because data is reflected in
the Notes to the Financial Statements
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION FILED HEREWITH OR INCORPORATED BY REFERENCE TO:
<S> <C> <C>
3.1 Amended and Restated Articles of Exhibit 3.1 to Form SB-2 Registration Statement, filed on
Incorporation of Smart Choice September 1, 1995, File No. 33-96520-A
Automotive Group, Inc. (the
"Company")
3.1.1 Articles of Amendment to Articles of Exhibit 3.2 to Form 10-Q filed on May 20, 1997
Incorporation of SMCH
3.2 Amended and Restated By-Laws of the Exhibit 3.2 to Form SB-2 Registration
Company Statement, filed on September 1, 1995, File No. 33-96520-A.
3.2.1 Amendment No. 1 to Amended and Exhibit 3.2.1 to Amendment No. 2 to Form SB-2 Registration
Restated Bylaws Statement, filed on November 6, 1995, File No. 33-96520-A.
3.2.2 Second Articles of Amendment to Exhibit 3.1 to Form 8-K filed on October 9, 1997.
Articles of Incorporation
4.1 Specimen Common Stock Certificate Exhibit 4.1 to Form 8-A Registration Statement, filed on
April 16, 1997.
4.2 Specimen of Warrant Certificate Exhibit 4.2 to Form 8-A Registration Statement, filed on
April 16, 1997.
4.3 Warrant Agreement between the Company Exhibit 4.5 to Amendment No. 2 to Form SB-2 Registration
and American Stock Transfer & Trust Statement, filed on November 6, 1995, File No. 33-96520-A.
Company, as Warrant Agent, dated
November 9, 1995
4.3.1 Form of Amendment to Warrant Agreement Exhibit 4.4 to Form 8-A Registration Statement, filed on
April 16, 1997.
10.1 Eckler Industries, Inc. Retirement and Exhibit 10.4.1 to Form SB-2 Registration Statement, filed
Savings Plan and Trust Agreement, as on September 1, 1995, File No. 33-96520-A.
Amended and Restated on September 14,
1992
10.2 Amendment No. 1 to Eckler Industries, Exhibit 10.4.2 to Form SB-2 Registration Statement filed
Inc. Retirement and Savings Plan Trust on September 1, 1995, File No. 33-96520-A.
Agreement Dated March 28, 1994.
10.3 Eckler Industries, Inc. Non-Qualified Exhibit 10.6 to Form SB-2 Registration Statement, filed on
Stock Option Plan September 1, 1995, File No. 33-96520-A.
10.4 Eckler Industries, Inc. 1995 Combined Exhibit 10.7 to Form SB-2 Registration Statement, filed on
Qualified and Non-Qualified Employee September 1, 1995, File No. 33-96520-A.
Stock Option Plan
10.5 Registration Rights Agreement by and Exhibit 10.15 to Amendment No. 1 to Form SB-2 Registration
among the Company and each of the Statement, filed on October 13, 1995, File No. 33-96520-A.
Purchasers referred to in Schedule 1
thereto, dated September 20, 1995.
10.6 Unit Purchase Option Agreement between Exhibit 1.2 to Amendment No. 2 to Form SB-2 Registration
the Company and Argent Securities, Statement, filed on November 6, 1995, File No. 33-96520-A.
Inc. and Certificate dated November
15, 1995
10.7 Loan Agreement between the Company Exhibit 10.19 to Post-Effective Amendment No. 2 to Form
and Barnett Bank, N.A. dated SB-2 Registration Statement, filed on November 14, 1996,
September 30, 1996 File No. 33-96520-A.
10.8 Mortgage and Security Agreement Exhibit 10.20 to Post-Effective Amendment No. 2 to Form
between the Company and Barnett Bank, SB-2 Registration Statement, filed on November 14, 1996,
N.A. dated September 30, 1996. File No. 33-96520-A.
10.9 Promissory Note in the amount of Exhibit 10.21 to Post-Effective Amendment No. 2 to Form SB-2
$2,400,000 from the Company in favor Registration Statement, filed on November 14, 1996, File No.
of Barnett Bank, N.A. dated September 30, 33-96520-A.
1996.
10.10 Assignment of Loan Documents dated Filed herewith.
November 4, 1997 between Barnett Bank,
N.A. and The Huntington National Bank
("Huntington")
10.11 Modification of Mortgage Deed and Filed herewith.
Security Agreement dated November 3,
1997 between the Company and Huntington
10.12 Future Advance Promissory Note dated Filed herewith.
December 30, 1997,principal amount
$260,000, the Company maker,
Huntington, payee
10.13 Modification of Mortgage and Mortgage Filed herewith.
Note and Extension Agreement dated
December 30, 1997 between the Company
and Huntington
10.14 Merger Agreement between Smart Exhibit 10.1 to Form 8-K, filed on February 12, 1997
Choice Holdings, Inc. ("SCHI"), the
Company, Thomas E. Conlan and
Gerald C. Parker dated December 30,
1997.
10.15 First Amended and Restated Loan and Exhibit 4.1 to Form 10-Q, filed on May 20, 1997.
Security Agreement between Florida
Finance Group, Inc. ("FFG") and Finova
Capital Corporation ("Finova"), dated
February 4, 1997.
10.16 Warrant to Purchase Common Stock of the Exhibit 4.2 to Form 10-Q, filed on May 20, 1997.
Company between the Company and Finova,
dated January 13, 1997.
10.17 Intentionally Omitted
10.18 Intentionally Omitted
10.19 Guaranty to Finova from the Company Exhibit 4.5 to Form 10-Q, filed on May 20, 1997.
dated January 13, 1997.
10.20 Eighth Amended and Restated Promissory Filed herewith.
Note dated March 27, 1998, between FFG,
maker, and Finova.
10.21 Fourth Amended and Restated Schedule to Filed herewith.
Amended and Restated Loan and Security
Agreement, FFG, borrower, Finova, lender,
dated March 27, 1998.
10.22 Stock Purchase Agreement dated January Exhibit 10.1 to Form 10-Q, filed on May 20, 1997. 28, 1997
between SCHI and Gary Smith.
10.23 Promissory Note dated January 28, 1997, Exhibit 10.2 to Form 10-Q filed on May 20, 1997.
First Choice Auto Finance, Inc.
("FCAF"), maker, Gary Smith, payee, in
the principal amount of $1,031,008.
10.24 Lease dated April 5, 1997 between Gary Filed herewith
R. Smith and Team Automobile Sales and
Finance, Inc.
10.25 Promissory Note Modification Agreement, Filed herewith.
dated December 15, 1997 between FCAF
and Gary R. Smith.
10.26 Asset Purchase Agreement dated January Exhibit 10.3 to Form 10-Q, filed on May 20, 1997.
28, 1997 between FCAF and Gary Smith.
10.27 Asset Purchase Agreement among FCAF, Exhibit 10.17 to Form 8-K, filed on February 26, 1997.
Palm Beach Finance and Mortgage Company
("PBF"), Two Two Five North Military
Corp. ("225"), and David Bumgardner,
and Amendment thereto.
10.28 Loan and Security Agreement between 225 Exhibit 10.18 to Form 8-K, filed on February 26,.
and FCAF dated February 14, 1997.
10.29 9% Secured Convertible Note of FCAF to Exhibit 10.20 to Form 8-K, filed on February 26, 1997.
225 and PBF.
10.30 9% Convertible Debenture of SCHI to PBF. Exhibit 10.21 to Form 8-K, filed on February 26, 1997.
10.31 Lease between David Bumgardner as Exhibit 10.22 to Form 8-K, filed on February 26, 1997.
Lessor and FCAF, Lessee, dated February
13, 1997.
10.32 Indemnification Agreement in favor of Exhibit 10.23 to Form 8-K, filed on February 26, 1997.
PBF and 225 by FCAF, dated February
dated February 14, 1997.
10.33 Executive Employment Agreement between Exhibit 10.15 to Form 10-Q, filed on May 20, 1997.
the Company and Gary Smith.
10.34 Executive Employment Agreement between Exhibit 10.16 to Form 10-Q, filed May 20, 1997.
the Company and Robert Abrahams.
10.35 Executive Employment Agreement dated Filed herewith.
April 11, 1997 between the Company and
Joseph Alvarez.
10.36 Executive Employment Agreement dated Filed herewith.
April 24, 1997 between the Company and
Ronald Anderson.
10.37 Non Qualified Stock Option Agreement Filed herewith.
dated March 5, 1997 among the Smart
Choice Holdings Management Trusts (the
"Management Trusts"), Eckler Industries,
Inc., and Robert J. Abrahams.
10.38 Non Qualified Stock Option Agreement Filed herewith.
dated March 5, 1997 among the Management
Trusts, Eckler Industries, Inc., and
Robert J. Abrahams.
10.39 Non Qualified Stock Option Agreement Filed herewith.
dated April 11, 1997, among the
Management Trusts, the Company and
Joseph Alvarez.
10.40 Stock Option Agreement dated March 24, Filed herewith.
1997 between the
Company and Ronald Anderson.
10.41 Non-Qualified Stock Option Agreement Filed herewith
dated April 17, 1997 between the
Company and David Bumgardner.
10.42 Non-Qualified Stock Option Agreement Filed herewith
dated April 17, 1997 between the
Company and Craig Macnab.
10.43 Stock Option Agreement dated March 19, Filed herewith.
1997 between the
Company and Gerald Parker.
10.44 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Gerald Parker.
10.45 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Donald Wojnowski.
10.46 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Joseph Yossifon.
10.47 Convertible Senior Promissory Note Exhibit 10.18 to Form 10-Q, filed May 20, 1997.
dated March 13, 1997, the Company,
maker, Sirrom Capital Corporation
("Sirrom"), payee.
10.48 Convertible Senior Promissory Note Exhibit 10.19 to Form 10-Q, filed May 20, 1997.
dated May 13, 1997, the Company, maker,
Sirrom, payee.
10.49 Amended and Restated Registration Exhibit 10.20 to Form 10-Q, filed May 20, 1997.
Rights Agreement between the Company
and Sirrom, dated May 13, 1997.
10.50 Asset Purchase Agreement dated as of Exhibit 10.1 to Form 8-K filed on July 14, 1997.
June 27, 1997 among the Company, Strata
Holding, Inc., Ready Finance, Inc.,
Donald Cook, Marilyn Cook and Madie A.
Stratemeyer.
10.51 Form of Convertible Note issued by the Exhibit 10.1 to Form 8-K filed on October 9, 1997.
Company to High Capital Funding, LLC,
and other purchasers.
10.52 Form of Warrant issued by the Company Exhibit 10.2 to Form 8-K filed on October 9, 1997.
to High Capital Funding, LLC, and other
purchasers.
10.53 Promissory Note, principal amount Exhibit 10.3 to Form 8-K filed on October 9, 1997.
$1,500,000 by Eckler Industries, Inc.,
maker, Stephens Inc., payee.
10.54 Promissory Note, principal amount Exhibit 10.1 to Form 8-K filed on March 5, 1998.
$3,000,000, Eckler Industries, Inc.,
maker, Stephens Inc., payee.
10.55 Guaranty Agreement by the Company to Exhibit 10.4 to Form 8-K filed on October 9, 1997.
Stephens Inc.
10.56 Amendment to Guaranty Agreement between Exhibit 10.4 to Form 8-K filed on March 5, 1998.
the Company and Stephens Inc.
10.57 Pledge and Security Agreement between Exhibit 10.5 to Form 8-K filed on October 9, 1997.
the Company and Stephens Inc.
10.58 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between the Company and
Stephens Inc.
10.59 Securities Purchase Agreement between Exhibit 10.6 to Form 8-K filed on October 9, 1997.
the Company and certain buyers
represented by Promethean Investment
Group, L.L.C.
10.60 Form of Warrant from the Company to Exhibit 10.7 to Form 8-K filed on October 9, 1997.
certain buyers represented by
Promethean Investment Group, L.L.C.
10.61 Automotive Wholesale Financing and Filed herewith.
Security Agreement dated July 21, 1997
between First Choice Stuart 1, Inc.
("FCS1") and Nissan Motor Acceptance
Corporation ("NMAC").
10.62 Addendum to Automotive Wholesale Filed herewith.
Financing and Security Agreement
10.63 Second Addendum to Automotive Wholesale Filed herewith.
Financing and Security Agreement dated
August 11, 1997 between NMAC and FCSI.
10.64 Dealer Capital Loan and Security Filed herewith.
Agreement dated October 12, 1995
between B&B Florida Enterprises, Inc.
and NMAC.
10.65 Amendment to Dealer Capital Loan and Filed herewith.
Security Agreement dated September 1,
1997 between NMAC and FCS1.
10.66 Dealer Equipment Loan and Security Filed herewith.
Agreement dated October 12, 1995
between NMAC and B&B Florida
Enterprises, Inc.
10.67 Amendment to Dealer Equipment Loan and Filed herewith.
Security Agreement dated September 1,
1997 between NMAC and FCSI.
10.68 Nissan Dealer Term Sales and Service Filed herewith.
Agreement dated August 29, 1997 between
Nissan Motor Corporation in U.S.A., the
Company, Smart Cars, Inc. and FCS1.
10.69 Wholesale Financing and Security Filed herewith.`
Agreement dated August 11, 1997 between
First Choice Stuart 2, Inc. ("FCS2")
and Volvo Finance North America, Inc.
10.70 Authorized Retailer Agreement between Filed herewith.
Volvo Cars of North America, Inc. and
FCS2.
10.71 Convertible Subordinated Debenture Filed herewith.
dated November 3, 1997, principal
amount $750,000, the Company, maker,
Bankers Life Insurance Company, payee.
10.72 Registration Rights Agreement dated Filed herewith.
November 3, 1997 between the Company
and Bankers Life Insurance Company.
10.73 Settlement Agreement and Release dated Filed herewith.
January 30, 1998 among the Company,
FCAF, FCS2, Jack Winters Enterprises,
Inc., Jack Winters, F. Craig Clements,
Killgore Pearlman, P.A. and Mark L.
Ornstein.
10.74 Stock Purchase Agreement dated May 6, Filed herewith.
1997 between FCS1 and Thomas DeRita, Jr.
10.75 Promissory Note dated December 19, Filed herewith.
1997, principal amount $2,199,000,
First Choice Melbourne 1, Inc., maker
and Raytheon Aircraft Credit
Corporation, payee.
10.76 Guaranty Agreement by the Company to Filed herewith.
Raytheon Aircraft Credit Corporation.
10.77 Security Agreement dated December 19, Filed herewith.
1997 between First Choice Melbourne 1,
Inc. and Raytheon Aircraft Credit
Corporation.
10.78 Registration Rights Agreement between Exhibit 10.8 to Form 8-K filed on October 9, 1997.
the Company and certain buyers
represented by Promethean Investment
Group, L.L.C.
10.79 Promissory Note dated February 24, Exhibit 10.9 to Form 8-K filed on March 5, 1998.
1998, FCAF, maker, Manheim Automotive
Financial Services, Inc., payee.
10.80 Guaranty dated March 21, 1997 from the Exhibit 10.10 to Form 8-K filed on March 5, 1998.
Company in favor of Manheim Automotive
Financial Services, Inc.
10.81 Intentionally Omitted.
10.82 Manheim Automotive Financial Services, Filed herewith.
Inc. Security Agreement dated March 21,
1997 between FCAF and Manheim
Automotive Financial Services, Inc.
10.83 Promissory Note dated June 17, 1997, Filed herewith.
principal amount $825,000, FCAF, maker,
Carl Schmidt Enterprises, Inc., payee.
10.84 Real Estate Mortgage dated June 17, Filed herewith.
1997, FCAF, mortgagor,
Carl Schmidt Enterprises, Inc., mortgagee.
10.85 Intentionally Omitted.
10.86 Intentionally Omitted.
10.87 Twenty-Fourth Amendment to GM Filed herewith.
Reproduction and Service Part Tooling
License Agreement.
10.88 Twenty-Sixth Amendment to GM Filed herewith.
Reproduction and Service Part Tooling
License Agreement.
10.89 Thirty-Fourth Amendment to GM Filed herewith
Reproduction Service Part Tooling
License Agreement.
10.90 Lease between Florida Auto Auction of Filed herewith.
Orlando, Inc. and First Choice Auto
Finance, Inc. dated May 12, 1997, for
Reconditioning Facility.
11.1 Statement re Computation of Earnings *
Per Share.
21.1 List of Subsidiaries. Filed herewith.
23.1 Consent of BDO Seidman, LLP. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
____________________
* Information regarding the computation of earnings per share is set forth
in the Notes to Consolidated Financial Statements.
</TABLE>
<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 April 13, 1998.
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.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Robert J. Abrahams Director April 13, 1998
- ---------------------------
Robert J. Abrahams
/s/ Gary R. Smith President, Chief Executive April 13, 1998
- --------------------------- Officer and a Director (Principal
Gary R. Smith Executive Officer)
/s/ Joseph E. Mohr Chief Financial Officer (Principal April 13, 1998
- --------------------------- Financial and Accounting Officer)
Joseph E. Mohr
/s/ Joseph Yossifon Director April 13, 1998
- ---------------------------
Joseph Yossifon
/s/ David E. Bumgardner Director April 10, 1998
- ---------------------------
David E. Bumgardner
/s/ Donald A. Wojnowski, Jr. Director April 13, 1998
- ----------------------------
Donald A. Wojnowski, Jr.
/s/ Gerald C. Parker Director April 13, 1998
- ----------------------------
Gerald C. Parker
/s/ Craig Macnab Director April 10, 1998
- ----------------------------
Craig Macnab
</TABLE>
<PAGE>
APPENDIX "A"
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM INCEPTION (JUNE 21, 1996)
THROUGH DECEMBER 31, 1996
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets F-3 - F-4
Statements of operations F-5
Statements of stockholders' equity (capital deficit) F-6
Statements of cash flows F-7 - F-8
Summary of significant accounting policies F-9 - F-13
Notes to consolidated financial statements F-14 - F-38
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Smart Choice Automotive Group, Inc.
Titusville, Florida
We have audited the accompanying consolidated balance sheets of Smart
Choice Automotive Group, Inc. and subsidiaries as of December 31, 1997 and 1996
and the related statements of operations, stockholders' equity (capital deficit)
and cash flows for the year ended December 31, 1997 and the period from
inception (June 21, 1996) through December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Smart Choice
Automotive Group, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for the year ended December 31,
1997 and the period from inception (June 21, 1996) through December 31, 1996 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Orlando, Florida
April 13, 1998
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,066,949 $ -
Accounts receivable 1,773,124 25,000
Finance receivables:
Principal balances, net 40,084,412 -
Less allowance for credit losses (6,857,265) -
- --------------------------------------------------------------------------------
Finance receivables, net 33,227,147 -
- --------------------------------------------------------------------------------
Inventories, at cost 15,516,084 -
Land held for resale 1,050,000 -
Property and equipment, net 9,214,207 22,454
Notes receivable 46,280 400,000
Deferred acquisition costs - 194,101
Deferred financing costs, net of accumulated
amortization of $207,508 and $2,249 426,823 24,735
Goodwill, net of accumulated
amortization of $470,897 25,562,162 -
Prepaid expenses 1,008,229 -
Deposits and other assets 213,986 50,000
- --------------------------------------------------------------------------------
$ 89,104,991 $ 716,290
================================================================================
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
LIABILITIES:
Bank overdraft $ - $ 82,884
Accounts payable 5,259,903 438,890
Accrued expenses 4,633,841 183,314
Line of credit, net of discount 31,229,600 -
Floor plans payable 8,287,092 -
Capital lease obligations 940,280 -
Notes payable 29,197,458 322,000
Other liabilities 94,913 -
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 79,643,087 1,027,088
- --------------------------------------------------------------------------------
REDEEMABLE CONVERTIBLE PREFERRED STOCK 4,941,834 387,022
STOCKHOLDERS' EQUITY (CAPITAL DEFICIT):
Common stock $.01 par value, authorized
100,000,000 shares; issued 9,734,007 and
5,488,432 shares 97,340 54,884
Additional paid-in capital 24,108,456 (48,916)
Accumulated deficit (19,685,726) (703,788)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) 4,520,070 (697,820)
- --------------------------------------------------------------------------------
$ 89,104,991 $ 716,290
================================================================================
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM
INCEPTION
(JUNE 21, 1996)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
- --------------------------------------------------------------------------------
REVENUES:
Sales at new car dealerships $ 9,863,245 $ -
Sales at used car dealerships 35,279,228 -
Income on finance receivables 9,209,656 -
Income from insurance and training 1,177,903 -
Corvette parts and accessories sales 15,384,589 -
- --------------------------------------------------------------------------------
Total revenues 70,914,621 -
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Costs of sales at new car dealerships 8,618,109 -
Costs of sales at used car dealerships 27,950,703 -
Costs of Corvette parts and accessories sold 10,205,633 -
Provision for credit losses 4,941,983 -
Costs of insurance and training 85,098
Selling, general and administrative expenses 24,707,839 670,616
Compensation expense related to employee and
director stock options 4,649,702 -
Restructuring charges 2,117,906 -
- --------------------------------------------------------------------------------
Total costs and expenses 83,276,973 670,616
- --------------------------------------------------------------------------------
Loss from operations (12,362,352) (670,616)
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (6,454,175) (33,172)
Other income, net 167,922 -
- --------------------------------------------------------------------------------
(6,286,253) (33,172)
- --------------------------------------------------------------------------------
NET LOSS (18,648,605) (703,788)
PREFERRED STOCK DIVIDENDS (333,333) -
- --------------------------------------------------------------------------------
NET LOSS APPLICABLE TO COMMON STOCK $(18,981,938) $ (703,788)
- --------------------------------------------------------------------------------
BASIC LOSS PER COMMON SHARE $ (2.14) $ (.13)
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,860,733 5,488,432
- --------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
COMMON STOCK
------------------- ADDITIONAL
NUMBER PAR PAID-IN ACCUMULATED
OF SHARES VALUE CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, June 21, 1996
(date of incorporation) - $ - $ - $ - $ -
Issuance of founders' shares 5,488,432 54,884 (48,916) - 5,968
Net loss - - - (703,788) (703,788)
- ------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 5,488,432 54,884 (48,916) (703,788) (697,820)
Common stock issued for acquisitions 4,110,952 41,110 14,372,770 - 14,413,880
Contribution and retirement
of common stock (331,428) (3,314) 3,314 - -
Common stock options granted
to employees and directors - - 3,809,826 - 3,809,826
Common stock options and warrants
granted to lenders and consultants - - 1,957,953 - 1,957,953
Treasury stock purchased and retired (2,000) (20) (13,570) - (13,590)
Issuance of common stock for
professional services 17,929 179 99,627 - 99,806
Issuance of common stock for
conversion of debt 442,514 4,425 1,765,631 - 1,770,056
Exercise of common stock options
and warrants, net 7,608 76 41,600 - 41,676
Convertible debt issued at a discount - - 827,685 - 827,685
Common stock issued by stockholders for
cancellation of common stock options
granted by the Company - - 800,000 - 800,000
Contribution to capital - - 159,203 - 159,203
Preferred stock dividend - - 333,333 (333,333) -
Net loss - - - (18,648,605) (18,648,605)
- ------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 9,734,007 $ 97,340 $ 24,108,456 $ (19,685,726) $ 4,520,070
=================================================================================================================
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM
INCEPTION
(JUNE 21, 1996)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,648,605) $(703,788)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation 445,311 2,132
Amortization 1,239,929 2,249
Gain on disposal of property and equipment (8,166) -
Provision for credit losses 4,941,983 -
Compensation expense related to stock options 4,649,702 -
Issuance of common stock for services and interest 374,806 4,968
Stock options and warrants issued to consultants and lenders 1,296,863 -
Cash provided by (used for), net of effect of acquisitions:
Accounts receivable (662,488) (25,000)
Inventories (5,969,719) -
Prepaid expenses 679,663 -
Accounts payable 2,668,636 438,890
Accrued expenses and other liabilities 3,048,563 183,314
- ------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (5,943,522) (97,235)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (13,600,550) -
Cash for acquisitions, net of cash acquired (7,927,844) -
Advances to acquired companies prior to acquisition (4,230,761) -
Purchase of property and equipment (1,356,644) (24,586)
Increase in notes receivable - (400,000)
Repayments of notes receivable 530,420 -
Proceeds from disposal of property and equipment 24,425 -
Other (21,981) (244,101)
- ------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (26,582,935) (668,687)
- ------------------------------------------------------------------------------------------------------------------
F-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 21, 1996)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock 4,554,812 387,022
Proceeds from sale of common stock - 1,000
Proceeds from exercise of common stock warrants 1,800 -
Purchase of treasury stock (13,590) -
Increase (decrease) in bank overdraft (82,884) 82,884
Proceeds from line of credit borrowings 16,462,090 -
Proceeds from floor plan notes payable 4,201,467 -
Proceeds from notes payable 14,163,892 322,000
Repayment of notes payable (5,271,154) -
Proceeds from capital lease obligations 251,722 -
Repayments of capital lease obligations (67,402) -
Deferred financing costs (607,347) (26,984)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 33,593,406 765,922
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,066,949 -
CASH AND CASH EQUIVALENTS, beginning of period - -
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 1,066,949 $ -
==================================================================================================================
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
F-8
</TABLE>
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of Smart Choice
Automotive Group, Inc. and its wholly-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated
in consolidation.
CONCENTRATION OF CREDIT RISK
- ----------------------------
The Company provides sales finance services in connection with the sale of
used cars to individuals residing primarily in Central and South Florida.
Periodically during the year, the Company maintains cash in financial
institutions in excess of the amounts insured by the federal government.
REVENUE RECOGNITION
- -------------------
Income on finance receivables is recognized using the interest method.
Direct loan origination costs are deferred and charged against finance
income over the life of the related installment sales contract as an
adjustment of yield.
Revenue from the sale of cars is recognized upon delivery, when the sales
contract is signed and the agreed-upon down payment has been received.
Parts and accessories sales are recognized upon shipment of products to
customers.
FINANCE RECEIVABLES
- -------------------
The Company originates installment sales contracts from its Company
dealerships. Finance receivables consist of contractually scheduled
payments from installment sales contracts net of unearned finance charges,
direct loan origination costs and an allowance for credit losses.
Unearned finance charges represent the balance of finance income (interest)
remaining from the capitalization of the total interest to be earned over
the original term of the related installment sales contract. Direct loan
origination costs represent the unamortized balance of costs incurred in
the origination of contracts at the Company's dealerships.
The Company follows the provisions of Statement of Financial Accounting
Standards No. 91, "Accounting for Nonrefundable Fees and Costs Associated
with Originating or Acquiring Loans and Initial Direct Costs of Leases."
F-9
<PAGE>
ALLOWANCE FOR CREDIT LOSS
- -------------------------
The allowance for uncollectible finance receivables is maintained at a
level which, in management's judgment, is adequate to absorb potential
losses inherent in the loan portfolio. The amount of the allowance is based
on management's evaluation of the collectibility of the loan portfolio,
which all originated in the State of Florida, including the nature of the
portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, collateral values and economic conditions. Because
of uncertainties associated with regional economic conditions, collateral
values and future cash flows on impaired loans, it is reasonably possible
that management's estimate of credit losses inherent in the loan portfolio
and the related allowance may change materially in the near term. However,
the amount of change that is reasonably possible cannot be estimated. The
allowance for uncollectible finance receivables is increased by a provision
for loan losses, which is charged to expense. Repossessed vehicles are
recorded as inventory at the lower of estimated net realizable value or the
related loan balances. The difference between the balance of the
installment contract and the amount recorded as inventory for the
repossessed vehicle is charged to the allowance for credit losses.
PRESENTATION OF REVENUES AND COST OF REVENUES
- ---------------------------------------------
The prices at which the Company sells its used 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. 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 by the Company 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 cars less cost of cars sold.
INVENTORY
- ---------
Inventory consists of new and used vehicles and vehicle parts and
accessories. Vehicle reconditioning costs are capitalized as a component of
inventory cost. The cost of new and used vehicles sold is determined on a
specific identification basis. Vehicle parts and accessories are valued at
the lower of first-in, first-out (FIFO) cost or market. Repossessed
vehicles are valued at the lower of estimated net realizable value or the
related loan balance.
F-10
<PAGE>
PROPERTY AND EQUIPMENT
- ----------------------
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line method.
DEFERRED ACQUISITION COSTS
- --------------------------
Deferred acquisition costs were related to specific identifiable
acquisitions and were allocated to the purchase price of the companies when
acquired.
GOODWILL
- --------
Goodwill represents acquisition costs in excess of the fair value of net
tangible assets of businesses purchased. These costs are being amortized
over 40 years on a straight-line basis. Goodwill is evaluated for
impairment when events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable. When any such
impairment exists, the related assets will be written down to fair value.
DEFERRED FINANCING COSTS
- ------------------------
Deferred financing costs include costs related to obtaining debt financing
and are being amortized over the term of the debt.
INCOME TAXES
- -------------
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). FAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Measurement of deferred income tax is
based on enacted tax laws including tax rates, with the measurement of
deferred income tax assets being reduced by available tax benefits not
expected to be realized.
F-11
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," (SFAS 121) during 1997. SFAS 121 requires
impairment losses to be recorded on long-lived assets used in operations
and goodwill when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount. The adoption of SFAS 121 did not impact the
financial statements of the Company.
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
LOSS PER SHARE
- --------------
Loss per share is based upon the weighted average number of common shares
outstanding during each period. Potential common shares have not been
included since their effect would be antidilutive. Potential common shares
include 2,224,000 stock options, 1,682,720 warrants, 2,281,767 shares
underlying the convertible debt and 1,972,083 shares underlying the
convertible preferred stock.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," (FAS 128),
which is effective for financial statements issued for periods ending after
December 15, 1997. FAS 128 simplifies the standards for computing earnings
per share and makes them comparable to international earnings per share
standards. This statement replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing
earnings available to common stockholders by the weighted-average number of
common shares outstanding for the period. Similar to fully diluted EPS,
diluted EPS reflects the potential dilution of securities that could share
in the earnings. Adoption of this statement did not have a material effect
on the Company's reported loss per share amounts.
F-12
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
(FAS 130) and No. 131, "Disclosure about Segments of an Enterprise and
Related Information," (FAS 131). FAS 130 establishes standards for
reporting and displaying comprehensive income, its components and
accumulated balances. FAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. Both FAS 130
and FAS 131 are effective for periods beginning after December 15, 1997.
The Company has not determined the impact that the adoption of these new
accounting standards will have on its future financial statements and
disclosures.
F-13
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
- --------------------------------
Smart Choice Automotive Group, Inc. (the "Company"), formerly named
"Eckler Industries, Inc.," operates new vehicle dealerships and 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, a supplier of Corvette
parts and accessories.
On January 28, 1997, pursuant to an Agreement and Plan of Merger dated
December 30, 1996 (the "Agreement"), Eckler Industries, Inc. ("EII")
acquired all of the issued and outstanding shares of common stock of
Smart Choice Holdings, Inc. ("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 acquiror 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 purchase price for Eckler was computed by
valuing the outstanding shares of common stock of Eckler (the
equivalent of 2,757,500 shares) at $3.375 or $9,306,563 and
acquisition costs of $100,119.
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,
F-14
<PAGE>
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 purchase price of FFG was $1,181,008 notes due
to the seller, 285,714 shares of common stock valued at $3.375 per
share ($964,285) and acquisition costs of $40,643. The purchase price
of DDS and DIS was $781,000 notes due to the sellers and acquisition
costs of $24,561.
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"). FFG services the receivables purchased from
Liberty, and FCAF operates the five used vehicle lots previously
operated by WA and Team in Orlando, Florida. The outstanding capital
stock of Liberty and affiliates was acquired for $1,500,000 notes due
to the seller, the equivalent of 352,156 shares of common stock valued
at $3.375 per share ($1,188,527) and $109,249 in acquisition costs.
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 net assets of
PBF and MMM were acquired for $3,050,000 cash, $1,473,175 notes due to
the seller, 285,714 shares of common stock valued at $3.375 per share
($964,285) and $53,299 in acquisition costs.
On June 27, 1997, the Company acquired the assets of Strata Holdings,
Inc. ("SHI") and Ready Finance, Inc. ("RFI"). FCAF operates the three
used vehicle lots previously operated by SHI in West Palm Beach,
Florida and FFG services the finance receivables purchased from RFI.
The net assets of SHI and RFI were acquired for $5,000,000 cash,
$4,880,089 notes due to the seller and $27,271 in acquisition costs.
F-15
<PAGE>
On June 30, 1997, the Company acquired the assets of Roman Fedo, Inc.
("FEDO") and Fedo Finance, Inc. ("FFI"). FCAF operates the used
vehicle lot previously operated by FEDO in West Palm Beach, Florida,
and FFG services the finance receivables purchased from FFI. The
assets of FEDO were acquired for $268,000 cash, 225,000 shares of
common stock valued at $4.50 per share ($1,012,500) and $8,741 in
acquisition costs.
On August 21, 1997, the Company acquired the assets of Jack Winters
Enterprises, Inc. ("Winters"). These assets consisted of a retail
automobile dealership located in Stuart, Florida for Volvo automobiles
and other consumer vehicles. The business is being operated by First
Choice Stuart 2, Inc., a 100%-owned subsidiary of the Company and is
doing business as Motorcars of Stuart. The purchase price of Winters
was $442,500 cash, $1,200,000 notes due the seller, 18,322 shares of
common stock valued at $5.125 per share ($93,900) and acquisition
costs of $49,540.
On August 29, 1997, the Company acquired the stock of B&B Enterprises
Inc. ("B&B"). B&B operates a retail automobile dealership located in
Stuart, Florida for Nissan automobiles and other consumer vehicles.
The business is being operated by First Choice Stuart 1, Inc., a 100%-
owned subsidiary of the Company and is doing business as Stuart
Nissan. The purchase price of B&B was 86,546 shares of common stock
valued at $6.3125 per share ($546,322) and acquisition costs of
$55,385.
The acquisitions described above have been accounted for using the
purchase method of accounting, and accordingly, the purchase prices
have been allocated to the assets purchased and the liabilities
assumed based upon the fair values at the dates of acquisition. The
excess of the purchase prices over the fair values of the net assets
acquired was approximately $26,000,000 and has been recorded as
goodwill, which is being amortized on a straight-line basis over 40
years.
The operating results of these acquired businesses have been included
in the consolidated statement of operations from the dates of
acquisition. The following pro forma information has been prepared
assuming certain of the acquisitions above, which were deemed to be
F-16
<PAGE>
significant acquisitions, had taken place at the beginning of the
respective periods. The pro forma information includes adjustments for
interest expense that would have been incurred to finance the
purchases, additional depreciation based on the fair value of property
acquired and the amortization of intangibles arising from the
transactions. The pro forma financial information is not necessarily
indicative of the results of operations as they would have been had
the transactions been effected on the assumed dates.
UNAUDITED
---------------------------
YEAR ENDED DECEMBER 31, 1997 1996
----------------------------------------------------------------
Net sales $ 92,405,005 $ 90,158,113
Net loss (19,155,105) (3,803,046)
Loss per common share (2.08) (.67)
=================================================================
The results of operations of the insignificant acquisitions were not
material to the Company's consolidated results of operations.
F-17
<PAGE>
2. FINANCE RECEIVABLES
- ----------------------
The following is a summary of principal balances, net as of December
31, 1997:
---------------------------------------------------------------
Contractually scheduled payments $ 55,107,232
Less: unearned finance charges (15,510,342)
---------------------------------------------------------------
Principal balances 39,596,890
Add: loan origination costs 487,522
---------------------------------------------------------------
Principal balances, net 40,084,412
Less: allowance for credit losses (6,857,265)
---------------------------------------------------------------
Finance receivables, net $ 33,227,147
===============================================================
Finance receivables consist of sales of used cars under installment
sale contracts with maturities that generally do not exceed 48 months.
The receivables bear interest at rates ranging from 25.0% to 29.9% and
are collateralized by the vehicles sold. The Company holds title to
the vehicles until full contract payment is made. Finance receivables
are pledged as collateral under a line of credit agreement (see Note
6).
Changes in the allowance for credit losses are as follows:
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------
Balance at dates of acquisitions $ 5,627,937
Loans charged off, net of recoveries (3,712,655)
Provision for credit losses 4,941,983
---------------------------------------------------------------
Balance at end of year $ 6,857,265
===============================================================
F-18
<PAGE>
3. PROPERTY AND EQUIPMENT
- -------------------------
Property and equipment consist of the following:
ESTIMATED
DECEMBER 31, USEFUL LIFE 1997 1996
---------------------------------------------------------------------
Land $ 1,177,091 $ -
Buildings and improvements 10-40 years 4,263,930 -
Leasehold improvements 7-39 years 708,009 -
Machinery and equipment 3-7 years 909,197 -
Molds 5-10 years 310,305 -
Office equipment and furniture 3-8 years 3,542,413 24,586
Transportation equipment 3-10 years 2,482,521 -
Signs 7 years 152,234 -
---------------------------------------------------------------------
13,545,700 24,586
Less accumulated depreciation 4,331,493 2,132
---------------------------------------------------------------------
$ 9,214,207 $22,454
=====================================================================
Depreciation expense for the years ended December 31, 1997 and 1996
was $445,311 and $2,132, respectively.
4. NOTE RECEIVABLE
- ------------------
At December 31, 1996, note receivable consisted of advances under a
$800,000 line of credit extended to a company which had signed a
contract to be acquired by Smart Choice Holdings, Inc. Advances under
the line of credit bore interest at the prime rate, were due and
payable 30 days after written demand and were collateralized by
substantially all assets of the borrower.
F-19
<PAGE>
5. ACCRUED EXPENSES
- -------------------
Accrued expenses consist of the following:
DECEMBER 31, 1997 1996
-------------------------------------------------------------------
Accrued compensation $ 855,806 $ 141,713
Accrued interest 411,913 32,620
Accrued professional fees 897,837 -
Accrued restructuring charges 1,101,266 -
Accrued taxes and other 1,367,019 8,981
-------------------------------------------------------------------
$ 4,633,841 $ 183,314
===================================================================
6. LINE OF CREDIT
- -----------------
The Company has a revolving line of credit with a lender which allows
the Company to borrow the lesser of $42,500,000 or 60% of certain
eligible accounts receivable at prime plus 3%. Interest is payable
monthly with all of the outstanding principal due December 1999. The
line of credit is collateralized by substantially all the assets of
Florida Finance Group, Inc. and is guaranteed by Smart Choice
Holdings, Inc. and Smart Choice Automotive Group, Inc. The balance at
December 31, 1997 under this line of credit was $31,400,000.
Unamortized debt discount was $170,400 at December 31, 1997. The line
of credit agreement contains various financial and operating
covenants. As of December 31, 1997, the Company was in violation of
certain of these covenants, including leverage ratios and minimum net
income requirement. The lender has waived compliance of these
covenants for the year ending December 31, 1997. The Company is
currently in negotiations with the lender to modify the terms of the
line of credit agreement and to increase the amount of the line of
credit. The amount of the line of credit was increased from
$35,000,000 to $42,500,000 on March 27, 1998.
The following summarizes certain information about the borrowings
under the line of credit:
1997
--------------------------------------------------------------------
Maximum amount outstanding at any month end $ 31,681,590
Average amount outstanding during the period $ 21,921,484
Weighted average interest rate during the period 11.45%
--------------------------------------------------------------------
Interest rates ranged from 11.25% to 11.5%, and interest expense was
$2,235,954 for the year ended December 31, 1997.
F-20
<PAGE>
7. NOTES PAYABLE
- ------------------
Notes payable consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1997 1996
<S> <C> <C>
Notes payable issued in connection with various acquisitions, interest ranging
from 8% to 10%, payable through June 1999. $ 6,029,146 $ -
12% unsecured convertible note payable, interest payable quarterly, unpaid
principal and interest due May 2002, convertible at a rate of one share of
common stock for every $7.50 of outstanding principal, conversion price
adjustable upon the occurrence of certain events. 4,000,000 -
12% convertible note payable, net of discount, interest payable quarterly,
unpaid principal and interest due March 1999, convertible at a rate of one
share of common stock for every $6.00 of outstanding principal, conversion
price adjustable upon the occurrence of certain events. On December 31, 1997,
the conversion price was adjusted to 90% of the market price of the Company's
common stock. Accordingly, $282,506 of interest expense has been recorded for
the difference between the conversion price of the note payable and the fair
market value of the Company's common stock on the date of issuance. 3,025,125 -
Prime + 1.5% (10% at December 31, 1997) mortgage note payable, principal
payments of $13,333 plus interest payable monthly, outstanding principal and
interest due July, 1998, collateralized by property and equipment of Eckler
Industries, Inc. and guaranteed by a stockholder of the Company. 2,500,000 -
Variable rate (8.5% at December 31, 1997) installment loan payable, principal
and interest payable monthly, outstanding principal and interest due December
2009, collateralized by certain property of the Company. 2,199,900 -
Various unsecured notes payable to investors bearing interest at rates ranging
from 10%-16%, interest payable monthly, outstanding principal balances due
through December 2001. 1,699,142 -
$1,500,000 note payable, net of discount (see below) 1,415,784 -
9% unsecured convertible notes payable, interest and principal due February
1998,convertible at a rate of one share of common stock for each $8.75 of
principal. 1,267,601 -
8% convertible debentures (see below) 1,050,000 -
9%unsecured convertible note payable, interest and principal due January 1999,
convertible at a rate of one share of common stock for each $8.75 of
principal. 1,031,008 -
F-21
<PAGE>
Prime plus 1.75% (10.25% at December 31, 1997) notes payable, principal of $24,274
plus interest payable monthly through June 1998 at which time all remaining
principal and interest are due, secured by substantially all the assets of
First Choice Stuart 1, Inc. and guaranteed by First Choice Auto Finance, Inc.
and Smart Choice Holdings, Inc. 894,173 -
8% note payable, principal and interest of $10,010 payable monthly through June 2007,
collateralized by certain property of the Company. 797,488 -
Prime (8.5% at December 31, 1997) unsecured convertible subordinated debenture,
net of discount, interest payable quarterly, unpaid principal and interest due
December 31, 2000, convertible at the rate of one share of common stock for
every $9.00 of outstanding principal, conversion price adjustable upon the
occurrence of certain events. 697,895 -
Prime plus 1% (9.5% at December 31, 1997) unsecured note payable, interest
payable monthly, outstanding principal due April 1998. 600,000 -
7.75% note payable, principal and interest of $8,683 payable monthly through
December 2003, secured by certain real property of the Company. 498,923 -
12% convertible debentures (see below) 410,000 262,000
Prime plus 1% (9.5% at December 31, 1997) note payable, interest payable
monthly, principal due upon demand. 300,000 -
Various notes payable bearing interest at rates from 6% to 10%, principal and interest
payable through July 2001. 274,023 60,000
10% unsecured note payable, interest payable monthly, outstanding principal due
December 1998. 257,250 -
Prime plus 1% (9.5% at December 31, 1997) unsecured convertible subordinated
note payable, interest payable quarterly, unpaid principal and interest due
June 1999, convertible at a rate of one share of common stock for every $7.50
of outstanding principal, conversion price adjustable upon the occurrence of
certain events. On December 31, 1997, the conversion price was adjusted to 90%
of the market price of the Company's common stock. Accordingly, $20,179 of
interest expense has been recorded for the difference between the conversion
price of the note payable and the fair market value of the Company's common
stock on the date of issuance. 250,000 -
- --------------------------------------------------------------------------------------------------------------------
Total notes payable $ 29,197,458 $322,000
====================================================================================================================
</TABLE>
Aggregate maturities of notes payable over future years are as follows: 1998 -
$11,180,849; 1999 - $10,471,143; 2000 - $1,002,763; 2001 - $740,415; 2002 -
$4,264,519; thereafter - $2,148,965.
Unamortized debt discount was $611,196 at December 31, 1997.
F-22
<PAGE>
$1,500,000 Note Payable
- -----------------------
On December 31, 1997, the Company signed a $1,500,000 note payable. The note
payable bears interest at 10%. Interest is payable monthly and the outstanding
principal balance is due October 1998. If the Company or any of its affiliates
should, prior to the repayment in full of the note, either (i) issue any debt or
equity securities in a public offering or (ii) issue, in the aggregate, more
than seven and one-half million dollars of debt or equity securities in one or
more private placements, including any securitization or other sale or financing
of chattel paper or receivables, but excluding floor plan financing; then all
the outstanding principal and all the accrued and unpaid interest on the note
will be due in full on the date of closing of such issuance. The note is
collateralized by substantially all the assets as well as all of the issued and
outstanding capital stock of Eckler Industries, Inc.
8% Convertible Debentures
- -------------------------
The unsecured convertible debentures bear interest at 8%. Interest is payable
monthly, and all outstanding principal is due April 1998. The debentures are
convertible from December 14, 1997 through April 15, 1998 at a conversion price
equal to 66 2/3% of the average closing bid price of the Company's common stock
for the five trading days immediately preceding the conversion date.
Accordingly, $525,000 of interest expense has been recorded for the year ended
December 31, 1997 for the difference between the conversion price of the
debentures and the fair market value of the Company's stock at the time of
issuance. The interest rate and conversion price are both adjustable upon the
occurrence of certain events.
12% Convertible Debentures
- --------------------------
The convertible debentures bear interest at 12% and were due on November 19,
1997. Holders of $340,000 of the debentures have extended the due date to
January 1999. Outstanding principal after November 19 bears interest at 18%. The
debentures were convertible prior to November 19, 1997 into the Company's common
stock at a rate of one share of common stock for each $5.00 of outstanding
principal. Additionally, holders of the debentures who did not convert prior to
the maturity date received, for each $20,000 debenture, a warrant to purchase
1,200 shares of the Company's common stock at $3.00 per share. The warrants are
immediately exercisable and expire five years from the date of issuance.
F-23
<PAGE>
8. FLOOR PLANS PAYABLE
- -----------------------
Floor plans payable consist of the following:
<TABLE>
<S> <C> <C>
DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
$3,350,000 floor plan line of credit, variable interest rate, interest payable
monthly, principal balance payable at the earlier of the time a vehicle is
sold or 360 and 180 days from the time a vehicle is floored for new and used
vehicles, respectively, guaranteed by Smart Choice Automotive Group, Inc.,
collateralized by vehicle inventory floored. The line of credit agreement
contains certain financial ratio covenants. $ 3,285,165 $ -
$3,000,000 floor plan line of credit, interest at prime plus 1.5% (10% at
December 31, 1997), interest payable monthly, principal balance payable the
earlier of (i) 48 hours from the time of sale of a vehicle or within 24 hours
from the time payment is received from the purchaser of the vehicle or (ii)
upon demand. Collateralized by all inventory, fixed assets, holdback reserves,
manufacturers' rebates, incentive payments and intangible assets of First
Choice Auto Finance, Inc., guaranteed by Smart Choice Automotive Group, Inc. 2,659,968
$3,000,000 floor plan line of credit, interest at prime plus 1% (9.5% at
December 31, 1997), interest payable monthly, principal payable upon sale of
floored vehicle, collateralized by certain assets of First Choice Stuart 1,
Inc. The line of credit expired December 31, 1997 and is subject to various
financial and operating covenants. As of December 31, 1997, the Company was in
violation of certain of the covenants. The lender has waived these covenants
through December 31, 1997. The Company is currently in negotiations with the
lender to modify the terms of the line of credit agreement. 2,341,959 -
- ----------------------------------------------------------------------------------------------------------------------
Total $ 8,287,092 $ -
======================================================================================================================
</TABLE>
F-24
<PAGE>
9. INCOME TAXES
- ---------------
The components of deferred income tax assets consist of the following:
DECEMBER 31, 1997 1996
---------------------------------------------------------------------
Deferred income tax assets:
Net operating loss carryforwards $ 3,476,000 $ 238,000
Accounts receivable 2,589,000 -
Stock options and warrants 1,805,000 -
Accruals 523,000 -
Compensation 423,000 -
Depreciation and amortization 243,000 -
Inventory 149,000 -
Other 93,000 -
---------------------------------------------------------------------
Gross deferred income tax assets 9,301,000 238,000
Valuation allowance (9,301,000) (238,000)
---------------------------------------------------------------------
Total deferred income tax assets $ - $ -
=====================================================================
The Company's valuation allowance increased by approximately
$9,063,000 and $238,000 for the periods ended December 31, 1997 and
1996, respectively, which represents the effect of changes in the
temporary differences and net operating losses. The Company has
recorded a valuation allowance to state its deferred tax assets at
estimated net realizable value due to the uncertainty related to
realization to these assets at estimated net realizable value due to
the uncertainty related to realization of these assets through future
taxable income.
At December 31, 1997, the Company had unused federal tax net operating
losses (NOLs) to carry forward against future years' taxable income of
approximately $10,223,000, expiring in various amounts through 2012.
As a result of certain acquisitions, the use of approximately
$1,141,000 the NOLs will be limited each year under the provisions of
Section 382 of the Internal Revenue Code of 1986, as amended, and the
provisions of Treasury Regulation 1.1502-21 regarding separate return
limitation years.
F-25
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
Leases
------
The Company conducts its operations partially from leased facilities.
These leases are classified as operating leases and expire on various
dates through 2005.
The Company also leases equipment under capital leases which expire on
various dates through 2002. The total capitalized cost for this
equipment is $1,004,961 with accumulated depreciation of $116,015 as
of December 31, 1997.
As of December 31, 1997, future minimum lease payments under capital
leases and future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in
excess of one year are as follows:
CAPITAL OPERATING
DECEMBER 31, 1997 LEASES LEASES
----------------------------------------------------------------
1998 $ 322,490 $ 2,247,147
1999 268,330 1,584,132
2000 254,342 1,481,429
2001 204,906 1,446,639
2002 101,111 936,414
Thereafter - 479,160
----------------------------------------------------------------
1,151,179 $ 8,174,921
============
Less amount representing interest 210,899
------------
Present value of minimum lease
payments $ 940,280
============
Rental expense for the year ended December 31, 1997 was approximately
$1,542,000.
F-26
<PAGE>
Employment Agreements
---------------------
The Company has entered into employment agreements expiring at various
dates through the year 2002. As of December 31, 1997, the Company's
total noncancellable obligation under all employment agreements is
approximately $2,404,000.
Litigation
----------
The Company is involved in legal and administrative proceedings and
claims of various types. While any litigation contains an element of
uncertainty, based upon the opinion of the Company's legal counsel,
management presently believes that the outcome of such proceedings or
claims which are pending or known to be threatened will not have a
material adverse effect on the Company's financial position since the
Company has accrued sufficient amounts to cover the costs expected to
be incurred in settlement of these actions.
Environmental Matters
---------------------
Some of the Company's past and present operations involve activities
which are subject to extensive and changing federal and state
environmental regulations and can give rise to environmental issues.
As a result, the Company is from time to time involved in
administrative and judicial proceedings and administrative inquiries
related to environmental matters. Based on advice of counsel,
management believes that the outcome of these matters will not have a
material impact on the Company's financial position.
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK
- ------------------------------------------
During December 1996 and January 1997, the Company sold 395,000 shares
of Series A redeemable convertible preferred stock. Proceeds from
these offerings, net of offering costs, were approximately $977,000.
The liquidation preference of each preferred share is $2.00. Upon the
completion of an initial public offering of the Company that raises a
minimum of $20 million in gross proceeds, each preferred share will be
converted automatically into the higher of: (i) one share of the
Company's $.01 par value common stock or (ii) that number of shares of
common stock having a value (as measured by a public offering sale
price) equal to $9.00. The holders of the Series A shares may require,
by a two-thirds vote of the issued and outstanding Series A shares,
that the Company offer to redeem the Series A shares at any time after
September 30, 1998. The redemption price will equal $2.00 per share.
On September 30, 1997, the Company completed an offering of 300 units
of Series A redeemable convertible preferred stock and warrants at
$10,000 per unit. Proceeds from the offering, net of offering costs,
were approximately $2,965,000. Each unit consists of one share of
Series A redeemable convertible preferred stock and one warrant to
acquire 300 shares of common stock for each preferred share purchased
at a price equal to $8.10 per share. The warrants expire five years
after the date of issuance. The preferred stock is convertible into
shares of common stock at a conversion price which, at the option of
the buyer, is either fixed at a rate of 135% of the market price of
common stock on the date of issuance of the preferred stock, or
floating at a rate of 100% of the market price of the common stock if
converted during the period 90 days after the issuance of the
preferred stock and 90% of the market price if converted at any time
after that 90-day period. Accordingly, since none of the preferred
stock was converted 90 days after issuance, a preferred stock dividend
of $333,333 ($.04 per share) has been recorded for the year ended
December 31, 1997 for the difference between the discounted conversion
price of the preferred stock and the fair market value of the
Company's common stock at the time of issuance. The preferred stock is
redeemable at the option of the buyer upon the occurrence of certain
events at a price per share that is also dependent upon the occurrence
of certain events.
F-28
<PAGE>
On December 10, 1997, the Company issued an additional 100 units of
the Series A redeemable convertible preferred stock and associated
warrants for net proceeds of $1,000,000. Each unit consists of one
share of Series A redeemable convertible preferred stock and one
warrant to acquire 300 shares of common stock for each preferred share
purchased at a price equal to $5.23 per share. The warrants expire
five years after the date of issuance. The preferred stock has
features identical to that of the Series A redeemable convertible
preferred stock issued on September 30, 1997.
Subsequent to December 31, 1997, the holders of the preferred stock
converted 245 shares of preferred stock into 1,265,827 shares of
common stock.
12. CAPITAL STOCK
- -----------------
Increase in Par Value
---------------------
In March 1997, the Company authorized an increase in the par value of
its common stock from $.001 to $.01. All share information included in
the accompanying financial statements has been retroactively adjusted
to give effect to the increase in par value.
Stock Options
-------------
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for options
issued to employees. Accordingly, no compensation cost has been
recognized for options granted to employees at exercise prices which
equal or exceed the market price of the Company's common stock at the
date of grant. Options granted at exercise prices below market prices
are recognized as compensation cost measured as the difference between
market price and exercise price at the date of grant.
Statement of Financial Accounting Standards No. 123 (FAS 123)
"Accounting for Stock-Based Compensation," requires the Company to
provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's employee stock options
had been determined in accordance with the fair market value based on
F-29
<PAGE>
the method prescribed in FAS 123. The Company estimates the fair value
of each stock option at the grant date by using the Black-Scholes
option-pricing model with the following weighted-average assumptions
used for grants in the year ended December 31, 1997: no dividend
yield, an expected life of 4.9 years; expected volatility of 61%, and
a risk-free interest rate of 6%.
Under the accounting provisions of FAS 123, the Company's net loss
applicable to common stock and loss per share would have been
increased to the pro forma amounts indicated below:
DECEMBER 31, 1997 1996
---------------------------------------------------------------------
Net loss applicable to common stock
As reported $ (18,981,938) $ (703,788)
Pro forma (22,570,717) (703,788)
Basic loss per common share
As reported $ (2.14) $ (.13)
Pro forma (2.55) (.13)
======================================================================
The following table summarizes information about employee plan and
non-plan stock option activity for the periods ended December 31, 1997
and 1996:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
WEIGHTED-AVERAGE FAIR VALUE OF
SHARES EXERCISE PRICE OPTIONS GRANTED
<S> <C> <C> <C>
Outstanding, December 31, 1996 - $ - $ -
Acquired in merger 175,000 2.66 -
Granted, at market value 838,000 4.89 2.78
Granted, above market value 30,000 6.50 3.55
Granted, below market value 50,000 4.07 2.53
Exercised (12,500) 2.50 -
Forfeited (3,000) 4.88 -
Outstanding, December 31, 1997 1,077,500 $ 4.56 $ -
</TABLE>
F-30
<PAGE>
At December 31, 1997, a total of 602,500 options were exercisable at a
weighted-average exercise price of $4.24.
The following table summarizes information about non-plan stock option
activity issued to non-employees for the periods ended December 31,
1997 and 1996:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
WEIGHTED-AVERAGE FAIR VALUE OF
SHARES EXERCISE PRICE OPTIONS GRANTED
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
Outstanding - inception - $ - $ -
Granted, above market value 290,000 4.75 -
Outstanding, December 31, 1996 290,000 4.75 -
Acquired in merger 1,044,000 3.81 -
Granted, at market value 232,500 5.06 2.58
Granted, above market value 300,000 8.17 2.28
Forfeited (680,000) 3.79 -
Expired (40,000) 5.00 -
-----------------------------------------------------------------------------------------
Outstanding, December 31, 1997 1,146,500 $ 5.41 $ -
========================================================================================
</TABLE>
At December 31, 1997 and 1996, a total of 996,500 and 262,000 options
were exercisable at a weighted-average exercise price of $5.14 and
$4.92, respectively.
F-31
<PAGE>
The following table summarizes information about stock options
outstanding and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER EXERCISE REMAINING NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING PRICE LIFE EXERCISABLE PRICE
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee Plan and
Non-Plan Options
$2.50 to $3.88 187,500 $ 2.84 3.3 years 162,500 $ 2.68
$4.25 to $6.50 890,000 4.93 4.4 years 440,000 4.82
---------------------------------------------------------------------------------
1,077,500 $ 4.56 602,500 $ 4.24
=================================================================================
Non-Employee
Non-Plan Options
$2.88 to $3.00 275,000 $ 2.91 3.7 years 275,000 $ 2.91
$4.50 to $6.50 721,500 5.44 3.8 years 621,500 5.55
$8.75 to $12.00 150,000 9.83 3.7 years 100,000 8.75
----------------------------------------------------------------------------------
1,146,500 $ 5.41 996,500 $ 5.41
==================================================================================
</TABLE>
Common Stock Options Issued - Compensation
------------------------------------------
During the year ended December 31, 1997, compensation expense of
$3,809,826 was recognized on common stock options granted to employees
and directors. These options were granted by trusts created by two
major stockholders to purchase shares of the Company's common stock
owned by the trusts. The trusts will receive the proceeds, if any,
from the exercise of these options. Since these options were not
granted by the Company and their exercise will not result in the
issuance of any additional common stock, they have been excluded from
the tables above.
Common Stock Options Issued - Consultants
-----------------------------------------
During the year ended December 31, 1997, options granted to
consultants were valued at $607,700 in accordance with FAS 123.
F-32
<PAGE>
Common Stock Issued - Professional Fees
---------------------------------------
The Company issued 17,929 shares of common stock as payment for
professional services which were valued at $99,806 representing the
fair value of the stock on the date of issuance.
Common Stock Options and Warrants Issued - Lenders
--------------------------------------------------
During 1997, the Company entered into various agreements with lending
institutions and issued options and warrants to purchase 472,500
shares of the Company's common stock at exercise prices ranging from
$2.00 to $12.00 per share. Of these options and warrants, 422,500 were
exercisable at December 31, 1997. The options and warrants expire at
various dates ranging from December 1999 through August 2002.
The above common stock options and warrants were valued at $1,350,253
in accordance with the provisions of FAS 123. This amount was recorded
as debt discount and is being amortized over the life of the related
debt. Interest expense related to these options and warrants was
$466,979 for the year ended December 31, 1997.
Common Stock Issued - Debt Conversion
-------------------------------------
During the year ended December 31, 1997, the Company issued 442,514
shares of common stock in conversion of debt amounting to $1,770,056.
F-33
<PAGE>
Stock Warrants
--------------
At December 31, 1997, the Company had the following stock warrants
outstanding:
NUMBER OF
UNDERLYING EXERCISE
EXPIRATION DATE SHARES PRICE
December 31, 1999 70,000 $ 2.00
November 8, 2000 12,500 $ 6.00
November 14, 2000 1,284,000 $ 6.50
March 30, 2001 20,000 $ 4.20
August 29, 2002 52,500 $ 7.00
September 30, 2002 90,000 $ 8.10
November 19, 2002 33,720 $ 3.00
December 10, 2002 30,000 $ 5.23
December 24, 2002 90,000 $ 4.00
----------
1,682,720
=========
At December 31, 1997, 1,632,000 of the warrants were exercisable.
Shares Reserved
---------------
At December 31, 1997, the Company has reserved approximately 8,159,970
shares of common stock for future issuance under all of the above
arrangements, the convertible debt and the convertible preferred
stock.
13. RESTRUCTURING CHARGE
------------------------
During the fourth quarter of 1997, after all acquisitions were
completed, the Company implemented a restructuring program (the
"Program") designed to enhance overall competitiveness and efficiency
through the reduction of operating costs. The Program resulted in a
charge to operations of $2,117,906. The charge consists primarily of
costs related to employment contract terminations and severance pay.
F-34
<PAGE>
14. RETIREMENT BENEFIT PLAN
---------------------------
The Company sponsors a defined contribution pension plan for all employees
meeting certain eligibility requirements. The plan provides for voluntary
employee contributions and contributions by the Company to be determined at
the discretion of the Board of Directors. The Company made no contribution
to the plan for the year ended December 31, 1997. There was no plan in
effect from the period of inception to December 31, 1996.
15. SUPPLEMENT CASH FLOW INFORMATION
------------------------------------
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996
-----------------------------------------------------------------------------------
Cash paid for interest $ 4,228,339 $ 552
===================================================================================
<S> <C> <C>
Noncash investing and financing activities:
Notes payable and capital lease obligations
incurred in connection with the purchase of
property and equipment $ 3,722,670 $ -
Notes payable issued in connection with
acquisitions 11,015,272 -
Common stock issued in
connection with acquisitions 14,413,880 -
Common stock issued for conversion of debt 1,770,056
Common stock options granted to employees and
directors 3,809,826 -
Common stock options and warrants issued to
lenders and consultants 1,957,953 -
Common stock issued for professional services 99,806 4,968
Common stock issued by stockholders for cancellation of
common stock options granted by the Company 800,000 -
Contribution to capital by stockholder 159,203 -
Debt discount on convertible debt 827,685 -
===================================================================================
</TABLE>
F-35
<PAGE>
16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following summary
presents a description of the methodologies and assumptions used to
determine such amounts:
Limitations
-----------
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument;
they are subjective in nature and involve uncertainties, matters of
judgment and, therefore, cannot be determined with precision. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
instrument. Changes in assumptions could significantly affect these
estimates.
Since the fair value is estimated as of December 31, 1997, the amounts that
will actually be realized or paid in settlement of the instruments could be
significantly different.
Cash and Cash Equivalents
-------------------------
The carrying amount is assumed to be the fair value because of the
liquidity of these instruments.
Finance Receivables, Net
------------------------
The carrying amount is assumed to be the fair value because of the relative
short maturity and repayment terms of the portfolio as compared to similar
instruments.
Accounts Payable and Accrued Expenses
-------------------------------------
The carrying amount approximates fair value because of the short maturity
of these instruments.
F-36
<PAGE>
Notes Payable
-------------
The terms of the Company's notes payable approximates the terms in the
market place at which they could be replaced. Therefore, the fair value
approximates the carrying value of these financial instruments.
17. SEGMENT INFORMATION
- -----------------------
The Company's operations are classified into four business segments. The
dealership segment operates a network of 24 new and used car dealerships in
the Southeastern United States. The Company primarily sells used vehicles
to payment-sensitive non-prime customers who, most likely, would be unable
to purchase a vehicle without financing through the Company's financing
services segment. The financing services segment finances consumer
purchases of used vehicles sold in the Company's used and new car
dealerships. Operations within the dealer services segment include
providing consulting services to new car dealers on the use of finance and
insurance products in the sale of vehicles. The parts and accessories
segment sells and distributes Corvette parts and accessories throughout the
United States, primarily through its extensive catalog.
The following table shows certain financial information by business segment
as of and for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
FINANCING DEALER PARTS AND
DEALERSHIPS SERVICES SERVICES ACCESSORIES CORPORATE CONSOLIDATED
1997
<S> <C> <C> <C> <C> <C> <C>
Sales $ 45,142,473 $ 9,209,656 $ 1,177,903 $ 15,384,589 $ - $ 70,914,621
Operating income (loss) (399,237) 3,028,596 207,320 17,635 (15,216,666) (12,362,352)
Depreciation and
amortization 128,673 8,078 2,552 277,794 1,268,143 1,685,240
Identifiable assets 17,642,458 34,763,399 111,312 5,439,449 31,148,373 89,104,991
Capital expenditures 1,431,339 178,238 3,684 286,853 3,179,200 5,079,314
(exclusive of acquisitions)
1996
Sales $ - $ - $ - $ - $ - $ -
Operating income (loss) - - - - (670,616) (670,616)
Depreciation and
amortization - - - - 4,381 4,381
Identifiable assets - - - - 716,290 716,290
Capital expenditures - - - - 24,586 24,586
========================================================================================================================
</TABLE>
F-37
<PAGE>
18. FOURTH QUARTER ADJUSTMENTS
------------------------------
During the fourth quarter of 1997, the Company recorded the following
adjustments:
--------------------------------------------------------------------
Expense costs of abandoned public offering $ 479,406
Restructuring charge 2,117,906
Expense related to stock options 1,405,087
--------------------------------------------------------------------
F-38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NO. EXHIBIT DESCRIPTION FILED HEREWITH OR INCORPORATED BY REFERENCE TO:
<S> <C> <C>
3.1 Amended and Restated Articles of Exhibit 3.1 to Form SB-2 Registration Statement, filed on
Incorporation of Smart Choice September 1, 1995, File No. 33-96520-A
Automotive Group, Inc. (the
"Company")
3.1.1 Articles of Amendment to Articles of Exhibit 3.2 to Form 10-Q filed on May 20, 1997
Incorporation of SMCH
3.2 Amended and Restated By-Laws of the Exhibit 3.2 to Form SB-2 Registration
Company Statement, filed on September 1, 1995, File No. 33-96520-A.
3.2.1 Amendment No. 1 to Amended and Exhibit 3.2.1 to Amendment No. 2 to Form SB-2 Registration
Restated Bylaws Statement, filed on November 6, 1995, File No. 33-96520-A.
3.2.2 Second Articles of Amendment to Exhibit 3.1 to Form 8-K filed on October 9, 1997.
Articles of Incorporation
4.1 Specimen Common Stock Certificate Exhibit 4.1 to Form 8-A Registration Statement, filed on
April 16, 1997.
4.2 Specimen of Warrant Certificate Exhibit 4.2 to Form 8-A Registration Statement, filed on
April 16, 1997.
4.3 Warrant Agreement between the Company Exhibit 4.5 to Amendment No. 2 to Form SB-2 Registration
and American Stock Transfer & Trust Statement, filed on November 6, 1995, File No. 33-96520-A.
Company, as Warrant Agent, dated
November 9, 1995
4.3.1 Form of Amendment to Warrant Agreement Exhibit 4.4 to Form 8-A Registration Statement, filed on
April 16, 1997.
10.1 Eckler Industries, Inc. Retirement and Exhibit 10.4.1 to Form SB-2 Registration Statement, filed
Savings Plan and Trust Agreement, as on September 1, 1995, File No. 33-96520-A.
Amended and Restated on September 14,
1992
10.2 Amendment No. 1 to Eckler Industries, Exhibit 10.4.2 to Form SB-2 Registration Statement filed
Inc. Retirement and Savings Plan Trust on September 1, 1995, File No. 33-96520-A.
Agreement Dated March 28, 1994.
10.3 Eckler Industries, Inc. Non-Qualified Exhibit 10.6 to Form SB-2 Registration Statement, filed on
Stock Option Plan September 1, 1995, File No. 33-96520-A.
10.4 Eckler Industries, Inc. 1995 Combined Exhibit 10.7 to Form SB-2 Registration Statement, filed on
Qualified and Non-Qualified Employee September 1, 1995, File No. 33-96520-A.
Stock Option Plan
10.5 Registration Rights Agreement by and Exhibit 10.15 to Amendment No. 1 to Form SB-2 Registration
among the Company and each of the Statement, filed on October 13, 1995, File No. 33-96520-A.
Purchasers referred to in Schedule 1
thereto, dated September 20, 1995.
10.6 Unit Purchase Option Agreement between Exhibit 1.2 to Amendment No. 2 to Form SB-2 Registration
the Company and Argent Securities, Statement, filed on November 6, 1995, File No. 33-96520-A.
Inc. and Certificate dated November
15, 1995
10.7 Loan Agreement between the Company Exhibit 10.19 to Post-Effective Amendment No. 2 to Form
and Barnett Bank, N.A. dated SB-2 Registration Statement, filed on November 14, 1996,
September 30, 1996 File No. 33-96520-A.
10.8 Mortgage and Security Agreement Exhibit 10.20 to Post-Effective Amendment No. 2 to Form
between the Company and Barnett Bank, SB-2 Registration Statement, filed on November 14, 1996,
N.A. dated September 30, 1996. File No. 33-96520-A.
10.9 Promissory Note in the amount of Exhibit 10.21 to Post-Effective Amendment No. 2 to Form SB-2
$2,400,000 from the Company in favor Registration Statement, filed on November 14, 1996, File No.
of Barnett Bank, N.A. dated September 30, 33-96520-A.
1996.
10.10 Assignment of Loan Documents dated Filed herewith.
November 4, 1997 between Barnett Bank,
N.A. and The Huntington National Bank
("Huntington")
10.11 Modification of Mortgage Deed and Filed herewith.
Security Agreement dated November 3,
1997 between the Company and Huntington
10.12 Future Advance Promissory Note dated Filed herewith.
December 30, 1997,principal amount
$260,000, the Company maker,
Huntington, payee
10.13 Modification of Mortgage and Mortgage Filed herewith.
Note and Extension Agreement dated
December 30, 1997 between the Company
and Huntington
10.14 Merger Agreement between Smart Exhibit 10.1 to Form 8-K, filed on February 12, 1997
Choice Holdings, Inc. ("SCHI"), the
Company, Thomas E. Conlan and
Gerald C. Parker dated December 30,
1997.
10.15 First Amended and Restated Loan and Exhibit 4.1 to Form 10-Q, filed on May 20, 1997.
Security Agreement between Florida
Finance Group, Inc. ("FFG") and Finova
Capital Corporation ("Finova"), dated
February 4, 1997.
10.16 Warrant to Purchase Common Stock of the Exhibit 4.2 to Form 10-Q, filed on May 20, 1997.
Company between the Company and Finova,
dated January 13, 1997.
10.17 Intentionally Omitted
10.18 Intentionally Omitted
10.19 Guaranty to Finova from the Company Exhibit 4.5 to Form 10-Q, filed on May 20, 1997.
dated January 13, 1997.
10.20 Eighth Amended and Restated Promissory Filed herewith.
Note dated March 27, 1998, between FFG,
maker, and Finova.
10.21 Fourth Amended and Restated Schedule to Filed herewith.
Amended and Restated Loan and Security
Agreement, FFG, borrower, Finova, lender,
dated March 27, 1998.
10.22 Stock Purchase Agreement dated January Exhibit 10.1 to Form 10-Q, filed on May 20, 1997. 28, 1997
between SCHI and Gary Smith.
10.23 Promissory Note dated January 28, 1997, Exhibit 10.2 to Form 10-Q filed on May 20, 1997.
First Choice Auto Finance, Inc.
("FCAF"), maker, Gary Smith, payee, in
the principal amount of $1,031,008.
10.24 Lease dated April 5, 1997 between Gary Filed herewith
R. Smith and Team Automobile Sales and
Finance, Inc.
10.25 Promissory Note Modification Agreement, Filed herewith.
dated December 15, 1997 between FCAF
and Gary R. Smith.
10.26 Asset Purchase Agreement dated January Exhibit 10.3 to Form 10-Q, filed on May 20, 1997.
28, 1997 between FCAF and Gary Smith.
10.27 Asset Purchase Agreement among FCAF, Exhibit 10.17 to Form 8-K, filed on February 26, 1997.
Palm Beach Finance and Mortgage Company
("PBF"), Two Two Five North Military
Corp. ("225"), and David Bumgardner,
and Amendment thereto.
10.28 Loan and Security Agreement between 225 Exhibit 10.18 to Form 8-K, filed on February 26,.
and FCAF dated February 14, 1997.
10.29 9% Secured Convertible Note of FCAF to Exhibit 10.20 to Form 8-K, filed on February 26, 1997.
225 and PBF.
10.30 9% Convertible Debenture of SCHI to PBF. Exhibit 10.21 to Form 8-K, filed on February 26, 1997.
10.31 Lease between David Bumgardner as Exhibit 10.22 to Form 8-K, filed on February 26, 1997.
Lessor and FCAF, Lessee, dated February
13, 1997.
10.32 Indemnification Agreement in favor of Exhibit 10.23 to Form 8-K, filed on February 26, 1997.
PBF and 225 by FCAF, dated
February 14, 1997.
10.33 Executive Employment Agreement between Exhibit 10.15 to Form 10-Q, filed on May 20, 1997.
the Company and Gary Smith.
10.34 Executive Employment Agreement between Exhibit 10.16 to Form 10-Q, filed May 20, 1997.
the Company and Robert Abrahams.
10.35 Executive Employment Agreement dated Filed herewith.
April 11, 1997 between the Company and
Joseph Alvarez.
10.36 Executive Employment Agreement dated Filed herewith.
April 24, 1997 between the Company and
Ronald Anderson.
10.37 Non Qualified Stock Option Agreement Filed herewith.
dated March 5, 1997 among the Smart
Choice Holdings Management Trusts (the
"Management Trusts"), Eckler Industries,
Inc., and Robert J. Abrahams.
10.38 Non Qualified Stock Option Agreement Filed herewith.
dated March 5, 1997 among the Management
Trusts, Eckler Industries, Inc., and
Robert J. Abrahams.
10.39 Non Qualified Stock Option Agreement Filed herewith.
dated April 11, 1997, among the
Management Trusts, the Company and
Joseph Alvarez.
10.40 Stock Option Agreement dated March 24, Filed herewith.
1997 between the
Company and Ronald Anderson.
10.41 Non-Qualified Stock Option Agreement Filed herewith
dated April 17, 1997 between the
Company and David Bumgardner.
10.42 Non-Qualified Stock Option Agreement Filed herewith
dated April 17, 1997 between the
Company and Craig Macnab.
10.43 Stock Option Agreement dated March 19, Filed herewith.
1997 between the
Company and Gerald Parker.
10.44 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Gerald Parker.
10.45 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Donald Wojnowski.
10.46 Non-Qualified Stock Option Agreement Filed herewith.
dated April 17, 1997 between the
Company and Joseph Yossifon.
10.47 Convertible Senior Promissory Note Exhibit 10.18 to Form 10-Q, filed May 20, 1997.
dated March 13, 1997, the Company,
maker, Sirrom Capital Corporation
("Sirrom"), payee.
10.48 Convertible Senior Promissory Note Exhibit 10.19 to Form 10-Q, filed May 20, 1997.
dated May 13, 1997, the Company, maker,
Sirrom, payee.
10.49 Amended and Restated Registration Exhibit 10.20 to Form 10-Q, filed May 20, 1997.
Rights Agreement between the Company
and Sirrom, dated May 13, 1997.
10.50 Asset Purchase Agreement dated as of Exhibit 10.1 to Form 8-K filed on July 14, 1997.
June 27, 1997 among the Company, Strata
Holding, Inc., Ready Finance, Inc.,
Donald Cook, Marilyn Cook and Madie A.
Stratemeyer.
10.51 Form of Convertible Note issued by the Exhibit 10.1 to Form 8-K filed on October 9, 1997.
Company to High Capital Funding, LLC,
and other purchasers.
10.52 Form of Warrant issued by the Company Exhibit 10.2 to Form 8-K filed on October 9, 1997.
to High Capital Funding, LLC, and other
purchasers.
10.53 Promissory Note, principal amount Exhibit 10.3 to Form 8-K filed on October 9, 1997.
$1,500,000 by Eckler Industries, Inc.,
maker, Stephens Inc., payee.
10.54 Promissory Note, principal amount Exhibit 10.1 to Form 8-K filed on March 5, 1998.
$3,000,000, Eckler Industries, Inc.,
maker, Stephens Inc., payee.
10.55 Guaranty Agreement by the Company to Exhibit 10.4 to Form 8-K filed on October 9, 1997.
Stephens Inc.
10.56 Amendment to Guaranty Agreement between Exhibit 10.4 to Form 8-K filed on March 5, 1998.
the Company and Stephens Inc.
10.57 Pledge and Security Agreement between Exhibit 10.5 to Form 8-K filed on October 9, 1997.
the Company and Stephens Inc.
10.58 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between the Company and
Stephens Inc.
10.59 Securities Purchase Agreement between Exhibit 10.6 to Form 8-K filed on October 9, 1997.
the Company and certain buyers
represented by Promethean Investment
Group, L.L.C.
10.60 Form of Warrant from the Company to Exhibit 10.7 to Form 8-K filed on October 9, 1997.
certain buyers represented by
Promethean Investment Group, L.L.C.
10.61 Automotive Wholesale Financing and Filed herewith.
Security Agreement dated July 21, 1997
between First Choice Stuart 1, Inc.
("FCS1") and Nissan Motor Acceptance
Corporation ("NMAC").
10.62 Addendum to Automotive Wholesale Filed herewith.
Financing and Security Agreement
10.63 Second Addendum to Automotive Wholesale Filed herewith.
Financing and Security Agreement dated
August 11, 1997 between NMAC and FCSI.
10.64 Dealer Capital Loan and Security Filed herewith.
Agreement dated October 12, 1995
between B&B Florida Enterprises, Inc.
and NMAC.
10.65 Amendment to Dealer Capital Loan and Filed herewith.
Security Agreement dated September 1,
1997 between NMAC and FCS1.
10.66 Dealer Equipment Loan and Security Filed herewith.
Agreement dated October 12, 1995
between NMAC and B&B Florida
Enterprises, Inc.
10.67 Amendment to Dealer Equipment Loan and Filed herewith.
Security Agreement dated September 1,
1997 between NMAC and FCSI.
10.68 Nissan Dealer Term Sales and Service Filed herewith.
Agreement dated August 29, 1997 between
Nissan Motor Corporation in U.S.A., the
Company, Smart Cars, Inc. and FCS1.
10.69 Wholesale Financing and Security Filed herewith.`
Agreement dated August 11, 1997 between
First Choice Stuart 2, Inc. ("FCS2")
and Volvo Finance North America, Inc.
10.70 Authorized Retailer Agreement between Filed herewith.
Volvo Cars of North America, Inc. and
FCS2.
10.71 Convertible Subordinated Debenture Filed herewith.
dated November 3, 1997, principal
amount $750,000, the Company, maker,
Bankers Life Insurance Company, payee.
10.72 Registration Rights Agreement dated Filed herewith.
November 3, 1997 between the Company
and Bankers Life Insurance Company.
10.73 Settlement Agreement and Release dated Filed herewith.
January 30, 1998 among the Company,
FCAF, FCS2, Jack Winters Enterprises,
Inc., Jack Winters, F. Craig Clements,
Killgore Pearlman, P.A. and Mark L.
Ornstein.
10.74 Stock Purchase Agreement dated May 6, Filed herewith.
1997 between FCS1 and Thomas DeRita, Jr.
10.75 Promissory Note dated December 19, Filed herewith.
1997, principal amount $2,199,000,
First Choice Melbourne 1, Inc., maker
and Raytheon Aircraft Credit
Corporation, payee.
10.76 Guaranty Agreement by the Company to Filed herewith.
Raytheon Aircraft Credit Corporation.
10.77 Security Agreement dated December 19, Filed herewith.
1997 between First Choice Melbourne 1,
Inc. and Raytheon Aircraft Credit
Corporation.
10.78 Registration Rights Agreement between Exhibit 10.8 to Form 8-K filed on October 9, 1997.
the Company and certain buyers
represented by Promethean Investment
Group, L.L.C.
10.79 Promissory Note dated February 24, Exhibit 10.9 to Form 8-K filed on March 5, 1998.
1998, FCAF, maker, Manheim Automotive
Financial Services, Inc., payee.
10.80 Guaranty dated March 21, 1997 from the Exhibit 10.10 to Form 8-K filed on March 5, 1998.
Company in favor of Manheim Automotive
Financial Services, Inc.
10.81 Intentionally Omitted.
10.82 Manheim Automotive Financial Services, Filed herewith.
Inc. Security Agreement dated March 21,
1997 between FCAF and Manheim
Automotive Financial Services, Inc.
10.83 Promissory Note dated June 17, 1997, Filed herewith.
principal amount $825,000, FCAF, maker,
Carl Schmidt Enterprises, Inc., payee.
10.84 Real Estate Mortgage dated June 17, Filed herewith.
1997, FCAF, mortgagor,
Carl Schmidt Enterprises, Inc., mortgagee.
10.85 Intentionally Omitted.
10.86 Intentionally Omitted.
10.87 Twenty-Fourth Amendment to GM Filed herewith.
Reproduction and Service Part Tooling
License Agreement.
10.88 Twenty-Sixth Amendment to GM Filed herewith.
Reproduction and Service Part Tooling
License Agreement.
10.89 Thirty-Fourth Amendment to GM Filed herewith
Reproduction Service Part Tooling
License Agreement.
10.90 Lease between Florida Auto Auction of Filed herewith.
Orlando, Inc. and First Choice Auto
Finance, Inc. dated May 12, 1997, for
Reconditioning Facility.
11.1 Statement re Computation of Earnings *
Per Share.
21.1 List of Subsidiaries. Filed herewith.
23.1 Consent of BDO Seidman, LLP. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
____________________
* Information regarding the computation of earnings per share is set forth
in the Notes to Consolidated Financial Statements.
</TABLE>
EXHIBIT 10.10
THIS INSTRUMENT PREPARED BY
AND TO BE RETURNED TO:
Joel E. Boyd, Esquire
Dean, Mead, Spielvogel, Goldman & Boyd
7380 Murrell Road, Suite 100
Melbourne, Florida 32940
(407) 259-8900
ASSIGNMENT OF LOAN DOCUMENTS
This Assignment of Loan Documents is made and entered into effective as of
the 4th day of November, 1997, by BARNETT BANK, N.A. (hereinafter referred to as
"Assignor"), with an office located at 100 North Laura Street, Jacksonville,
Florida 32202, to and for the benefit of THE HUNTINGTON NATIONAL BANK, its
successors and assigns, with an office located at 685 S. Babcock Street,
Melbourne, Florida 32901.
A. Assignor is the holder of those certain loan documents as set forth in
Exhibit "A" which is attached hereto and by this reference made a part hereof
("Loan Documents"). The defined terms used in Exhibit "A" are hereby
incorporated by reference.
B. Assignor desires to assign and transfer, and THE HUNTINGTON NATIONAL
BANK desires to accept the Loan Documents, all as more particularly hereinafter
set forth.
NOW, THEREFORE, in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, it is agreed as follows:
Assignment of Loan Documents. Assignor hereby grants, bargains, sells,
assigns, transfers and sets over and unto THE HUNTINGTON NATIONAL BANK, its
successors and assigns, WITHOUT RECOURSE, all of the Loan Documents, together
with all obligations described therein and/or secured thereby and all monies due
and/or to become due or pursuant thereto.
IN WITNESS WHEREOF, Assignor has caused this Assignment of Loan Documents
to be executed effective as of the date first set forth above.
Signed, sealed and delivered
in the presence of: BARNETT BANK, N.A.
By: /s/ James T. Hurst
/s/ Maria E. Holland James T. Hurst
Maria E. Holland Special Assets Officer
(Print Name) (Print Name/Title)
/s/ Rebecca L. Bowles
Rebecca L. Bowles
(Print Name)
<PAGE>
EXHIBIT "A"
1. Promissory Note in the amount of $2,400,000.00 from Eckler Industries,
Inc., a Florida corporation, to Barnett Bank, N.A., a national banking
association, dated September 30, 1996;
2. Mortgage and Security Agreement between Eckler Industries, Inc., a Florida
corporation, as Borrower, and Barnett Bank, N.A., a national banking
association, as Lender, dated September 30, 1996, and recorded in Official
Records Book 3609, Page 0715, Public Records of Brevard County, Florida;
3. Assignment of Leases, Rents and Profits between Eckler Industries, Inc., as
Owner, and Barnett Bank, N.A., as Mortgagee, recorded in Official Records
Book 3609, Page 0737, Public Records of Brevard County, Florida.
4. Mortgage Modification Agreement between Eckler Industries, Inc., a Florida
corporation, as Mortgagor, and Barnett Bank, N.A., a national banking
association, as Mortgagee, dated October 25, 1996, and recorded in Official
Records Book 3617, Page 1805, Public Records of Brevard County, Florida;
5. Second Modification to Mortgage and Security Agreement and Partial Release
of Personal Property Agreement between Smart Choice Automotive Group, Inc.,
a Florida corporation, successor by merger to Eckler Industries, Inc., as
Borrower, and Barnett Bank, N.A., a national banking association, as
Lender, dated September 15, 1997, and recorded in Official Records Book
3711, Page 4702, Public Records of Brevard County, Florida;
6. Commonwealth Land Title Insurance Company Loan Policy No. F02-166424 and
all endorsements thereto;
7. Survey prepared by Loys Ward Associates dated September 19, 1996, W.O.
97193;
8. Survey prepared by John W. Cooper Land Survey, Inc. dated September 25,
1996, Project #96-09-61; and
9. Any and all other instruments or documents evidencing or securing the
indebtedness represented by the promissory notes described in item 1.
above.
EXHIBIT 10.11
This instrument prepared by: Joel E. Boyd, Esq., of
Name: Dean, Mead, Spielvogel, Goldman & Boyd
Address: Attorneys-at-Law
7380 Murrell Road, Suite 100
Melbourne, FL 32940
XXX THIS IS A BALLOON MORTGAGE AND THE FINAL PRINCIPAL PAYMENT OR THE PRINCIPAL
BALANCE DUE UPON MATURITY IS $2,133,333.20, TOGETHER WITH ACCRUED INTEREST, IF
ANY, AND ALL ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF THIS
MORTGAGE.
MODIFICATION OF
MORTGAGE DEED AND SECURITY AGREEMENT
THIS MODIFICATION OF MORTGAGE DEED AND SECURITY AGREEMENT ("Mortgage")
made, executed and given this 3rd day of November, 1997, by SMART CHOICE
AUTOMOTIVE GROUP, INC., a Florida corporation, formerly having the name ECKLER
INDUSTRIES, INC., (the "Mortgagor"), to and in favor of THE HUNTINGTON NATIONAL
BANK, a national banking corporation, with its principal place of business at
Melbourne, Brevard County, Florida ("Mortgagee" which reference includes
successors and assigns);
W I T N E S S E T H:
WHEREAS, BARNETT BANK, N.A., on September 30, 1996, made a loan to Mortgagor
in the original principal amount of Two Million Four Hundred Thousand and No/100
($2,400,000.00) Dollars ("Loan"); and
WHEREAS, in connection with the Loan, Mortgagor executed that certain
promissory note dated September 30, 1996, in the original principal amount of
Two Million Four Hundred Thousand and No/100 ($2,400,000.00) Dollars evidencing
the Loan ("Note"); and
WHEREAS, the Note is secured by that certain Mortgage and Security Agreement
dated September 30, 1996, and recorded on October 1, 1996, in Official Records
Book 3609, Page 0715, of the Public Records of Brevard County, Florida,
("Mortgage"), encumbering that certain real property described therein, and
further secured by that certain Assignment of Leases, Rents and Profits dated
September 30, 1996 and recorded in Official Records Book 3609, Page 0737, Public
Records of Brevard County, Florida; and
WHEREAS, the Loan, Note and Mortgage were modified by a Mortgage
Modification Agreement dated October 25, 1996, and recorded on October 31, 1996,
in Official Records Book 3617, Page 1805, of the Public Records of Brevard
County, Florida; and
WHEREAS, the Loan, Note and Mortgage were further modified by a Second
Modification to Mortgage and Security Agreement and Partial Release of Personal
Property Agreement dated September 15, 1997, and recorded on September 25, 1997,
in Official Records Book 3711, Page 4702, of the Public Records of Brevard
County, Florida; and
WHEREAS, the property currently encumbered by the Mortgage is the real
property set forth on Exhibit "A" and Exhibit "B" to that certain Mortgage
Modification Agreement dated October 25, 1996, and recorded on October 31, 1996,
in Official Records Book 3617, Page 1805, of the Public Records of Brevard
County, Florida; and
WHEREAS, Mortgagor has requested that Mortgagee modify the Note and Mortgage
and Mortgagee has agreed to such modification upon the following terms and
conditions.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
A. RECITALS. The above recitals are true and correct and are incorporated
by reference herein.
B. MODIFICATION. The existing terms and conditions of the Loan, Note and
Mortgage are modified to incorporate the following provisions which shall
prevail in the event of any inconsistency with the provisions of the Note and
Mortgage.
C. REPAYMENT. As of the date of this Mortgage, Mortgagor agrees and
acknowledges that the outstanding principal balance of the Note is Two Million
Two Hundred Thirty-Nine Thousand Nine Hundred Ninety-Nine and 92/100
($2,239,999.92) Dollars which principal balance, plus interest at the rate of
one and one-half (1.50%) percent per annum in excess of The Huntington National
Bank's Prime Commercial Lending Rate ("Rate"), with the amount of interest
payable to be adjusted from time to time as the Rate changes, Mortgagor agrees
to repay the Mortgagee as follows:
Monthly principal payments of $13,333.34 plus interest shall be due and
payable on the 30th day of November, 1997, and the 30th day of each
consecutive month thereafter until the 1st day of July, 1998 when the entire
outstanding principal balance plus all accrued interest shall be due and
payable.
Interest shall be calculated on the basis of a three hundred sixty (360) day
year and charged for the actual number of days elapsed in an interest
period. In no event shall the amount of interest due or payments in the
nature of interest payable hereunder exceed the maximum rate of interest
allowed by applicable law, as amended from time to time, and in the event
any such payment is paid by Borrower or received by the Lender, then such
excess sum shall be credited as a payment of principal, unless Borrower
shall notify the Lender, in writing, that Borrower elects to have such
excess returned to it for its worth.
Each payment when made shall be applied first to the payment of interest,
second to the payment of sums due hereunder other than interest or principal
(i.e., late payment and similar charges), and then to the payment of
principal.
Mortgagor shall have the right to prepay this loan, in full or part, without
penalty through the application of normal operating cash flow of the
Mortgagor. Should prepayment be funded from any other source, a prepayment
fee of one-half (.50%) percent of the then outstanding balance shall be due
and payable.
D. RALPH H. ECKLER is hereby released as a Guarantor of the Note.
AND MORTGAGOR DOES HEREBY COVENANT TO AND AGREE WITH MORTGAGEE AS FOLLOWS:
1. To pay all and singular the principal and interest and other sums of
money payable by virtue of the Note and Mortgage, or either, promptly on the
days respectively the same severally come due. To perform, comply with and abide
by each and every of the stipulations, agreements, conditions and covenants set
forth in the Note and this Mortgage.
2. To pay all and singular the taxes, assessments, levies, liabilities,
obligations and encumbrances of every nature on the Property each and every when
due and payable, according to law, before they become delinquent; and, if the
same shall not be promptly paid, the Mortgagee, at any time either before or
after delinquency, may pay the same without waiving or affecting its option to
foreclose or any right hereunder, and every payment so made shall bear interest
from the date thereof at the highest legal rate permitted by the laws of the
State of Florida, payable monthly, until repaid, and each such payment, together
with said interest thereon, shall be secured by the lien of this Mortgage.
3. To keep the buildings and all equipment and personal property now or
hereafter on the Property covered by this Mortgage insured in a sum equal to at
least the balance of the Note and equal to an amount sufficient to comply with
any co-insurance requirements covering the same under the laws of the State of
Florida and the insurance contract, covering loss from both fire and extended
coverage, making the loss under said policies, each and every, payable to
Mortgagee as its interest may appear and naming Mortgagee as additional insured;
and the policy or policies shall be held by Mortgagee and, in the event any sum
of money becomes payable under such policy or policies, the Mortgagee shall have
the option to receive and apply the same on account of the indebtedness hereby
secured or may permit Mortgagor to receive and use it or any part thereof for
other purposes, without thereby waiving or impairing any equity, lien or right
under and by virtue of this Mortgage. Mortgagee may place and pay for such
insurance, or any part thereof, without waiving or affecting its option to
foreclose or any right hereunder; and each and every payment so made shall bear
interest from date thereof at the highest legal rate permitted by the laws of
the State of Florida, payable monthly, until repaid, and each such payment,
together with said interest thereon, shall be secured by the lien of this
Mortgage.
4. To permit, commit or suffer no waste, impairment or deterioration of the
Property, or any part thereof, and, upon the failure of the Mortgagor to keep
the buildings or other improvements on the Property in good condition and
repair, Mortgagee may demand the immediate repair of said buildings or other
improvements or an increase in the amount of security or the immediate repayment
of the debt hereby secured, and the failure of the Mortgagor to comply with said
demand of the Mortgagee, for a period of thirty (30) days, shall constitute a
breach of this Mortgage and, at the option of Mortgagee, immediately mature the
entire amount of principal and interest hereby secured, and Mortgagee
immediately and without notice may institute proceedings to foreclose this
Mortgage and may apply for and have appointed a receiver, as hereinafter
provided.
5. If any sums of money herein and in the Note be not promptly and fully
paid within fifteen (15) days next after same become due and payable, or if each
and every of the stipulations, agreements, conditions and covenants of the Note
and this Mortgage, or either, are not duly performed, complied with and abided
by, the aggregate sum remaining unpaid under the Note shall become due and
payable forthwith or thereafter at the option of the Mortgagee as fully and
completely as if said aggregate sum of money was originally stipulated to be
paid on said date, anything in the Note or herein to the contrary
notwithstanding.
6. To deliver to Mortgagee, on or before March 15 of each year, tax receipts
evidencing the payment of all lawfully imposed taxes for the preceding calendar
year; to deliver to Mortgagee receipts evidencing the payment of all liens for
public improvements within forty-five (45) days after the same shall become due
and payable; and to pay or discharge within ten (10) days after due date any and
all government levies that may be made on the Property, on this Mortgage or
Note, or in any other way resulting from the indebtedness secured by this
Mortgage; and, if this condition be not complied with and performed, Mortgagee
may, without waiving or affecting its option to foreclose, pay such sum or sums
which shall become part of the debt secured by this Mortgage and which shall
bear interest, payable monthly until repaid, at the highest legal rate permitted
by the laws of the State of Florida.
7. That, in the event of a breach by Mortgagor of any covenant contained in
this Mortgage or in the Note or, if applicable, in a Development Loan Agreement
or Construction Loan Agreement between Mortgagor and Mortgagee and covering the
Property, or any part thereof, the terms of such agreement being incorporated
herein by reference, Mortgagee is entitled to receive all rents, issues,
proceeds and profits accruing and to accrue from the Property pursuant to
Florida Statutes 697.07 (1991) and, upon Mortgagor's receipt of a written demand
made by Mortgagee, all future payments shall be paid directly to Mortgagee. If a
receiver is appointed by a court having jurisdiction hereof, pursuant to
Paragraph 8 or other provisions of this Mortgage, the order appointing such a
receiver may direct that said rents, issues, proceeds, profits shall be paid to
the receiver after the date of appointment. Nothing in this paragraph shall
require the appointment of a receiver or excuse Mortgagor from failing to make
payments directly to Mortgagee upon receipt of written demand therefor.
8. That Mortgagee is entitled to the appointment of a receiver even if the
market value of the Property exceeds the amount of the balance owed on the Note
and additional charges due under this Mortgage and the Note.
9. If proceedings under any bankruptcy or insolvency law are commenced by or
against Mortgagor or if a general assignment for the benefit of creditors is
made by Mortgagor, whether under state or federal law, or a trustee or receiver
of all or a substantial part of Mortgagor's property, whether or not covered by
the lien of the Mortgage, is appointed, then, at Mortgagee's option and if
permitted by law, the whole of the unpaid principal sum and accrued interest
remaining unpaid on the Note shall become immediately due and payable.
10. That, if a petition shall be filed for any relief under the provisions
of the federal Bankruptcy Act or any state insolvency statute by or against a
guarantor or if a guarantor shall make a general assignment for the benefit of
creditors or if a receiver shall be appointed for substantially all of the
property of any guarantor, then, and in any of the foregoing events, the Note
shall become immediately due and payable at the option of the Mortgagee.
11. That, if all or any part of the Property or an interest therein is sold
or transferred by Mortgagor, whether voluntary or involuntary, without
Mortgagee's prior written consent, excluding (a) the creation of a lien or
encumbrance subordinate to this Mortgage, or (b) the creation of a purchase
money security interest for household appliances, Mortgagee may, at its option,
declare all the sums secured by this Mortgage to be immediately due and payable.
Mortgagee shall have waived such option to accelerate if, prior to the sale or
transfer for which such waiver of option is requested, the Mortgagee and the
person or entity to whom the Property is to be sold or transferred reach
agreement in writing that the credit of such third party is satisfactory to
Mortgagee and that the interest payable on the Note shall be at such rate as
Mortgagee shall request. If Mortgagee exercises such option to accelerate,
Mortgagee shall mail Mortgagor notice of acceleration and such notice shall
provide a period of not less than thirty (30) days from the date the notice is
mailed within which Mortgagor must pay the sums declared due. If Mortgagor fails
to pay such sums prior to the expiration of such period, Mortgagee may, without
further notice or demand on Mortgagor, invoke any remedies permitted by this
Mortgage and the Note.
12. If the Property or any part thereof shall be condemned and taken for
public use under the power of eminent domain, Mortgagee shall have the right to
require that all damages awarded for the taking of or damages to said Property
shall be paid to Mortgagee up to the aggregate amount then unpaid on the Note
and credited to the payment or payments last payable thereon.
13. That time is of the essence of this Mortgage and of the Note and no
waiver of any obligation hereunder or in the Note shall at any time thereafter
be held to be a waiver of the terms hereof or of the Note or other instruments
secured hereby.
14. To comply with all the terms, provisions and conditions of any superior
mortgage or lien encumbering the Property, including, but not limited to, those
applicable to the payment of principal and interest due under said superior
mortgage or lien. If Mortgagor fails to comply with each and every one of the
terms, provisions and conditions of said encumbrance, the failure to comply or
default on Mortgagor's part shall constitute a default under this Mortgage and
the Note and shall entitle Mortgagee, at its option, to exercise any and all of
its rights and remedies hereunder. If foreclosure proceedings of any superior or
inferior mortgage or any senior or junior lien of any kind should be instituted,
Mortgagee may, at Mortgagee's option, immediately or thereafter, declare this
Mortgage and the entire indebtedness secured hereby due and payable.
15. To the extent of the indebtedness of the Mortgagor to Mortgagee
described herein or secured hereby, Mortgagee is hereby subrogated to the lien
or liens and to the rights of the owners and holders of each and every mortgage,
lien or other encumbrance on the Property which is or has been paid or
satisfied, in whole or in part, out of the proceeds of the Note and the
respective liens of said mortgages, liens or other encumbrances, shall be, and
the same are hereby, preserved and shall pass to and be held by the Mortgagee
herein as security for the indebtedness to Mortgagee herein described or hereby
secured to the same extent that it would have been passed to and held by
Mortgagee, had it been duly and regularly assigned, transferred, set over and
delivered unto Mortgagee by separate assignment, notwithstanding the fact that
the same may be satisfied and cancelled of record.
16. To pay all and singular the costs, charges and expenses, including
reasonable attorney's fees and cost of abstracts of title, incurred or paid at
any time by Mortgagee because or in the event of the failure on the part of the
Mortgagor to duly, promptly and fully perform, discharge, execute, effect,
complete, comply with and abide by each and every the stipulations, agreements,
conditions and covenants of the Note and this Mortgage, any or either, and said
costs, charges and expenses, each and every, shall be immediately due and
payable whether or not there be notice, demand, attempt to collect or suit
pending; then the full amount of each and every such payment shall bear interest
from the date thereof until paid at the highest legal rate permitted by the laws
of the State of Florida; and all said costs, charges and expenses so incurred or
paid, together with such interest, shall be secured by the lien of this
Mortgage. Reference herein to "reasonable attorney's fees" shall include
attorney fees incurred by the Mortgagee for appellate and bankruptcy proceedings
incident to any action brought hereunder or upon the Note.
17. That, if any word, clause, term, phrase or paragraph used in the Note
or this Mortgage should be held to be unenforceable by any court of competent
jurisdiction, the same shall not affect, alter or otherwise impair the meaning
of any other word, clause, term, phrase or paragraph in the Note and Mortgage,
and the same shall stand in full force and effect and shall be obligatory upon
the parties hereto and the assignees, heirs and legal representatives of the
parties hereto.
18. That, except for any notice required under applicable law to be given in
another manner, any notice to Mortgagee provided for or given pursuant to this
Mortgage or the Note shall be given by mailing such notice, postage prepaid, by
United States registered or certified mail, return receipt requested, to
Mortgagee's address as stated herein or in the Note secured hereby or to such
other address as Mortgagee may designate, in writing, by notice to Mortgagor
from time to time.
19. That all remedies provided in this Mortgage or in the Note, or other
instrument secured hereby or incorporated by reference herein, are distinct and
cumulative to any other right or remedy under this Mortgage or such other
instrument or afforded by law or equity and may be exercised concurrently,
independently or successively. The Note shall become due at the option of
Mortgagee if any representation or warranty made or given by Mortgagor or
otherwise made in writing in connection with the transaction evidenced by this
Mortgage shall prove to have been false or incorrect in any material respect as
of date hereof and such defect (if curable) shall not have been cured within
seven (7) days from the date of the mailing of notice thereof to the Mortgagor.
20. To pay to the Mortgagee, after written request therefor, on the day that
monthly installments of principal and interest are payable under the Note a sum
equal to one-twelfth of the yearly taxes and assessments which may attain
priority over this Mortgage, plus one-twelfth of the yearly premium installments
for hazard and flood insurance, all as reasonably estimated initially and from
time to time by Mortgagee on the basis of assessments and bills and estimates
thereof. Said sum shall be held in escrow by the Mortgagee or its designee and
is pledged as additional security for the sums secured by this Mortgage. If the
escrowed funds shall not be sufficient to pay taxes, assessments and insurance
premiums as they fall due, Mortgagor shall pay to Mortgagee any amount necessary
to make up such deficiency within twenty (20) days after notice from Mortgagee
requesting payment thereof. Such escrowed sum shall be held by Mortgagee without
allowance of interest.
21. That, notwithstanding anything to the contrary contained in this
Mortgage or in the Note or in any other instruments securing the Note, Mortgagee
may, at Mortgagee's option, declare the entire indebtedness secured hereby,
together with all interest thereon and all advances made by the Mortgagee
hereunder, immediately due and payable in the event of a breach by Mortgagor of
any covenant contained in this Mortgage or in the Note or, if applicable, in the
Development Loan Agreement or a Construction Loan Agreement referred to in
Paragraph 7. In the event of any conflict between the terms of this Mortgage and
the terms of said loan agreement, the terms of the loan agreement shall prevail.
22. To collaterally assign, coincident herewith or hereafter, to Mortgagee,
any lease or leases of all or of any portions of the Property. If such
assignment is made and accepted by Mortgagee, Mortgagor shall perform promptly
each and every covenant and agreement of any such lease that is to be kept or
performed by the Mortgagor in Mortgagor's capacity as lessor and any violation
on Mortgagor's part of any covenant or agreement in any such lease or in the
assignment of said lease that is to be kept or performed by Mortgagor, or any
violation on Mortgagor's part of any agreement by Mortgagor set out in such
Assignment of Lease, shall constitute a breach of this Mortgage and thereupon
Mortgagee may, at its option, without notice, declare the Note immediately due
and payable. Mortgagor will advise Mortgagee promptly of the execution hereafter
of any lease of all or any part of the Property and shall, upon Mortgagee's
request, submit to Mortgagee for examination and approval any such lease. If
Mortgagee so requests, Mortgagor shall specifically collaterally assign such
lease to Mortgagee (in form acceptable to Mortgagee); and it is agreed that the
provisions of this Mortgage with regard to Mortgagor's obligations and
Mortgagee's rights with respect to leases and collateral assignment of the same
shall apply to all such additional leases and assignments thereof. Mortgagee
may, at its option, perform any covenant or provision of any such lease for and
on behalf of the Mortgagor and at Mortgagor's expense and any amount advanced
for this purpose shall bear interest at the same rate as for other advances and
shall be secured by this Mortgage and shall be payable upon demand. The security
interest created by the following paragraph of this Mortgage is specifically
intended to cover and include all leases of the Property, together with all
amendments and supplements thereto, between Mortgagor as lessor and any tenants
named therein as lessees, including all extended terms and all extensions and
renewals of the terms thereof, as well as any amendments to or replacements of
said leases, together with all the right, title and interest of Mortgagor as
lessor thereunder; including, without limiting the generality of the foregoing,
the present and continuing right to make claim for, collect, receive and receipt
for any and all of the rents, income, revenue, issues, profits and monies
payable as damages or in lieu of the rent, and monies payable as the purchase
price of the Property, or any part thereof, or of awards or claims for money and
other sums of money payable or receivable thereunder, howsoever payable; and to
bring actions and proceedings thereunder or for the enforcement thereof; and to
do any and all things which Mortgagor or any lessor is or may be entitled to do
under the lease; provided that the assignment made by this paragraph and the
collateral assignment of lease, if any, entered into simultaneously herewith or
subsequent hereto shall not impair or diminish any obligations of Mortgagor
under the lease nor shall any obligations be imposed upon the Mortgagee, except
at Mortgagee's option, to perform any duties or obligations imposed by the terms
of the lease upon the Mortgagor as lessor in said lease. Nothing herein
contained, including the acceptance of a Collateral Assignment of Lease by
Mortgagee, shall subordinate the lien of this Mortgage to such lease unless such
subordination is specifically provided for herein or by separate written
instrument executed by Mortgagee.
23. That, in addition to all other right, title and interest of Mortgagor
granted, mortgaged, conveyed, pledged and assigned herein, or in instruments
collateral hereto, Mortgagee shall have, and there is hereby created in favor of
Mortgagee, a security interest in all equipment and fixtures now or hereafter
attached to the Property, as well as any other property of Mortgagor as may be
necessary for operation of the Property, including, but not limited to,
electrical, plumbing, heating and cooling systems, it being the intention of the
parties hereto that, so far as may be permitted by law, all property of the
character hereinabove described, which is now owned or is hereafter acquired by
Mortgagor and is affixed, attached, or annexed to the Property, shall be and
remain or become and constitute a portion of the Property and be subject to the
lien of the security interest created by this Mortgage, together with all rents,
income, revenues, issues and profits thereof and present and continuing right in
the Mortgagee to make claim for, collect, receive and receipt for the same.
Mortgagor will not remove, attempt to remove or permit to be removed any part of
the Property, which includes items described in the security instrument
referenced in Paragraph 22, without first and prior to removal thereof, having
received permission in writing for such removal from Mortgagee. Mortgagor will
immediately execute such Financing Statements and renewals thereof as may be
periodically requested by Mortgagee. If Mortgagor fails or refuses to comply
with such request, Mortgagee is irrevocably authorized to execute such documents
as Mortgagee's attorney-in-fact.
24. To not use, nor knowingly permit the use of, the Property or any part
thereof for any unlawful purpose or for the commission of a nuisance.
25. That neither the provisions of this Mortgage, nor of the Note, shall
have the effect of or be construed as requiring or permitting the Mortgagor to
pay interest in excess of the highest rate per annum allowed by the laws of the
State of Florida on any item or items of indebtedness referred to in the Note or
this Mortgage and, if any such excess interest be charged or paid, written
notification thereof shall be given by Mortgagor to Mortgagee and such excess
interest, together with interest thereon at the legal rate, shall, at
Mortgagor's option, either be credited to the unpaid principal indebtedness
secured hereby or reimbursed to the Mortgagor.
26. That any part of the security herein described and covered by the lien
of this Mortgage may be released with or without consideration and without
regard to the amount of consideration furnished without in anywise altering,
varying or diminishing the force, effect or lien of this Mortgage or any renewal
or extension of it, and the same shall continue as a lien on all Property not
expressly released until all sums, with interest and charges hereby secured, be
fully paid.
27. That the terms "hazardous waste", "hazardous substance", "disposal",
"release", and "threatened release", as used in this Mortgage, shall have the
same meanings as set forth in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et.
seq., ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act. 49, U.S.C.
Section 1801, et. seq., the Resource Conservation and Recovery Act. 49 U.S. C.
Section 6901, et. seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant to any of the foregoing. Mortgagor represents and
warrants to Mortgagee that: (a) To the best knowledge of Mortgagor, during the
period of Mortgagor's ownership of the Property, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under, or about
the Property; (b) Mortgagor has no knowledge of, or reason to believe that there
has been, except as previously disclosed to and acknowledged by Mortgagee in
writing, (i) any use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous waste or substance by any prior
owners or occupants of the Property or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters; and (c) Except as
previously disclosed to and acknowledged by Mortgagee in writing, (i) Mortgagor
shall not use, generate, manufacture, store, treat, dispose of or release any
hazardous waste or substance on, under or about the Property (and Mortgagor
shall use its best efforts to prohibit any tenant or other user of the Property
from any such use) and (ii) any activity on the Property shall be conducted in
compliance with all applicable federal, state and local laws, regulations and
ordinances, including, without limitation, those laws, regulations and
ordinances described above. Mortgagor authorizes Mortgagee and Mortgagee's
agents to enter upon the Property to make such inspections and tests as
Mortgagee may deem appropriate to determine compliance by Mortgagor and the
Property with the provisions hereof. Any inspections or tests made by Mortgagee
shall be for Mortgagee's purposes and benefit only and shall not be construed to
create any responsibility or liability on the part of Mortgagee to Mortgagor or
to any other person or entity, governmental or otherwise. The representations
and warranties contained herein are based on Mortgagor's due diligence in
investigating the Property for hazardous waste. Mortgagor (a) releases and
waives any present or future claims against Mortgagee for indemnity or
contribution if Mortgagor becomes liable for cleanup or other costs under any
such laws, and (b) agrees to indemnify and hold harmless Mortgagee against any
and all claims, losses, liabilities, damages, penalties and expenses which
Mortgagee may directly sustain or suffer resulting from a breach of this
provision or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior or subsequent to
Mortgagor's ownership or interest in the Property, whether or not the same was
or should have been known to Mortgagor. The provisions of this paragraph,
including the obligation to indemnify, shall survive the payment of the Note and
the satisfaction and reconveyance of the lien of this Mortgage and shall not be
affected by Mortgagee's acquisition of any interest in the Property, whether by
foreclosure or otherwise.
28. To maintain the Property, at Mortgagor's sole expense, and make such
repairs and renovations as may, during the term of this Mortgage, be required
for compliance with The Americans with Disabilities Act, 42 U.S.C. 12101, et.
seq., and amendments thereto ("ADA"). Any notice or warning of violation or
noncompliance of or with the provisions of ADA received by Mortgagor shall be
sent in accordance with Paragraph 18 to Mortgagee within ten (10) days after
receipt thereof and Mortgagor shall have a period of thirty (30) days thereafter
(unless a shorter term is imposed by the notice or warning) within which to
furnish to Mortgagee a written plan and time schedule for correcting the
deficiency in accordance with the requirements of ADA.
29. This Mortgage shall, at the option of the Mortgagee, secure, in addition
to the debt evidenced by the Note, any other liability or liabilities owed by
the Mortgagor to the Mortgagee, whether direct or indirect, secured or
unsecured, contingent or fixed, now due, or to become due, or which may
hereafter be contracted by virtue of any advances, disbursements, payments,
charges or costs made or incurred by the Mortgagee under the terms of this
Mortgage or any other instrument including, but not by way of limitation,
promissory notes, guaranties, financing statements, security agreements,
endorsements and overdrafts, though the aggregate outstanding amount at any time
may exceed the amount originally secured hereby. Mortgagee shall be entitled to
receive and retain the full amount of the debt evidenced by the Note and the
other liabilities herein described in any action for foreclosure, redemption by
the Mortgagor, accounting for the proceeds of a foreclosure sale, accounting for
insurance proceeds or condemnation award.
30. To waive and renounce to the extent permitted by law any and all
homestead and exemption rights Mortgagor may now or hereafter have as against
the payment of the obligation evidenced or secured hereby, or any portion
thereof, or any other obligation or damage that may accrue to Mortgagee's
benefit under the terms of the Note and this Mortgage.
31. To pay to Mortgagee a transfer fee each time the legal or beneficial
title to the Property is conveyed or assigned. The amount of such fee will be a
specified amount or a percent of the principal balance remaining unpaid on the
Note at the time of the conveyance or assignment, except that such transfer fee
shall not exceed 1% of the then principal balance or $300, whichever is greater.
The collection of a transfer fee shall not be construed as authorizing the
assumption of this Mortgage other than as provided hereinabove.
32. That Mortgagee shall not be responsible or liable to anyone other than
the Mortgagor for Mortgagee's disbursement of or failure to disburse the funds
or any part thereof evidenced by the Note, and no third party, including any
creditor or subrogee of the Mortgagor, shall have any claim or right against the
Mortgagee under this Mortgage or the Note for Mortgagee's administration of
disbursement, nor shall the Mortgagee be liable for the manner in which any
disbursements under this Mortgage or the Note may be applied or misapplied by
the Mortgagor.
33. In this Mortgage and the Note, the singular shall include the plural and
the masculine shall include the feminine and neuter. Whenever the term
"Mortgagor" is used herein, it shall include corporate and individual
mortgagors, their heirs, personal representatives, trustees in dissolution,
assigns and successors in interest in title to the Property.
34. This Mortgage, the Note and other instruments incidental hereto or
referenced herein shall be construed according to the laws of the State of
Florida, and the venue for any litigation brought on account of or incidental to
this Mortgage shall be Brevard County, Florida, except that any foreclosure of
this Mortgage will be filed in the county wherein the Property is located.
35. MORTGAGEE AND MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE AND
ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MORTGAGEE ENTERING
INTO THIS TRANSACTION WITH MORTGAGOR.
XXX THIS IS A BALLOON MORTGAGE AND THE FINAL PRINCIPAL PAYMENT OR THE
PRINCIPAL BALANCE DUE UPON MATURITY IS $2,133,333.20, TOGETHER WITH ACCRUED
INTEREST, IF ANY, AND ALL ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF
THIS MORTGAGE.
Signed, sealed and delivered in the presence of:
SMART CHOICE AUTOMOTIVE GROUP, INC.,
a Florida corporation
Print Name
By: /s/ Ronald W. Anderson
--------------------------
Print Name Ronald W. Anderson, Executive Vice President
and Chief Operating Officer
Address: 5200 S. Washington Avenue
Titusville, FL 32780
EXHIBIT 10.12
FUTURE ADVANCE PROMISSORY NOTE
$260,000.08 December 30, 1997
For value received the undersigned promises to pay to the order of THE
HUNTINGTON NATIONAL BANK, a national banking corporation, at its principal
office at 685 S. Babcock Street, Melbourne, Florida 32901, the principal sum of
Two Hundred Sixty Thousand and 08/100 Dollars ($260,000.08), together with
interest from date hereof on unpaid principal at the rate of one and one-half
(1.50%) percent per annum in excess of The Huntington National Bank's Prime
Commercial Lending Rate ("Rate"), with the amount of interest payable to be
adjusted from time to time as the Rate changes. Principal and interest shall be
payable upon demand.
Nothing herein, nor any transaction related thereto, shall be construed or
so operate as to require the maker to pay interest at a greater rate than is
lawful in the State in which the loan described herein is to be performed.
Should any interest or other charges paid by the maker in connection with the
loan evidenced by this Note result in the computation or earning of interest in
excess of the maximum legal rate of interest which is legally permitted under
the laws of the State of Florida, then any and all such excess shall be, and the
same is hereby waived by the payee, and any and all such excess shall be
automatically credited against and in reduction of the balance due under this
indebtedness, and the portion of said excess which exceeds the balance due under
this Note shall be paid by the payee to the maker.
Interest hereunder shall be charged only on the sums advanced from the date
of advance to the date of repayment and interest from the date of this Note to
the date of advance is waived. Interest hereunder, if on an annual basis, shall
be computed on the basis of a 360 day year.
Each maker and endorser further agree, jointly and severally, to pay all
costs of collection, including a reasonable attorney's fee and all costs of levy
or appellate proceedings and/or review in case the principal of this Note or any
payment on the principal or any interest thereon is not paid at the respective
maturity thereof, or in case it becomes necessary to protect the security
hereof, whether suit be brought or not.
The principal, or any installment of principal, unless paid when due shall
bear interest after maturity at the maximum rate permitted by the laws of the
State of Florida.
Time is of the essence hereof. Upon default in the principal and/or
interest due hereunder or on any notes held by the payee hereunder and given by
the maker hereof, or upon a default of any agreement or mortgage or any
ancillary documents executed in connection therewith, then all payments due
hereunder and on all other notes, held by the payee and given by maker hereof
and remaining unpaid, shall forthwith, at the option of the holder of this Note,
become due and payable notwithstanding their tenor.
"Maker"
SMART CHOICE AUTOMOTIVE GROUP,
Attest: INC., a Florida corporation
/s/ James Neal Hutchinson, Jr. By: /s/ Joseph E. Mohr
- ------------------------------ -------------------------------
J. Neal Hutchinson, Jr., Joseph E. Mohr, Chief Financial
Assistant Secretary Officer
(Corporate Seal)
Maker's Address:
5200 S. Washington Street
Titusville, Florida 32780
EXHIBIT 10.13
This instrument prepared by:
Joel E. Boyd, Esq.
DEAN, MEAD, SPIELVOGEL, GOLDMAN
& BOYD
7380 Murrell Road, Suite 100
Melbourne, Florida 32940
THIS IS A BALLOON MORTGAGE AND THE FINAL PAYMENT OF THE BALANCE DUE UPON
MATURITY IS $2,406,666.62, TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF THIS MORTGAGE.
MODIFICATION OF MORTGAGE AND MORTGAGE NOTE
AND EXTENSION AGREEMENT
THIS MODIFICATION OF MORTGAGE AND MORTGAGE NOTE AND EXTENSION AGREEMENT,
entered into this 30th day of December, 1997 by and between THE HUNTINGTON
NATIONAL BANK, a national banking corporation, whose address is 685 S. Babcock
Street, Melbourne, Florida 32901, hereinafter referred to as "Mortgagee"; and
SMART CHOICE AUTOMOTIVE GROUP, INC., a Florida corporation, whose address is
5200 S. Washington Avenue, Titusville, Florida 32780, hereinafter referred to as
"Mortgagor".
W I T N E S S E T H:
WHEREAS, BARNETT BANK, N.A., on September 30, 1996, made a loan to
Mortgagor in the original principal amount of Two Million Four Hundred Thousand
and No/100 ($2,400,000.00) Dollars ("Loan"); and
WHEREAS, in connection with the Loan, Mortgagor executed that certain
promissory note dated September 30, 1996, in the original principal amount of
Two Million Four Hundred Thousand and No/100 ($2,400,000.00) Dollars evidencing
the Loan ("Note"); and
WHEREAS, the Note is secured by that certain Mortgage and Security
Agreement dated September 30, 1996, and recorded on October 1, 1996, in Official
Records Book 3609, Page 0715, of the Public Records of Brevard County, Florida,
("Mortgage"), encumbering that certain real property described therein, and
further secured by that certain Assignment of Leases, Rents and Profits dated
September 30, 1996 and recorded in Official Records Book 3609, Page 0737, Public
Records of Brevard County, Florida; and
WHEREAS, the Loan, Note and Mortgage were modified by a Mortgage
Modification Agreement dated October 25, 1996, and recorded on October 31, 1996,
in Official Records Book 3617, Page 1805, of the Public Records of Brevard
County, Florida; and
WHEREAS, the Loan, Note and Mortgage were further modified by a Second
Modification to Mortgage and Security Agreement and Partial Release of Personal
Property Agreement dated September 15, 1997, and recorded on September 25, 1997,
in Official Records Book 3711, Page 4702, of the Public Records of Brevard
County, Florida; and
WHEREAS, the Loan, Note and Mortgage were assigned to Mortgagor by
Assignment of Loan Documents dated November 4, 1997, and recorded on November
10, 1997, in Official Records Book 3725, Page 3827, of the Public Records of
Brevard County, Florida; and
WHEREAS, the Loan, Note and Mortgage were further modified by Modification
of Mortgage Deed and Security Agreement dated November 3, 1997, and recorded on
November 10, 1997, in Official Records Book 3725, Page 3830, of the Public
Records of Brevard County, Florida; and
WHEREAS, the property currently encumbered by the Mortgage is the real
property set forth on Exhibit "A" and Exhibit "B" to that certain Mortgage
Modification Agreement dated October 25, 1996, and recorded on October 31, 1996,
in Official Records Book 3617, Page 1805, of the Public Records of Brevard
County, Florida; and
WHEREAS, the parties hereto are desirous of further modifying said Mortgage
and Mortgage Note.
NOW, THEREFORE, in consideration of the sum of $10.00 this day paid by each
party to the other, receipt whereof being hereby acknowledged, and other good
and valuable considerations, the parties do hereby amend said Note and Mortgage
as follows:
1. The present outstanding principal balance of said Mortgage is
$2,226,666.58.
2. The Note and Mortgage are hereby deemed to be modified to incorporate
the following provisions which shall prevail to the extent of any inconsistency
with the provisions of the Note and Mortgage. Failure to comply with any or all
of the following provisions shall constitute a default under the Note, Mortgage,
UCC-1 Financing Statements, assignments of rents and leases, guarantees, and all
other documents executed and/or delivered by Mortgagor to Mortgagee.
3. Mortgagor hereby acknowledges receipt from Mortgagee of the Future
Advance in the sum of Two Hundred Sixty Thousand and 08/100 Dollars
($260,000.08). The Future Advance is evidenced by a Future Advance Note of even
date herewith in the principal sum of Two Hundred Sixty Thousand and 08/100
Dollars ($260,000.08), which Future Advance Note, by this reference, is made a
part hereof to the same extent as if set forth herein verbatim.
4. The Future Advance in the principal sum of Two Hundred Sixty Thousand
and 08/100 Dollars ($260,000.08) evidenced by the Future Advance Note is secured
by the Mortgage to the same extent as though advanced on the date of the
Mortgage. Accordingly, on the date hereof, the total principal indebtedness
secured by the Mortgage is $2,486,666.66.
5. The total principal indebtedness of $2,486,666.66 plus interest at the
rate of one and one-half (1.50%) percent per annum in excess of The Huntington
National Bank's Prime Commercial Lending Rate ("Rate"), with the amount of
interest payable to be adjusted from time to time as the Rate changes] shall be
paid as follows:
Monthly principal payments of $13,333.34 plus interest shall be due and
payable on the day 30th of January, 1998, and the 30th day of each consecutive
month thereafter until the 1st day of July, 1998 when the entire outstanding
principal balance plus all accrued interest shall be due and payable.
Interest shall be calculated on the basis of a three hundred sixty (360)
day year and charged for the actual number of days elapsed in an interest
period. In no event shall the amount of interest due or payments in the nature
of interest payable hereunder exceed the maximum rate of interest allowed by
applicable law, as amended from time to time, and in the event any such payment
is paid by Borrower or received by the Lender, then such excess sum shall be
credited as a payment of principal, unless Borrower shall notify the Lender, in
writing, that Borrower elects to have such excess returned to it for its worth.
Each payment when made shall be applied first to the payment of interest,
second to the payment of sums due hereunder other than interest or principal
(i.e., late payment and similar charges), and then to the payment of principal.
Mortgagor shall have the right to prepay this loan, in full or part,
without penalty through the application of normal operating cash flow of the
Mortgagor. Should prepayment be funded from any other source, a prepayment fee
of one-half (.50%) percent of the then outstanding balance shall be due and
payable.
6. The parties agree that interest at the rate of one and one-half (1.50%)
percent per annum in excess of The Huntington National Bank's Prime Commercial
Lending Rate ("Rate"), with the amount of interest payable to be adjusted from
time to time as the Rate changes, shall begin accruing on December 30, 1997.
Mortgagor, in consideration of the above and foregoing and in consideration
of other valuable considerations running to it do hereby agree to pay the
Mortgage indebtedness according to the terms, covenants and conditions contained
therein and the Note secured thereby and as amended herein.
In all other respects, said Mortgage and Mortgage Note heretofore described
are ratified and confirmed with the terms of the original Mortgage and Mortgage
Note.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed the day and year first above written.
Signed, sealed and delivered THE HUNTINGTON NATIONAL BANK OF
in the presence of: FLORIDA, a national banking corporation
/s/ R. Mason Blake By: /s Shari J. Evetts
------------------ -----------------------
R. Mason Blake Shari J. Evetts, Vice President
(Print Name) (Printed Name and Title)
/s/ Juliann E. Wolf (Corporate Seal)
- -------------------
Juliann E. Wolf
(Print Name) "Mortgagee"
THIS IS A BALLOON MORTGAGE AND THE FINAL PAYMENT OF THE BALANCE DUE UPON
MATURITY IS $2,406,666.62, TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF THIS MORTGAGE.
Signed, sealed and delivered SMART CHOICE AUTOMOTIVE GROUP,
in the presence of: INC., a Florida corporation
By: /s/ Joseph E. Mohr
----------------------
Joseph E. Mohr, Chief Financial Officer
(Print Name)
(Corporate Seal)
(Print Name) "Mortgagor"
ACKNOWLEDGMENT AND CONSENT OF GUARANTOR
The undersigned hereby acknowledges and consents to the foregoing
Modification of Mortgage and Mortgage Note and Extension Agreement.
Dated this day of , 1997.
ECKLER INDUSTRIES, INC.
By: /s/ Joseph E. Mohr
-----------------------
Joseph E. Mohr, Chief Financial Officer
5200 S. Washington Avenue
Titusville, FL 32780
EXHIBIT 10.20
EIGHTH AMENDED AND RESTATED
PROMISSORY NOTE
$42,500,000.00 PHOENIX, ARIZONA MARCH 27, 1998
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 Forty-Two Million Five Hundred Thousand Dollars
($42,500,000.00) 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 April 15, 1998. 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.
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. 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.
12. RENEWAL AND EXTENSION. This Eighth 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 Eighth 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). that
certain Sixth Amended and Restated Promissory Note, dated May 7, 1997 ("Sixth
Amended Note") in the stated principal amount of Thirty-Five Million Dollars
($35,000,000.00) and that certain Seventh Amended and Restated Promissory Note,
dated December 30, 1997, in the stated principal amount of Thirty-Five Million
Dollars ($35,000,000.00). This Eighth 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 Eighth Amended
and Restated Promissory Note, but are hereby renewed, extended, recognized and
preserved in full to secure payment of this Eighth Amended and Restated
Promissory Note and all sums due or to become due and payable under the Loan
Documents.
13. TEMPORARY OVERLINE. The maximum outstanding balance of this Note
includes a grant by Lender to Borrower of a temporary overline of Seven Million
Five Hundred Thousand Dollars ($7,500,000.00). The availability of the temporary
overline expires on April 30, 1998, and therefore, the maximum availability
pursuant to this Note shall be Thirty-Five Million Dollars ($35,000,000.00)
after April 30, 1998.
MAKER:
Florida Finance Group Inc.
a Florida corporation
By: /s/ Richard Todd
--------------------
Assistant Vice President
Liberty Finance Company
a Florida corporation
By: /s/ Richard Todd
---------------------
Assistant Vice President
Smart Choice Receivables
Holding Company,
a Delaware corporation
By: /s/ Richard Todd
--------------------
Assistant Vice President
EXHIBIT 10.21
FOURTH AMENDED AND RESTATED SCHEDULE TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Borrower: FLORIDA FINANCE GROUP INC.
LIBERTY FINANCE COMPANY
Address: 5200 S. WASHINGTON
TITUSVILLE, FLORIDA 32780-7316
Borrower: SMART CHOICE RECEIVABLES HOLDING COMPANY
P. O. Box 50102
Henderson, NV 89016
Date: MARCH 27, 1998
This Fourth Amended and Restated Schedule ("Fourth 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 Fourth
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. and
that certain First Amended and Restated Schedule to Amended and Restated Loan
and Security Agreement, dated April 22, 1997, that certain Second Amended and
Restated Schedule to Amended and Restated Loan and Security Agreement, dated May
7, 1997 and that certain Third Amended and Restated Schedule to Amended and
Restated Loan and Security Agreement, dated December 30, 1997. The terms and
provisions of this Fourth Amended Schedule shall supersede all prior schedules.
All references to Section numbers herein refer to Sections in the Agreement.
================================================================================
1.A. BORROWERS (SECTION 1).
All references to "Borrower" in any and all Loan Documents are hereby
modified to include the following Borrower, as co-borrowers, jointly and
severally:
Florida Finance Group, Inc. - "FFG" or "Lead Borrower"
Liberty Finance Company - "Liberty"
Smart Choice Receivables Holding Company "Smart Choice Receivables"
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 or due = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 or more days past due = "60 + day Account"
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 Industries, 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 consolidated 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
consolidated 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)
(i) If the date of determination is on or before April 30, 1998, then the
Amount of Revolving Credit Line shall be Forty-Two Million Five
Hundred Thousand Dollars ($42,500,000.00). Seven Million Five Hundred
Thousand Dollars ($7,500,000.00) of the $42,500,000.00 represents a
temporary overline granted to Borrower that expires on April 30, 1998.
(ii) If the date of determination is after April 30, 1998, then the Amount
of Revolving Credit Line shall be 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
(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.
2.11. FACILITY FEE (SECTION 2.11).
A Facility Fee shall not be due for any calender month ending on or after
April 30, 1997.
2.12 CO-BORROWER PROVISIONS (SECTIONS 2.12, 2.13, AND 2.14)
The following Sections 2.12, 2.13 and 2.14 are hereby added to the
Agreement:
2.12 APPLICATION OF PAYMENTS. All payments and collections shall be deemed
to be comprised of a pro rata remittance or payment made by each Borrower,
based upon the proportion that the Eligible Receivables of each Borrower
bears to the aggregate of all Eligible Receivables of the Borrowers, as of
the date on which such remittance or payment is received by Lender. In the
event such remittance or payment shall be made by the Lead Borrower, acting
as agent or trustee for the other Borrowers, each Borrower shall be deemed
to have made their proportionate amount of such remittance or payment to
Lender by and through such agent or trustee.
2.13. ADVANCES TO LEAD BORROWER. Borrower does hereby irrevocably agree
that in the event Lender makes advances to Lead Borrower, as agent or
trustee for each of Borrower, as contemplated in Section 2.14, each such
advance shall be deemed to be made to each Borrower based upon a proportion
that each Borrower's Eligible Receivables bear to the aggregate of all
Eligible Receivables of Borrower, notwithstanding any subsequent
disbursement of said advance by the Lead Borrower, acting as agent or
trustee for the Borrowers. In the event that the actual advances, direct or
indirect, received by Lead Borrower or any other Borrower or the balance
due to Lender as shown in the records of any Borrower shall be
disproportionate when compared to the proportion of the Eligible
Receivables of each Borrower, whether by way of subsequent disbursements by
Lead Borrower, acting as agent or trustee, by way of Lender electing to
make advances to each Borrower, as contemplated in Section 2.14 or
otherwise, such disproportionalities shall be deemed to have occurred by
virtue of loans made between and among Borrowers.
2.14 APPOINTMENT OF AGENT. Lender agrees that, in the sole discretion of
Lender, Borrower may, by written notice to Lender, designate a Lead
Borrower to receive advances from Lender, make payments to Lender,
communicate with Lender and generally represent the interests of the
Borrowers with respect to the subject matter of this Agreement;
notwithstanding the foregoing, Lender may, at its sole discretion and upon
notice to each of the Borrowers, make advances directly to each of the
Borrowers, require that payments due hereunder be made to Lender by each of
the Borrowers, require each of the Borrowers to communicate directly with
Lender, for its own account, and generally deal independently and
separately with each of the Borrowers. Until so notified by Lender, each of
the Borrowers hereby agree that any and all funds advanced by Lender
pursuant to the terms of this Agreement, shall be advanced to the Lead
Borrower and may be deposited or transferred into the general corporate
account of Lead Borrower, as agent and/or trustee for Borrowers. Lead
Borrower hereby agrees to keep detailed and accurate records of all such
disbursements made to any other Borrowers. Lead Borrower hereby agrees to
keep detailed and accurate records of all loans and dealings between or
among Lead Borrower and the other Borrowers. Borrowers agree to furnish
copies of such records to Lender upon request. Each Borrower, other than
the Lead Borrower hereby irrevocably makes, constitutes, designates and
appoints Lead Borrower as its agent and/or trustee with full power to
receive all notices, request all Advances hereunder and to deal generally
with Lender as agent and/or trustee for the Borrowers and Lead Borrower is
hereby granted full power and authority to bind the Borrowers in respect of
any term, condition, covenant or undertaking embraced in this Agreement.
Lender may, without liability or responsibility to the Borrowers rely upon
the instructions or other communications of Lead Borrower on behalf of each
of the Borrowers in connection with any notifications, requests or
communications required or permitted to be given hereunder with the same
force and effect as if actually given by each Borrower; each Borrower
hereby agrees to indemnify and hold Lender harmless from and against any
liability, claim, suit, action, penalty, fine or damage arising out of or
incurred in connection with Lender's reliance upon communications from Lead
Borrower on behalf of the Borrowers. It is specifically understood and
agreed that any Advance made hereunder by Lender to Lead Borrower shall be
considered and treated as an Advance to the Borrowers and each Borrower
shall be jointly and severally liable therefor.
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
3.16 CROSS COLLATERALIZATION PROVISION (SECTION 3.16)
The following Section 3.16 is hereby added to the Agreement:
3.16 CROSS COLLATERALIZATION. Each Borrower agrees that the Collateral of
each Borrower pledged hereunder shall secure all of the obligations of the
Borrowers to Lender hereunder. Upon and after an Event of Default by any
Borrower, Lender may pursue all rights and remedies it may have against all
or any part of the Collateral regardless of the status of legal title to
such Collateral. Each Borrower hereby acknowledges that this Cross
Collateralization of their Collateral is in consideration of Lender's
extending the credit hereunder and mutually beneficial to each Borrower.
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).
Borrowers shall reimburse Lender for legal fees and expenses incurred in
the negotiations, preparation and closing of this Third Amended and
Restated Schedule to Amended and Restated Loan and Security Agreement.
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.
Liberty Finance Company
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-269-1880
Borrower: Smart Choice Receivables Holding Company
P. O. Box 50102
Henderson, NV 89016
Telephone: (702) 598-3738
Telecopy No.: (702) 598-3651
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
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/ Bradley R. Fisher 3/27/98
------------------------------------------------
Bradley R. Fisher, Vice President (Date)
BORROWERS:
FLORIDA FINANCE GROUP INC.
By: /s/ Richard Todd 3/27/98
-----------------------------------------------
Richard Todd, Assistant Vice President (Date)
LIBERTY FINANCE COMPANY
By: /s/ Richard Todd 3/27/98
-----------------------------------------------
Richard Todd, Assistant Vice President (Date)
SMART CHOICE RECEIVABLES HOLDING COMPANY
By: /s/ Richard Todd 3/27/98
-----------------------------------------------
Richard Todd, Assistant Vice President (Date)
GUARANTORS:
SMART CHOICE HOLDINGS, INC.
By: /s/ Richard Todd 3/27/98
-----------------------------------------------
Richard Todd, Assistant Vice President (Date)
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Richard Todd 3/27/98
-----------------------------------------------
Richard Todd, Assistant Vice President (Date)
EXHIBIT 10.24
LEASE
THIS LEASE AGREEMENT is made and entered into this 5th day of April, 1997,
by and between Gary R. Smith (hereinafter referred to as "Landlord") and Team
Automobile Sales & Finance, Inc., d/b/a Team Automobile Sales & Finance
(hereinafter referred to as "Tenant").
SECTION 1
DESCRIPTION OF PREMISES
Landlord leases to Tenant and Tenant leases from Landlord the Premises
located at 8101 66th Street North, Pinellas Park, Florida 33781, legal
description attached.
SECTION 2
QUIET ENJOYMENT
Landlord covenants, warrants and represents that, Landlord has full right
and power to execute and perform this Lease, and to grant the estate demised
herein; and that Tenant, upon the payment of the rent herein reserved and
performance of the covenants and agreements herein contained shall peaceably and
quietly have, hold and enjoy the Premises and all rights, easements, covenants
and privileges belonging or in any way appertaining thereto.
SECTION 3
USE OF PREMISES
The Premises shall be used for the maintenance and operation of a used
automobile sales location, which shall include all reasonable activities
ancillary thereto.
SECTION 4
TERM
The initial term of this Lease is two (2) years ("the initial Term)
beginning April 5, 1997 (the "Commencement Date"). Tenant at its option may
exercise in writing (3) one (1) year renewals. Rent will be increased three
percent (3%) in each renewal year.
SECTION 5
RENT
Tenant shall pay last month's rent of $3,500, a security deposit of $3,000
and first's rent upon execution of this Lease. The base monthly rental for the
Premises for the initial Term shall be $3,500 (the "Base Rent"). The Base Rent
shall be payable in advance on the fifteenth day of each month, plus and
together with sales or use tax at the then applicable in the County in which the
Premises are located. Said monthly installments shall be paid, without demand,
at such address as the Landlord shall designate, in writing, from time to time.
SECTION 6
LATE PAYMENTS
In the event of any failure to pay Rent or to make any other payment due
Landlord hereunder in the manner of time provided for herein, Tenant shall pay
to Landlord upon demand an administrative charge in the amount of One Hundred
and No/100 Dollars ($100.00) for any payment not made by the fifth (5th) day
after its due date.
SECTION 7
INSUFFICIENT CHECKS
Tenant shall pay to Landlord upon demand a charge of Fifty and No/100
Dollars ($50.00) for each check tendered to Landlord in payment of Rent or any
other payment due Landlord hereunder which is returned to Landlord by Tenant's
bank for any reason not the fault of the Landlord.
SECTION 8
UTILITIES
Tenant shall arrange and pay for all utilities furnished to the Premises
during the term of this Lease, including water, sewer, trash, electricity, gas,
telephone service and janitorial service. In no event shall Landlord be liable
for any interruption or failure of utility service to the premises unless caused
by the gross negligence or willful misconduct of Landlord.
SECTION 9
REPAIRS AND MAINTENANCE
Tenant shall at its expense, maintain in good condition, the roof, walls,
foundation, structural portions of the Premises, including carpets, window
coverings, interior fixtures, heating and air conditioning equipment, presently
in place or added by the Tenant or Landlord except when such damages is caused
by the Landlord, its agents or employees. In addition, Tenant shall maintain the
exterior landscape areas and sprinkler system, if any, and the parking lot. Any
repairs or modifications required by the Americans With Disabilities Act or
local law will be accomplished by Tenant at its expense. Landlord makes no
representations whether the premises complies with the American With
Disabilities Act.
SECTION 10
ENVIRONMENTAL
If any government or local agency requires and inspection for toxic or
hazardous materials prior to a new tenancy, Landlord shall bear the cost of such
inspection. If governmental authority requires the removal of hazardous
materials from the lands, subject to this Lease prior to April 5, 1997, it will
be the Landlord's responsibility to remove the offensive material. If said
material is removed from an area that lies below the parking lot, Landlord shall
immediately repair any and all damage thereto. However, Landlord will not be
responsible for any consequential or incidental damages, including, but not
limited to, lost sales or profits, suffered by Tenant.
During the entire term of this Lease (including any period of time Tenant
occupies any part of the Premises prior to the Commencement Date of the term of
the Lease) and including any extensions or renewals thereof, Tenant shall fully
and strictly comply with all federal, state and local laws, ordinances, rules
and regulations now or at any time hereafter in effect which regulate, relate
to, or impose liability or standards of conduct concerning any Hazardous
Substances (as such term is hereafter defined), including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act and any
so-called federal, state of local "Superfund" or "Superlien" laws (collectively,
the "Environmental Laws"), and which directly or indirectly affect Tenant's
business and Tenant's use of the Premises; and Tenant hall not permit the
Premises to be used to store or otherwise handle Hazardous Substances except
where stored where stored in sealed containers and in quantities normally
associated with Tenant's business conducted on the Premises or for office
maintenance and cleaning and in those instances, the Hazardous Substances shall
be handled or stored in compliance with all Environmental Laws. Tenant
acknowledges that is compliance shall include, by way of illustration and not by
way of limitation, the completions and timely filing of all reports and
statements required pursuant to or imposed from time to time in connection
therewith; and the timely disclosure to Landlord upon request of any information
requested by Landlord when and as required pursuant to the Environmental Laws,
as the same may be amended or replaced from time to time, in order to permit
Landlord or others to make full and complete disclosures or filings as required
pursuant to such laws.
Should a release of any Hazardous Substances onto or from the Premises or
land occur as a result of any intentional or unintentional act or omission on
the part of Tenant or any other person, Tenant shall immediately notify Landlord
thereof and, if such release is due to any act or omission of Tenant or of any
of Tenant's employees, agents, invitees, licensees, subtenants or assignees, as
soon as possible thereafter Tenant shall conduct and complete or cause to be
conducted or completed any and all remedial work reasonably required to clean up
and remove all such Hazardous Substances in accordance with and to the extent
required by all applicable Environmental Laws and any orders or directives of
any federal, state or local governmental authorities charged with responsibility
or authority pursuant to such Environmental Laws.
Tenant shall hold Landlord, its officers, directors, partners, agents and
employees (as the case may be) harmless from an indemnified against all claims,
penalties, fines, liabilities, settlements, damages and costs (including, but
not limited to, reasonable attorneys' and other consultants' fees, investigation
or laboratory fees, court costs and litigation expenses) arising out of, or as a
result of (a) the presence, disposal, release or threatened release of any
Hazardous Substances on, over, under, from or affecting the Premises or land
caused or permitted by, attributed or related to or otherwise arising out of the
use and occupancy of the Premises by Tenant or by anyone acting by, through or
under Tenant, including, without limitation, any of Tenant's employees, agents,
invitees, licensees, subtenants or assignees; (b) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or relating
to any such presence, disposal, release or threatened release of any Hazardous
Substances; (c) any violation of or failure to comply with any Environmental
Laws or any orders, requirements or demands of any governmental authorities
which are based upon or in any way related to any such presence, disposal,
release or threatened release of any Hazardous Substances; or (d) Tenant's
failure to comply with any of the requirements of this Section of the Lease.
Tenant shall hold Landlord, its officers, directors, partners, agents and
employees (as the case may be) harmless from an indemnified against all claims,
penalties, fines, liabilities, settlements, damages and costs (including, but
not limited to, reasonable attorneys' and other consultants' fees, investigation
or laboratory fees, court costs and litigation expenses) arising out of, or as a
result of (a) the presence, disposal, release or threatened release of any
Hazardous Substances on, over, under, from or affecting the Premises or land
caused or permitted by, attributed or related to or otherwise arising out of the
use and occupancy of the Premises by Landlord, or by anyone acting by, through
or under Landlord (except Tenant), including, without limitation, any of
Landlord's employees, agents, invitees, licensees, subtenants or assignees; (b)
any personal injury (including wrongful death) or property damage (real or
personal) arising out of or relating to any such presence, disposal, release or
threatened release of any Hazardous Substances; (c) any violation of or failure
to comply with any Environmental Laws or any orders, requirements or demands of
any governmental authorities which are based upon or in any way related to any
such presence, disposal, release or threatened release of any Hazardous
Substances; or (d) Landlord's failure to comply with any of the requirements of
this Section of the Lease.
For purposes of this Lease, the term "Hazardous Substances" shall mean and
include (a) any asbestos, PCBs or dioxins; (b) any petroleum products; (c) any
waste, substance, material, pollutant or contaminant defined as hazardous or
toxic in (or for purpose of) the Comprehensive Environmental Response,
Compensation of Liability Act or any other applicable Environmental Laws, as the
same may heretofore or hereafter be enacted or amended; and (d) any waster,
substance, material, pollutant or contaminant either (i) defined as hazardous or
toxic in (or for purposes of) or (ii) the presence, disposal, release or
threatened release of which on, onto or from any Premises including the Premises
or the land) is governed by any other applicable Environmental Laws.
SECTION 11
GLASS
Tenant covenants and agrees to replace any plate glass broken on the leased
Premises during the term of this Lease, except if such damage is caused by the
negligence of the Landlord, its agent or employees.
SECTION 12
DAMAGE OR DESTRUCTION OF PREMISES
If the Premises are damaged or partially destroyed by fire, casualty or
other cause during the term of the Lease or any extension thereof, Landlord
shall promptly repair them to the condition which Landlord furnished to Tenant
upon the commencement of the term of this Lease. The Premises shall be repaired
within one hundred twenty (120) days of the date of the damage or destruction.
Rent, and all other charges shall be abated only in the event the damage
and subsequent repair operations prohibit business to be conducted on the
Premises by Tenant.
SECTION 13
NON-LIABILITY OF LANDLORD FOR DAMAGES
Landlord shall not be responsible for liability or damage claims for injury
to persons or property for any cause relating to the occupancy of the Premises
by Tenant. Tenant shall indemnify Landlord from all liability, loss or other
damage claims for obligations resulting from any injuries or losses of this
nature, including reasonable attorney's fees and court costs incurred by
Landlord in defending any such claims, except when caused by the negligence of
the Landlord, its agent, servants or employees.
SECTION 14
FIRE INSURANCE
Tenant covenants and agrees, as a material inducement for entering into
this Lease, to obtain and continue in full force and effect throughout the term
of this Lease, a standard fire and extended coverage insurance policy in an
amount sufficient to cover the full replacement cost or insurable value
(whichever is less) of the Premises, and shall name Landlord as a primary or an
additional insured. Such insurance policy shall be written by a responsible
mutually covenant and agree, as a material inducement for entering into this
Lease, that any insurance proceeds shall be applied exclusively to the cost of
repairing or rebuilding the Premises. Landlord agrees to reasonably cooperate
with Tenant in obtaining such insurance policy.
Tenant is responsible for its own insurance to cover its own contents
located in the Premises, and all personal property and equipment included in the
Premises. Landlord shall not be liable for any damage to the property or person
of any of the Tenant's officers, employees, agents, invitees or guests from
perils customarily covered by fire and extended coverage insurance, liability
insurance or acts of God.
SECTION 15
LIABILITY INSURANCE
Tenant shall procure and maintain in full force, at its expense, during the
term of this Lease, and any extension thereof, for the benefit of Landlord or
Tenant and Landlord, general or public liability insurance which shall be
adequate to protect against liability for damage claims through public use of or
arising out of any accident occurring in or around the leased Premises, in a
minimum amount of $100,000.00 for each person injured, $300,000.00 for any one
accident, and $50,000.00 for property damage. Landlord shall be the primary
insured or an additional named insured in such policy and Tenant shall furnish
Landlord with a Certificate of Insurance with reference to the same. Landlord
agrees to reasonably cooperate with Tenant in obtaining such insurance policy.
SECTION 16
IMPROVEMENTS OR ADDITIONS BY TENANT
During the term of this Lease, Tenant shall have the right and privilege of
remodeling or altering the interior of the Premises, including installation of
additional portions, complying with all codes, ordinances and laws in effect at
the time of remodeling. No alterations or improvements effecting the structural
portion of the building shall be made by Tenant without the written consent of
Landlord. Tenant shall be permitted, within ten (10) days after the expiration
or sooner termination of this Lease, to remove any additions or improvements
made by it, provided, however, that it repairs any damage to the Premises caused
by such removal or pays for any damages caused by such removal and further
provided, that any such addition or improvement not removed within ten (10) days
shall be deemed abandoned and shall, thereupon, become property of Landlord
without compensation to Tenant.
SECTION 17
ENCUMBRANCES
This Lease is subject and subordinate to any mortgage with which the
Landlord may now or hereafter encumber the Property and to all renewals,
modifications, consolidations, replacements and extensions thereof. This cause
shall be self-operative and no further instrument of subordination need be
required by a mortgagee. In confirmation of such subordination, however, Tenant
shall, within twenty (20) days of Landlord's receipt of written notice, promptly
execute any instrument evidencing such subordination. In the event of
foreclosure under any mortgage, Tenant shall, upon request of any person or
party succeeding to the interest of Landlord as a result of such foreclosure,
automatically become the Tenant of such successor in interest without change in
the terms or other provisions of this Lease and, upon request by such successor
in interest, Tenant shall execute and deliver instrument(s) confirming the
attornment provided for herein; provided the transferee with the material terms
of this Lease to which transferee will be bound and required to fulfill the
obligations of "Landlord". Notwithstanding the foregoing to the contrary, in no
event shall Tenant be required to submit Tenant's financial statement(s), to any
successor landlord.
SECTION 18
MORTGAGING
Tenant shall not be entitled to mortgage, pledge, grant deeds of trust, or
otherwise encumber Tenant's leasehold interest under this Lease, or to assign,
hypothecate or pledge same as security, for any debt without Landlord's prior
consent, which consent shall not be unreasonably withheld. Any attempted
mortgage or encumbrance by Tenant of Tenant's leasehold interest herein without
Landlord's prior written consent shall be null and void.
SECTION 19
CONSTRUCTION LIENS
Tenant shall not permit any construction, mechanics or materialmen lien or
any other liens to be placed upon the Premises, or any improvements located
therein, during the Lease terms, caused by or resulting from any work performed,
materials furnished or obligation incurred by or at the request of Tenant. In
the case of the filing of any lien on the interest of Landlord or Tenant in the
Premises, Tenant shall cause the same to be discharged or recorded by payment of
the amount claimed to be due or by posting of the necessary bond within thirty
(30) days after the filing of same. A failure by Tenant to do so shall
constitute an event of default by Tenant under this Lease.
SECTION 20
LIEN WAIVER
Landlord hereby waives any lien Landlord may have pursuant to this Lease or
under law upon any personal property of Tenant, including inventory, to the
extent a security interest or lien may attach to same in favor of anyone other
than Landlord. In such circumstances, Landlord shall execute and deliver to
Tenant an appropriate lien waiver to effectuate this section within twenty (20)
days of Tenant's written request for such waiver.
SECTION 21
TENANT'S REMEDIES ON DEFAULT
In the event of any material and significant default by Landlord in the
performance of any material and significant promise or obligation to be kept or
performed hereunder and the default continues for a period of thirty (30) days
after receipt by Landlord or a written notice from Tenant specifying the
default, in such event Tenant, at its election, can declare this Lease
terminated, null and void and vacate the Premises within an additional period of
thirty (30) days, paying rent only to the date of said vacating.
SECTION 22
LANDLORD'S REMEDIES ON DEFAULT
If (i) Tenant fails to make any payment of Base Rent or additional rent or
payment required under this Lease when due, and such amount remains unpaid for a
period of ten (10) days following written notice to Tenant of such failure; (ii)
Tenant fails to comply with any term, provision, condition or covenant of this
Lease or any of the rules and regulations now or hereafter established for the
governance of the Premises for a period of thirty (30) days, following notice
from Landlord of such failure to comply or, if such failure is not susceptible
to cure within such thirty (30) days, Tenant has not instituted and diligently
pursued good faith efforts to cure such failure within such thirty (30) day
period; (iii) any petition is filed by or against Tenant under a section or
chapter of the Bankruptcy Code, as amended, or under any similar law or statute
of the United States or any state thereof and such petition is not discharged
within sixty (60) days from the date of its filing; (iv) Tenant becomes
insolvent or makes a transfer in fraud of creditors; (v) Tenant makes an
assignment for the benefit of creditors; (vi) a receiver is appointed for Tenant
or any of the assets of Tenant; (vii) Tenant fails to discharge any
construction, mechanics or materialmen lien in the manner and in the time period
described in Section 26, above; or (viii) Tenant vacates the Premises for more
than ten (10) days; then in any of such events, Landlord acknowledges that
Tenant shall have the right to close the business temporarily in order to retake
the Premises from the Tenant. Landlord shall have the option to do nay one or
more of the following with notice or demand, in addition to and not in
limitation of any other remedy permitted by law or in equity or by this Lease:
(a) Terminate this Lease, in which event Tenant shall immediately surrender
the Premises to Landlord, but if Tenant shall fail so to do, Landlord may, with
notice and without prejudice to any other remedy Landlord may have, enter upon
and take possession of the Premises and expel or remove Tenant and its effect by
force if necessary, without being liable to prosecution or any claim for damages
therefore; and Tenant agrees to indemnify Landlord for all loss and damage which
Landlord may suffer by reason of such termination, whether through inability to
relet the Premises on satisfactory terms, or through decrease in rent, or
otherwise.
(b) Enter upon and take possession of the leased Premises as agent of
Tenant, by force if necessary, without being liable to prosecution or any claim
for damages therefor and without terminating this Lease, and, thereupon,
Landlord may relet the Premises as agent of Tenant and receive rent therefore;
and in such event, Tenant shall pay Landlord the reasonable cost of renovating,
repairing and altering the Premises for a new tenant or tenants and any
deficiency in rent that may arise by reasons of such reletting. Landlord
acknowledges an affirmative duty to mitigate damage.
SECTION 23
SURRENDER OF PREMISES
Tenant shall surrender the Premises at the end of the Term, or any
extension thereof, in the same condition as when it took possession. Tenant
shall not be responsible for any repairs of alterations beyond those required to
restore the Premises to a condition substantially similar to the condition of
the Premises at the commencement of this Lease, reasonable wear and tear
excepted.
SECTION 24
HOLDING OVER
The failure of Tenant to surrender the Premises upon the termination of the
initial Lease term or renewal term, and subsequent holding over by Tenant,
without consent of the Landlord shall result in the creation of a tenancy at
sufferance whereupon Landlord shall be entitled to collect 125% of the Base Rent
Tenant. This provision does not give Tenant any right to hold over. All other
terms and condition of this Lease shall remain in full force during any extended
tenancy hereunder.
SECTION 25
ATTORNMENT
In the event Landlord sells, conveys or otherwise transfers its interest in
the property or any portion thereof containing the Premises, whether said
transfer is voluntary or otherwise, or through bankruptcy or foreclosure, this
Lease shall remain in full force and effect and the new owner agrees, within ten
(10) days written request, to confirm in writing, the continued validity of this
Lease. Tenant hereby attorns to and covenants and agrees, within ten (10) days
of Tenant's receipt of a written request, to execute an instrument in writing
reasonably satisfactory to the new owner whereby Tenant attorns to such
successor in interest and recognizes such successor as the Landlord under this
Lease.
SECTION 26
ESTOPPEL CERTIFICATE
Tenant will, at any time and from time to time, upon not less than ten (10)
days prior request from Landlord, execute, acknowledge and deliver to Landlord,
a statement ("Tenant's Estoppel Certificate") in writing certifying that Tenant
is in possession of the Premises under the terms of this Lease, that this Lease
is unmodified and in full effect (or, if there have been modifications, that
this Lease is in full effect as modified, and setting forth such modification),
stating the dates to which the rent has been paid, and either stating that, to
the knowledge of Tenant, no default exists hereunder, or specifying each such
default of which Tenant may have knowledge, and such other matters as may be
reasonably requested by Landlord. Within ten (10) days of written notice from
Tenant, Landlord agrees to execute and deliver to Tenant similar documents.
SECTION 27
ASSIGNMENT, SUBLEASE OR LICENSE
Tenant shall not assign this Lease or sublease the Premises, or any right
or privilege connected therewith, or allow any other person, except agents,
employees, and customers of the Tenant, to occupy the Premises or any part
thereof, without first obtaining the written consent of Landlord. A consent by
Landlord shall not be a consent for a subsequent assignment, subleased or
occupation by other persons. An unauthorized assignment, sublease or license to
occupy of Tenant shall be void and shall terminate this Lease at the option of
the Landlord. The interest of the Tenant in this Lease is not assignable by
operation of law, without the written consent of the Landlord.
SECTION 28
CONDEMNATION
If the whole or any part of the Premises shall be taken by any lawful
authority under the power of eminent domain, then this Lease and the term
demised shall thereupon terminate and Tenant shall be liable for rent only up to
the date of such termination.
In the event of the partial or complete taking of the improvements, as
aforesaid, Tenant shall only be entitled to participate in any awards for such
taking to the extent that any such award includes the loss, if any, sustained by
Tenant for loss of business, goodwill and moving expense. Any recovery by Tenant
will be against the taking government entity, and not against the Landlord.
SECTION 29
LANDLORD TO HAVE ACCESS
Landlord hereby expressly reserves the right to enter the Premises or any
part thereof, at any time in any event of emergency. Furthermore, Landlord may
enter the Premises after one (1) day notice to make inspection and repairs, to
exhibit the Premises to prospective tenants, purchasers, or others, and to
perform any acts related to safety, protection, preservation or improvements of
the Premises.
Tenant shall have the right to peacefully hold and enjoy the leased
Premises without unreasonable hindrance or interruption by Landlord or any
persons claiming by, through or under him until the end of this Lease term or
any extension of renewal hereof.
SECTION 30
NOTICES
Any notice which is to be given to either Landlord or Tenant shall be
deemed sufficiently given if sent by Certified or Registered Mail, postage
prepaid, adduced as follows:
Tenant: Team Automobile Sales & Finance, Inc.,
d/b/a Team Automobile Sales & Finance
8101 66th Street North
Pinellas Park, Florida 33781
Landlord: Gary R. Smith
c/o Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
The customary receipt shall be conclusive evidence of service, and notices
shall be effective as of the date of mailing thereof. Landlord agrees to accept
rent at the above referenced address.
Any change in the entity to whom rent is due must be authorized in writing
by the named landlord, its mortgagor or by court order. Absent such acceptable
authorization, Tenant shall not be in default of this Lease if it continues to
pay rent as specified herein.
SECTION 31
ENTIRE AGREEMENT
Landlord and Tenant agree that there are no oral agreements affecting this
Lease. The parties further agree that no alteration, amendment, change or
addition to this Lease shall be binding upon either party unless reduced to
writing and signed by each party.
SECTION 32
RECORDING
Neither this Lease nor a memorandum of this Lease may be recorded in the
public record any jurisdiction.
SECTION 33
TIME
Time shall be of the essence with respect to all terms under this Lease.
SECTION 34
WAIVER
No waiver by either of the parties hereto of any provision or breach hereof
shall be deemed a waiver of any other provision or of any subsequent breach by
the Tenant or the Landlord of the same or any other provisions. The Landlord's
or Tenant's consent to or approval of any act shall not be deemed to render
unnecessary the obtaining of the Landlord's or the Tenant's consent to or
approval of any subsequent act.
No remedy or election hereunder shall be deemed exclusive, but shall,
whenever possible, be cumulative with all other remedies at law or in equity.
SECTION 35
HEADINGS
This instrument's section headings are for quick reference and convenience
only and do not alter, amend or otherwise affect the terms, conditions and
agreements set out herein.
SECTION 37
LITIGATION
In the event of litigation between the Landlord and the Tenant relative to
rights, obligations and duties of either party under this Lease, the prevailing
party shall be entitled to an award of reasonable attorneys' fees and costs,
including those incurred prior to the commencement of litigation and at the
trial and appellate levels. In addition, both parties hereby waive their rights
to a trial by jury.
SECTION 38
SEVERABILITY
Should any provision of this Lease be or become invalid, void, illegal or
not enforceable, it shall be considered separate and severable from the Lease
and the remaining provisions shall remain in force and be binding upon the
parties hereto as though such provision had not been included.
SECTION 39
FORCE MAJEURE
If either party fails to perform any of its obligations under this Lease as
a result of Force Majeure, such party shall not be liable for loss or damage for
the failure and the other party shall not be released from any of its
obligations under this Lease. If either party is delayed or prevented from
performing any of its obligations as a result of Force Majeure, the period of
delay or prevention shall be added to the time herein provided for the
performance of any such obligation.
"Force Majeure" shall mean any period of delay which arises from or through
Acts of God; strikes, lockouts or labor difficulty; explosion, sabotage, riot or
civil commotion; act of war; fire or other casualty; legal requirements; and
causes beyond the reasonable control of a party.
SECTION 40
CONSTRUCTION
Should any provision of this Lease require judicial interpretation, the
parties hereto agree that the court interpreting or construing this Lease shall
not apply a presumption that the terms hereof shall be more strictly construed
against one party by reason of the rule of construction that a document is to be
more strictly construed against the party who itself or through its agent
prepared the same, it being agreed that Landlord, Tenant and their respective
agents have participated in the preparation thereof.
SECTION 41
RADON GAS
"Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit." Radon, an odorless, invisible and naturally occurring gas is often found
inside tightly sealed buildings. The gas has been linked to lung cancer, with
susceptibility heightened among smokers.
IN WITNESS WHEREOF, the parties have executed and delivered this Lease as
of the date first above written.
WITNESS: TEAM AUTOMOBILE SALES &
FINANCE, INC. D/B/A TEAM
AUTOMOBILE SALES & FINANCE
/s/ Deborah DiStefano By: /s/ R.C. Hill
- --------------------- ------------------
Deborah DiStefano R.C. Hill
Its: President
WITNESS:
/s/ Donna Siebel /s/ Gary R. Smith
- ---------------- -----------------
Donna Siebel Gary R. Smith, Individually
/s/ Larry Righmyer
- ------------------
Larry Righmyer
EXHIBIT 10.25
PROMISSORY NOTE MODIFICATION AGREEMENT
This Agreement made and entered into in Titusville, Florida this 15 day of
December, 1997 by and between First Choice Auto Finance, Inc. and Smart Choice
Holdings, Inc. as makers of a promissory note and Suncoast Auto Brokers, Inc.
and Suncoast Auto Brokers Enterprises, Inc. as payees of said promissory note.
WITNESSETH
WHEREAS, On or about January 28, 1997 First Choice Auto Finance, Inc. and
Smart Choice Holdings, Inc. executed and delivered to Suncoast Auto Brokers,
Inc. and Suncoast Auto Brokers Enterprises, Inc. a promissory note in the
principal amount of $1,031,008.36 that accrues interest at the annual rate of
nine percent (9.0%) and is payable in full no later than December 31, 1997. Said
promissory note, at the option of the payees, provides for a stock conversion at
a per share price of $8.75.
WHEREAS, As an accommodation to all of the parties to said promissory note
all said parties have agreed to modify certain terms thereof.
NOW, THEREFORE, for and in consideration the mutual covenants and promises
and ten dollars ($10.00) and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. All accrued interest on said promissory note has been paid through the date
of this modification agreement.
2. The principal balance of said note is one million thirty one thousand eight
dollars and thirty six cents ($1,031,008.36).
3. Interest on this principal balance shall accrue from the date hereof at the
presently existing rate, but effective January 1, 1998 and thereafter the
interest rate on all unpaid principal shall be increased to a new rate of
twelve percent per annum (12%). 4. All interest accruing subsequent to the
date of this Modification Agreement shall be paid monthly on the fifteenth
(15th) beginning January 15, 1998 and on the fifteenth (15th) of each month
thereafter until the principal balance is paid in full.
5. The date on which payment in full of the principal balance of this note is
due shall be extended to the earlier of: (i) fifteen (15) days after the
date on which the maker of the note and/or any of its corporate affiliates
shall consummate an underwritten public offering of its equity securities
under which at least twenty million dollars ($20,000,000) in gross proceeds
is raised, or (ii) January 15, 1999.
6. The stock Conversion Price set at eight dollars and seventy five cents
($8.75) in paragraph 3(b) of the said promissory note is hereby changed to
include an alternate conversion price of the lesser of : (I) the eight
dollars and seventy five cents ($8.75) as stated above, or (ii) the market
price of the stock at the time of conversion.
<PAGE>
7. In all other respects the terms and conditions of the said January 28, 1997
promissory note shall remain unchanged and reaffirmed.
FIRST CHOICE AUTO FINANCE, INC.
By: /s/ Joseph E. Mohr
As its: Senior Vice President
SMART CHOICE HOLDINGS, INC.
By: /s/ Joseph E. Mohr
As its: Senior Vice President
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Joseph E. Mohr
As its: Senior Vice President
SUNCOAST AUTO BROKERS, INC.
By: /s/ Gary R. Smith
As its: President
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
By: /s/ Gary R. Smith
As its: President
EXHIBIT 10.35
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Employment Agreement") is
effective as of April 11, 1997, by and between SMART CHOICE AUTOMOTIVE GROUP,
INC., a Florida corporation ("Company"), and JOSEPH ALVAREZ, an individual
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive has extensive experience relating to business
matters in the automotive sales industry; and
WHEREAS, to promote the ongoing business of the Company, the Company
desires to assure itself of the right to the Executive's services from and after
the date hereof, on the terms and conditions of this Agreement; and
WHEREAS, the 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
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 the President of its new and used car
sales division, 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 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 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 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 the date hereof (the "Commencement Date"). The Employment Period
shall automatically renew for additional terms of three years each on each
anniversary of the date hereof hereafter (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:
<PAGE>
a. BASE SALARY. The Company shall pay to Executive a base salary of
$150,000 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 (as renewed under
Section 3 hereof) after the initial three (3) 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. BONUS. In addition to the annual base salary, the Company shall pay the
Executive a minimum bonus (the "Minimum Bonus") of $50,000 as of the end of each
fiscal year of the Company during the Employment Period payable on the last day
of each such fiscal year. If the termination of the Employment Period occurs
other than at the end of a fiscal year, then the Minimum Bonus shall be
prorated. In addition to the Minimum Bonus, Executive shall be entitled to
receive an annual performance bonus (the "Performance Bonus") as determined and
in an amount set by the Board. Except for such proration and as provided in
Section 9 hereof, Executive shall have no right to receive partial payments of
the Minimum Bonus or the Performance Bonus.
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 $500 per month which the
Executive shall apply to leasing an automobile(s) for use by executive and his
immediate family. The automobile allowance shall be payable at the end of each
calendar month of the Employment Period. 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 of his employment, 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). The Executive's health insurance
benefits shall include coverage of his wife's pregnancy;
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
reimbursement shall 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;
<PAGE>
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
100% of his base salary, at least 80% of which is funded by insurance;
j. Moving Expenses. The Company shall reimburse the Executive for the
Executive's reasonable pre-approved expenses of moving the Executive's principal
residence from the St. Petersburg, Florida area to the area of Titusville,
Florida, in accordance with the Company's expense reimbursement policies.
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
term of this Employment Agreement, not including any renewal or extension
thereof) 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
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.
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
<PAGE>
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
Executive because his regular duties hereunder are materially reduced or
diminished (the position and duties of the Executive hereunder 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
(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.
<PAGE>
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. RESTRICTIVE COVENANTS.
a. The Executive hereby acknowledges and agrees that (i) the business
contacts, customers, suppliers, know-how, trade secrets, marketing techniques,
confidential information, financial and operating models, promotional methods
and other aspects of the business of the Company and its affiliates have been
and are of value to the Company, and have provided and will hereafter provide
the Company with substantial competitive advantages in the operation of its
business, (ii) he has and will continue to have detailed knowledge and possesses
and will possess confidential information concerning the business and operations
of the Company, (iii) the restrictions set forth in this Section are reasonably
necessary to protect the legitimate business interests of the Company, and (iv)
but for Executive's agreement to be governed by the restrictions set forth in
this Section 10, the Company would not have entered into this Agreement. The
Executive hereby further acknowledges that his business skills are not uniquely
suited to businesses of the type conducted by the Company, and that, if
required, he could readily adapt and utilize such skills in one or more other
types of businesses.
b. The Executive shall not, directly or indirectly, for himself or through
or on behalf of any other person or entity:
(i) at any time, divulge, transmit or otherwise disclose or cause to
be divulged, transmitted or otherwise disclosed, any business contacts,
client or customer lists, technology, know-how, trade secrets, marketing
techniques, contracts or other confidential or proprietary information of
the Company of whatever nature, whether now existing or hereafter created
or developed (provided, however, that for purposes hereof, information
shall not be considered to be confidential or proprietary if (A) it is a
matter of common knowledge or public record, (B) it is generally known in
the industry, or (C) 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
(ii) at any time during the period from the date hereof through and
including the date of the expiration or termination of the Executive's
employment with the Company (the "Restrictive Period"), directly or
indirectly invest, carry on, engage or become involved, either as 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 Company or its
subsidiaries, affiliates, successors or assigns) which derives any material
revenues from the sale, lease, financing or other transactions in new or
used automobiles or other consumer vehicles.
c. The Executive and the Company hereby acknowledge and agree that, in the
event of any breach by the Executive, directly or indirectly, of the foregoing
restrictive covenants, it will be difficult to ascertain the precise amount of
damages that may be suffered by the Company by reason of such breach; and
accordingly, the parties hereby agree that, as liquidated damages (and not as a
penalty) in respect of any such breach, the breaching party or parties shall be
required to pay to the Company, on demand from time to time, cash amounts equal
to any and all gross revenues derived by the breaching party or parties,
directly or indirectly, from any and all violative acts or activities. The
parties hereby agree that the foregoing constitutes a fair and reasonable
estimate of the actual damages that might be suffered by reason of any breach of
this Section 10 by the Executive, and the parties hereby agree to such
liquidated damages in lieu of any and all other measures of damages that might
be asserted in respect of any subject breach.
<PAGE>
d. The Executive and the Company hereby further acknowledge and agree that
any breach by the Executive, directly or indirectly, of the foregoing
restrictive covenants will cause the Company irreparable injury for which there
is no adequate remedy at law. Accordingly, the Executive expressly agrees that,
in the event of any such breach or any threatened breach hereunder by the
Executive, directly or indirectly, the Company shall be entitled, in addition to
any and all other remedies available (including but not limited to the
liquidated damages provided for in Section 10c above), to seek and obtain
injunctive and/or other equitable relief to require specific performance of or
prevent, restrain and/or enjoin a breach under the provisions of this Section 10
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.
e. In the event of any dispute under or arising out of this Section 10, the
prevailing party in such dispute shall be entitled to recover from the
non-prevailing party or parties, in addition to any damages and/or other relief
that may be awarded, its actual costs and expenses (including actual attorneys'
fees) incurred in connection with prosecuting or defending the subject dispute.
f. Executive expressly agrees that the existence of any claims that he has
or that he may have against the Company, its affiliates or parent companies,
whether or not arising from this Agreement, shall not constitute a defense to
the enforcement by the Company of this Section 10.
SECTION 11. 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 12. 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 13. 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 Automotive Group, Inc.
5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
If to Executive: Joseph Alvarez
5200 S. Washington Avenue
Titusville, Florida 32780
SECTION 14. 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 15. 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 16. 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 17. 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 18. 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: /s/ Gary R. Smith
---------------------
Gary R. Smith
EXECUTIVE:
/s/ Joseph Alvarez
------------------
Joseph Alvarez
EXHIBIT 10.36
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Employment Agreement") is
effective as of April 24, 1997, by and between SMART CHOICE AUTOMOTIVE GROUP,
INC., a Florida corporation ("Company"), and RONALD ANDERSON, an individual
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive has extensive experience relating to business
matters; and
WHEREAS, to promote the ongoing business of the Company, the Company
desires to assure itself of the right to the Executive's services from and after
the date hereof, on the terms and conditions of this Agreement; and
WHEREAS, the 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
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 Senior Vice President and Chief
Operating Officer, 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 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 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 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 the date hereof (the "Commencement Date"). The Employment Period
shall automatically renew for additional terms of three years each on each
anniversary of the date hereof hereafter (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
$125,000 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 (as renewed under
Section 3 hereof) after the initial three (3) 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. Bonus. In addition to the annual base salary, Executive shall be
entitled to receive an annual performance bonus (the "Performance Bonus") as
determined and in an amount set by the Board.
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 automobile allowance shall be payable at the end of each
calendar month of the Employment Period. 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 expenses for the acquisition and use of a
cellular telephone and cellular service of Executive's choice. All expense
reimbursement shall 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. Executive shall also be provided with a disability income plan equal to
100% of his base salary, at least 80% of which is funded by insurance;
j. Moving Expenses. The Company shall reimburse the Executive for the
Executive's reasonable pre-approved expenses of moving the Executive's principal
residence from the Jacksonville, Florida area to the area of Titusville,
Florida, in accordance with the Company's expense reimbursement policies.
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
term of this Employment Agreement, not including any renewal or extension
thereof) 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 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.
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.
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 the Executive hereunder 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 in 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 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. Restrictive Covenants.
a. The Executive hereby acknowledges and agrees that (i) the business
contacts, customers, suppliers, know-how, trade secrets, marketing techniques,
confidential information, financial and operating models, promotional methods
and other aspects of the business of the Company and its affiliates have been
and are of value to the Company, and have provided and will hereafter provide
the Company with substantial competitive advantages in the operation of its
business, (ii) he has and will continue to have detailed knowledge and possesses
and will possess confidential information concerning the business and operations
of the Company, (iii) the restrictions set forth in this Section are reasonably
necessary to protect the legitimate business interests of the Company, and (iv)
but for Executive's agreement to be governed by the restrictions set forth in
this Section 10, the Company would not have entered into this Agreement. The
Executive hereby further acknowledges that his business skills are not uniquely
suited to businesses of the type conducted by the Company, and that, if
required, he could readily adapt and utilize such skills in one or more other
types of businesses.
b. The Executive shall not, directly or indirectly, for himself or through
or on behalf of any other person or entity:
(i) at any time, divulge, transmit or otherwise disclose or cause to be
divulged, transmitted or otherwise disclosed, any business contacts, client or
customer lists, technology, know-how, trade secrets, marketing techniques,
contracts or other confidential or proprietary information of the Company of
whatever nature, whether now existing or hereafter created or developed
(provided, however, that for purposes hereof, information shall not be
considered to be confidential or proprietary if (A) it is a matter of common
knowledge or public record, (B) it is generally known in the industry, or (C)
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
(ii) at any time during the period from the date hereof through and
including the date of the expiration or termination of the Executive's
employment with the Company (the "Restrictive Period"), directly or indirectly
invest, carry on, engage or become involved, either as 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
Company or its subsidiaries, affiliates, successors or assigns) which derives
any material revenues from the sale, lease, financing or other transactions in
new or used automobiles or other consumer vehicles.
c. The Executive and the Company hereby acknowledge and agree that, in the
event of any breach by the Executive, directly or indirectly, of the foregoing
restrictive covenants, it will be difficult to ascertain the precise amount of
damages that may be suffered by the Company by reason of such breach; and
accordingly, the parties hereby agree that, as liquidated damages (and not as a
penalty) in respect of any such breach, the breaching party or parties shall be
required to pay to the Company, on demand from time to time, cash amounts equal
to any and all gross revenues derived by the breaching party or parties,
directly or indirectly, from any and all violative acts or activities. The
parties hereby agree that the foregoing constitutes a fair and reasonable
estimate of the actual damages that might be suffered by reason of any breach of
this Section 10 by the Executive, and the parties hereby agree to such
liquidated damages in lieu of any and all other measures of damages that might
be asserted in respect of any subject breach.
d. The Executive and the Company hereby further acknowledge and agree that
any breach by the Executive, directly or indirectly, of the foregoing
restrictive covenants will cause the Company irreparable injury for which there
is no adequate remedy at law. Accordingly, the Executive expressly agrees that,
in the event of any such breach or any threatened breach hereunder by the
Executive, directly or indirectly, the Company shall be entitled, in addition to
any and all other remedies available (including but not limited to the
liquidated damages provided for in Section 10c above), to seek and obtain
injunctive and/or other equitable relief to require specific performance of or
prevent, restrain and/or enjoin a breach under the provisions of this Section 10
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.
e. In the event of any dispute under or arising out of this Section 10, the
prevailing party in such dispute shall be entitled to recover from the
non-prevailing party or parties, in addition to any damages and/or other relief
that may be awarded, its actual costs and expenses (including actual attorneys'
fees) incurred in connection with prosecuting or defending the subject dispute.
f. Executive expressly agrees that the existence of any claims that he has
or that he may have against the Company, its affiliates or parent companies,
whether or not arising from this Agreement, shall not constitute a defense to
the enforcement by the Company of this Section 10.
Section 11. 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 are fair and reasonable and are
reasonably required for the protection of the legitimate business interests of
the Company.
Section 12. 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 13. 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 Automotive Group, Inc.
5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
If to Executive: Ronald Anderson
5200 S. Washington Avenue
Titusville, Florida 32780
Section 14. 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 15. 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 16. 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 17. 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 18. 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: /s/ Gary R. Smith
EXECUTIVE:
/s/ Ronald Anderson
-------------------
Ronald Anderson
EXHIBIT 10.37
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
ECKLER INDUSTRIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
5th day of March, 1997, by and among the CONLAN-SMART CHOICE HOLDINGS MANAGEMENT
TRUST under agreement dated January 29, 1997, Thomas E. Conlan, settlor, and
Gary R. Smith and Gerald C. Parker, trustees, and the PARKER-SMART CHOICE
HOLDINGS MANAGEMENT TRUST under agreement dated January 29, 1997, Gerald C.
Parker, settlor, and Gary R. Smith and Gerald C. Parker, trustees (such trusts
are referred to herein as the "Grantors"), ROBERT J. ABRAHAMS, an individual,
(the "Optionee") and ECKLER INDUSTRIES, INC., a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, the Optionee has provided services to the Company and its
affiliates from December 1, 1996 through February 15, 1997 without compensation
and has not been paid a starting bonus described in the Optionee's Executive
Employment Agreement with the Company dated December 1, 1996 (the foregoing is
referred to herein as the "Compensation"):
WHEREAS, the Grantors desire to grant the Optionee the option set forth
herein in lieu of the Compensation;
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:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, the Grantors hereby grant to Optionee, the option to purchase from
the Grantors (the "Option"), 12,500 shares of the Class A Common Stock (the
"Common Stock") of the Company (the "Option Shares"), at the exercise price per
share of $2.00 (the "Option Price"). The Option shall be exerciseable, in whole
or in part, for a period of five (5) years (the "Exercise Period") from the date
hereof. The Option shall vest immediately so that the Optionee may exercise the
Option as to all the Option Shares on the execution and delivery of this
Agreement.
The Grantors agree that on any exercise of the Option, the Option shall be
exercised as to an equal number of Option Shares for each Grantor.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code. Grantors and the Company
represent and warrant that no action required of them under this Agreement or
any other agreements or understandings, written or oral, entered into with
Optionee will conflict with, breach or otherwise impair any previously existing
agreements or understandings, whether written or oral, into which the Company
and Grantors have entered with other persons or entities.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
occurrence of the following:
(i) In accordance with the expiration of the Exercise Period set forth
above;
(ii) Involuntary dissolution of the Company.
<PAGE>
(b) Termination in the event of death, disability or termination of status
as an employee.
(i) If Optionee dies while an employee of the Company or within three (3)
months after termination of his status as an employee because of his permanent
disability (as defined below), his Option may be exercised, to the extent that
the Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Option passes by will
or applicable law, or if no such person has such right, by his executors or
administrators, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after Optionee's
death, whichever is earlier.
(ii) If Optionee's status as an employee of the Company shall terminate
because of his total disability, he may exercise his Option to the extent that
he shall have been entitled to do so at the date of such termination, at any
time or from time to time, but not later than the expiration date specified in
Section 1 or three (3) months after termination of employment, whichever date is
earlier.
(iii) If Optionee's status as an employee of the Company shall terminate
(A) involuntarily other than for cause, death, or total disability, all rights
to exercise his Option, to the extent that he shall have been entitled to do so
at the date of such termination, shall terminate at the expiration date
specified in Section 1 or three months after termination of employment,
whichever date is earlier.
(iv) If Optionee's status as an employee of the Company shall terminate for
cause (as defined below), all rights to exercise his Options shall terminate at
the date of such termination.
(c) "Termination for cause" shall be defined as set forth in the Employment
Agreement between Company and Optionee effective as of December 1, 1996.
"Permanent disability" shall be defined as set forth in the Employment Agreement
between Company and Optionee effective as of December 1, 1996.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may execute the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Grantors at 5200 South Washington
Avenue, Titusville, Florida. Such notice shall state the number of shares to be
purchased which are attributable to the Option which is being exercised, and
shall be accompanied by the full purchase price for such shares, payable in U.S.
Dollars by certified check or bank draft, unless the Grantors shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as possible after receipt by the
Grantors of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Grantors shall transfer to Optionee or his Legal
Representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall immediately terminate this Agreement, all
the Options granted hereunder shall be of no further force or effect and no
interest or right hereunder shall vest in any other person.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate evidencing ownership of
the Common Stock will be stamped or otherwise imprinted on the face thereof with
a legend in substantially the following form:
"The shares represented by this Certificate have not been registered under
the federal Securities Act of 1933, as amended (the "Act") or any state
securities act. No sale, offer to sell or transfer of the shares shall be
made unless a registration statement under the Act, or any applicable state
statute, with respect to the shares is then in effect or an exemption from
the registration requirements of such Act or state statute is then in fact
applicable to the shares."
<PAGE>
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised and until such respective shares attributable to such Option shall
have been issued to Optionee.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of any of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) If the outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company or of another corporation or entity or shares of a
different par value or without par value through a recapitalization, stock
dividend, stock split, reverse stock split or a reorganization under which the
Company is not the surviving entity, an appropriate or proportionate adjustment
shall be made in the number and/or kind of securities allocated to the Options,
without change in the aggregate Option Price applicable to the unexercised
portion of the outstanding Option but with a corresponding adjustment in the
Option Price for each share or other unit of any security covered by the Option.
No adjustment shall occur under this Section 6 by virtue of the fact that the
Company purchases or sells Common Stock or any securities of the Company for
cash. No fractional shares shall be issued for any such adjustment. No
adjustments under this Section shall be applicable in the event the Company
takes any of the aforementioned actions in order to complete a merger, stock for
stock exchange, reorganization or other transaction with Eckler Industries, Inc.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee and the Grantors at least fifteen (15) days prior to such proposed
action. To the extent it has not been exercised during such fifteen (15) day
period, these Options will terminate as to any unexercised portion thereof
immediately prior to the consummation of such proposed action.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended, ("Act") and
any applicable state securities laws, and upon the acquisition of the shares,
Optionee will enter into such written representations, warranties and agreements
as the Company or the Grantors may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Grantors agree, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Grantors are
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers: <PAGE>
If to Company or
Grantors: 5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
Telecopier: (407) 383-8822
If to Optionee: Robert Abrahams
2610 Crestwood Lane
Deerfield, Illinois 60015
The date of service of any notice or communication hereunder shall be the
date of the hand delivery or receipt of telecopy, or three (3) days after the
mailing, if mailed by certified mail, return receipt requested. A party whose
address or telecopy number changes shall notify the other party, in accordance
with this Section, within five (5) business days of such change (the "Changed
Party"). Failure of the Changed Party to notify the other party of such a change
shall constitute a waiver of any right to receive notice under this Agreement by
the Changed Party until such time s the Changed Party shall have properly
notified the other party in accordance with this Section 10.(d).
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not effect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitutes the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restriction, representations or
warranties among the parties other than those set forth herein. Nothing in this
Agreement shall alter, amend, modify, delete, rescind or otherwise waive any
transfer conditions to which Holder, or the Securities held by such Holder, may
be subject.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals, is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
[THIS AREA INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
ECKLER INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------
Gary R. Smith
THE GRANTORS:
CONLAN-SMART CHOICE HOLDINGS
MANAGEMENT TRUST UNDER AGREEMENT
DATED JANUARY 29, 1997
By: /s/ Gary R. Smith
---------------------
Gary R. Smith, Trustee
By: /s/ Gerald C. Parker
------------------------
Gerald C. Parker, Trustee
PARKER-SMART CHOICE HOLDINGS
MANAGEMENT TRUST UNDER AGREEMENT
DATED JANUARY 29, 1997
By: /s/ Gary R. Smith
---------------------
Gary R. Smith, Trustee
By: /s/ Gerald C. Parker
Gerald C. Parker, Trustee
THE OPTIONEE:
/s/ Robert J. Abrahams
-------------------------------
Robert J. Abrahams
EXHIBIT 10.38
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
ECKLER INDUSTRIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
5th day of March, 1997, by and among the CONLAN-SMART CHOICE HOLDINGS MANAGEMENT
TRUST under agreement dated January 29, 1997, Thomas E. Conlan, settlor, and
Gary R. Smith and Gerald C. Parker, trustees, and the PARKER-SMART CHOICE
HOLDINGS MANAGEMENT TRUST under agreement dated January 29, 1997, Gerald C.
Parker, settlor, and Gary R. Smith and Gerald C. Parker, trustees (such trusts
are referred to herein as the "Grantors"), ROBERT J. ABRAHAMS, an individual,
(the "Optionee") and ECKLER INDUSTRIES, INC., a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, the settlors of Grantors were founders of Smart Choice Holdings,
Inc., a Delaware corporation that intends to establish a network of
"neighborhood stores" for the financed sales of motor vehicles in the
Southeastern United States; and
WHEREAS, Smart Choice Holdings, Inc. became a wholly-owned subsidiary of
the Company pursuant to a merger that closed on January 28, 1997; and
WHEREAS, the Grantors and the Company believe that the attraction and
retention of key employees such as Optionee is essential to the Company's growth
and success; and
WHEREAS, in order to induce Optionee to serve as the Company's Chairman,
the Grantors hereby provide Optionee with the following additional incentives,
on the terms and conditions set forth herein.
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:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, the Grantors hereby grant to Optionee, the option to purchase from
the Grantors (the "Option"), 210,000 shares of the Class A Common Stock (the
"Common Stock") of the Company (the "Option Shares"), at the exercise price per
share of $1.00 (the "Option Price"). The Option shall be exerciseable, in whole
or in part, for a period of five (5) years (the "Exercise Period"), which period
shall commence on December 1, 1997. The Option shall vest immediately so that
the Optionee may exercise the Option as to all the Option Shares on the
execution and delivery of this Agreement.
The Grantors agree that on any exercise of the Option, the Option shall be
exercised as to an equal number of Option Shares for each Grantor.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code. Grantors and the Company
represent and warrant that no action required of them under this Agreement or
any other agreements or understandings, written or oral, entered into with
Optionee will conflict with, breach or otherwise impair any previously existing
agreements or understandings, whether written or oral, into which the Company
and Grantors have entered with other persons or entities.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
occurrence of the following:
(i) In accordance with the expiration of the Exercise Period set
forth above;
(ii) Involuntary dissolution of the Company.
(b) Termination in the event of death, disability or termination of status
as an employee.
(i) If Optionee dies while an employee of the Company or within
three (3) months after termination of his status as an employee
because of his permanent disability (as defined below), his
Option may be exercised, to the extent that the Optionee shall
have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Option
passes by will or applicable law, or if no such person has such
right, by his executors or administrators, at any time or from
time to time, but not later than the expiration date specified in
Section 1 or three (3) months after Optionee's death, whichever
is earlier.
(ii) If Optionee's status as an employee of the Company shall
terminate because of his total disability, he may exercise his
Option to the extent that he shall have been entitled to do so at
the date of such termination, at any time or from time to time,
but not later than the expiration date specified in Section 1 or
three (3) months after termination of employment, whichever date
is earlier.
(iii)If Optionee's status as an employee of the Company shall
terminate (A) involuntarily other than for cause, death, or total
disability, all rights to exercise his Option, to the extent that
he shall have been entitled to do so at the date of such
termination, shall terminate at the expiration date specified in
Section 1 or three months after termination of employment,
whichever date is earlier. (iv) If Optionee's status as an
employee of the Company shall terminate for cause (as defined
below), all rights to exercise his Options shall terminate at the
date of such termination.
(c) "Termination for cause" shall be defined as set forth in the Employment
Agreement between Company and Optionee effective as of December 1, 1996.
"Permanent disability" shall be defined as set forth in the Employment Agreement
between Company and Optionee effective as of December 1, 1996.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may execute the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Grantors at 5200 South Washington
Avenue, Titusville, Florida. Such notice shall state the number of shares to be
purchased which are attributable to the Option which is being exercised, and
shall be accompanied by the full purchase price for such shares, payable in U.S.
Dollars by certified check or bank draft, unless the Grantors shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as possible after receipt by the
Grantors of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Grantors shall transfer to Optionee or his Legal
Representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall immediately terminate this Agreement, all
the Options granted hereunder shall be of no further force or effect and no
interest or right hereunder shall vest in any other person.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate evidencing ownership of
the Common Stock will be stamped or otherwise imprinted on the face thereof with
a legend in substantially the following form:
"The shares represented by this Certificate have not been
registered under the federal Securities Act of 1933, as amended
(the "Act") or any state securities act. No sale, offer to sell
or transfer of the shares shall be made unless a registration
statement under the Act, or any applicable state statute, with
respect to the shares is then in effect or an exemption from the
registration requirements of such Act or state statute is then in
fact applicable to the shares."
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised and until such respective shares attributable to such Option shall
have been issued to Optionee.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of any of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) If the outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company or of another corporation or entity or shares of a
different par value or without par value through a recapitalization, stock
dividend, stock split, reverse stock split or a reorganization under which the
Company is not the surviving entity, an appropriate or proportionate adjustment
shall be made in the number and/or kind of securities allocated to the Options,
without change in the aggregate Option Price applicable to the unexercised
portion of the outstanding Option but with a corresponding adjustment in the
Option Price for each share or other unit of any security covered by the Option.
No adjustment shall occur under this Section 6 by virtue of the fact that the
Company purchases or sells Common Stock or any securities of the Company for
cash. No fractional shares shall be issued for any such adjustment. No
adjustments under this Section shall be applicable in the event the Company
takes any of the aforementioned actions in order to complete a merger, stock for
stock exchange, reorganization or other transaction with Eckler Industries, Inc.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee and the Grantors at least fifteen (15) days prior to such proposed
action. To the extent it has not been exercised during such fifteen (15) day
period, these Options will terminate as to any unexercised portion thereof
immediately prior to the consummation of such proposed action.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended, ("Act") and
any applicable state securities laws, and upon the acquisition of the shares,
Optionee will enter into such written representations, warranties and agreements
as the Company or the Grantors may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Grantors agree, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Grantors are
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
<PAGE>
If to Company or
Grantors: 5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
Telecopier: (407) 383-8822
If to Optionee: Robert Abrahams
2610 Crestwood Lane
Deerfield, Illinois 60015
The date of service of any notice or communication hereunder shall be the
date of the hand delivery or receipt of telecopy, or three (3) days after the
mailing, if mailed by certified mail, return receipt requested. A party whose
address or telecopy number changes shall notify the other party, in accordance
with this Section, within five (5) business days of such change (the "Changed
Party"). Failure of the Changed Party to notify the other party of such a change
shall constitute a waiver of any right to receive notice under this Agreement by
the Changed Party until such time s the Changed Party shall have properly
notified the other party in accordance with this Section 10.(d).
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not effect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitutes the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restriction, representations or
warranties among the parties other than those set forth herein. Nothing in this
Agreement shall alter, amend, modify, delete, rescind or otherwise waive any
transfer conditions to which Holder, or the Securities held by such Holder, may
be subject.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals, is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
ECKLER INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------
Gary R. Smith
THE GRANTORS:
CONLAN-SMART CHOICE HOLDINGS
MANAGEMENT TRUST UNDER AGREEMENT
DATED JANUARY 29, 1997
By: /s Gary R. Smith
--------------------
Gary R. Smith, Trustee
By: /s/ Gerald C. Parker
------------------------
Gerald C. Parker, Trustee
<PAGE>
PARKER-SMART CHOICE HOLDINGS
MANAGEMENT TRUST UNDER AGREEMENT
DATED JANUARY 29, 1997
By: /s/ Gary R. Smith
---------------------
Gary R. Smith, Trustee
By: /s/ Gerald C. Parker
------------------------
Gerald C. Parker, Trustee
THE OPTIONEE:
/s/ Robert J. Abrahams
----------------------
Robert J. Abrahams
EXHIBIT 10.39
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
11TH day of April, 1997, by and among the CONLAN-SMART CHOICE HOLDINGS
MANAGEMENT TRUST under agreement dated January 29, 1997, Thomas E. Conlan,
settlor, and Gary R. Smith and Gerald C. Parker, trustees, and the PARKER-SMART
CHOICE HOLDINGS MANAGEMENT TRUST under agreement dated January 29, 1997, Gerald
C. Parker, settlor, and Gary R. Smith and Gerald C. Parker, trustees (such
trusts are referred to herein as the "Grantors"), JOSEPH ALVAREZ, an individual,
(the "Optionee") and SMART CHOICE AUTOMOTIVE GROUP, INC., a Florida corporation
(the "Company").
WITNESSETH:
WHEREAS, the Company desires to employ the Optionee; and
WHEREAS, the Grantors and the Company believe that the attraction and
retention of key employees such as Optionee is essential to the Company's growth
and success; and
WHEREAS, in order to induce Optionee to serve as an Employee of the
Company, the Grantors hereby provide Optionee with the following additional
incentives, on the terms and conditions set forth herein.
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:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, the Grantors hereby grant to Optionee, the option to purchase a total
of 80,000 shares (the "Option Shares") of the Company's common stock, par value
$.01 per share (the "Common Stock"), 40,000 shares from each Grantor (the
"Option"), at the exercise price of $2.00 per share (the "Option Price"). The
Option shall be exercisable, in whole or in part, for a period of ten (10) years
(the "Exercise Period"), which period shall commence on the date of execution of
this Agreement (the "Execution Date"). The Option shall be fully vested and
exercisable as to all the Option Shares on the Execution Date for the entire
Exercise Period. None of the Options are intended to be "incentive stock
options" as defined in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as an employee.
(i) If Optionee dies while an employee of the Company or within three (3)
months after termination of his status as an employee because of his permanent
disability (as defined below), his Option may be exercised, to the extent that
the Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Option passes by will
or applicable law, or if no such person has such right, by his executors or
administrators, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after the appointment
or qualification of an executor of Optionee's estate, whichever is earlier.
(ii) If Optionee's status as an employee of the Company shall terminate
because of his permanent disability, he may exercise his Option to the extent
that he shall have been entitled to do so at the date of such termination, at
any time or from time to time, but not later than the expiration date specified
in Section 1 or three (3) months after termination of employment, whichever date
is earlier.
(iii) If Optionee's status as an employee of the Company shall terminate
involuntarily other than for cause, death, or total disability, all rights to
exercise his Option, to the extent that he shall have been entitled to do so at
the date of such termination, shall terminate at the expiration date specified
in Section 1 or three months after termination of employment, whichever date is
earlier.
(iv) If Optionee's status as an employee of the Company shall terminate for
cause (as defined below), all rights to exercise his Options shall terminate no
later than sixty (60) days after such termination.
(c) "Termination for cause" shall be defined as set forth in the Employment
Agreement between Company and Optionee of even date herewith. "Permanent
disability" shall be defined as set forth in the Employment Agreement between
Company and Optionee of even date herewith.
3. Exercise. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Grantor c/o Smart Choice Automotive
Group, Inc., 5200 South Washington Avenue, Titusville, Florida 32780. Such
notice shall state the number of shares to be purchased which are attributable
to the Option which is being exercised, and shall be accompanied by the full
purchase price for such shares, payable in U.S. Dollars by certified check or
bank draft, unless the Grantor shall permit payment of the purchase price in
another manner.
4. DELIVERY OF OPTION SHARES. As soon as reasonably practicable after
receipt by the Grantor of a timely notice of exercise of any of the Options
hereunder, and payment therefor, the Grantor shall transfer to Optionee or his
legal representative(s), as the case may be, one or more certificate(s) for the
number of shares with respect to which the Options shall have been so exercised.
The Grantor represents to Optionee that it has sufficient shares to grant the
Option set forth herein.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate evidencing ownership of
the Common Stock will be stamped or otherwise imprinted on the face thereof with
a legend in substantially the following form:
"The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933, as amended (the "Act") or
any state securities act. No sale, offer to sell or transfer of the
shares shall be made unless a registration statement under the Act,
and any applicable state statute, with respect to the shares is then
in effect or an exemption from the registration requirements of such
Act or state statute is then in fact applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate or proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash.
(ii) In case the Company shall issue rights or warrants to all holders of
its shares of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock at a price per share which, when added to the amount of
consideration received or receivable by the Company for such rights or warrants
is less than the Current Market Price (as hereinafter defined) per share at the
record date, the number of Option Shares purchasable upon the exercise of the
Option shall be increased so that thereafter, until further adjusted, this
Option shall entitle the Optionee to purchase an additional number of shares
determined as if the Option had been fully exercised and the Optionee were a
record holder entitled to receive such rights or warrants at an option price
which is the same as the per share consideration payable pursuant to such rights
or warrants. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders entitled
to receive such rights or warrants and the date such rights or warrants are
issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if the
shares of Common Stock are listed on any national securities exchange, the
average of the daily closing prices for the fifteen (15) consecutive business
days commencing twenty (20) business days before the date of determination (the
"Trading Period"); (ii) if the shares of Common Stock are not listed on any
national securities exchange but are quoted or reported on the National
Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ"),
the last quoted price or, if not quoted, the average of the high bid and low
asked price as reported by NASDAQ for the Trading Period, or the daily closing
prices for the Trading Period as reported by NASDAQ, as the case may be; and
(iii) if the shares of Common Stock are neither listed on any national
securities exchange nor quoted or reported on NASDAQ, the higher of (x) the
Exercise Price then in effect, or (y) the tangible book value per share of
Common Stock as of the end of the Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee and the Grantor at least thirty (30)days prior to such proposed action.
To the extent it has not been exercised during such thirty (30) day period, the
Options will terminate as to any unexercised portion thereof immediately prior
to the consummation of such proposed action.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended, ("Act") and
any applicable state securities laws, and upon the acquisition of the shares,
Optionee will enter into such written representations, warranties and agreements
as the Company or the Grantor may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement. Grantor represents
and warrants that it owns sufficient Common Stock to issue the Option Shares to
the Optionee on exercise of the Option and agrees that it will reserve
sufficient Common Stock to issue the Option Shares to the Optionee on exercise
of the Option.
8. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Grantor is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
9. NON-EMPLOYMENT. Nothing in this Agreement, shall confer on Optionee, nor
imply in favor of Optionee any right to continue as a contractor to or employee
of the Company or of any parent or subsidiary company of the Company or prevent,
or in any way impair the right of the stockholders or Board to terminate
Optionee's relationship with the Company pursuant to the Employment Agreement.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Attention: James Neal Hutchinson, Jr.
Corporate Counsel
Telecopier: (407) 383-8822
If to Grantor: Gerald C. Parker, Trustee
101 Phillipe Parkway, Suite 300
Safety Harbor, Florida 34695
Telecopier: (813) 725-9570
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
The date of service of any notice or communication hereunder shall be the
date of the hand delivery or receipt of telecopy, or three (3) days after the
mailing, if mailed by certified mail, return receipt requested. A party whose
address or telecopy number changes shall notify the other party, in accordance
with this Section, within five (5) business days of such change (the "Changed
Party"). Failure of the Changed Party to notify the other party of such a change
shall constitute a waiver of any right to receive notice under this Agreement by
the Changed Party.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and the Employment Agreement and
all agreements executed in accordance with the terms hereof constitutes the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements, understandings,
restrictions, representations or warranties among the parties other than those
set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise shall accrue to the benefit of any party to this
Agreement and each party shall expressly waives the right to assert such a
presumption in any proceedings or disputes connected with, arising out of, or
involving this Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
---------------------
Gary R. Smith
THE GRANTORS:
CONLAN-SMART CHOICE HOLDINGS
MANAGEMENT TRUST under agreement
dated January 29, 1997
By: /s/ Gary R. Smith
---------------------
Gary R. Smith, Trustee
By: /S/ Gerald C. Parker
-----------------------
Gerald C. Parker, Trustee
PARKER-SMART CHOICE HOLDINGS
MANAGEMENT TRUST under agreement
dated January 29, 1997
By: /s/ Gary R. Smith
---------------------
Gary R. Smith, Trustee
By: /s/ Gerald C. Parker
------------------------
Gerald C. Parker, Trustee
THE OPTIONEE:
/s/ Joseph Alvarez
------------------------------
Joseph Alvarez
EXHIBIT 10.40
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement") effective as of the 24th day of
March, 1997, by and between Smart Choice Automotive Group, Inc., a Florida
corporation (the "Company") and Ronald Anderson, an individual (the "Optionee").
WITNESSETH:
WHEREAS, the Company believes that the attraction and retention of key
employees such as Optionee is essential to the Company's growth and success; and
WHEREAS, in order to induce Optionee to serve as an Employee of the
Company, the Company hereby provides Optionee with the following additional
incentives, on the terms and conditions set forth herein.
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:
1. Grant of Option. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option (the "Option") to
purchase 30,000 shares (the "Option Shares") of the Company's common stock, par
value $.01 per share (the "Common Stock") at the exercise price of $4-7/8 per
share (the "Option Price"). The Option shall be exercisable, in whole or in
part, for a period of five (5) years (the "Exercise Period"), which period shall
commence on the date of execution of this Agreement (the "Execution Date"). The
Option shall be fully vested and exercisable as to all the Option Shares on the
Execution Date for the entire Exercise Period.
2. Termination of the Option.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as an employee.
(i) If Optionee dies while an employee of the Company or within three (3)
months after termination of his status as an employee because of his permanent
disability (as defined below), his Option may be exercised, to the extent that
the Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Option passes by will
or applicable law, or if no such person has such right, by his executors or
administrators, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after the appointment
or qualification of an executor of Optionee's estate, whichever is earlier.
(ii) If Optionee's status as an employee of the Company shall terminate
because of his permanent disability, he may exercise his Option to the extent
that he shall have been entitled to do so at the date of such termination, at
any time or from time to time, but not later than the expiration date specified
in Section 1 or three (3) months after termination of employment, whichever date
is earlier.
(iii) If Optionee's status as an employee of the Company shall terminate
involuntarily other than for cause, death, or total disability, all rights to
exercise his Option, to the extent that he shall have been entitled to do so at
the date of such termination, shall terminate at the expiration date specified
in Section 1 or three months after termination of employment, whichever date is
earlier.
(iv) If Optionee's status as an employee of the Company shall terminate for
cause (as defined below), all rights to exercise his Options shall terminate no
later than sixty (60) days after such termination.
(c) "Termination for cause" shall be defined as set forth in the Employment
Agreement between Company and Optionee. "Permanent disability" shall be defined
as set forth in the Employment Agreement between Company and Optionee.
3. Exercise. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice to the Company of exercise of an Option prior to the expiration or
termination of the Exercise Period. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. Delivery of Option Shares. As soon as reasonably practicable after
receipt by the Company of a timely notice of exercise of any of the Options
hereunder, and payment therefor, the Company shall issue to Optionee or his
legal representative(s), as the case may be, one or more certificate(s) for the
number of shares with respect to which the Options shall have been so exercised.
5. Restrictions upon Transfer.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate evidencing ownership of
the Common Stock will be stamped or otherwise imprinted on the face thereof with
a legend in substantially the following form:
"The shares represented by this Certificate have not been registered under
the federal Securities Act of 1933, as amended (the "Act") or any state
securities act. No sale, offer to sell or transfer of the shares shall be
made unless a registration statement under the Act, and any applicable
state statute, with respect to the shares is then in effect or an exemption
from the registration requirements of such Act or state statute is then in
fact applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. Rights as Stockholder.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate or proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash.
(ii) In case the Company shall issue rights or warrants to all holders of
its shares of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock at a price per share which, when added to the amount of
consideration received or receivable by the Company for such rights or warrants
is less than the Current Market Price (as hereinafter defined) per share at the
record date, the number of Option Shares purchasable upon the exercise of the
Option shall be increased so that thereafter, until further adjusted, this
Option shall entitle the Optionee to purchase an additional number of shares
determined as if the Option had been fully exercised and the Optionee were a
record holder entitled to receive such rights or warrants at an option price
which is the same as the per share consideration payable pursuant to such rights
or warrants. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders entitled
to receive such rights or warrants and the date such rights or warrants are
issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if the
shares of Common Stock are listed on any national securities exchange, the
average of the daily closing prices for the fifteen (15) consecutive business
days commencing twenty (20) business days before the date of determination (the
"Trading Period"); (ii) if the shares of Common Stock are not listed on any
national securities exchange but are quoted or reported on the National
Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ"),
the last quoted price or, if not quoted, the average of the high bid and low
asked price as reported by NASDAQ for the Trading Period, or the daily closing
prices for the Trading Period as reported by NASDAQ, as the case may be; and
(iii) if the shares of Common Stock are neither listed on any national
securities exchange nor quoted or reported on NASDAQ, the higher of (x) the
Exercise Price then in effect, or (y) the tangible book value per share of
Common Stock as of the end of the Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30)days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit "A" attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports pursuant
to Subsection (a) of Section 16 of the Securities Exchange Act of 1934, at any
time during the period in which the Option is exercisable, then the Withholding
Election must be made either (A) at least six (6) months prior to the Tax Date
applicable to the exercise of the Option, or (B) prior to the Tax Date and in
any ten day period beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales and earnings.
7. Representations. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended, ("Act") and
any applicable state securities laws, and upon the acquisition of the shares,
Optionee will enter into such written representations, warranties and agreements
as the Company may request in order to comply with the Act, any applicable state
securities laws and this Option Agreement. The Company represents and warrants
that it owns sufficient Common Stock to issue the Option Shares to the Optionee
on exercise of the Option and agrees that it will reserve sufficient Common
Stock to issue the Option Shares to the Optionee on exercise of the Option.
8. Tax Consequences and Withholding. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
9. Non-Employment. Nothing in this Agreement, shall confer on Optionee, nor
imply in favor of Optionee any right to continue as a contractor to or employee
of the Company or of any parent or subsidiary company of the Company or prevent,
or in any way impair the right of the stockholders or Board to terminate
Optionee's relationship with the Company pursuant to the Employment Agreement.
10. General Provisions.
(a) Agreement to be Bound by Contract. This Agreement shall be binding not
only on the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) Amendment or Alteration. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) Waiver. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) Notices. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Attention: James Neal Hutchinson, Jr.
Corporate Counsel
Telecopier:(407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
The date of service of any notice or communication hereunder shall be the
date of the hand delivery or receipt of telecopy, or three (3) days after the
mailing, if mailed by certified mail, return receipt requested. A party whose
address or telecopy number changes shall notify the other party, in accordance
with this Section, within five (5) business days of such change (the "Changed
Party"). Failure of the Changed Party to notify the other party of such a change
shall constitute a waiver of any right to receive notice under this Agreement by
the Changed Party.
(e) Validity. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) Integrated Agreement. This Agreement and the Employment Agreement and
all agreements executed in accordance with the terms hereof constitutes the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements, understandings,
restrictions, representations or warranties among the parties other than those
set forth herein.
(g) Attorneys' Fees. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) State Law Governing Contracts. This Agreement shall be governed by the
laws of the State of Florida.
(i) No Construction Against Drafting Party. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise shall accrue to the benefit of any party to this
Agreement and each party expressly waives the right to assert such a presumption
in any proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement
under seal as of the date first above written.
The Company:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
---------------------
Gary R. Smith
The Optionee:
/s/ Ronald Anderson
-------------------
Ronald Anderson
<PAGE>
EXHIBIT A
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
FROM: Optionee (or other party specified in (2) below)
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original
recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
____________________________ for __________ shares of Common Stock and dated
__________________ (the "Option"). This election relates to ___________ shares
of Common Stock issuable upon whole or partial exercise(s) of the Option (the
"Option Shares"); provided that the numbers set forth above shall be deemed
changed as appropriate to reflect stock splits and other adjustments
contemplated by the applicable provisions of the Option.
(4) In connection with any future exercise of the Option with respect to
the Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having the
value of the shares applied to pay federal, state, and local, if any, taxes
arising from the exercise. The shares to be withheld shall have, as of the Tax
Date (as defined in the Option Agreement applicable to the Option (the "Option
Agreement")), applicable to the exercise, a fair market value equal to the
minimum statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option
Shares a number of shares of Common Stock having the value specified in
Paragraph 4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name
(Printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
EXHIBIT 10.41
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of
the 17th day of April, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida corporation (the "Company") and DAVID E. BUMGARDNER, a director of the
Company (the "Optionee").
W I T N E S S E T H:
In consideration of the agreements set forth herein, the parties hereby
covenant and agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company 12,500 shares (the "Option") of the Company's Common Stock, $.01 par
value ("Common Stock"), at the exercise price per share equal to $5-1/2 per
share (the "Option Price"), the fair market value on the date hereof. The shares
issuable on exercise of the Option are referred to herein as the "Option
Shares". The Option shall be exercisable, in whole or in part, for a period of
ten (10) years (the "Exercise Period"), which period shall commence on the date
of Optionee's execution of this Agreement (the "Execution Date"). The Option
shall be fully exercisable on the Execution Date.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as a director.
(i) If Optionee dies prior to the termination of the Option under Section
2(a) hereof, his Options may be exercised, to the extent that the Optionee shall
have been entitled to do so on the date of his death, by the person or persons
to whom the Optionee's right under the Options passes by will or applicable law,
or if no such person has such right, by his executors or administrators, at any
time or from time to time, but not later than the expiration date specified in
Section 1 or three (3) months after the appointment or qualification of an
executor of Optionee's estate, whichever is earlier.
(ii) If Optionee's status as a director of the Company shall terminate
because of his permanent disability, he may exercise his Option to the extent
that he shall have been entitled to do so at the date of such termination, at
any time or from time to time, but not later than the expiration date specified
in Section 1 or three (3) months after termination of his director status,
whichever date is earlier.
(iii) If Optionee's status as a director of the Company shall terminate
other than from death or total disability, all rights to exercise his Option, to
the extent that he shall have been entitled to do so at the date of such
termination, shall terminate at the expiration date specified in Section 1 or
three months after termination of his director status, whichever date is
earlier.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida 32780. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as practicable after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his legal
representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate(s) evidencing ownership
of the Common Stock will be stamped or otherwise imprinted on the face thereof
with a legend in substantially the following form:
"The shares represented by this Certificate have not been registered under
the federal Securities Act of 1933, as amended (the "Act") or any state
securities act. No sale, offer to sell or transfer of the shares shall be
made unless a registration statement under the Act, or any applicable state
statute, with respect to the shares is then in effect or an exemption from
the registration requirements of such Act or state statute is then in fact
applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash. No fractional shares shall be issued for any such
adjustment.
(ii) In case the Company shall issue rights or warrants to all holders of
its shares of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock at a price per share which, when added to the amount of
consideration received or receivable by the Company for such rights or warrants
is less than the Current Market Price (as hereinafter defined) per share at the
record date, the number of Option Shares purchasable upon the exercise of the
Option shall be increased so that thereafter, until further adjusted, this
Option shall entitle the Optionee to purchase an additional number of shares
determined as if the Option had been fully exercised and the Optionee were a
record holder entitled to receive such rights or warrants at an option price
which is the same as the per share consideration payable pursuant to such rights
or warrants. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders entitled
to receive such rights or warrants and the date such rights or warrants are
issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if the
shares of Common Stock are listed on any national securities exchange, the
average of the daily closing prices for the fifteen (15) consecutive business
days commencing twenty (20) business days before the date of determination (the
"Trading Period"); (ii) if the shares of Common Stock are not listed on any
national securities exchange but are quoted or reported on the National
Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ"),
the last quoted price or, if not quoted, the average of the high bid and low
asked price as reported by NASDAQ for the Trading Period, or the daily closing
prices for the Trading Period as reported by NASDAQ, as the case may be; and
(iii) if the shares of Common Stock are neither listed on any national
securities exchange nor quoted or reported on NASDAQ, the higher of (x) the
Exercise Price then in effect, or (y) the tangible book value per share of
Common Stock as of the end of the Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit "A" attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports pursuant
to Subsection (a) of Section 16 of the Securities Exchange Act of 1934, at any
time during the period in which the Option is exercisable, then the Withholding
Election must be made either (A) at least six (6) months prior to the Tax Date
applicable to the exercise of the Option, or (B) prior to the Tax Date and in
any ten day period beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales and earnings.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and any applicable state securities laws, and upon the acquisition of the
shares, Optionee will enter into such written representations, warranties and
agreements as the Company may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, FL 32780
Telecopier: (407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
or such other address as either party hereto shall notify the other as provided
herein. The date of service of any notice or communication hereunder shall be
the date of the hand delivery or receipt of telecopy, or three (3) days after
the mailing, if mailed by certified mail, return receipt requested.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restrictions, representations or
warranties among the parties other than those set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ James Neal Hutchinson, Jr.
----------------------------------
Print Name: James Neal Hutchinson, Jr.
As Its: Assistant Vice President
OPTIONEE:
/s/ David E. Bumgardner
-----------------------
David E. Bumgardner
<PAGE>
EXHIBIT A
TO
STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original
recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
______________ for ________ shares of Common Stock and dated ___________, 19__
(the "Option"). This election relates to ___________ shares of Common Stock
issuable upon whole or partial exercise(s) of the Option (the "Option Shares");
provided that the numbers set forth above shall be deemed changed as appropriate
to reflect stock splits and other adjustments contemplated by the applicable
provisions of the Option.
(4) In connection with any future exercise of the Option with respect to
the Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having the
value of the shares applied to pay federal, state, and local, if any, taxes
arising from the exercise. The shares to be withheld shall have, as of the Tax
Date (as defined in the Option Agreement applicable to the Option (the "Option
Agreement")), applicable to the exercise, a fair market value equal to the
minimum statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option
Shares a number of shares of Common Stock having the value specified in
Paragraph 4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name
(Printed)
__________________________________
Street Address
__________________________________
City, State, Zip Code
EXHIBIT 10.42
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
17th day of April, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida corporation (the "Company") and CRAIG MACNAB, a director of the Company
(the "Optionee").
W I T N E S S E T H:
In consideration of the agreements set forth herein, the parties hereby
covenant and agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company 12,500 shares (the "Option") of the Company's Common Stock, $.01 par
value ("Common Stock"), at the exercise price per share equal to $5-1/2 per
share (the "Option Price"), the fair market value on the date hereof. The shares
issuable on exercise of the Option are referred to herein as the "Option
Shares". The Option shall be exercisable, in whole or in part, for a period of
ten (10) years (the "Exercise Period"), which period shall commence on the date
of Optionee's execution of this Agreement (the "Execution Date"). The Option
shall be fully exercisable on the Execution Date.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as a director.
(i) If Optionee dies prior to the termination of the Option under Section
2(a) hereof, his Options may be exercised, to the extent that the Optionee shall
have been entitled to do so on the date of his death, by the person or persons
to whom the Optionee's right under the Options passes by will or applicable law,
or if no such person has such right, by his executors or administrators, at any
time or from time to time, but not later than the expiration date specified in
Section 1 or three (3) months after the appointment or qualification of an
executor of Optionee's estate, whichever is earlier.
(ii) If Optionee's status as a director of the Company shall terminate
because of his permanent disability, he may exercise his Option to the extent
that he shall have been entitled to do so at the date of such termination, at
any time or from time to time, but not later than the expiration date specified
in Section 1 or three (3) months after termination of his director status,
whichever date is earlier.
(iii) If Optionee's status as a director of the Company shall terminate
other than from death or total disability, all rights to exercise his Option, to
the extent that he shall have been entitled to do so at the date of such
termination, shall terminate at the expiration date specified in Section 1 or
three months after termination of his director status, whichever date is
earlier.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida 32780. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as practicable after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his legal
representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a
modification of any existing agreements with respect to the gift, sale,
purchase, transfer, pledge, hypothecation, or other disposition or encumbrance
of the Option Shares between the parties to this Agreement, or between or among
either or both of the parties to this Agreement and one or more persons not
party to this Agreement.
(d) The Optionee acknowledges that the certificate(s) evidencing
ownership of the Common Stock will be stamped or otherwise imprinted on the face
thereof with a legend in substantially the following form:
"The shares represented by this Certificate have not been registered under
the federal Securities Act of 1933, as amended (the "Act") or any state
securities act. No sale, offer to sell or transfer of the shares shall be
made unless a registration statement under the Act, or any applicable state
statute, with respect to the shares is then in effect or an exemption from
the registration requirements of such Act or state statute is then in fact
applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash. No fractional shares shall be issued for any such
adjustment.
(ii) In case the Company shall issue rights or warrants to all holders of
its shares of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock at a price per share which, when added to the amount of
consideration received or receivable by the Company for such rights or warrants
is less than the Current Market Price (as hereinafter defined) per share at the
record date, the number of Option Shares purchasable upon the exercise of the
Option shall be increased so that thereafter, until further adjusted, this
Option shall entitle the Optionee to purchase an additional number of shares
determined as if the Option had been fully exercised and the Optionee were a
record holder entitled to receive such rights or warrants at an option price
which is the same as the per share consideration payable pursuant to such rights
or warrants. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders entitled
to receive such rights or warrants and the date such rights or warrants are
issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if the
shares of Common Stock are listed on any national securities exchange, the
average of the daily closing prices for the fifteen (15) consecutive business
days commencing twenty (20) business days before the date of determination (the
"Trading Period"); (ii) if the shares of Common Stock are not listed on any
national securities exchange but are quoted or reported on the National
Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ"),
the last quoted price or, if not quoted, the average of the high bid and low
asked price as reported by NASDAQ for the Trading Period, or the daily closing
prices for the Trading Period as reported by NASDAQ, as the case may be; and
(iii) if the shares of Common Stock are neither listed on any national
securities exchange nor quoted or reported on NASDAQ, the higher of (x) the
Exercise Price then in effect, or (y) the tangible book value per share of
Common Stock as of the end of the Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit "A" attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports pursuant
to Subsection (a) of Section 16 of the Securities Exchange Act of 1934, at any
time during the period in which the Option is exercisable, then the Withholding
Election must be made either (A) at least six (6) months prior to the Tax Date
applicable to the exercise of the Option, or (B) prior to the Tax Date and in
any ten day period beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales and earnings.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and any applicable state securities laws, and upon the acquisition of the
shares, Optionee will enter into such written representations, warranties and
agreements as the Company may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, FL 32780
Telecopier: (407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
or such other address as either party hereto shall notify the other as
provided herein. The date of service of any notice or communication hereunder
shall be the date of the hand delivery or receipt of telecopy, or three (3) days
after the mailing, if mailed by certified mail, return receipt requested.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restrictions, representations or
warranties among the parties other than those set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ James Neal Hutchinson, Jr.
Print Name: James Neal Hutchinson, Jr.
As Its: Assistant Secretary
OPTIONEE:
/s/ Craig Macnab
----------------
Craig Macnab
<PAGE>
EXHIBIT A
TO
STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original
recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
______________ for ________ shares of Common Stock and dated ___________, 19__
(the "Option"). This election relates to ___________ shares of Common Stock
issuable upon whole or partial exercise(s) of the Option (the "Option Shares");
provided that the numbers set forth above shall be deemed changed as appropriate
to reflect stock splits and other adjustments contemplated by the applicable
provisions of the Option.
(4) In connection with any future exercise of the Option with respect to
the Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having the
value of the shares applied to pay federal, state, and local, if any, taxes
arising from the exercise. The shares to be withheld shall have, as of the Tax
Date (as defined in the Option Agreement applicable to the Option (the "Option
Agreement")), applicable to the exercise, a fair market value equal to the
minimum statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option
Shares a number of shares of Common Stock having the value specified in
Paragraph 4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name (Printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
EXHIBIT 10.43
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
19th day of March, 1997, by and between SMART CHOICE AUTOMOTIVE GROUP, INC. (the
"Company") and GERALD C. PARKER an individual (the "Optionee").
WITNESSETH:
In consideration of the agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company (the "Option"), 75,000 shares of the Common Stock (the "Common
Stock") of the Company (the "Option Shares"), at the exercise price per share of
4-13/16 (the "Option Price"). The Option shall be exerciseable, in whole or in
part, for a period of five (5) years (the "Exercise Period"). Excercise of the
Option shall vest as to 25,000 shares on the date hereof, 25,000 shares on the
first anniversary of the date hereof, and 25,000 shares on the second
anniversary of the date hereof.
2. TERMINATION OF THE OPTION.
The Option shall terminate and no longer be exercisable upon the occurrence
of the following: (i) in accordance with the expiration of the Exercise Period
set forth above; or (ii) involuntary dissolution of the Company.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may execute the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida. Such notice shall state the number of shares to be
purchased which are attributable to the Option which is being exercised, and
shall be accompanied by the full purchase price for such shares, payable in U.S.
Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as possible after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his Legal
Representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Option. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall immediately terminate this Agreement, all
the Options granted hereunder shall be of no further force or effect and no
interest or right hereunder shall vest in any other person.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate evidencing ownership of
the Common Stock will be stamped or otherwise imprinted on the face thereof with
a legend in substantially the following form:
"The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933, as amended (the "Act") or
any state securities act. No sale, offer to sell or transfer of the
shares shall be made unless a registration statement under the Act, or
any applicable state statute, with respect to the shares is then in
effect or an exemption from the registration requirements of such Act
or state statute is then in fact applicable to the shares."
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised and until such respective shares attributable to such Option shall
have been issued to Optionee.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of any of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) If the outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company or of another corporation or entity or shares of a
different par value or without par value through a recapitalization, stock
dividend, stock split, reverse stock split or a reorganization under which the
Company is not the surviving entity, an appropriate or proportionate adjustment
shall be made in the number and/or kind of securities allocated to the Options,
without change in the aggregate Option Price applicable to the unexercised
portion of the outstanding Option but with a corresponding adjustment in the
Option Price for each share or other unit of any security covered by the Option.
No adjustment shall occur under this Section 6 by virtue of the fact that the
Company purchases or sells Common Stock or any securities of the Company for
cash. No fractional shares shall be issued for any such adjustment. No
adjustments under this Section shall be applicable in the event the Company
takes any of the aforementioned actions in order to complete a merger, stock for
stock exchange, reorganization or other transaction with Eckler Industries, Inc.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been exercised during such fifteen (15) day period, these Options
will terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended, ("Act") and
any applicable state securities laws, and upon the acquisition of the shares,
Optionee will enter into such written representations, warranties and agreements
as the Company may request in order to comply with the Act, any applicable state
securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses:
If to Company: 5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
If to Optionee: Gerald C. Parker
101 Phillippe Parkway, Suite 300
Safety Harbor, FL 34695
The date of service of any notice or communication hereunder shall be the date
of the hand delivery or receipt of telecopy, or three (3) days after the
mailing, if mailed by certified mail, return receipt requested. A party whose
address or telecopy number changes shall notify the other party, in accordance
with this Section, within five (5) business days of such change (the "Changed
Party"). Failure of the Changed Party to notify the other party of such a change
shall constitute a waiver of any right to receive notice under this Agreement by
the Changed Party until such time s the Changed Party shall have properly
notified the other party in accordance with this Section 10.(d).
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not effect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitutes the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restriction, representations or
warranties among the parties other than those set forth herein. Nothing in this
Agreement shall alter, amend, modify, delete, rescind or otherwise waive any
transfer conditions to which Holder, or the Securities held by such Holder, may
be subject.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals, is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
---------------------
THE OPTIONEE:
/s/ Gerald C. Parker
--------------------
Gerald C. Parker
EXHIBIT 10.44
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
17th day of April, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida corporation (the "Company") and GERALD PARKER, a director of the Company
(the "Optionee").
W I T N E S S E T H:
In consideration of the agreements set forth herein, the parties hereby
covenant and agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company 12,500 shares (the "Option") of the Company's Common Stock, $.01 par
value ("Common Stock"), at the exercise price per share equal to $5-1/2 per
share (the "Option Price"), the fair market value on the date hereof. The shares
issuable on exercise of the Option are referred to herein as the "Option
Shares". The Option shall be exercisable, in whole or in part, for a period of
ten (10) years (the "Exercise Period"), which period shall commence on the date
of Optionee's execution of this Agreement (the "Execution Date"). The Option
shall be fully exercisable on the Execution Date.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as a director.
(i) If Optionee dies prior to the termination of the Option under
Section 2(a) hereof, his Options may be exercised, to the extent that the
Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Options passes by
will or applicable law, or if no such person has such right, by his
executors or administrators, at any time or from time to time, but not
later than the expiration date specified in Section 1 or three (3) months
after the appointment or qualification of an executor of Optionee's estate,
whichever is earlier.
(ii) If Optionee's status as a director of the Company shall terminate
because of his permanent disability, he may exercise his Option to the
extent that he shall have been entitled to do so at the date of such
termination, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after
termination of his director status, whichever date is earlier.
(iii) If Optionee's status as a director of the Company shall
terminate other than from death or total disability, all rights to exercise
his Option, to the extent that he shall have been entitled to do so at the
date of such termination, shall terminate at the expiration date specified
in Section 1 or three months after termination of his director status,
whichever date is earlier.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida 32780. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as practicable after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his legal
representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate(s) evidencing ownership
of the Common Stock will be stamped or otherwise imprinted on the face thereof
with a legend in substantially the following form:
"The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933, as amended (the "Act") or
any state securities act. No sale, offer to sell or transfer of the
shares shall be made unless a registration statement under the Act, or
any applicable state statute, with respect to the shares is then in
effect or an exemption from the registration requirements of such Act
or state statute is then in fact applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash. No fractional shares shall be issued for any such
adjustment.
(ii) In case the Company shall issue rights or warrants to all holders of
its shares of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock at a price per share which, when added to the amount of
consideration received or receivable by the Company for such rights or warrants
is less than the Current Market Price (as hereinafter defined) per share at the
record date, the number of Option Shares purchasable upon the exercise of the
Option shall be increased so that thereafter, until further adjusted, this
Option shall entitle the Optionee to purchase an additional number of shares
determined as if the Option had been fully exercised and the Optionee were a
record holder entitled to receive such rights or warrants at an option price
which is the same as the per share consideration payable pursuant to such rights
or warrants. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders entitled
to receive such rights or warrants and the date such rights or warrants are
issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if the
shares of Common Stock are listed on any national securities exchange, the
average of the daily closing prices for the fifteen (15) consecutive business
days commencing twenty (20) business days before the date of determination (the
"Trading Period"); (ii) if the shares of Common Stock are not listed on any
national securities exchange but are quoted or reported on the National
Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ"),
the last quoted price or, if not quoted, the average of the high bid and low
asked price as reported by NASDAQ for the Trading Period, or the daily closing
prices for the Trading Period as reported by NASDAQ, as the case may be; and
(iii) if the shares of Common Stock are neither listed on any national
securities exchange nor quoted or reported on NASDAQ, the higher of (x) the
Exercise Price then in effect, or (y) the tangible book value per share of
Common Stock as of the end of the Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed
Notice of Withholding Election, in substantially the form of Exhibit "A"
attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of
1934, at any time during the period in which the Option is exercisable,
then the Withholding Election must be made either (A) at least six (6)
months prior to the Tax Date applicable to the exercise of the Option, or
(B) prior to the Tax Date and in any ten day period beginning on the third
day following the release of the Company's quarterly or annual summary
statement of sales and earnings.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and any applicable state securities laws, and upon the acquisition of the
shares, Optionee will enter into such written representations, warranties and
agreements as the Company may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, FL 32780
Telecopier: (407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
or such other address as either party hereto shall notify the other as provided
herein. The date of service of any notice or communication hereunder shall be
the date of the hand delivery or receipt of telecopy, or three (3) days after
the mailing, if mailed by certified mail, return receipt requested.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restrictions, representations or
warranties among the parties other than those set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this Agreement
expressly recognizes that it results from a negotiated process in which each
party was given the opportunity to consult with counsel and contributed to the
drafting of this Agreement. Given this fact, no legal or other presumptions
against the party drafting this Agreement concerning its construction,
interpretation or otherwise accrue to the benefit of any party to this Agreement
and each party expressly waives the right to assert such a presumption in any
proceedings or disputes connected with, arising out of, or involving this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ James Neal Hutchinson, Jr.
----------------------------------
Print Name: James Neal Hutchinson, Jr.
As Its: Assistant Vice President
OPTIONEE:
/s/ Gerald Parker
-----------------
Gerald Parker
<PAGE>
EXHIBIT A
TO
STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I hereby
certify that:
(1) My correct name and social security number and my current address are set
forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
______________ for ________ shares of Common Stock and dated ___________,
19__ (the "Option"). This election relates to ___________ shares of Common
Stock issuable upon whole or partial exercise(s) of the Option (the "Option
Shares"); provided that the numbers set forth above shall be deemed changed
as appropriate to reflect stock splits and other adjustments contemplated
by the applicable provisions of the Option.
(4) In connection with any future exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having
the value of the shares applied to pay federal, state, and local, if any,
taxes arising from the exercise. The shares to be withheld shall have, as
of the Tax Date (as defined in the Option Agreement applicable to the
Option (the "Option Agreement")), applicable to the exercise, a fair market
value equal to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is otherwise
timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option Shares
a number of shares of Common Stock having the value specified in Paragraph
4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name
(Printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
EXHIBIT 10.45
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
17th day of April, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida corporation (the "Company") and DONALD WOJNOWSKI, a director of the
Company (the "Optionee").
W I T N E S S E T H:
In consideration of the agreements set forth herein, the parties hereby
covenant and agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company 12,500 shares (the "Option") of the Company's Common Stock, $.01 par
value ("Common Stock"), at the exercise price per share equal to $5-1/2 per
share (the "Option Price"), the fair market value on the date hereof. The shares
issuable on exercise of the Option are referred to herein as the "Option
Shares". The Option shall be exercisable, in whole or in part, for a period of
ten (10) years (the "Exercise Period"), which period shall commence on the date
of Optionee's execution of this Agreement (the "Execution Date"). The Option
shall be fully exercisable on the Execution Date.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as a director.
(i) If Optionee dies prior to the termination of the Option under
Section 2(a) hereof, his Options may be exercised, to the extent that the
Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Options passes by
will or applicable law, or if no such person has such right, by his
executors or administrators, at any time or from time to time, but not
later than the expiration date specified in Section 1 or three (3) months
after the appointment or qualification of an executor of Optionee's estate,
whichever is earlier.
(ii) If Optionee's status as a director of the Company shall terminate
because of his permanent disability, he may exercise his Option to the
extent that he shall have been entitled to do so at the date of such
termination, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after
termination of his director status, whichever date is earlier.
(iii) If Optionee's status as a director of the Company shall
terminate other than from death or total disability, all rights to exercise
his Option, to the extent that he shall have been entitled to do so at the
date of such termination, shall terminate at the expiration date specified
in Section 1 or three months after termination of his director status,
whichever date is earlier.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida 32780. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as practicable after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his legal
representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate(s) evidencing ownership
of the Common Stock will be stamped or otherwise imprinted on the face thereof
with a legend in substantially the following form:
"The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933, as amended (the "Act") or
any state securities act. No sale, offer to sell or transfer of the
shares shall be made unless a registration statement under the Act, or
any applicable state statute, with respect to the shares is then in
effect or an exemption from the registration requirements of such Act
or state statute is then in fact applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash. No fractional shares shall be issued for any such
adjustment.
(ii) In case the Company shall issue rights or warrants to all holders
of its shares of Common Stock entitling them to subscribe for or to
purchase shares of Common Stock at a price per share which, when added to
the amount of consideration received or receivable by the Company for such
rights or warrants is less than the Current Market Price (as hereinafter
defined) per share at the record date, the number of Option Shares
purchasable upon the exercise of the Option shall be increased so that
thereafter, until further adjusted, this Option shall entitle the Optionee
to purchase an additional number of shares determined as if the Option had
been fully exercised and the Optionee were a record holder entitled to
receive such rights or warrants at an option price which is the same as the
per share consideration payable pursuant to such rights or warrants. Such
adjustment shall be made whenever such rights or warrants are issued, but
shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders
entitled to receive such rights or warrants and the date such rights or
warrants are issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if
the shares of Common Stock are listed on any national securities exchange,
the average of the daily closing prices for the fifteen (15) consecutive
business days commencing twenty (20) business days before the date of
determination (the "Trading Period"); (ii) if the shares of Common Stock
are not listed on any national securities exchange but are quoted or
reported on the National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ"), the last quoted price or, if not quoted, the
average of the high bid and low asked price as reported by NASDAQ for the
Trading Period, or the daily closing prices for the Trading Period as
reported by NASDAQ, as the case may be; and (iii) if the shares of Common
Stock are neither listed on any national securities exchange nor quoted or
reported on NASDAQ, the higher of (x) the Exercise Price then in effect, or
(y) the tangible book value per share of Common Stock as of the end of the
Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed
Notice of Withholding Election, in substantially the form of Exhibit "A"
attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of
1934, at any time during the period in which the Option is exercisable,
then the Withholding Election must be made either (A) at least six (6)
months prior to the Tax Date applicable to the exercise of the Option, or
(B) prior to the Tax Date and in any ten day period beginning on the third
day following the release of the Company's quarterly or annual summary
statement of sales and earnings.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and any applicable state securities laws, and upon the acquisition of the
shares, Optionee will enter into such written representations, warranties and
agreements as the Company may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, FL 32780
Telecopier: (407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
or such other address as either party hereto shall notify the other as provided
herein. The date of service of any notice or communication hereunder shall be
the date of the hand delivery or receipt of telecopy, or three (3) days after
the mailing, if mailed by certified mail, return receipt requested.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restrictions, representations or
warranties among the parties other than those set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this
Agreement expressly recognizes that it results from a negotiated process in
which each party was given the opportunity to consult with counsel and
contributed to the drafting of this Agreement. Given this fact, no legal or
other presumptions against the party drafting this Agreement concerning its
construction, interpretation or otherwise accrue to the benefit of any
party to this Agreement and each party expressly waives the right to assert
such a presumption in any proceedings or disputes connected with, arising
out of, or involving this Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ James Neal Hutchinson, Jr.
----------------------------------
Print Name: James Neal Hutchinson, Jr.
As Its: Vice President
OPTIONEE:
/S/ Donald Wojnowski
--------------------
Donald Wojnowski
<PAGE>
EXHIBIT A
TO
STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I hereby
certify that:
(1) My correct name and social security number and my current address are set
forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
______________ for ________ shares of Common Stock and dated ___________,
19__ (the "Option"). This election relates to ___________ shares of Common
Stock issuable upon whole or partial exercise(s) of the Option (the "Option
Shares"); provided that the numbers set forth above shall be deemed changed
as appropriate to reflect stock splits and other adjustments contemplated
by the applicable provisions of the Option.
(4) In connection with any future exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having
the value of the shares applied to pay federal, state, and local, if any,
taxes arising from the exercise. The shares to be withheld shall have, as
of the Tax Date (as defined in the Option Agreement applicable to the
Option (the "Option Agreement")), applicable to the exercise, a fair market
value equal to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is otherwise
timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option Shares
a number of shares of Common Stock having the value specified in Paragraph
4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name
(Printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
EXHIBIT 10.46
THE OPTION AND COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, THE FLORIDA SECURITIES ACT, AS AMENDED, OR THE LAWS
OF ANY OTHER STATE, AND ARE BEING GRANTED PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THAT ACT AND SUCH STATE LAWS. OPTIONS OR SHARES OF STOCK
ACQUIRED BY OPTIONEE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE OPTIONS OR SHARES OF STOCK UNDER THAT
ACT OR SUCH STATE LAWS AS MAY BE APPLICABLE, OR PURSUANT TO EXEMPTIONS FROM SAID
REGISTRATION UNDER SAID ACT AND SAID LAWS. FURTHER, THIS AGREEMENT CONTAINS
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY OF THE OPTIONS AND SHARES OF STOCK.
SMART CHOICE AUTOMOTIVE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") effective as of the
17th day of April, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida corporation (the "Company") and JOSEPH YOSSIFON, a director of the
Company (the "Optionee").
W I T N E S S E T H:
In consideration of the agreements set forth herein, the parties hereby
covenant and agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to Optionee, the option to purchase from
the Company 12,500 shares (the "Option") of the Company's Common Stock, $.01 par
value ("Common Stock"), at the exercise price per share equal to $5-1/2 per
share (the "Option Price"), the fair market value on the date hereof. The shares
issuable on exercise of the Option are referred to herein as the "Option
Shares". The Option shall be exercisable, in whole or in part, for a period of
ten (10) years (the "Exercise Period"), which period shall commence on the date
of Optionee's execution of this Agreement (the "Execution Date"). The Option
shall be fully exercisable on the Execution Date.
None of the Options are intended to be "incentive stock options" as defined
in Section 422(b) of the Internal Revenue Code.
2. TERMINATION OF THE OPTION.
(a) The Option shall terminate and no longer be exercisable upon the
expiration of the Exercise Period set forth above.
(b) Termination in the event of death, permanent disability or termination
of status as a director.
(i) If Optionee dies prior to the termination of the Option under
Section 2(a) hereof, his Options may be exercised, to the extent that the
Optionee shall have been entitled to do so on the date of his death, by the
person or persons to whom the Optionee's right under the Options passes by
will or applicable law, or if no such person has such right, by his
executors or administrators, at any time or from time to time, but not
later than the expiration date specified in Section 1 or three (3) months
after the appointment or qualification of an executor of Optionee's estate,
whichever is earlier.
(ii) If Optionee's status as a director of the Company shall terminate
because of his permanent disability, he may exercise his Option to the
extent that he shall have been entitled to do so at the date of such
termination, at any time or from time to time, but not later than the
expiration date specified in Section 1 or three (3) months after
termination of his director status, whichever date is earlier.
(iii) If Optionee's status as a director of the Company shall
terminate other than from death or total disability, all rights to exercise
his Option, to the extent that he shall have been entitled to do so at the
date of such termination, shall terminate at the expiration date specified
in Section 1 or three months after termination of his director status,
whichever date is earlier.
3. EXERCISE. Optionee (or in the case of Optionee's death or disability,
the legal representative of Optionee) may exercise the Option only by giving
timely notice of the exercise of an Option prior to the expiration or
termination of the Exercise Period to the Company at 5200 South Washington
Avenue, Titusville, Florida 32780. Such notice shall state the number of shares
to be purchased which are attributable to the Option which is being exercised,
and shall be accompanied by the full purchase price for such shares, payable in
U.S. Dollars by certified check or bank draft, unless the Company shall permit
payment of the purchase price in another manner.
4. DELIVERY OF OPTION SHARES. As soon as practicable after receipt by the
Company of a timely notice of exercise of any of the Options hereunder, of
payment therefor, the Company shall transfer to Optionee or his legal
representative(s), as the case may be, one or more certificate(s) for the number
of shares with respect to which the Options shall have been so exercised.
5. RESTRICTIONS UPON TRANSFER.
(a) Neither the Optionee nor any other person or entity shall have any
interest in any specific asset or assets or stock of the Company by reason of
the granting of the Options. Any attempt to assign or to transfer this Agreement
or the Options granted hereunder, whether voluntarily or involuntarily, by
operation of law or otherwise, shall be of no further force or effect and no
interest or right hereunder shall vest in any other person. Nothing in this
Agreement shall be deemed to limit Optionee's right to transfer this Agreement
or the Option Shares by will or in accordance with the laws of devise, descent
and distribution.
(b) Nothing in this Agreement shall be construed in limitation of any
restrictions upon transfer of any of the Option Shares contained elsewhere,
including any restrictions that may be contained in the Certificate of
Incorporation or the By-Laws of the Company.
(c) Nothing in this Agreement shall be construed as a modification of any
existing agreements with respect to the gift, sale, purchase, transfer, pledge,
hypothecation, or other disposition or encumbrance of the Option Shares between
the parties to this Agreement, or between or among either or both of the parties
to this Agreement and one or more persons not party to this Agreement.
(d) The Optionee acknowledges that the certificate(s) evidencing ownership
of the Common Stock will be stamped or otherwise imprinted on the face thereof
with a legend in substantially the following form:
"The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933, as amended (the "Act") or
any state securities act. No sale, offer to sell or transfer of the
shares shall be made unless a registration statement under the Act, or
any applicable state statute, with respect to the shares is then in
effect or an exemption from the registration requirements of such Act
or state statute is then in fact applicable to the shares."
(e) Any legend endorsed on a certificate pursuant to Section 5(d) hereof
and the stop transfer instructions with respect to the Option Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such Option Shares are registered under the Securities Act and
a prospectus meeting the requirements of Section 10 of the Securities Act is
available.
(f) The restrictions described in any legend endorsed on a certificate
pursuant to Section 5(d) hereof shall be removed at such time as permitted by
Rule 144(k) promulgated under the Securities Act.
(g) (1) If the Company at any time elects or proposes to register any of
its shares of Common Stock (the "Registration Shares") under the 1933 Act on
forms S-1, S-2, S-3 or SB-1, SB-2 or any other form in effect at such time for
the registration of securities to be sold for cash (a "Registration Statement")
with the Securities and Exchange Commission (the "SEC") pursuant to which shares
of Common Stock owned by any other shareholder of the Company are to be
registered, the Company shall give prompt written notice (the "Registration
Notice") to the Optionee of its intention to register the Registration Shares.
(2) Within fifteen (15) days after the Registration Notice shall have been
given to the Optionee, the Optionee may give written notice to the Company of
exercise of all, or a portion of the Option (the "Optionee Notice"), accompanied
by payment of the Option Price in accordance with Section 1 hereof, stating the
number of shares Optionee elects to be included among the Registration Shares
(which number may include shares held by Optionee as a result of prior exercises
of this Option, or otherwise) (the "Optionee's Included Shares").
(3) The Company shall use reasonable efforts to register the Optionee's
Included Shares under the Securities Act of 1933 and any state securities acts,
if necessary, designated by the Optionee in the Optionee Notice. The Company
shall have the right to withdraw and discontinue registration of the Optionee's
Included Shares at any time prior to the effective date of such Registration
Statement if the registration of the Registration Shares is withdrawn or
discontinued.
(4) The Company shall not be required to include any of the Optionee's
Included Shares in any Registration Statement unless the Optionee agrees, if so
requested by the Company, to: (i) offer and sell the Optionee's Included Shares
to or through an underwriter selected by the Company and, to the extent
possible, on substantially the same terms and conditions under which the
Registration Shares are to be offered and sold; (ii) comply with any
arrangements, terms and conditions with respect to the offer and sale of the
Optionee's Included Shares to which the Company may be required to agree; and
(iii) enter into any underwriting agreement containing customary terms and
conditions.
(5) If the offering of the Registration Shares by the Company is, in whole
or in part, an underwritten public offering, and if the managing underwriter
determines and advises the Company in writing that the inclusion in such
Registration Statement of all of the Shares, together with the stock of other
persons who have a right to include their stock in the Registration Statement
(collectively referred to as the "Aggregate Shares"), would adversely affect the
marketability of the offering of the Registration Shares, then the Optionee and
such other holders shall be entitled to register the portion of such number of
Aggregate Shares as the managing underwriter determines may be included without
such adverse effects (collectively, "Aggregate Underwriter Shares"), subject to
the terms, exceptions and conditions of this Section 5(g). The number of
Aggregate Underwriter Shares which the Optionee shall be entitled to register
shall be equal to the number of Aggregate Underwriter Shares multiplied by a
fraction, the numerator of which is the number of Optionee's Included Shares and
the denominator of which is the number of Aggregate Shares.
(6) The Company shall bear all costs and expenses of registration of the
Registration Shares, including Optionee's Included Shares.
(7) It shall be a condition precedent to the Company's obligation to
register any of Optionee's Included Shares that the Optionee shall provide the
Company with all information and documents, and shall execute, acknowledge, seal
and deliver all documents reasonably necessary, to enable the Company to comply
with the 1933 Act, the State Acts, and all applicable laws, rules and
regulations of the SEC or of any state securities law authorities.
6. RIGHTS AS STOCKHOLDER.
(a) Optionee shall have none of the rights of a stockholder with respect to
any of the Option Shares until any Option granted herein shall have been
exercised.
(b) Nothing in this Agreement shall affect in any way the rights or powers
of the Company, or any parent or subsidiary Company, or any of the directors or
stockholders of the Company, to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stocks or other
classes of securities ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any grant of
options to purchase securities of the Company otherwise than under this
Agreement, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise.
(c) (i) If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or of another corporation or entity or
shares of a different par value or without par value through a recapitalization,
stock dividend, stock split, reverse stock split or a reorganization under which
the Company is not the surviving entity, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
the Options, without change in the aggregate Option Price applicable to the
unexercised portion of the outstanding Option but with a corresponding
adjustment in the Option Price for each share or other unit of any security
covered by the Option. No adjustment shall occur under this Section 6 by virtue
of the fact that the Company purchases or sells Common Stock or any securities
of the Company at its fair market value (other than pursuant to compensatory
Stock Options) for cash. No fractional shares shall be issued for any such
adjustment.
(ii) In case the Company shall issue rights or warrants to all holders
of its shares of Common Stock entitling them to subscribe for or to
purchase shares of Common Stock at a price per share which, when added to
the amount of consideration received or receivable by the Company for such
rights or warrants is less than the Current Market Price (as hereinafter
defined) per share at the record date, the number of Option Shares
purchasable upon the exercise of the Option shall be increased so that
thereafter, until further adjusted, this Option shall entitle the Optionee
to purchase an additional number of shares determined as if the Option had
been fully exercised and the Optionee were a record holder entitled to
receive such rights or warrants at an option price which is the same as the
per share consideration payable pursuant to such rights or warrants. Such
adjustment shall be made whenever such rights or warrants are issued, but
shall also be effective retroactively as to portions of the Option
exercised between the record date for the determination of shareholders
entitled to receive such rights or warrants and the date such rights or
warrants are issued.
(iii) For the purpose of any computation under Section 6(c)(ii), the
Current Market Price per share of Common Stock at any date shall be (i) if
the shares of Common Stock are listed on any national securities exchange,
the average of the daily closing prices for the fifteen (15) consecutive
business days commencing twenty (20) business days before the date of
determination (the "Trading Period"); (ii) if the shares of Common Stock
are not listed on any national securities exchange but are quoted or
reported on the National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ"), the last quoted price or, if not quoted, the
average of the high bid and low asked price as reported by NASDAQ for the
Trading Period, or the daily closing prices for the Trading Period as
reported by NASDAQ, as the case may be; and (iii) if the shares of Common
Stock are neither listed on any national securities exchange nor quoted or
reported on NASDAQ, the higher of (x) the Exercise Price then in effect, or
(y) the tangible book value per share of Common Stock as of the end of the
Company's immediately preceding fiscal year.
(d) In the event of the proposed dissolution or liquidation of the Company,
the Company shall cause the Board of Directors of the Company to notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been exercised during such thirty (30) day period, the Options will
terminate as to any unexercised portion thereof immediately prior to the
consummation of such proposed action.
(e) In lieu of paying in cash any withholding tax obligation imposed on any
exercise of an Option hereunder, Optionee may elect to have the actual number of
shares issuable upon exercise of the Option reduced by the smallest number of
whole shares of Common Stock which, when multiplied by the fair market value of
the Common Stock as of the date the Option is exercised, is sufficient to
satisfy the amount of the withholding tax obligations imposed by reason of the
exercise hereof (the "Withholding Elections"). Optionee may make a Withholding
Election only if all of the following conditions are met:
(i) the Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed
Notice of Withholding Election, in substantially the form of Exhibit "A"
attached hereto;
(ii) any Withholding Election made will be irrevocable; and
(iii) if Optionee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of
1934, at any time during the period in which the Option is exercisable,
then the Withholding Election must be made either (A) at least six (6)
months prior to the Tax Date applicable to the exercise of the Option, or
(B) prior to the Tax Date and in any ten day period beginning on the third
day following the release of the Company's quarterly or annual summary
statement of sales and earnings.
7. REPRESENTATIONS. Optionee will acquire Optionee's shares for Optionee's
own account, for investment only and without a view to resale or distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and any applicable state securities laws, and upon the acquisition of the
shares, Optionee will enter into such written representations, warranties and
agreements as the Company may request in order to comply with the Act, any
applicable state securities laws and this Option Agreement.
8. RESERVATION. The Company agrees, at all times during the term of the
Options, to reserve and keep available such number of shares of the Common Stock
as will be sufficient to satisfy the requirements of the Options.
9. TAX CONSEQUENCES AND WITHHOLDING. Optionee agrees that the Company is
not responsible for the tax consequences to Optionee of the granting of the
Options or its subsequent exercise by Optionee, and that it is the
responsibility of Optionee to consult with Optionee's personal tax advisor
regarding all matters with respect to the tax consequences of the granting of
the Options and its exercise by Optionee.
10. GENERAL PROVISIONS.
(a) AGREEMENT TO BE BOUND BY CONTRACT. This Agreement shall be binding not
only by the parties hereto, but also upon their heirs, executors,
administrators, successors or assigns. The parties hereto agree for themselves
and their heirs, executors, administrators, successors or assigns, to execute
any instruments and to perform any acts which may be necessary or proper to
carry out the purposes of this Agreement.
(b) AMENDMENT OR ALTERATION. This Agreement may be altered or amended, in
whole or in part, at any time, only by a written instrument setting forth such
changes signed by all parties hereto.
(c) WAIVER. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by any party.
(d) NOTICES. Any notices permitted or required hereunder shall be delivered
to the parties personally, by telecopier, or by United States Mail, with postage
prepaid, certified or registered, return receipt requested, addressed to the
respective parties at the following addresses and telecopier numbers:
If to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, FL 32780
Telecopier: (407) 383-8822
If to Optionee: At the address and telecopier
number for the Optionee on file
with the Company
or such other address as either party hereto shall notify the other as provided
herein. The date of service of any notice or communication hereunder shall be
the date of the hand delivery or receipt of telecopy, or three (3) days after
the mailing, if mailed by certified mail, return receipt requested.
(e) VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect, in any respect, the validity of
the remainder of this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and all agreements executed in
accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understandings, restrictions, representations or
warranties among the parties other than those set forth herein.
(g) ATTORNEYS' FEES. In the event any litigation including any appeals is
instituted in connection with the breach, enforcement or interpretation of this
Agreement, including, without limitation, any action seeking declaratory relief,
equitable relief, injunctive relief, or damages, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, expenses and
attorneys' fees incurred in connection therewith, including any costs of
collection.
(h) STATE LAW GOVERNING CONTRACTS. This Agreement shall be governed by the
laws of the State of Florida.
(i) NO CONSTRUCTION AGAINST DRAFTING PARTY. Each party to this
Agreement expressly recognizes that it results from a negotiated process in
which each party was given the opportunity to consult with counsel and
contributed to the drafting of this Agreement. Given this fact, no legal or
other presumptions against the party drafting this Agreement concerning its
construction, interpretation or otherwise accrue to the benefit of any
party to this Agreement and each party expressly waives the right to assert
such a presumption in any proceedings or disputes connected with, arising
out of, or involving this Agreement.
IN WITNESS WHEREOF, the parties have executed this Non-Qualified Stock
Option Agreement under seal as of the date first above written.
THE COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ James Neal Hutchinson, Jr.
-----------------------------------
Print Name: James Neal Hutchinson, Jr.
As Its: Vice President
OPTIONEE:
/s/ Joseph Yossifon
-------------------
Joseph Yossifon
<PAGE>
EXHIBIT A
TO
STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: Smart Choice Automotive Group, Inc.
RE: Withholding Election
* * * * * * * * * * * * * * *
This election relates to the Option identified in Paragraph 3 below. I hereby
certify that:
(1) My correct name and social security number and my current address are set
forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made in the name of
______________ for ________ shares of Common Stock and dated ___________,
19__ (the "Option"). This election relates to ___________ shares of Common
Stock issuable upon whole or partial exercise(s) of the Option (the "Option
Shares"); provided that the numbers set forth above shall be deemed changed
as appropriate to reflect stock splits and other adjustments contemplated
by the applicable provisions of the Option.
(4) In connection with any future exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Company for the purpose of having
the value of the shares applied to pay federal, state, and local, if any,
taxes arising from the exercise. The shares to be withheld shall have, as
of the Tax Date (as defined in the Option Agreement applicable to the
Option (the "Option Agreement")), applicable to the exercise, a fair market
value equal to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is otherwise
timely made pursuant to the Option Agreement.
(6) I further understand that the Company shall withhold from the Option Shares
a number of shares of Common Stock having the value specified in Paragraph
4 above.
(7) Capitalized terms used in this Notice of Withholding Election without
definition shall have the meanings given to them in the Option Agreement.
Dated: ____________________ ___________________________________
Legal Signature
___________________________ ___________________________________
Social Security Number Name
(Printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
EXHIBIT 10.61
NISSAN MOTOR ACCEPTANCE CORPORATION
AUTOMOTIVE WHOLESALE FINANCING
AND SECURITY AGREEMENT
This Agreement between NISSAN MOTOR ACCEPTANCE CORPORATION, 990 W. 190th
Street, Torrance, California 90502 ("NMAC"), and FIRST CHOICE STUART 1, INC. DBA
STUART NISSAN, located at 4313 S. FEDERAL HIGHWAY, STUART, FL 34997 ("Dealer"),
sets out the basic terms under which NMAC may establish and maintain for Dealer
a wholesale line of credit, and make advances to or on behalf of Dealer
thereunder, to finance new and used automobiles, trucks, truck-tractors,
trailers, semi-trailers, buses, mobile homes, motor homes, other vehicles and
other merchandise for Dealer whether held by dealer for sale, lease or otherwise
as inventory, equipment or otherwise ("the Property"). It is therefore agreed as
follows:
1. ADVANCES MADE BY NMAC
NMAC at all times shall have the right, in its sole discretion, to determine the
extent to which the terms and conditions on which, and the period for which it
will make advances to or on behalf of Dealer, or extend credit to Dealer, NMAC
may at any time and from time to time in its sole discretion establish, rescind
or change limits or the extent to which financing accommodations under this
Agreement will be made available to Dealer. This Agreement contemplates that
NMAC may extend credit and make advances to Dealer by paying the invoice amount
of Property ordered by or shipped to Dealer by a manufacturer, distributor or
other seller of such Property to Dealer and NMAC may pay to any such person the
invoice amount thereof, and NMAC shall be fully protected in relying in good
faith upon any invoice or advice from any manufacturer, distributor or seller
that the property described therein has been ordered by or shipped to Dealer and
the invoice amount therefor is correctly stated. Any such payment made by NMAC
to any such manufacturer, distributor or seller shall be an advance made by NMAC
to or on behalf of Dealer pursuant hereto and shall be repayable by Dealer in
accordance with the terms hereof. In addition, NMAC may make loans or other
advances directly to Dealer with respect to property of any type held by Dealer
for sale or lease and any such loan or other advance shall be an advance made by
NMAC to or on behalf of Dealer pursuant hereto and shall be repayable by Dealer
in accordance with the terms hereof. NMAC from time to time shall furnish
statements to Dealer of advances made by NMAC to or on behalf of Dealer pursuant
hereto. Promptly upon receipt by Dealer of any such statement, Dealer shall
review the same and advise NMAC in writing of any discrepancy therein. In the
event Dealer shall fail to advise NMAC of any discrepancy in any such statement
within ten calendar days from the receipt thereof by Dealer, such statement
shall be deemed to be conclusive evidence of advances by NMAC to or on behalf of
Dealer pursuant hereto unless Dealer or NMAC establishes by a preponderance of
evidence that such advances were not made or were made in different amounts than
as set forth in such statement.
2. INTEREST RATE AND FLAT CHARGES
All advances made by NMAC to or on behalf of Dealer pursuant hereto shall bear
interest from the date of advance by NMAC to the date of repayment in good funds
by Dealer at the rate established by NMAC from time to time for Dealer (the
"Rate"); provided, however, that any amount not paid when due hereunder shall
bear interest at 2% per annum in excess of the Rate, or the maximum contract
rate permitted by law of the state where Dealer maintains its business as
indicated above, whichever is the lesser. In addition to such interest, the
financing of property hereunder shall be subject to service and insurance flat
charges ("Flat Charges") established by NMAC from time to time for Dealer. NMAC
shall advise Dealer in writing from time to time of changes in the Rate and Flat
Charges. Such changes in the Rate and Flat Charges shall be effective from the
date stated in such notice; provided, however, that in the event any such notice
advises Dealer of an increase in the Rate or Flat Charges, Dealer shall have the
option of terminating this Agreement by paying to NMAC the full unpaid balance
outstanding under Dealer's wholesale line of credit and all other amounts due or
to become due hereunder in good funds within ten calendar days after receipt of
such notice by Dealer, in which event such increased Rate or Flat Charges shall
not become effective. Interest shall be calculated daily on the unpaid principal
balance outstanding at the close of business each day. In no event shall Dealer
be obligated to pay interest for any period which exceeds the maximum interest
permitted by the applicable law for that period.
3. PAYMENTS BY DEALER
The aggregate amount outstanding from time to time of all advances made by NMAC
to or on behalf of Dealer pursuant hereto shall constitute a single obligation
of Dealer, notwithstanding such advances are made from time to time, and such
amount, or so much thereof as may be demanded, together with NMAC's interest and
Flat Charges with respect thereto, shall be payable by Dealer to NMAC upon
demand. Notwithstanding that NMAC shall not have demanded payment therefor, upon
any sale, lease, transfer or other disposition of property financed pursuant to
this Agreement, dealer shall, on or before the close of the next business day
following such sale, pay over to NMAC an amount equal to the unpaid balance of
the amount advanced with respect to the item sold together with interest
thereon; provided, however, that if Dealer is in default, Dealer shall, on or
before the close of the next business day following such sale, pay over to NMAC
the entire proceeds of such sale, but nothing herein contained shall be deemed
to authorize any sale of any Collateral (as hereinafter defined) while Dealer is
in default. Dealer shall also pay to NMAC upon demand, the full amount of any
rebate, refund or other credit received by Dealer with respect to any property
financed by NMAC hereunder. Dealer shall pay NMAC the earned and accrued
interest on the unpaid balance of all advances made from time to time upon the
earlier of demand by NMAC or the fifteenth day of each calendar month.
4. NMAC'S SECURITY INTEREST
As security for (i) all advances now or hereafter made by NMAC to or on behalf
of Dealer pursuant hereto, (ii) any other indebtedness of Dealer to NMAC now in
existence or hereafter arising and (iii) the observance of performance of all
other obligations of Dealer to NMAC in connection with the financing of property
for Dealer; Dealer hereby grants to NMAC, its successors and assigns, a security
interest in the following: the "Collateral."
This financing statement covers the following types (or items) of collateral,
wherever located, now owned or hereafter acquired by Debtor(s):
A. All automobiles, trucks, truck-tractors, trailers, semi-trailers, buses,
mobile homes, motor homes, other vehicles and other merchandise and all parts,
accessories and furnishings, now held or hereafter acquired by Debtor, including
all goods hereafter added to or acquired in replacement of the foregoing, and
the proceeds of all of the foregoing, whether or not inventory or other and
whether or not new, used, repossessed, surrendered or other;
B. All goods, including without limitation, all machinery, equipment,
tools, appliances, trucks, motor vehicles and office furniture and fixtures now
held or hereafter acquired by Debtor, and the proceeds of all of the foregoing;
C. All accounts receivable, chattel paper, security agreements,
instruments, contract rights, policies and certificates of insurance, dealer
reserve accounts, manufacturer's statements of origin (MSO's) or certificates of
title or ownership relating to vehicles, documents and general intangibles now
held or hereafter acquired by Debtor, including all monies and credits now due
or to become due to Debtor from, and all claims against, manufacturers or
distributors of inventory or other lending institutions, and the proceeds of all
of the foregoing; and
D. All other assets now held or hereafter acquired by Debtor, with the
exception of real property, but including fixtures.
5. DEALER'S POSSESSION AND SALE OF MERCHANDISE
Dealer's possession of the Property financed pursuant hereto shall be for the
sole purpose of storing and exhibiting the same for sale or lease in the
ordinary course of Dealer's business. Dealer shall keep all new Property brand
new and all used Property in at least as good condition as when it was acquired
by Dealer, all of which shall be subject to inspection by NMAC. Dealer shall
keep all such Property free from all taxes, liens and encumbrances. Any sum of
money that may be paid by NMAC in release or discharge of any taxes, liens or
encumbrances on any Collateral, or on any documents executed in connection
therewith, shall become an obligation of Dealer to NMAC and shall be paid by
Dealer to NMAC upon demand. Dealer shall keep the Collateral at the premises
described above or at such other place as NMAC may approve in writing. Dealer
shall not, except as expressly permitted under this paragraph 5, sell, transfer,
lease, mortgage or otherwise dispose of the Collateral or any part thereof or
interest therein, remove the Collateral from such premises or attempt any such
sale, transfer, lease, mortgage, removal or other disposition of the Collateral
without the prior written consent of NMAC. Unless and until an event of default
shall have occurred, Dealer may sell the Property financed pursuant to this
Agreement in the ordinary course of the Dealer's business, but nothing herein
shall be deemed to waive or release any interest NMAC may have hereunder or
under any other agreement and in any proceeds of such Property, including any
accounts receivable, chattel paper, security agreements, instruments, contract
rights, documents and general intangibles. Except as may be necessary to remove
or transport the same from a freight depot to Dealer's place of business. Dealer
shall not use or operate, or permit the use or operation of, any Property
financed hereunder for demonstration or otherwise without the express prior
written consent of NMAC in each case, and Dealer shall not in any event use such
Property illegally, improperly or for hire. Dealer shall not mortgage, pledge or
loan any of such Property and shall not transfer or otherwise dispose of the
same except by sale or lease in the ordinary course of Dealer's business. Dealer
represents and warrants that it has good title to the Collateral, that the
Collateral is free and clear of all liens and encumbrances other than those
created by this Agreement, that Dealer has authority to convey a security
interest in the Collateral, that NMAC need not look behind the Dealer
signatories hereto to verify such authority, that Dealer will comply with all
laws and regulations affecting the Collateral, and that Dealer shall maintain
adequate records for the purpose of identifying the disposition of any of the
Property. As used in this paragraph 5, "sale in the ordinary course of Dealer's
business" shall include only (i) a bona fide retail sale to a purchaser for his
own use at the fair market value of the Property sold, and (ii) an occasional
sale of such Property to another dealer at a price not less than Dealer's cost
of the Property sold, provided such sale is not a part of a plan or scheme to
liquidate all or any portion of Dealer's business; and "lease in the ordinary
course of Dealer's business" shall include only a bona fide lease to a lessee
for his own use at a fair rental value of the Property leased.
6. RISK OF LOSS AND INSURANCE REQUIREMENTS
Except to the extent of any insurance proceeds actually received by NMAC with
respect thereto under insurance obtained by NMAC pursuant to this Agreement or
any other agreement, all Property financed hereunder shall be at Dealer's sole
risk of any loss or damage to the same. Dealer hereby indemnifies NMAC against
and holds NMAC harmless from all claims for injury or damage to persons or
property caused by the use, operation or other holding of the Collateral; and if
requested to do so by NMAC, Dealer shall maintain at its own expense liability
insurance in connection therewith in such form and amounts and with such
insurers as NMAC may reasonably require from time to time. In addition, Dealer
shall insure all Collateral financed hereunder that is or may be used for
demonstration or operated for any other purpose against loss due to collision,
subject in each case to the deductible amounts and limitations required by NMAC.
If Dealer fails to furnish acceptable evidence of any insurance required by
NMAC, NMAC may, but shall not be required to, obtain such insurance at Dealer's
expense.
7. CREDITS AND SETOFFS
All funds or other property belonging to NMAC and received by Dealer shall be
received by Dealer in trust for NMAC and shall be remitted to NMAC forthwith.
NMAC shall at all times have a right to offset and apply any and all credits,
monies or properties of Dealer in NMAC's possession or control against any
obligation of Dealer to NMAC.
8. INFORMATION CONCERNING DEALER
To induce NMAC to extend financing accommodations hereunder, Dealer has
submitted information concerning its business organization and financial
condition; and Dealer hereby certifies that the information is complete, true
and correct in all respects and that the financial information contained
therein, and any other financial information that may be furnished to NMAC from
time to time hereafter, does and shall fairly present the financial condition of
Dealer in accordance with generally accepted accounting principles applied on a
consistent basis. Dealer shall submit to NMAC (i) within 120 days after the end
of Dealer's fiscal year, a complete statement of Dealer's financial condition
for that year in a form which is reasonably satisfactory to NMAC, (ii) within 15
days after the last day of each calendar month, a balance sheet and profit and
loss statement for that preceding month, and (iii) any other financial records
or reports which NMAC may reasonably request. In addition, Dealer agrees to
notify NMAC immediately of any material change in its ownership, control,
business organization or financial condition or of any information relating
thereto previously furnished to NMAC. Dealer acknowledges and intends that NMAC
shall rely, and shall have the right to rely, on such information in extending
and continuing to extend financing accommodations to Dealer. Dealer hereby
authorizes NMAC from time to time and at all reasonable times to examine,
appraise and verify, through contacts with retail purchasers and otherwise, the
existence and condition of all inventory, goods, documents, commercial or other
paper and other property in which NMAC has or has had any title, title
retention, lien, security or other interest, and all of Dealer's books and
records in any way relating to its business.
9. DEFAULT
The happening of any of the following events or conditions shall constitute a
default as such term is used herein:
A. Dealer defaults in the payment of any indebtedness for advances made
hereunder or otherwise due NMAC or in the performance of any of the terms,
conditions or obligations of Dealer under this Agreement or any other agreement
between NMAC and Dealer;
B. Any warranty, representation or statement made or caused to be made by
Dealer in connection with this Agreement or any other agreement between NMAC and
Dealer is or becomes false or breached in any material respect;
C. Loss, theft, damage, destruction, sale (except as permitted in paragraph
5) or encumbrance of the Collateral or the making of any levy, seizure or
attachment thereon;
<PAGE>
D. Inability of Dealer to pay debts as they mature, insolvency, appointment
of a receiver, trustee or custodian for Dealer or Dealer's property, assignment
for the benefit of creditors by Dealer, commencement of any proceeding under any
bankruptcy or insolvency law of the United States, any state or any political
subdivision thereof by or against Dealer, or an order of attachment, execution,
sequestration or other order in the nature of a writ is levied on the
Collateral;
E. Death of the Dealer if the Dealer is a natural person, or death of any
partner of the Dealer if it is a partnership;
F. Dissolution, merger, or consolidation of any Dealer which is a
corporation or a partnership or a transfer of all or any substantial part of the
property of any Dealer; or
G. Revocation, surrender, suspension or termination of any license,
certificate, franchise, permit or any agreement necessary to allow Dealer to
engage in the business which it presently conducts or which materially affects
the ability of Dealer to carry on its business as it is presently conducted.
Whenever a default shall occur, or at any time thereafter, NMAC at its option
and without demand or notice of any kind, may terminate this Agreement and
declare the indebtedness to be immediately due and payable. Upon default, NMAC
shall have all the remedies of a secured creditor under the Uniform Commercial
Code with respect to the Collateral and all other security pursuant to any other
agreements between NMAC and Dealer. Dealer grants to NMAC, in any such event,
the right to take possession of the Collateral and such other security by any
means not involving a breach of the peace and to sell the same. For such
purpose, NMAC may enter upon the premises on which the Collateral or other
security may be situated and remove the same to such other place as NMAC may
determine, and Dealer waives any notice or hearing with respect to such taking
of possession. Dealer shall, upon NMAC's demand, assemble and make the
Collateral or other security available to NMAC at a place to be designated by
NMAC which is reasonably convenient to both parties. Further, NMAC may collect
all monies and credits then due or to become due to Dealer from, and all claims
against, manufacturers or distributors of inventory or other lending
institutions. If any notice is required by law, such notice shall be deemed
reasonably and properly given if mailed first class mail, postage prepaid, to
the address of Dealer indicated above at least five days before the event with
respect to which notice is required.
In the event of any default, Dealer shall pay all costs incurred by NMAC in
enforcing the terms of this Agreement and collecting any amounts due hereunder,
including those incurred in bankruptcy proceedings, expenses of locating the
goods, expense of any repairs to any realty or other property to which any of
the goods may be affixed or be a part, and reasonable attorney's fees and legal
expenses. The security interest granted hereunder shall be deemed to secure, in
addition to all other sums of money due hereunder, the repayment of all such
costs of collection and enforcement and all amounts expended by NMAC on behalf
of the Dealer. Dealer agrees that the sale by NMAC of any new or unused property
repossessed by NMAC to the manufacturer, distributor or seller thereof, or to
any person designated by such manufacturer, distributor or seller, at the
invoice cost to Dealer less any credit granted to Dealer with respect thereto
and reasonable costs of transportation and reconditioning, shall be deemed to be
a commercially reasonable means of disposing of the same. Dealer further agrees
that if NMAC shall solicit bids from three or more other dealers in the type of
property repossessed by NMAC hereunder, any sale by NMAC of such property in
bulk or in parcels to the bidder submitting the highest cash bid therefor shall
also be deemed to be a commercially reasonable means of disposing of the same.
Notwithstanding the foregoing, it is expressly understood that such means of
disposal shall not be exclusive, and that NMAC shall have the right to dispose
of any property repossessed hereunder by any commercially reasonable means. In
addition to all other rights and remedies of NMAC, Dealer shall be liable for
the amounts by which the indebtedness of Dealer to NMAC hereunder shall exceed
the amount realized by NMAC from any of the Collateral and other security, but
nothing herein shall require NMAC to look to any or all of the Collateral in
satisfaction of Dealer's indebtedness to NMAC.
10. GENERAL
Time shall be of the essence herein. Any delay on the part of NMAC in the
exercise of any right or remedy shall not operate as a waiver thereof, and no
single or partial exercise by NMAC of any right or remedy shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
The word "indebtedness" is used herein in its most comprehensive sense and
includes any and all advances, debts, obligations and liabilities of Dealer,
heretofore, now, or hereafter made, incurred or created, whether voluntary or
involuntary, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Dealer may be liable
individually or jointly with others.
<PAGE>
Any reference herein to NMAC shall include the successors and assigns of NMAC.
If more than one party shall execute this Agreement, the term "Dealer" shall
mean all parties signing this Agreement, (other than NMAC) and each of them, and
all such parties shall be jointly and severally obligated and liable hereunder.
The covenants and conditions of this Agreement shall apply to and be binding
upon the heirs, executors, administrators, successors and assigns of Dealer and
shall inure to the benefit of NMAC, its successors and assigns. This Agreement
shall not be assignable by Dealer except with the express written consent of
NMAC.
The neuter pronoun when used herein shall include the masculine and the feminine
and also the plural.
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
Dealer further agrees that the Collateral is now and shall continue to be
personal property, notwithstanding the manner and degree of affixation of the
Collateral to any real property.
Except as herein provided, no modification hereof may be made except by written
instrument duly executed by, or pursuant to the express written authority of, an
executive officer of NMAC.
Dealer shall execute and deliver to NMAC promissory notes or other evidences of
Dealer's indebtedness hereunder, security agreements, trust receipts, chattel
mortgages or other security instruments and any other documents which NMAC may
reasonably request to confirm Dealer's obligation to NMAC and to confirm NMAC's
security interest in any collateral by NMAC, and if NMAC so requests, the terms
and conditions hereof shall be deemed to be incorporated therein. NMAC's
security or other interest in any Collateral shall not be impaired by the
delivery to Dealer of such Collateral or of bills of lading, certificates of
origin, invoices or other documents pertaining thereto or by the payment by
Dealer of any curtailment, security or other deposit or portion of the amount
financed. The execution by Dealer or on Dealer's behalf of any document for the
amount of any credit extended shall be deemed evidence of Dealer's obligation
and not payment thereof.
NMAC may, for and in the name of Dealer, endorse and assign any obligation
transferred to NMAC by Dealer and any check or other medium of payment intended
to apply upon such obligation. NMAC may complete any blank space and fill in
omitted information on any document or paper furnished to it by Dealer.
Unless the context clearly requires, the terms used herein shall be given the
same meaning as ascribed to them under the provisions of the Uniform Commercial
Code.
Section headings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement. This Agreement shall be
interpreted in accordance with the laws of the state of the Dealer's place of
business indicated above.
11. EFFECTIVE DATE AND TERMINATION
This Agreement shall become effective on the date NMAC first extends credit to
Dealer hereunder and shall be binding on Dealer and NMAC and their respective
successors and assigns from such date until terminated by receipt of written
notice by either party from the other, provided, however, that any such
termination shall not relieve either party from any obligation incurred prior to
the effective date thereof, nor shall it affect the security interest granted
hereunder which shall continue until all outstanding obligations and
indebtedness of Dealer to NMAC are satisfied in full. Such termination shall not
affect the obligations of any guarantor of the obligations and indebtedness of
the Dealer hereunder.
Dated: 7-21-97
FIRS CHOICE STUART 1, INC. NISSAN MOTOR ACCEPTANCE CORPORATION
DBA STUART NISSAN
4313 S. FEDERAL HIGHWAY
STUART, FL 34997
By: /s/ Gary R. Smith By: /s/ Mark Doi
- --------------------- --------------------
Gary R. Smith Mark Doi
President Senior Manager, Commercial Credit
EXHIBIT 10.62
ADDENDUM TO
AUTOMOTIVE WHOLESALE FINANCING
AND SECURITY AGREEMENT
This Addendum to Automotive Wholesale Financing and Security Agreement
("Addendum") is made between NISSAN MOTOR ACCEPTANCE CORPORATION ("NMAC") and
FIRST CHOICE STUART 1, INC., a Florida corporation, dba Stuart Nissan ("Dealer")
effective as of July 21, 1997.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, NMAC and Dealer hereby agree to supplement the
Automotive Wholesale Financing and Security Agreement between NMAC and Dealer,
dated as of July 21, 1997 (the "Agreement"), as follows:
Section 8 of the Agreement is amended to add, at the end of the
section, the following paragraph:
"As a condition of extensions of credit by NMAC, Dealer
acknowledges and agrees to maintain tangible net worth, working
capital and net cash requirements established by Nissan Motor
Corporation in U.S.A. ("NMC") and/or NMAC ("Capitalization
Guidelines"). The Capitalization Guidelines are established and
modified from time to time, based upon Dealer's total new vehicle
unit sales, the Dealer's annual planning unit volume established
by NMC, and/or the amount of the Dealer's wholesale inventory
floorplan lines of credit approved by NMAC, as the foregoing may
be modified from time to time. Dealer shall receive prior written
notice from NMC or NMAC regarding any changes to the
Capitalization Guidelines."
Except as expressly modified in this Addendum, the Agreement shall
remain unchanged and in full force and effect.
FIRST CHOICE STUART 1, INC.,
a Florida corporation
/s/ James Neal Hutchinson, Jr.
By:
Its:
EXHIBIT 10.63
SECOND ADDENDUM TO
AUTOMOTIVE WHOLESALE FINANCING
AND SECURITY AGREEMENT
This Second Addendum to Automotive Wholesale Financing and Security
Agreement ("Second Addendum") is made between NISSAN MOTOR ACCEPTANCE
CORPORATION ("NMAC") and FIRST CHOICE STUART 1, INC., a Florida corporation, dba
Stuart Nissan ("Dealer") effective as of August 11, 1997.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, NMAC and Dealer hereby agree to supplement the
Automotive Wholesale Financing and Security Agreement between NMAC and Dealer,
dated as of July 21, 1997 as supplemented by the Addendum to Automotive
Wholesale Financing and Security Agreement dated July 21, 1997 (collectively the
"Agreement"), as follows:
"Dealer agrees that the Agreement will terminate upon the earlier of
the following:
1) December 31, 1997, and the unpaid Principal
together with all accrued and unpaid interest and all other
fees, costs and charges due and owing under the Agreement
shall immediately be accelerated and be due in full; or
2) Should Smart Choice Automotive Group, Inc., a
Florida corporation (and/or its successors or assigns), sell
stock pursuant to an underwritten public offering prior to
December 31, 1997, the unpaid Principal together with all
accrued and unpaid interest and all other fees, costs and
charges due and owing under the Agreement shall immediately be
accelerated and be due and payable in full."
Except as expressly modified in this Second Addendum, the Agreement shall
remain unchanged and in full force and effect.
FIRST CHOICE STUART 1, INC.,
a Florida corporation
James Neal Hutchinson, Jr.
------------------------------------
By:
Its:
EXHIBIT 10.64
NISSAN MOTOR ACCEPTANCE CORPORATION
DEALER CAPITAL LOAN AND
SECURITY AGREEMENT
Nissan Motor Acceptance Corporation ("NMAC") and B & B Florida Enterprises,
Inc., a Florida corporation, dba Stuart Nissan ("Dealer"), for good and valuable
consideration received, hereby agree as follows:
I. LOAN
Dealer hereby promises to pay to the order of NMAC the maximum sum of
$1,200,000 ("Principal") and interest at the rate of 1.75 percentage points per
annum over the NMAC Prime Rate (as defined in Schedule A attached hereto and
made a part hereof), but in no event more than the maximum allowed by law, on
that portion of the Principal remaining unpaid from time to time. The Principal
shall be payable in 59 successive monthly installments of $20,000 each, followed
by one final installment equal to the then unpaid Principal, all accrued and
unpaid interest and all other fees, costs and charges due and owing under the
terms of this loan. Installments are payable monthly on the 15th day of each
month commencing on the 15th day of the month following the loan closing, until
the Principal is paid in full. Interest accrued through the end of the preceding
month shall be payable with each installment of Principal, provided that all
unpaid interest accrued to the date thereof shall be due and payable with the
last installment of Principal. Payments shall be applied first to accrued and
unpaid interest, then to Principal and finally to costs, fees, charges and
expenses.
II. SECURITY
As security for the payment of the Principal and interest thereon, and for
all other obligations and performances now or hereafter owing by Dealer to NMAC
under this Agreement and any other agreement between said parties, Dealer hereby
grants to NMAC a security interest in the following property ("Collateral"), now
owned or hereafter acquired by Dealer, and in the proceeds thereof:
(a) all automobiles, trucks, truck-tractors, trailers,
semi-trailers, busses, mobile homes, motor homes, other
vehicles and other merchandise, and all parts, accessories and
furnishings used in connection therewith, now held or
hereafter acquired by Dealer, including all goods hereafter
added to or acquired in replacement of the foregoing, and the
proceeds of all of the foregoing, whether or not inventory or
other and whether or not new, used, repossessed, surrendered
or other;
(b) all goods, including without limitation, all machinery,
equipment, tools, appliances, trucks, motor vehicles and
office furniture and fixtures now held or hereafter acquired
by Dealer, and the proceeds of all of the foregoing;
(c) all accounts receivable, chattel paper, security agreements,
instruments, contract rights, policies and certificates of
insurance, documents and general intangibles now held or
hereafter acquired by Dealer, including all monies and credits
now due or to become due to Dealer from, and all claims
against, manufacturers or distributors of inventory or other
lending institutions, and the proceeds of all the foregoing;
and
(d) all other assets now held or hereafter acquired by Dealer with
the exception of real property, exclusive of fixtures.
III. COVENANTS, REPRESENTATIONS AND WARRANTIES
Dealer hereby covenants, represents, warrants and agrees as follows:
(a) The above indebtedness arises from a loan (the "Loan") made by NMAC to
Dealer simultaneously with the execution of this Dealer Capital Loan
and Security Agreement, the proceeds of which shall be used as working
capital of Dealer.
(b) Prior to the funding of the Loan, Thomas DeRita, Jr. and Don Cook own
51% and 49%, respectively, of the issued and outstanding stock of the
Dealer. Immediately following the funding of the Loan, and for so long
as any portion of the Loan is outstanding, each of the persons named
below ("Dealer Principals"), respectively, shall have an ownership
interest in the Dealer and shall participates in the active management
and operation of the Dealer as follows:
OWNERSHIP
NAME PERCENTAGE POSITION
Thomas DeRita, Jr. 51% President
William A. Chamberlain 34% ___________
Louis V. Cianfrogna 15% Inactive
(c) Additional covenants, representations and warranties and other
agreements are set forth in Schedule A hereto. If there is any
conflict between the provisions of this Dealer Capital Loan and
Security Agreement and those set forth in Schedule A, the
provisions of this Dealer Capital Loan and Security Agreement
shall govern. This Dealer Capital Loan and Security Agreement,
together with Schedule A hereto, constitutes the entire agreement
between Dealer and NMAC with respect to the subject matter
hereof, and supersedes all prior undertakings and agreements
between Dealer and NMAC with respect thereto, including without
limitation any capital loan application or commitment letter.
IV. ACCELERATION OF LOAN
NMAC shall have the option to declare the unpaid portion of the Principal,
and accrued and unpaid interest thereon, to be immediately due and payable,
without demand or notice of any kind:
(a) in the event that either (i) any of the changes in ownership interest
in and active management and operation of Dealer described in Section
III (b), above fails to occur immediately following the funding of the
Loan or (ii) following the occurrence of such changes, as described in
Section III (b), above, there shall occur any further variation in the
ownership interest in or active management and operation of Dealer
with respect to the Dealer Principals, or
(b) upon the occurrence of an Event of Default (as defined in Schedule A
hereto), and thereupon, in either instance, NMAC may exercise any or
all of its remedies and rights set forth in Schedule A.
Dated: 10-12, 1995
B & B FLORIDA ENTERPRISES, INC. NISSAN MOTOR ACCEPTANCE CORPORATION,
a Florida corporation, dba Stuart Nissan a California corporation
By: /s/ Thomas DeRita, Jr. By: /s/ Mark Doi
- --------------------------- -----------------
Name: Thomas DeRita, Jr. Mark Doi
Title: President Corporate Manager, Commercial Credit
<PAGE>
SCHEDULE A TO NMAC
DEALER CAPITAL LOAN AND SECURITY AGREEMENT
ARTICLE I. DEFINITIONS
A. "Net Assets" shall mean the value of Borrower's assets (determined
in accordance with generally accepted accounting principles) other than
franchise and license values, goodwill, organization expenses, patents,
trademarks and trade names and other intangible assets, less the liabilities of
Borrower other than liabilities that are subordinated to obligations owing by
Borrower to Nissan Motor Acceptance Corporation ("NMAC").
B. "NMAC Prime Rate" shall mean the per annum interest rate from time
to time announced by a majority of the following New York City banks: Bankers
Trust Company, Chase Manhattan Bank, N.A., Chemical Bank, Citibank, N.A., and
Morgan Guaranty Trust Company of New York, as their respective Prime Rate;
provided that if fewer than three of such banks have the same rate in effect,
the median of the five rates shall be the NMAC Prime Rate. For the purposes of
computing interest hereunder, the NMAC Prime Rate in effect on the last day of a
month shall be deemed to be such rate in effect throughout the succeeding month.
C. "Agreement" shall mean this Schedule A and the Dealer Capital Loan
and Security Agreement to which this Schedule A is attached.
D. "Borrower" shall mean the Dealer who has executed the attached
Dealer Capital Loan and Security Agreement with NMAC.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
A. As inducement for NMAC to enter into a Dealer Capital Loan and
Security Agreement with Borrower, Borrower hereby represents and warrants to
NMAC the following:
1. Dealership. Borrower is operating under a duly executed Sales and
Service Agreement with Nissan Motor Corporation in U.S.A., and Borrower is
duly authorized, licensed and franchised to operate such business.
2. Financial Information. All balance sheets, statements of profit and
loss and other financial data that have been given to NMAC by or on behalf
of Borrower are complete and correct in all material respects, accurately
present the financial condition of Borrower as of the dates thereof, and
the results of its operations for the periods for which the same have been
furnished, and have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods covered
thereby and from period to period. Except as specifically disclosed by the
most recent financial or other statements furnished by or on behalf of
Borrower to NMAC, Borrower does not have outstanding any indebtedness,
direct or contingent, other than to NMAC; none of its assets is subject to
any security interest, lien or other encumbrance in favor of anyone other
than NMAC and Borrower does not have outstanding any loan or advance to any
individual or to any partnership, corporation or other entity. There has
been no change in the assets, liabilities or financial condition of
Borrower from that set out in the most recent financial statements given to
NMAC with respect to Borrower other than changes in the ordinary course of
business, none of which changes has been materially adverse to Borrower.
3. Other Information. All other information, reports, papers and data
given to NMAC by or on behalf of Borrower are accurate and correct in all
material respects and complete insofar as completeness may be necessary to
give NMAC a true and accurate knowledge of the subject matter.
4. Tax Matters. Borrower has filed all federal, state, county,
municipal and other tax returns required to have been filed by it and has
paid all taxes which have become due pursuant to such returns or pursuant
to any assessment received by it, and Borrower does not know of any basis
for additional assessment in respect of such taxes.
5. Litigation. Except as specifically disclosed to NMAC by the most
recent financial or other statements furnished by or on behalf of Borrower
to NMAC, there are no unsatisfied liens or judgments against Borrower nor
is there now pending against Borrower, nor to the knowledge of Borrower is
there threatened, any action, suit or proceeding at law or in equity or by
or before any administrative agency that could have a material adverse
effect upon its financial condition or operations if adversely determined.
6. Validity of Agreement. Having due regard to all outstanding
agreements and commitments of Borrower, and, if Borrower is a corporation,
all restrictions contained in its Articles or Certificate of Incorporation
and By-Laws, or if Borrower is a partnership, all restrictions contained in
its Articles or Agreement of Partnership, Borrower has the power and
authority to borrow money from, and pledge its assets to, NMAC and to
execute and perform this Agreement; and Borrower has taken all steps
necessary to insure that this Agreement is legally valid and enforceable
against Borrower in accordance with its terms and conditions.
ARTICLE III. COVENANTS
A. Borrower hereby covenants and agrees that until the Principal and
interest thereon and any future advances and interest thereon made by NMAC to
Borrower shall have been paid in full:
1. Legal and Other Requirements. Borrower shall preserve and keep in
full force and effect its existence, rights, franchises and trade names; be
legally authorized and otherwise authorized by, and in good standing with,
other persons necessary to carry on its business as now conducted, and
comply with, conform to and obey all present and future laws, ordinances,
rules, regulations, orders of public authorities and other requirements
applicable to it.
2. Protection, Repair and Replacement of Property. Borrower shall
maintain, preserve, protect and keep in good order and condition all
property used or useful in the conduct of its business and from time to
time make all necessary or appropriate repairs, replacements and
improvements thereto. Borrower also shall permit any person designated by
NMAC, at reasonable times during business hours and as often as NMAC may
reasonably request, to inspect such property.
3. Taxes. Borrower shall pay, as and when the same shall become due
and payable, all taxes, assessments, fees and charges of any kind
whatsoever imposed upon Borrower or its property, and all claims which
constitute, or if unpaid may become, a lien, charge or encumbrance upon any
of its property.
4. Insurance. Borrower shall obtain and maintain insurance protecting
its property against loss or physical damage from risks, in amounts and
with insurers acceptable to NMAC. In addition, Borrower shall:
(a) cause each insurance policy issued pursuant to the above to
provide, and the insurer issuing such policy to certify to NMAC, that
(i) NMAC will be insured as its interest may appear, (ii) adjustment
of losses will be subject to the approval of NMAC, (iii) all amounts
payable thereunder, including return of unearned premiums, will be
paid to NMAC for the accounts of NMAC and Borrower as their respective
interests may appear (such amounts to be applied to the restoration,
repair or replacement of property damaged or destroyed if an Event of
Default, or other event for which NMAC may exercise the remedies set
out in Article IV (B) hereof, is not then existing, or, at the option
of NMAC, to the payment of the Principal, interest thereon and all
other amounts owing by Borrower to NMAC, in the manner specified in
Article IV (F) hereof, if any such event is then existing), (iv) the
interest of NMAC will be insured regardless of any breach or violation
by Borrower of any warranties, declarations or conditions contained in
such policy and (v) such insurer will promptly notify NMAC if such
policy be cancelled or materially changed for any reason whatsoever,
and such cancellation or change will not be effective as to NMAC for
30 days after receipt by NMAC of such notice; and
(b) deliver to NMAC copies of each such insurance policy upon the
funding of the Loan and copies of each renewal policy not less than 30
days prior to the expiration of the original policy or preceding
renewal policy, as the case may be, and receipts or other evidence
that the premiums thereon have been paid.
Irrespective of Borrower's compliance with the provisions hereof, the
funding of the Loan shall constitute an assignment by Borrower to NMAC
of any amounts that may become payable under any such insurance policy
for application as provided above. NMAC may (and Borrower hereby
appoints NMAC as Borrower's attorney in fact so to do) endorse
Borrower's name upon any checks, drafts, money orders, notes or other
orders or instruments for the payment of any such amounts payable to
or to the order of Borrower.
5. Financial and Other Statements. Borrower shall maintain full and
complete books of account and other records reflecting the results of its
operations in accordance with generally accepted accounting principles
applied on a consistent basis and shall permit any person designated by
NMAC, at reasonable times during business hours and as often as NMAC may
reasonably request, to inspect such books and records and to make extracts
therefrom. Borrower also shall furnish to NMAC:
(a) within 15 days after the end of each month, or at such other
frequency as NMAC may request from time to time, its balance sheet as
of the end of such month and its statement of profit and loss for such
month in such detail as NMAC may reasonably request from time to time,
each certified by Borrower (or by an employee or representative of
Borrower acceptable to NMAC) as having been prepared in accordance
with accounting principles consistent with those reflected in the
audited financial statements of Borrower and as to the truth,
accuracy, and completeness of the information contained therein.
(b) within 120 days after the end of each of its fiscal years, or
at such other frequency as NMAC may request from time to time, a
complete, executed copy of a report of an examination of its financial
statements made by independent, certified public accountants selected
by Borrower and acceptable to NMAC, such report to include a balance
sheet and a statement of profit and loss for such year in such detail
as NMAC may reasonably request from time to time and an unqualified
opinion to the effect that such balance sheet and statement of profit
and loss fairly present the financial condition of Borrower and the
results of its operations in conformance with generally accepted
accounting principles applied on a consistent basis, except as may be
described in such opinion; and
(c) such other financial or other statements respecting the
condition, operation and affairs of Borrower or its property as NMAC
may from time to time reasonably request.
6. Litigation. Borrower shall promptly defend any action, proceeding
or claim affecting Borrower or its property and shall promptly notify NMAC
of the institution of any such action, proceeding or claim if the same
could have a material adverse effect upon the financial condition or
operations of Borrower if adversely determined. Borrower also shall
promptly notify NMAC of the occurrence of any other event the effect or
outcome of which could have such a material adverse effect.
B. Borrower hereby covenants and agrees that until the Principal and
interest thereon and any future advances made by NMAC to Borrower shall have
been paid in full, without the prior written consent of NMAC:
1. Indebtedness. Borrower shall not create or have outstanding any
indebtedness for money borrowed except for (i) indebtedness owing to NMAC,
(ii) indebtedness specifically disclosed by the most recent financial or
other statements furnished by or on behalf of Borrower to NMAC prior to the
date of this Agreement and that is not to be paid with the proceeds of the
Loan, and (iii) indebtedness subordinated to all obligations owing by
Borrower to NMAC.
2. Encumbrances. Borrower shall not create, incur or permit to exist
on any of its property any security interest, lien or other encumbrance
except for (i) security interests, liens or other encumbrances in favor of,
or subordinated to, NMAC, (ii) security interests, liens or other
encumbrances specifically disclosed by the most recent financial or other
statements furnished by or on behalf of Borrower to NMAC prior to the date
of this Agreement and that are securing indebtedness not to be paid with
the proceeds of the Loan, (iii) liens for taxes not delinquent or being
contested in good faith, (iv) liens of mechanics or materialmen arising in
the ordinary course of business with respect to obligations that are not
overdue or that are being contested in good faith, and (v) liens resulting
from deposits or pledges to secure payment of worker's compensation,
unemployment insurance, old age pensions or other social security.
3. Guaranties. Borrower shall not endorse, guaranty or become surety
for the payment of any debt or obligation of any individual, partnership or
corporation, directly or contingently, except for recourse on the
obligations of retail purchasers of merchandise from Borrower and in
connection with endorsing checks and other negotiable instruments for
deposit and collection.
4. Transfers, Acquisitions, Mergers, etc. Borrower shall not sell,
exchange, transfer or otherwise dispose of any of Borrower's property,
except in the normal course of business; buy, rent, lease or otherwise
acquire property from any Dealer Principal, or in which any of the Dealer
Principals has an interest, direct or indirect; consolidate with or merge
into any other business concern or permit any other business concern to
consolidate with or merge into Borrower; sell, exchange, transfer, lease or
otherwise dispose of all or any substantial part of the capital assets of
Borrower; make any payments upon or transfer any assets in satisfaction, in
whole or in part, of any indebtedness subordinated to any obligation owing
to NMAC; or make or have outstanding, except loans and advances
specifically disclosed by the most recent financial statement furnished by
Borrower to NMAC prior to the date of this Agreement, any loan or advance
to any individual, partnership or corporation, purchase any security of any
corporation or invest in the obligations of any individual, partnership or
corporation.
5. Compensation. Borrower shall not make any loan to or increase the
present annual compensation of any director, officer, manager or Dealer
Principal of Borrower, directly or indirectly, or permit any of the
foregoing to withdraw from Borrower money in any manner other than in the
normal and usual course of business.
6. Dividends. If a corporation, Borrower shall not declare or pay any
dividend on any shares of its capital stock, make any other distribution on
any such shares or retire or issue any additional shares of its capital
stock or other securities.
ARTICLE IV. DEFAULT
A. Events of Default. If any of the following events (herein called an
"Event of Default") shall occur, NMAC may declare the unpaid portion of the
Principal, and accrued and unpaid interest thereon, and any other obligation to
NMAC with interest thereon, to be immediately due and payable, without notice or
demand to anyone, and may proceed in the manner set out in Article IV (B)
hereof.
1. Default in Payment. Borrower fails to pay in full any installment
of the Principal, or interest thereon, as and when the same becomes due and
payable. Acceptance of payments in arrears shall not waive or affect any
right to accelerate as herein provided.
2. Breach of Covenant or Agreement. Borrower breaches any other
covenant or agreement made by it hereunder or in any other agreement
between Borrower and NMAC, whether now existing or hereafter arising.
3. Misrepresentation. Any representation or warranty made by Borrower
to NMAC, whether set forth in this Agreement, in any other agreement
between Borrower and NMAC, in any report, certificate, financial statement
or other statement furnished to NMAC, or otherwise, shall prove to have
been false or misleading in any material respect as of the date on which
the same was made.
4. Default Under Other Agreements. Any other indebtedness of Borrower
to NMAC shall be accelerated under the terms of the instrument evidencing
such indebtedness as a result of a default by Borrower, or, if payable upon
demand, shall be demanded.
5. Bankruptcy, Receivership, Insolvency. Bankruptcy, receivership,
insolvency, assignment for the benefit of creditors, reorganization,
arrangement, dissolution, liquidation or other similar proceedings shall be
instituted by or against Borrower or all or any part of its property under
the laws of the United States or of any state or other competent
jurisdiction.
6. Variance in Ownership or Management of Borrower. NMAC has
confidence in the integrity and ability of the Dealer Principals and in
making the Loan is relying on such individuals to continue to have
ownership interest in or be in the active management and operation of
Borrower, or both, as the case may be, in the manner set out in this
Agreement. In the event there shall be any variation in the ownership
interest in, or active management and operation of, Borrower with respect
to the Dealer Principals, NMAC may declare the unpaid portion of the
Principal, and accrued and unpaid interest thereon, to be immediately due
and payable, without notice or demand to anyone, and may proceed in the
manner set out in Article IV (B) hereof.
B. Remedies. If an Event of Default shall occur, or in the event there
shall be any variation in the ownership interest in or active management and
operation of Borrower with respect to the Dealer Principals, NMAC may exercise
any one or more of the following remedies:
1. Acceleration. NMAC may declare the unpaid portion of the Principal,
and accrued and unpaid interest thereon, to be immediately due and payable,
without notice or demand to anyone.
2. Suit. NMAC may institute proceedings to collect the Principal and
interest thereon and to recover judgment for the same and to collect upon
such judgment out of any property of Borrower wheresoever situated.
3. Offset. NMAC may offset and apply any monies, credits or other
proceeds or property of Borrower that have or may come into the possession
or under the control of NMAC against any amount owing by Borrower to NMAC.
NMAC may convert any such proceeds or property to cash and deduct from the
amount applied the cost of converting the same to cash.
4. Other Remedies. NMAC may exercise its rights as a secured creditor
under the Uniform Commercial Code, and, in addition, exercise any of the
rights granted it in this Article IV or elsewhere in this Agreement or any
other document, instrument or agreement executed in connection with this
Agreement, or exercise any rights and pursue any remedies otherwise
available to it at law or in equity.
C. Rights with Respect to Intangibles. In addition to the rights
granted to NMAC with respect to accounts, contract rights, chattel paper, tax
refunds and general intangibles (hereinafter called the "Intangibles") pursuant
to this Agreement, NMAC may:
1. settle, adjust and compromise all present and future claims arising
thereunder or in connection therewith;
2. sell, assign, pledge or make any other agreement with respect
thereto or the proceeds thereof; and
3. exercise any and all other rights and remedies that NMAC would have
with respect thereto if it were the absolute owner thereof.
Borrower shall deliver to NMAC upon demand, all of its books and
records relating to the Intangibles and all instruments and other writings
relating to, evidencing or constituting all or any portion of the
Intangibles.
D. Repossession of Collateral. NMAC may
1. personally, or by agents or attorneys, take possession of the
Collateral or any portion thereof, from Borrower, with or without notice or
demand or process of law and free from all claims by Borrower, and for that
purpose NMAC may enter upon Borrower's premises where any of the same is
located, remove the same without liability for suit, action or proceeding
by Borrower and use in connection with such removal any and all services,
supplies, aids and other facilities of Borrower, and
2. take possession of the Collateral, or any portion thereof, free
from all claims by Borrower, by directing Borrower in writing to assemble
the same and deliver the same to NMAC at any place or places at which
Borrower then maintains facilities for maintenance or storage or to any
other place or places designated by NMAC and reasonably convenient to
Borrower and NMAC, in which event Borrower shall at its own expense
forthwith cause the same to be moved to the place or places so designated
by NMAC and there delivered to NMAC, it being understood that Borrower's
obligation so to deliver the same is of the essence of this Agreement and
that, accordingly, upon application to a court of equity having
jurisdiction, NMAC shall be entitled to a decree requiring specific
performance by Borrower of such obligation. NMAC may, without charge, keep
any of the Collateral repossessed by NMAC pursuant to this clause on the
premises of Borrower pending further action by NMAC. NMAC also may take
possession of any or all proceeds arising from the disposition of the
Collateral or any portion thereof.
E. Disposition of Collateral. NMAC may, at its option:
1. sell the Collateral or any portion thereof, at one or more public
or private sales, in such manner, at such time or times and upon such terms
as NMAC may determine, following notice to Borrower (which hereby agrees
that any such notice given at least five (5) days before the time of any
intended public sale, or before the time after which private sale, of the
Collateral, or any portion thereof, is to be made, shall be reasonable
notice of such sale); and/or
2. hold, lease, operate or otherwise use or permit the use of the
Collateral, or any portion thereof, in such manner, for such time and upon
such terms as NMAC may determine, and, in connection therewith, collect and
retain all earnings, rents, profits and other amounts due and to become due
with respect thereto.
Borrower agrees that the sale by NMAC of any new or unused property
repossessed by NMAC to the manufacturer, distributor or seller thereof, or
to any person designated by such manufacturer, distributor or seller, at
the invoice cost to Borrower less any credit granted to Borrower with
respect thereto and reasonable costs of transportation and reconditioning,
shall be deemed to be a commercially reasonable means of disposing of the
same. Borrower further agrees that if NMAC shall solicit bids from three or
more other dealers in the type of property repossessed by NMAC hereunder,
any sale by NMAC of such property in bulk or in parcels to the bidder
submitting the highest cash bid therefor shall also be deemed to be a
commercially reasonable means of disposing of the same. Borrower further
agrees that return by NMAC of any property to the manufacturer, distributor
or seller thereof in accordance with any agreement between Borrower and
such manufacturer, distributor or seller shall be deemed to be a
commercially reasonable means of disposing of the same. Notwithstanding the
foregoing, it is expressly understood that such means of disposal shall not
be exclusive, and that NMAC shall have the right to dispose of any property
repossessed hereunder by any commercially reasonable means. Nothing herein
shall require NMAC to look to any or all of the Collateral in satisfaction
of Borrower's indebtedness to NMAC.
Any disposition of the Collateral may be made on the premises of
Borrower or elsewhere, at the option of NMAC. Borrower hereby agrees that
NMAC may, in the exercise of its remedies hereunder, use the premises on
which the Collateral is located and may exercise all rights of Borrower
with respect to such premises. If Borrower is the lessee of such premises,
Borrower hereby assigns to NMAC all of Borrower's right, title, and
interest in and to Borrower's lease covering such premises (such assignment
to become effective, however, only at such time as NMAC shall notify
Borrower in writing thereof), and Borrower agrees to use its best efforts
to attempt to obtain any necessary consent to such assignment by the lessor
thereof.
F. Application of Proceeds. The proceeds of any sale, lease or use of
the Collateral, less the expenses incurred by NMAC in taking, holding, selling,
leasing, using, preparing for sale or lease and the like, and reasonable
attorneys' fees and other legal expenses, shall be applied by NMAC to the
partial or complete satisfaction of any indebtedness or obligation of Borrower
to NMAC. NMAC shall account to Borrower for any surplus, and Borrower shall be
liable to NMAC for any deficiency.
G. Late Charges and Collection Expenses. Without limiting or otherwise
affecting NMAC's remedies, if Borrower shall fail to pay any installment of the
Principal, when and as the same shall become due and payable, interest
thereafter shall accrue thereon and be payable at a rate that is three (3)
percentage points per annum more than the rate set forth in this Agreement (but
in no event more than the maximum rate allowed under applicable law) until the
same is paid and Borrower shall pay to NMAC, upon demand, all expenses
(including reasonable attorneys' fees and other legal expenses) incurred by NMAC
in effecting, or attempting to effect, collection.
H. Waiver. Borrower hereby waives (to the extent that the same may be
waived) the benefit of all valuation, appraisement, exemption, stay of execution
and redemption laws now or hereafter in effect.
I. Other. NMAC may exercise any other remedy specifically granted to a
secured party under the Uniform Commercial Code or now or hereafter existing in
equity, at law, by virtue of statute or otherwise.
ARTICLE V. MISCELLANEOUS
A. Prepayment. Borrower may prepay the Principal in whole or in part at
any time. Prepayments of the Principal shall be applied to the installments of
the Principal remaining unpaid in inverse order of their maturity. Any
prepayment shall not be deemed to extend or modify the repayment schedule or the
due date of the final installation.
B. Expenses and Fees. Borrower shall pay all costs and expenses
incurred by NMAC in connection with the preparation, execution and delivery of
this Agreement and all other agreements and instruments executed in connection
herewith, including but not limited to, fees and disbursements of counsel for
NMAC.
C. Performance of Borrower's Obligations. Time is of the essence. If
Borrower shall fail to make any payment or perform any act required by this
Agreement, NMAC may, but shall not be obligated to, and without prejudice to its
rights and remedies if it does not, make such payment or perform such act for
the account and at the expense of Borrower, without notice to or demand upon
Borrower and without waiving or releasing any obligation or default. Borrower
shall indemnify and hold harmless NMAC from and against all losses and expenses
(including, but not limited to, reasonable attorneys' fees) suffered or incurred
by NMAC by reason of any acts performed by it pursuant to this Section; and
Borrower shall pay to NMAC, upon demand, all sums expended, or losses and
expenses suffered or incurred, by NMAC pursuant to this Section, plus interest
thereon at a rate that is three (3) percentage points per annum more than the
rate set forth in this Agreement (but in no event more than the maximum rate
allowed under applicable law) from the date on which such sums are expended, or
losses and expenses suffered or incurred, by NMAC to the date on which Borrower
reimburses NMAC therefor.
D. Rights, Remedies, Powers. Each and every right, remedy and power
granted to NMAC under this Agreement shall be cumulative and in addition to any
other right, remedy or power herein specifically granted or now or hereafter
existing in equity, at law, by virtue of statute or otherwise and may be
exercised by NMAC from time to time concurrently or independently and as often
and in such order as NMAC may deem expedient. Any failure or delay on the part
of NMAC in exercising any such right, remedy or power, or abandonment or
discontinuance of steps to enforce the same, shall not operate as a waiver
thereof or affect NMAC's right thereafter to exercise the same, and any single
or partial exercise of any such right, remedy or power shall not preclude any
other or further exercise thereof or the exercise of any other right, remedy or
power. In the event NMAC shall institute proceedings to enforce any such right,
remedy or power and such proceedings shall be determined adversely to NMAC, then
Borrower and NMAC shall be restored to their former positions and the rights,
remedies and powers of NMAC shall continue as if no such proceedings had been
taken.
E. Modification, Waiver, Consent. Any modification or waiver of any
provision of this Agreement, or any consent to any departure by Borrower
therefrom, shall not be effective in any event unless the same is in writing and
signed by a branch manager or any officer of NMAC and then such modification,
waiver or consent shall be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Borrower in any event not
specifically required of NMAC hereunder shall not entitle Borrower to any other
or further notice or demand in the same, similar or other circumstances unless
specifically required hereunder.
F. Communications. Any notice, request, demand, consent, approval or
other communication provided or permitted under this Agreement shall be in
writing and be given by personal delivery or sent by United States first class
mail, postage prepaid, addressed to the party for whom it is intended at its
address specified in this Agreement; provided, however, that either party may
change its address for purposes of receipt of any such communication by giving
ten days' written notice of such change to the other party in the manner above
prescribed.
Communications shall be mailed to:
<PAGE>
Dealer at: NMAC at:
B & B FLORIDA ENTERPRISES, INC., NISSAN MOTOR ACCEPTANCE CORPORATION
dba Stuart Nissan 990 West 190th Street
Torrance, CA 9502-1019
Attention: Manager, Commercial Credit
BEFORE 1/1/96: 2755 S. Federal Highway
Stuart, Florida 34994
AFTER 1/1/96: 4313 S. Federal Highway
Stuart, Florida 34997
Attention: Mr. Thomas A. DeRita, Jr.
G. Approvals. By accepting or approving anything required to be
observed or performed by Borrower, or to be given to NMAC, pursuant to this
Agreement (including, but not limited to, any policy of insurance or any balance
sheet, statement of profit and loss or other financial statement, any Intangible
or any agreement), NMAC shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof and such acceptance or approval thereof
shall not be or constitute any warranty or representation with respect thereto
by NMAC.
H. Governing Law. This Agreement shall be deemed to have been made
under, and shall be governed in all respects by, the laws of the state in which
Borrower's place of business is located (as set forth in this Agreement),
including matters of construction, validity and performance.
I. Severability. If any provision of this Agreement is prohibited by,
or is unlawful or unenforceable under, any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such prohibition without invalidating the remaining provisions hereof; provided,
however, that any such prohibition in any jurisdiction shall not invalidate such
provision in any other jurisdiction; and provided, further, that where the
provisions of any such applicable law may be waived, they hereby are waived by
Borrower to the full extent permitted by law to the end that this Agreement
shall be deemed to be valid and binding in accordance with its terms.
J. Applicability, If Borrower a Proprietorship. If Borrower is a sole
proprietorship, the warranties and covenants set forth herein shall apply only
to matters connected with Borrower's business herein described.
K. Binding Effect. This Agreement shall be binding upon, and shall
inure to the benefit of, the heirs, executors, administrators, legal
representatives, successors and assigns of Borrower and NMAC.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date set forth
below.
Dated: 10-12, 1995
B & B FLORIDA ENTERPRISES, INC., NISSAN MOTOR ACCEPTANCE CORPORATION,
a Florida corporation, a California corporation
dba Stuart Nissan
By: /s/ Thomas DeRita, Jr. By: /S/ Mark Doi
- --------------------------- ------------------
Name: Thomas DeRita, Jr. Mark Doi
Title: President Corporate Manager, Commercial Credit
EXHIBIT 10.65
AMENDMENT TO DEALER CAPITAL
LOAN AND SECURITY AGREEMENT
This Amendment to Dealer Capital Loan and Security Agreement ("Amendment"),
effective as of the 1st day of September, 1997 (the "Effective Date"), by and
between NISSAN MOTOR ACCEPTANCE CORPORATION ("NMAC") and FIRST CHOICE STUART 1,
INC., a Florida corporation d/b/a Stuart Nissan ("Dealer").
W I T N E S S E T H:
WHEREAS, NMAC and B & B Florida Enterprises, Inc., a Florida corporation
("B & B") entered into that certain Nissan Motor Acceptance Corporation Dealer
Capital Loan and Security Agreement, dated October 12, 1995 (the "Loan
Agreement"), whereby NMAC agreed to advance to B & B the maximum sum of ONE
MILLION TWO HUNDRED THOUSAND AND NO/100 ($1,200,000.00) DOLLARS, upon
fulfillment of the terms and conditions thereof by B & B;
WHEREAS, the Loan Agreement was secured by, among other instruments, that
certain Guaranty Agreement dated October 12, 1995 (the "Original Guaranty")
executed by B&B, Thomas DeRita, Jr., William A. Chamberlain and Louis V.
Cianfrogna (individually and collectively the "Original Guarantors");
WHEREAS, by instrument entitled Agreement and Plan of Merger, August 29,
1997 (the "Merger Agreement"), B & B merged into the Dealer with the Dealer
being the surviving corporation (the "Merger"), such Merger Agreement to be
filed with the Florida Secretary of State;
WHEREAS, B & B and Dealer have requested that NMAC consent to the Merger
and to further release the Original Guarantors from the Original Guaranty and
substitute Smart Choice Automotive Group, Inc., a Florida corporation, Smart
Cars, Inc., a Florida corporation, and Smart Choice Automotive Group, Inc., a
Florida corporation (individually and collectively the "New Guarantors") for the
Original Guarantors; and
WHEREAS, NMAC has agreed not to declare a default under the terms of the
Loan Agreement by virtue of the Merger provided that the Dealer agrees to the
terms and conditions of this Amendment.
NOW THEREFORE, in consideration of the premises, Ten and No/100 ($10.00)
Dollars and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. The recitations set forth above are true and correct.
2. The terms and conditions of the Commitment Letter dated July 9, 1997, as
modified by letters dated July 30, 1997, August 8, 1997 and August 13, 1997 from
NMAC to the Dealer (the "Commitment Letter") are hereby incorporated into the
Loan Agreement in their entirety. The terms and conditions of the Commitment
Letter shall control over any conflict with the terms and conditions of this
Amendment and/or Loan Agreement. The Dealer agrees and understands that,
notwithstanding NMAC's execution of this Amendment and the delivery thereof to
the Dealer, all of the terms and conditions of the Commitment Letter (including
but not limited to the execution by the New Guarantors and the delivery of their
Guaranty Agreement to NMAC and the fulfillment of all of the "Conditions to
Commitment" set forth in SCHEDULE B to the Commitment Letter), must be fulfilled
within the time period(s) set forth within the Commitment Letter prior to this
Amendment becoming enforceable against NMAC.
3. The principal outstanding balance (exclusive of interest) owed to NMAC
under the Loan Agreement is EIGHT HUNDRED THOUSAND AND NO/100 ($800,000.00)
DOLLARS, less any principal payments (if any) made subsequent to July 8, 1997.
4. The second sentence of Article I of the Loan Agreement is hereby deleted
in its entirety and the following is substituted therefore:
"From the Effective Date of this Dealer Capital Loan and
Security Agreement through the ninetieth (90th) day thereafter
(the "Interest Only Period") accrued interest together with
all other fees, costs and charges shall be paid monthly under
this Agreement. Commencing with the first month following the
expiration of the Interest Only Period and continuing each
month thereafter, successive monthly installments of TWENTY
THOUSAND AND NO/100 ($20,000.00) DOLLARS each together with
all accrued and unpaid interest and all other fees, costs and
charges shall be paid under this Agreement, followed by one
final installment on December 31, 1997 equal to the then
unpaid Principal, all accrued and unpaid interest and all
other fees, costs and charges due and owing under this Loan.
Interest shall be calculated on a daily basis, computed on the
actual number of days elapsed over a year of 365 or 366 days,
commencing on the date the Principal is funded.
Should Smart Choice Automotive Group, Inc., a Florida
corporation (and/or its successors or assigns), sell stock
pursuant to an underwritten public offering prior to December
31, 1997, the unpaid Principal together with all accrued and
unpaid interest and all other fees, costs and charges due and
owing under the Loan Agreement shall immediately be
accelerated and be due and payable in full."
5. Article III of the Loan Agreement is hereby modified by deleting
subparagraph (b) thereof and substituting the following in its place:
"So long as any portion of the Loan is outstanding, each of
the person(s) named below ("Dealer Principals"), respectively,
shall participate in the active management and operation of
the Dealer as follows:
NAME POSITION
----- --------
Gary Smith Dealer Principal
Should Thomas DeRita, Jr. no longer have the position of
Executive Manger of the Dealer, this position will be filled
by a person acceptable to NMAC, which such approval will not
be unreasonably withheld or delayed."
6. Article I (B) of Schedule A to the Loan Agreement is hereby deleted in
its entirety and the following is substituted therefore:
The "NMAC Prime Rate" shall mean the per annum interest rate
from time to time announced by a majority of the following
banks: Bankers Trust Company, The Chase Manhattan Bank,
Citibank N.A., Bank of America, N.T. & S.A. and Morgan
Guaranty Trust Company of New York, as their respective prime
or reference rate; provided that if fewer than three of such
banks have the same rate in effect, the median of the five
rates shall be the NMAC Prime Rate. For purposes of computing
interest hereunder, the NMAC Prime Rate in effect on the last
day of the month shall be deemed to be such rate in effect
through the succeeding month."
7. Article III, Section A of Schedule A to the Loan Agreement is hereby
modified by adding the following:
"7. Tangible Net Worth, Working Capital and Net Cash
Requirements. The Borrower shall at all times during the term
of this Loan maintain Tangible Net Worth, Working Capital and
Net Cash Requirements as established from time to time by
NMAC. Effective July 1, 1997, the Capitalization Guidelines
are as follows:
Required Minimum Amount
Tangible Net Worth $880,000.00
Working Capital $560,000.00
Net Cash $140,000.00
The Capitalization Guidelines are only minimum guidelines and
may change in the sole and absolute discretion of NMAC and/or
NMC upon notice to the Borrower."
8. Article IV of Schedule A to the Loan Agreement is hereby modified by
adding the following:
"7. Other Events of Default. In addition to the other Events
of Default set forth above, the following shall also
constitute and Event of Default:
(a) The occurrence of any default under or termination of
the Dealer Sales and Service Agreement between the
Borrower and Nissan Motor Corporation in U.S.A.
("NMC");
(b) Termination of or default under that certain Lease
Agreement dated July 11, 1997 with TAD Partnership
regarding the property situated at 4313 South Federal
Highway, Stuart, Florida 34997;
(c) Failure to allow NMAC to audit the financial records of
the Borrower or any Guarantor;
(d) Failure of the Borrower to maintain Net Worth, Net Cash
and Working Capital Requirements established from time
to time by NMAC and/or NMC;
(e) The occurrence of an event of default under the terms
and conditions of any other loan or loans currently in
existence or to be consummated at a future date between
NMAC and the Borrower or any Guarantor or any of their
affiliates;
(f) Termination, for any reason, of Borrower's wholesale
inventory financing for new vehicles provided by NMAC;
or
(g) Borrower and/or any Guarantor shall fail to furnish
periodic financial statements, income and expense
statements and balance sheets as may be required from
time to time by NMAC, all of such statements to set
forth in reasonable detail the financial condition of
the respective party and in form satisfactory to NMAC.
Should Borrower not timely make any regularly scheduled
payment of principal or interest due and payable under this
Loan, the Borrower shall have fifteen (15) days following
written notice of the default to cure the default. NMAC shall
be entitled to a four (4%) percent late charge whenever any
payment required under this Loan Agreement is not paid when
due."
9. Article V(F) of Schedule A to the Loan Agreement is hereby modified by
providing that all notices to the Dealer shall be sent to the following:
5200 South Washington Avenue
Titusville, Florida 32780
Attention:
10. Dealer hereby covenants to continue to abide by all of the terms and
conditions of the Loan Agreement in the same manner as if the Dealer had
originally executed the Loan Agreement. NMAC's waiver of any term, provision,
condition, covenant or agreement of the Loan Agreement prior to the Effective
Date hereof shall not be construed in any manner, to NMAC's consent to such
waiver on or after the Effective Date. No waiver of any term, provision,
condition, covenant or agreement herein contained or contained in the Loan
Agreement shall be effective unless set forth in writing signed by NMAC and any
such waiver shall be effective only to the extent set forth in such writing.
11. NMAC hereby waives its right to declare an event of default under the
terms of the Loan Agreement which would otherwise arise due to the transfer of
the ownership of B&B and the merger thereof into Dealer; however, the
foregoing shall not amend or modify the Loan Agreement or be deemed a waiver of
any rights of NMAC thereunder as to any further sale, transfer or conveyance of
any interest in the Dealer and/or the merger thereof into another entity.
12. Dealer agrees to pay any and all documentary stamps which are assessed
by the State of Florida on account of the execution and/or delivery of this
Amendment. Dealer shall pay such sums immediately upon receipt of notice of such
amounts from NMAC. If the Dealer fails to pay such sums to NMAC, NMAC may (and
without waiving such Event of Default), at its option, pay such taxes and any
such payment made by NMAC shall be added to the indebtedness hereof and shall
bear interest from the date advanced at the rate of the lesser of eighteen (18%)
percent per annum or the maximum rate permissible under Florida law.
13. The Dealer hereby represents, ratifies and affirms to NMAC that NMAC
has acted in good faith and has fulfilled and fully performed its obligations
under the Loan Agreement and all of its obligations with respect to the
administration and disbursement of the loan proceeds.
14. Except as specifically provided in this Amendment, no part of the Loan
Agreement or any other instrument securing the Loan Agreement is in any way
altered, amended or changed.
15. The parties hereto intend that this Amendment will not disturb the
existing lien priority of NMAC and that this Amendment will retain the same lien
and priority as the Loan Agreement which this Amendment modifies.
16. This Amendment shall be governed by and construed and the rights and
obligations of the parties under this Amendment shall be determined in
accordance with the laws of the State of Florida.
17. This Amendment and the Loan Agreement shall be binding upon and shall
enure to the benefit of the parties hereto and their respective personnel,
representatives, heirs, successors and assigns.
18. Each party to this Amendment acknowledges that it has reviewed this
Amendment and hereby declares that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Amendment. In the event that any terms or
provisions of this Amendment are held invalid or unenforceable, the remaining
terms and conditions of this Amendment shall continue to be fully enforceable
without change, and this Amendment shall be interpreted as if the unenforceable
provision had not been a part hereof.
19. NMAC AND DEALER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY AND ALL RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION (INCLUDING, BUT NOT LIMITED TO, ANY CLAIMS, CROSS-CLAIMS OR A
THIRD-PARTY CLAIMS) ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT,
THE LOAN AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH OR THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER WRITTEN OR VERBAL) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR NMAC TO ENTER INTO THIS AMENDMENT. THE
DEALER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF NMAC NOR NMAC'S
COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT NMAC WOULD NOT, IN THE
EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION."
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Signed, sealed and delivered in NISSAN MOTOR ACCEPTANCE CORPORATION the presence
of:
/s/ Christine Daba By: /s/ Mark Doi
Witness Print Name: Mark Doi
Print Name: Christine Daba Title: Commercial Credit Manager
/s/ Todd Ryan
Witness
Print Name: Todd Ryan
FIRST CHOICE STUART 1, INC.,
a Florida corporation d/b/a Stuart Nissan
/s/ Phyllis A. George By: /s/ Gary R. Smith
Witness Print Name: Gary R. Smith
Print Name: Phyllis A. George Title: President
/s/ Lori J. Arp
Witness
Print Name: Lori J. Arp
EXHIBIT 10.66
DEALER EQUIPMENT LOAN AND SECURITY AGREEMENT
THIS EQUIPMENT LOAN AND SECURITY AGREEMENT ("AGREEMENT") IS EXECUTED BY AND
BETWEEN B & B FLORIDA ENTERPRISES, INC., A FLORIDA CORPORATION, DBA STUART
NISSAN ("BORROWER"), AND NISSAN MOTOR ACCEPTANCE CORPORATION, A CALIFORNIA
CORPORATION ("NMAC"). IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS
HEREIN CONTAINED, THE PARTIES HERETO COVENANT AND AGREE AS FOLLOWS:
1. LOAN. SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT, NMAC
AGREES TO MAKE ADVANCES (AS DEFINED BELOW) TO BORROWER (COLLECTIVELY, THE
"LOAN") IN AGGREGATE PRINCIPAL AMOUNT NOT IN EXCESS OF $250,000.00. THE PROCEEDS
OF THE LOAN MADE HEREUNDER SHALL BE USED SOLELY FOR THE PURCHASE OF EQUIPMENT,
MACHINERY AND FURNITURE TO BE USED IN THE OPERATION OF BORROWER'S BUSINESS, AT
THAT CERTAIN DEALERSHIP COMMONLY KNOWN AS STUART NISSAN.
1.1 ADVANCES. AT ANY TIME AND FROM TIME TO TIME FROM NOVEMBER 1, 1995
THROUGH JANUARY 31, 1996 (THE "DRAW PERIOD"), BORROWER MAY SUBMIT WRITTEN
REQUESTS TO LENDER FOR DISBURSEMENT OF PROCEEDS OF THE LOAN (EACH SUCH
DISBURSEMENT AN "ADVANCE"). EACH REQUEST FOR AN ADVANCE SHALL SPECIFY THE AMOUNT
OF THE REQUESTED ADVANCE (WHICH, WHEN ADDED TO THE OUTSTANDING PRINCIPAL BALANCE
OF THE LOAN AS OF THE DATE OF THE REQUESTED ADVANCE, SHALL NOT CAUSE THE
AGGREGATE PRINCIPAL BALANCE OF THE LOAN TO EXCEED $250,000), SHALL INCLUDE
INSTRUCTIONS FOR WIRING OR OTHERWISE DISBURSING THE ADVANCE, AND SHALL BE
ACCOMPANIED BY (A) A BILL OF SALE FOR EACH ITEM OF EQUIPMENT, MACHINERY AND
FURNITURE PURCHASED BY BORROWER FOR WHICH BORROWER IS REQUESTING THE ADVANCE AS
REIMBURSEMENT, (B) A SIGNED UCC AMENDMENT SATISFACTORY TO LENDER DESCRIBING IN
DETAIL (INCLUDING SERIAL NUMBERS) ALL SUCH EQUIPMENT, MACHINERY AND FURNITURE AS
ADDITIONAL COLLATERAL (AS DEFINED BELOW), (C) A SIGNED AMENDMENT OF OR ADDITION
TO SCHEDULE A ATTACHED HERETO DESCRIBING IN DETAIL (INCLUDING SERIAL NUMBERS)
ALL NEW COLLATERAL, AND (D) SUCH OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS AS
LENDER MAY REASONABLY REQUEST. ONCE ADVANCED, LOAN PROCEEDS CANNOT BE REPAID AND
REBORROWED.
2. PAYMENTS OF INTEREST AND PRINCIPAL. FOR VALUE RECEIVED, BORROWER AGREES TO
PAY TO THE ORDER OF NMAC THE TOTAL PRINCIPAL AMOUNT OF $250,000 OR SUCH LESSER
SUM AS IS OUTSTANDING HEREUNDER, PLUS INTEREST THEREON AT THE INTEREST RATE
DEFINED BELOW.
2.1 INTEREST. THE LOAN SHALL BEAR INTEREST AT A VARIABLE RATE (THE
"INTEREST RATE") THAT IS ONE AND THREE-QUARTERS PERCENT (1.75%) PER ANNUM ABOVE
THE PER ANNUM INTEREST RATE FROM TIME TO TIME ANNOUNCED BY A MAJORITY OF THE
FOLLOWING NEW YORK CITY BANKS: THE CHASE MANHATTAN BANK, N.A.; CHEMICAL BANK;
CITIBANK, N.A.; BANKERS TRUST COMPANY; AND MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, AS THEIR RESPECTIVE PRIME RATES (THE "NMAC PRIME RATE"); PROVIDED THAT IF
FEWER THAN THREE OF SUCH BANKS HAVE THE SAME RATE IN EFFECT, THE MEDIAN OF THE
FIVE RATES SHALL BE THE NMAC PRIME RATE. FOR THE PURPOSES OF COMPUTING THE
INTEREST RATE, THE NMAC PRIME RATE IN EFFECT ON THE LAST DAY OF A MONTH SHALL BE
DEEMED TO BE SUCH RATE IN EFFECT THROUGHOUT THE SUCCEEDING MONTH. IN NO EVENT
SHALL THE INTEREST PROVIDED FOR HEREIN EXCEED THE MAXIMUM PERMITTED BY LAW,
WHICH THE PARTIES RECOGNIZE MAY CHANGE FROM TIME TO TIME. THE INTEREST RATE ON
THE DATE OF EXECUTION OF THIS AGREEMENT IS 10.50% PER ANNUM.
2.2 PAYMENTS OF INTEREST AND PRINCIPAL. DURING THE DRAW PERIOD, PAYMENTS OF
ACCRUED INTEREST ONLY SHALL BE MADE AS BILLED, BASED UPON THE OUTSTANDING
PRINCIPAL BALANCE OF THE LOAN AS OF THE LAST DAY OF EACH CALENDAR MONTH. EACH
SUCH INTEREST PAYMENT SHALL BE DUE ON THE FIFTEENTH DAY OF EACH CALENDAR MONTH,
COMMENCING DECEMBER 15, 1995. THE PRINCIPAL AMOUNT OF THE LOAN BALANCE
OUTSTANDING AS OF THE END OF THE DRAW PERIOD SHALL BE PAYABLE IN 59 EQUAL,
SUCCESSIVE MONTHLY INSTALLMENTS OF PRINCIPAL (CALCULATED ON THE BASIS OF A
60-MONTH AMORTIZATION PERIOD), PLUS ACCRUED INTEREST (COLLECTIVELY, THE "MONTHLY
INSTALLMENTS"), PLUS ONE FINAL PAYMENT OF THE OUTSTANDING BALANCE OF ALL
PRINCIPAL AND ACCRUED INTEREST, PLUS ANY COSTS, FEES AND CHARGES THEN DUE AND
UNPAID (THE "FINAL PAYMENT"). MONTHLY INSTALLMENTS SHALL BE DUE AND PAYABLE AS
BILLED ON THE FIFTEENTH OF EACH MONTH, BEGINNING ON FEBRUARY 15, 1996. THE FINAL
PAYMENT SHALL BE DUE AND PAYABLE AS BILLED ON JANUARY 15, 2001.
3. GRANT OF SECURITY INTEREST. AS SECURITY FOR THE PROMPT PAYMENT OF THE LOAN
AND ANY EXTENSIONS, RENEWALS OR AMENDMENTS THEREOF, AND THE PAYMENT AND
PERFORMANCE OF ALL OTHER OBLIGATIONS OF BORROWER TO NMAC UNDER THIS AGREEMENT,
INCLUDING OBLIGATIONS OF PERFORMANCE AS WELL AS OBLIGATIONS OF PAYMENT, BORROWER
HEREBY ASSIGNS AND PLEDGES TO NMAC, AND GRANTS TO NMAC A SECURITY INTEREST IN
THE PROPERTY DESCRIBED IN SCHEDULE A ATTACHED HERETO, AND IN ANY AMENDMENTS OR
ADDITIONS TO SUCH SCHEDULE A, TOGETHER WITH ALL PRESENT AND FUTURE ATTACHMENTS
AND ACCESSORIES TO SUCH PROPERTY AND REPLACEMENTS AND PROCEEDS THEREOF,
INCLUDING AMOUNTS PAYABLE UNDER ANY INSURANCE POLICIES PERTAINING TO SUCH
PROPERTY (ALL OF WHICH ARE HEREAFTER REFERRED TO COLLECTIVELY AS THE
"COLLATERAL").
4. REPRESENTATIONS AND WARRANTIES. BORROWER HEREBY REPRESENTS AND WARRANTS THAT:
4.1 THE COLLATERAL DOES NOT COMPRISE A PART OF BORROWER'S INVENTORY AND IT
WILL ONLY BE USED BY BORROWER IN BORROWER'S BUSINESS AND WILL NOT BE HELD FOR
SALE OR LEASE, OR REMOVED FROM THE PREMISES WHERE PRESENTLY LOCATED, OR
OTHERWISE DISPOSED OF BY BORROWER WITHOUT NMAC'S PRIOR WRITTEN CONSENT.
4.2 THE LIEN AND SECURITY INTEREST GRANTED TO NMAC IN THE COLLATERAL
CONSTITUTES AND SHALL AT ALL TIMES CONSTITUTE A FIRST LIEN THEREON; BORROWER IS
THE ABSOLUTE OWNER OF THE COLLATERAL WITH FULL RIGHT TO PLEDGE, SELL, TRANSFER
AND CREATE A SECURITY INTEREST IN THE SAME, FREE AND CLEAR OF ANY AND ALL
CLAIMS, ENCUMBRANCES AND ADVERSE INTERESTS; AND BORROWER WILL FOREVER WARRANT
AND, AT NMAC'S REQUEST, DEFEND THE SAME FROM ALL CLAIMS AND DEMANDS OF ALL OTHER
PERSONS
4.3 BORROWER HAS FULL AUTHORITY TO ENTER INTO THIS AGREEMENT AND IN SO
DOING IS NOT VIOLATING ANY LAW OR REGULATION, OR AGREEMENT WITH THIRD PARTIES,
AND BORROWER HAS TAKEN ALL SUCH ACTION AS MAY BE NECESSARY OR APPROPRIATE TO
MAKE THIS AGREEMENT BINDING UPON IT; AND
4.4 ALL INFORMATION HERETOFORE, HEREIN OR HEREAFTER SUPPLIED TO NMAC BY OR
ON BEHALF OF BORROWER WITH RESPECT TO THE COLLATERAL IS TRUE AND CORRECT.
5. COVENANTS BY BORROWER.
5.1 BORROWER AGREES: (A) TO MAINTAIN THE COLLATERAL IN GOOD CONDITION AND
REPAIR AND TO TAKE ALL OTHER ACTION THAT MAY BE NECESSARY TO MAINTAIN, PRESERVE
AND PROTECT THE COLLATERAL, (B) NOT TO SELL, LEASE OR OTHERWISE TRANSFER OR
DISPOSE OF ALL OR ANY PART OF THE COLLATERAL OR ANY INTEREST THEREIN WITHOUT THE
PRIOR WRITTEN CONSENT OF NMAC; (C) NOT TO CREATE, INCUR OR PERMIT TO EXIST ANY
SECURITY INTEREST, LIEN OR OTHER ENCUMBRANCE UPON ALL OR ANY PART OF THE
COLLATERAL, OR ANY INTEREST THEREIN, EXCEPT IN FAVOR OF NMAC; (D) WITHOUT THE
PRIOR WRITTEN CONSENT OF NMAC, REMOVE ALL OR ANY PART OF THE COLLATERAL FROM THE
PREMISES WHERE PRESENTLY LOCATED.
5.2 BORROWER AGREES TO COMPLY WITH ALL LAWS AND REGULATIONS APPLICABLE TO
THE COLLATERAL OR ANY PART THEREOF OR TO THE OPERATION OF BORROWER'S BUSINESS.
5.3 BORROWER AGREES TO MAINTAIN INSURANCE, WITH SUCH INSURANCE COMPANIES,
IN SUCH AMOUNTS AND COVERING SUCH RISKS AS ARE AT ALL TIMES SATISFACTORY TO
NMAC. ALL POLICIES COVERING THE COLLATERAL ARE TO BE MADE PAYABLE TO NMAC, IN
CASE OF LOSS, UNDER A STANDARD NON-CONTRIBUTORY "LENDER'S" OR "SECURED PARTY"
CLAUSE.
5.4 AS SOON AS PRACTICABLE, AND IN ANY EVENT WITHIN TEN (10) DAYS, BORROWER
SHALL NOTIFY NMAC OF: (A) ANY ATTACHMENT OR OTHER LEGAL PROCESS LEVIED AGAINST
ANY OF THE COLLATERAL; (B) ANY SUBSTANTIAL CHANGE IN THE COLLATERAL OR OF THE
OCCURRENCE OF ANY EVENT WHICH MAY IN ANY MANNER MATERIALLY AND ADVERSELY AFFECT
THE VALUE OF THE COLLATERAL OR THE RIGHTS AND REMEDIES OF NMAC WITH RESPECT
THERETO; AND (C) THE REMOVAL OF ANY OF THE COLLATERAL TO A NEW LOCATION OTHER
THAN THE DEALERSHIP ADDRESS. ANY NOTICE DELIVERED PURSUANT TO THIS SECTION 5.4
SHALL SET FORTH THE NATURE OF SUCH EVENT AND THE ACTION WHICH BORROWER PROPOSES
TO TAKE WITH RESPECT THERETO.
5.5 IN THE EVENT THAT BORROWER FAILS TO PERFORM ANY OBLIGATION SET FORTH
HEREIN, NMAC MAY, BUT SHALL NOT BE OBLIGATED TO, PERFORM THE SAME, AND THE COST
THEREOF SHALL BE PAYABLE BY BORROWER TO NMAC ON DEMAND AND SHALL BEAR INTEREST
AT THE INTEREST RATE.
6. EVENTS OF DEFAULT. THE OCCURRENCE OF ANY OF THE FOLLOWING SHALL CONSTITUTE AN
"EVENT OF DEFAULT" HEREUNDER:
6.1 BORROWER FAILS TO MAKE ANY PAYMENT WHEN DUE, OR FAILS TO PERFORM ANY
OBLIGATION, UNDER THIS AGREEMENT OR UNDER ANY OTHER INDEBTEDNESS TO NMAC, AND
SUCH FAILURE REMAINS UNCURED FOR TEN (10) BUSINESS DAYS OR MORE AFTER WRITTEN
NOTICE THAT SUCH PAYMENT WAS NOT MADE OR SUCH OBLIGATION WAS NOT PERFORMED; OR
6.2 ANY REPRESENTATION OR WARRANTY CONTAINED IN THIS AGREEMENT PROVES TO
HAVE BEEN INCORRECT IN ANY MATERIAL RESPECT WHEN MADE; OR
6.3 BORROWER OR ANY GUARANTOR IS DISSOLVED, LIQUIDATED OR TERMINATED, OR
ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF BORROWER OR ANY GUARANTOR ARE SOLD OR
OTHERWISE TRANSFERRED WITHOUT NMAC'S PRIOR WRITTEN CONSENT; OR
6.4 BORROWER OR ANY GUARANTOR IS THE SUBJECT OF AN ORDER FOR RELIEF BY A
BANKRUPTCY COURT, OR IS UNABLE OR ADMITS ITS INABILITY TO PAY ITS DEBTS AS THEY
MATURE, OR MAKES AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS; OR BORROWER OR ANY
GUARANTOR APPLIES FOR OR CONSENTS TO THE APPOINTMENT OF ANY RECEIVER, TRUSTEE,
CUSTODIAN, CONSERVATOR, LIQUIDATOR, REHABILITATOR OR SIMILAR OFFICER FOR IT OR
ANY PART OF ITS PROPERTY; OR ANY RECEIVER, TRUSTEE, CUSTODIAN, CONSERVATOR,
LIQUIDATOR, REHABILITATOR OR SIMILAR OFFICER IS APPOINTED WITHOUT THE
APPLICATION OR CONSENT OF BORROWER OR ANY GUARANTOR, AS THE CASE MAY BE, AND THE
APPOINTMENT CONTINUES UNDISCHARGED AND UNSTAYED FOR 60 OR MORE DAYS.
7. ACCELERATION AND OTHER REMEDIES. UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT,
NMAC MAY, AT ITS OPTION AND IN ITS ABSOLUTE DISCRETION, WITH OR WITHOUT FURTHER
NOTICE TO BORROWER, DO ANY OR ALL OF THE FOLLOWING:
7.1 BY WRITTEN NOTICE TO BORROWER, DECLARE THE PRINCIPAL OF THE NOTE AND
ALL OTHER AMOUNTS OWING UNDER THIS AGREEMENT, TOGETHER WITH ALL ACCRUED INTEREST
AND OTHER AMOUNTS OWING IN CONNECTION THEREWITH, TO BE IMMEDIATELY DUE AND
PAYABLE, REGARDLESS OF ANY OTHER SPECIFIED DUE DATE;
7.2 TERMINATE ALL COMMITMENTS TO MAKE LOANS OR OTHERWISE EXTEND OR CONTINUE
CREDIT TO BORROWER;
7.3 FORECLOSE OR OTHERWISE ENFORCE THE SECURITY INTERESTS CREATED UNDER
THIS AGREEMENT IN ANY MANNER PERMITTED BY LAW;
7.4 SELL, ASSIGN, LEASE, OR OTHERWISE DISPOSE OF ALL OR ANY PART OF THE
COLLATERAL AT ONE OR MORE PUBLIC OR PRIVATE SALES, IN LOTS OR IN BULK, FOR CASH,
ON CREDIT OR OTHERWISE, WITH OR WITHOUT REPRESENTATIONS OR WARRANTIES, AND UPON
SUCH TERMS AND IN SUCH MANNER AS NMAC SHALL DETERMINE IN THE EXERCISE OF ITS
SOLE AND ABSOLUTE DISCRETION;
7.5 ENTER ANY PREMISES WHERE ANY COLLATERAL MAY BE LOCATED FOR THE PURPOSE
OF SECURING, PROTECTING, INVENTORYING, APPRAISING, INSPECTING, REPAIRING,
PRESERVING, STORING OR TAKING POSSESSION OF SUCH COLLATERAL;
7.6 TAKE POSSESSION OF ANY OR ALL COLLATERAL AND TO REMOVE FROM ANY
PREMISES WHERE ANY COLLATERAL MAY BE LOCATED THE COLLATERAL AND ANY AND ALL
DOCUMENTS, INSTRUMENTS, FILES AND RECORDS RELATING TO THE COLLATERAL;
7.7 REQUIRE BORROWER TO ASSEMBLE THE COLLATERAL AND MAKE IT AVAILABLE TO
NMAC AT SUCH PLACES AS NMAC MAY DESIGNATE;
7.8 EXERCISE ANY AND ALL OTHER RIGHTS AND REMEDIES THAT NMAC MAY HAVE IN
ANY JURISDICTION WHERE ENFORCEMENT OF THIS AGREEMENT IS SOUGHT, INCLUDING,
WITHOUT LIMITATION, ALL RIGHTS AND REMEDIES OF A SECURED PARTY UNDER ANY
APPLICABLE UNIFORM COMMERCIAL CODE.
BORROWER EXPRESSLY WAIVES ANY RIGHT TO DIRECT THE ORDER AND MANNER OF SALE OF
ANY COLLATERAL. NMAC OR ANY PERSON ON NMAC'S BEHALF MAY BID AND PURCHASE AT ANY
SUCH SALE OR OTHER DISPOSITION. BORROWER AND ANY OTHER PERSON THEN OBLIGATED
THEREFOR SHALL PAY TO NMAC ON DEMAND ANY DEFICIENCY WITH REGARD THERETO WHICH
MAY REMAIN AFTER SUCH SALE, DISPOSITION, COLLECTION OR LIQUIDATION OF THE
COLLATERAL. NMAC WILL SEND OR OTHERWISE MAKE AVAILABLE TO BORROWER REASONABLE
NOTICE OF THE TIME AND PLACE OF ANY PUBLIC SALE THEREOF OR OF THE TIME ON OR
AFTER WHICH ANY PRIVATE SALE THEREOF IS TO BE MADE. THE REQUIREMENT OF SENDING
REASONABLE NOTICE CONCLUSIVELY SHALL BE MET IF SUCH NOTICE IS MAILED, FIRST
CLASS MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH IN THIS
AGREEMENT, OR DELIVERED OR OTHERWISE SENT TO BORROWER, AT LEAST FIVE (5)
BUSINESS DAYS BEFORE THE DATE OF THE SALE. BORROWER EXPRESSLY WAIVES ANY RIGHT
TO RECEIVE NOTICE OF ANY PUBLIC OR PRIVATE SALE OF ANY COLLATERAL OR OTHER
SECURITY EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS PARAGRAPH.
UPON CONSUMMATION OF ANY SALE OF COLLATERAL HEREUNDER, NMAC SHALL HAVE THE RIGHT
TO ASSIGN, TRANSFER AND DELIVER TO THE PURCHASER OR PURCHASERS THEREOF THE
COLLATERAL SO SOLD. EACH SUCH PURCHASER AT ANY SUCH SALE SHALL HOLD THE
COLLATERAL SO SOLD ABSOLUTELY FREE FROM ANY CLAIM OR RIGHT UPON THE PART OF
BORROWER OR ANY OTHER PERSON, AND BORROWER HEREBY WAIVES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) ALL RIGHTS OF REDEMPTION, STAY AND APPRAISAL WHICH
IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR
STATUTE NOW EXISTING OR HEREAFTER ENACTED.
8. APPLICATION OF PROCEEDS. THE NET CASH PROCEEDS RESULTING FROM ANY COLLECTION,
LIQUIDATION, SALE OR OTHER DISPOSITION OF THE COLLATERAL BY NMAC SHALL BE
APPLIED FIRST TO THE EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) OF
RETAKING, HOLDING, STORING, PROCESSING, PREPARING FOR SALE, SELLING, COLLECTING,
LIQUIDATING AND THE LIKE, AND THEN TO PRINCIPAL AND INTEREST ON THE LOAN, WITH
ANY SURPLUS PROCEEDS SUBJECT TO APPLICATION AS NMAC MAY IN ITS SOLE DISCRETION
DETERMINE.
9. CUMULATIVE REMEDIES/NO WAIVER. NMAC'S RIGHTS AND REMEDIES UNDER THIS
AGREEMENT ARE CUMULATIVE AND IN ADDITION TO ALL RIGHTS AND REMEDIES PROVIDED BY
LAW FROM TIME TO TIME. NMAC SHALL HAVE THE RIGHT TO ENFORCE ONE OR MORE OF ITS
REMEDIES SUCCESSIVELY OR CONCURRENTLY. NMAC'S CONSENT TO OR APPROVAL OF ANY ACT
BY BORROWER REQUIRING FURTHER CONSENT OR APPROVAL SHALL NOT BE DEEMED TO WAIVE
OR RENDER UNNECESSARY NMAC'S CONSENT TO OR APPROVAL OF ANY SUBSEQUENT ACT.
10. COSTS AND EXPENSES. BORROWER SHALL REIMBURSE NMAC ON DEMAND FOR ALL COSTS
AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) INCURRED BY NMAC IN
CONNECTION WITH THE NEGOTIATION, PREPARATION, ADMINISTRATION AND ENFORCEMENT OF
THIS AGREEMENT, REGARDLESS OF WHETHER ANY SUIT IS FILED, INCLUDING, WITHOUT
LIMITATION, ALL COSTS AND EXPENSES INCURRED IN CHECKING, RETAKING, HOLDING,
HANDLING, PREPARING FOR SALE AND SELLING OR OTHERWISE DISPOSING OF ALL OR ANY
PART OF THE COLLATERAL. SUCH REIMBURSEMENT OBLIGATIONS SHALL BEAR INTEREST AT
THE INTEREST RATE.
11. MISCELLANEOUS WAIVERS. THE OBLIGATIONS OF BORROWER ARE JOINT AND SEVERAL.
PRESENTMENT, PROTEST, NOTICE OF PROTEST, NOTICE OF DISHONOR AND NOTICE OF
NONPAYMENT ARE WAIVED WITH RESPECT TO ANY PROCEEDS TO WHICH NMAC IS ENTITLED
HEREUNDER.
12. SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BIND AND SHALL INURE TO THE
BENEFIT OF NMAC, BORROWER, AND THEIR RESPECTIVE HEIRS, EXECUTORS,
ADMINISTRATORS, SUCCESSORS AND ASSIGNS.
13. NOTICES. ALL NOTICES, DEMANDS, APPROVALS AND OTHER COMMUNICATIONS PROVIDED
FOR HEREIN SHALL BE IN WRITING AND SHALL BE PERSONALLY DELIVERED OR MAILED BY
UNITED STATES MAIL, AS CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, TO THE APPROPRIATE PARTY AT THE ADDRESS FOR SUCH PARTY SET
FORTH IN THE FIRST PARAGRAPH OF THIS AGREEMENT. ADDRESSES FOR NOTICE MAY BE
CHANGED FROM TIME TO TIME BY WRITTEN NOTICE TO ALL OTHER PARTIES GIVEN IN
ACCORDANCE HEREWITH. ALL COMMUNICATIONS SHALL BE EFFECTIVE WHEN ACTUALLY
RECEIVED; PROVIDED, HOWEVER, THAT NONRECEIPT OF ANY COMMUNICATION AS A RESULT OF
A CHANGE OF ADDRESS AS TO WHICH THE SENDING PARTY WAS NOTIFIED OR AS A RESULT OF
A REFUSAL TO ACCEPT DELIVERY, SHALL BE DEEMED RECEIPT OF SUCH COMMUNICATION.
14. MISCELLANEOUS. TIME IS OF THE ESSENCE. BORROWER'S REIMBURSEMENT OBLIGATIONS
UNDER THIS AGREEMENT, ALTHOUGH PART OF THE PRINCIPAL BALANCE DUE HEREUNDER AND
UNDER THE NOTE, SHALL NOT BE GOVERNED BY ANY PRINCIPAL REPAYMENT PROVISIONS SET
FORTH HEREIN BUT SHALL INSTEAD BE DUE AND PAYABLE ON DEMAND. THIS AGREEMENT,
TOGETHER WITH ANY AND ALL OTHER DOCUMENTS REFERRED TO HEREIN, CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN NMAC AND BORROWER PERTAINING TO THE SUBJECT MATTER
CONTAINED HEREIN. THIS AGREEMENT MAY NOT BE AMENDED, CHANGED, MODIFIED, ALTERED
OR TERMINATED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY NMAC AND BORROWER.
NEITHER NMAC NOR BORROWER MAY WAIVE ANY RIGHT HEREUNDER EXCEPT BY A SIGNED
WRITTEN INSTRUMENT. IN THE EVENT ANY PROVISION OF THIS AGREEMENT IS HELD INVALID
OR UNENFORCEABLE BY ANY COURT OF COMPETENT JURISDICTION, SUCH HOLDING SHALL NOT
INVALIDATE OR RENDER UNENFORCEABLE ANY OTHER PROVISION HEREOF. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE
WHERE THE BORROWER IS LOCATED. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED TO BE AN ORIGINAL, AND ALL OF WHICH
SHALL CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.
IN WITNESS WHEREOF, BORROWER AND NMAC HAVE CAUSED THIS AGREEMENT TO BE DULY
EXECUTED AS THIS 12TH DAY OF OCTOBER, 1995.
"BORROWER":
B & B FLORIDA ENTERPRISES, INC.,
A FLORIDA CORPORATION, DBA STUART NISSAN
BY: /S/ THOMAS DERITA, JR.
- ---------------------------
THOMAS DERITA, JR., PRESIDENT
ADDRESS:
BEFORE 1/1/96: AFTER 1/1/96:
2755 S. FEDERAL HIGHWAY 4313 S. FEDERAL HIGHWAY
STUART, FLORIDA 34994 STUART, FLORIDA 34997
"NMAC":
NISSAN MOTOR ACCEPTANCE CORPORATION,
A CALIFORNIA CORPORATION
BY: /S/ JOHN A. FRENCH
- -----------------------
JOHN A. FRENCH, VICE PRESIDENT
(PRINTED NAME AND TITLE)
ADDRESS:
990 WEST 190TH STREET
TORRANCE, CALIFORNIA 90502
AMENDMENT TO DEALER EQUIPMENT
LOAN AND SECURITY AGREEMENT
This Amendment to Dealer Equipment Loan and Security Agreement
("Amendment"), effective as of the 1st day of September, 1997 (the "Effective
Date"), by and between NISSAN MOTOR ACCEPTANCE CORPORATION ("NMAC") and FIRST
CHOICE STUART 1, INC., a Florida corporation d/b/a Stuart Nissan ("Dealer").
W I T N E S S E T H:
WHEREAS, NMAC and B & B Florida Enterprises, Inc., a Florida corporation
("B & B") entered into that certain Nissan Motor Acceptance Corporation Dealer
Equipment Loan and Security Agreement, dated October 12, 1995 (the "Loan
Agreement"), whereby NMAC agreed to advance to B & B the maximum sum of TWO
HUNDRED FIFTY THOUSAND AND NO/100 ($250,000.00) DOLLARS, upon fulfillment of the
terms and conditions thereof by B & B;
WHEREAS, the Loan Agreement was secured by, among other instruments, that
certain Guaranty Agreement dated October 12, 1995 (the "Original Guaranty")
executed by B & B, Thomas DeRita, Jr., William A. Chamberlain and Louis V.
Cianfrogna (individually and collectively the "Original Guarantors");
WHEREAS, by instrument entitled Agreement and Plan of Merger, August 29,
1997 (the "Merger Agreement"), B & B merged into the Dealer with the Dealer
being the surviving corporation (the "Merger"), such Merger Agreement to be
filed with the Florida Secretary of State;
WHEREAS, B & B and Dealer have requested that NMAC consent to the Merger
and to further release the Original Guarantors from the Original Guaranty and
substitute Smart Choice Automotive Group, Inc., a Florida corporation, Smart
Cars, Inc., a Florida corporation and Smart Choice Automotive Group, Inc., a
Florida corporation (individually and collectively the "New Guarantors") for the
Original Guarantors; and
WHEREAS, NMAC has agreed not to declare a default under the terms of the
Loan Agreement by virtue of the Merger provided that the Dealer agrees to the
terms and conditions of this Amendment.
NOW THEREFORE, in consideration of the premises, Ten and No/100 ($10.00)
Dollars and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. The recitations set forth above are true and correct.
2. The terms and conditions of the Commitment Letter dated July 9, 1997 as
modified by letters dated July 30, 1997, August 8, 1997 and August 13, 1997 from
NMAC to the Dealer (the "Commitment Letter") are hereby incorporated into the
Loan Agreement in their entirety. The terms and conditions of the Commitment
Letter shall control over any conflict with the terms and conditions of this
Amendment and/or Loan Agreement. The Dealer agrees and understands that,
notwithstanding NMAC's execution of this Amendment and the delivery thereof to
the Dealer, all of the terms and conditions of the Commitment Letter (including
but not limited to the execution by the New Guarantors and the delivery of their
Guaranty Agreement to NMAC and the fulfillment of all of the "Conditions to
Commitment" set forth in SCHEDULE B to the Commitment Letter), must be fulfilled
within the time period(s) set forth within the Commitment Letter prior to this
Amendment becoming enforceable against NMAC.
3. The principal outstanding balance (exclusive of interest) owed to NMAC
under the Loan Agreement is ONE HUNDRED EIGHTY-THREE THOUSAND SEVEN HUNDRED
SIXTY-TWO AND 56/100 ($183,762.56) DOLLARS, less any principal payments (if any)
made subsequent to July 8, 1997.
4. All except the first two (2) sentences of Section 2.2 of the Loan
Agreement are hereby deleted in their entirety and the following is substituted
therefore:
"From the Effective Date of this Dealer Equipment Loan and
Security Agreement through the ninetieth (90th) day thereafter
(the "Interest Only Period"), accrued interest together with
all other fees, costs and charges shall be paid monthly on the
15th day thereof under this Loan. Commencing with the first
month following the expiration of the Interest Only Period and
continuing each month thereafter, successive monthly
installments of Principal in the amount of FOUR THOUSAND TWO
HUNDRED SEVENTY-THREE AND 56/100 ($4,273.56) DOLLARS each
together with all accrued and unpaid interest and all other
fees, costs and charges due and owing under this Loan shall be
paid on the 15th day of each month, followed by one final
installment on December 31, 1997 equal to the then unpaid
Principal, all accrued and unpaid interest and all other fees,
costs and charges due and owing under this Loan. Interest
shall be calculated on a daily basis, computed on the actual
number of days elapsed over a year of 365 or 366 days,
commencing on the date the Principal is funded.
Should Smart Choice Automotive Group, Inc., a Florida
corporation (and/or its successors or assigns), sell stock
pursuant to an underwritten public offering prior to December
31, 1997, the unpaid Principal together with all accrued and
unpaid interest and all other fees, costs and charges due and
owing under the Loan Agreement shall immediately be
accelerated and be due and payable in full."
5. The first sentence of Section 2.1 to the Loan Agreement is hereby
deleted in its entirety and the following is substituted therefore:
The "NMAC Prime Rate" shall mean the per annum interest rate
from time to time announced by a majority of the following
banks: Bankers Trust Company, The Chase Manhattan Bank,
Citibank N.A., Bank of America, N.T. & S.A. and Morgan
Guaranty Trust Company of New York, as their respective prime
or reference rate; provided that if fewer than three of such
banks have the same rate in effect, the median of the five
rates shall be the NMAC Prime Rate. For purposes of computing
interest hereunder, the NMAC Prime Rate in effect on the last
day of the month shall be deemed to be such rate in effect
through the succeeding month."
6. Section 6 to the Loan Agreement is hereby modified by adding the
following:
6.5 The occurrence of any default under or termination of
the Dealer Sales and Service Agreement between the
Borrower and Nissan Motor Corporation in U.S.A.
("NMC"); or
6.6 Termination of or default under that certain Lease
Agreement dated July 11, 1997 with TAD Partnership
regarding the property situated at 4313 South Federal
Highway, Stuart, Florida 34997; or
6.7 Failure to allow NMAC to audit the financial records of
the Borrower or any Guarantor; or
6.8 Failure of the Borrower to maintain Net Worth, Net Cash
and Working Capital Requirements established from time
to time by NMAC and/or NMC; or
6.9 The occurrence of an event of default under the terms
and conditions of any other loan or loans currently in
existence or to be consummated at a future date between
NMAC and the Borrower or any Guarantor or any of their
affiliates; or
6.10 Termination, for any reason, of Borrower's wholesale
inventory financing for new vehicles provided by NMAC;
or
6.11 Borrower and/or any Guarantor shall fail to furnish
periodic financial statements, income and expense
statements and balance sheets as may be required from
time to time by NMAC, all of such statements to set
forth in reasonable detail the financial condition of
the respective party and in form satisfactory to NMAC,
or
6.12 The Borrower fails at all times during the term of this
Loan to maintain Tangible Net Worth, Working Capital
and Net Cash Requirements as established by NMAC.
Effective July 1, 1997, the Capitalization Guidelines
(which are only minimum guidelines and may change in
the sole and absolute discretion of NMAC and/or NMC
upon notice to the Borrower) are as follows:
Required Minimum Amount
Tangible Net Worth $880,000.00
Working Capital $560,000.00
Net Cash $140,000.00
6.13 The Borrower fails at all times during the term of this
Loan to have the following person(s) participate in the
active management and operation of the Borrower:
NAME POSITION
---- --------
Gary R. Smith Dealer Principal
6.14 Borrower fails to timely notify NMAC that Thomas
DeRita, Jr. is no longer the Executive Manager of
Borrower and/or a new Executive Manager of the Borrower
is appointed without the prior written consent of NMAC
(which such consent will not be unreasonably withheld
or delayed).
Should Borrower not timely make any regularly scheduled payment of
principal or interest due and payable under this Loan, the Borrower
shall have fifteen (15) days following written notice of the default to
cure the default. NMAC shall be entitled to a four (4%) percent late
charge whenever any payment required under this Loan Agreement is not
paid when due."
7. Dealer hereby covenants to continue to abide by all of the terms and
conditions of the Loan Agreement in the same manner as if the Dealer had
originally executed the Loan Agreement. NMAC's waiver of any term, provision,
condition, covenant or agreement of the Loan Agreement prior to the Effective
Date hereof shall not be construed in any manner, to NMAC's consent to such
waiver on or after the Effective Date. No waiver of any term, provision,
condition, covenant or agreement contained in this Agreement or contained in the
Loan Agreement shall be effective unless set forth in writing signed by NMAC and
any such waiver shall be effective only to the extent set forth in such writing.
8. NMAC hereby waives its right to declare an event of default under the
terms of the Loan Agreement which would otherwise arise due to the transfer of
the ownership of B & B and the merger thereof into Dealer; however, the
foregoing shall not amend or modify the Loan Agreement or be deemed a waiver of
any rights of NMAC thereunder as to any further sale, transfer or conveyance of
any interest in the Dealer and/or the merger thereof into another entity.
9. Dealer agrees to pay any and all documentary stamps which are assessed
by the State of Florida on account of the execution and/or delivery of this
Amendment. Dealer shall pay such sums immediately upon receipt of notice of such
amounts from NMAC. If the Dealer fails to pay such sums to NMAC, NMAC may (and
without waiving such Event of Default), at its option, pay such taxes and any
such payment made by NMAC shall be added to the indebtedness hereof and shall
bear interest from the date advanced at the rate of the lesser of eighteen (18%)
percent per annum or the maximum rate permissible under Florida law.
10. The Dealer hereby represents, ratifies and affirms to NMAC that NMAC
has acted in good faith and has fulfilled and fully performed its obligations
under the Loan Agreement and all of its obligations with respect to the
administration and disbursement of the loan proceeds.
11. Except as specifically provided in this Amendment, no part of the Loan
Agreement or any other instrument securing the Loan Agreement is in any way
altered, amended or changed.
12. The parties hereto intend that this Amendment will not disturb the
existing lien priority of NMAC and that this Amendment will retain the same lien
and priority as the Loan Agreement which this Amendment modifies.
13. This Amendment shall be governed by and construed and the rights and
obligations of the parties under this Amendment shall be determined in
accordance with the laws of the State of Florida.
14. This Amendment and the Loan Agreement shall be binding upon and shall
enure to the benefit of the parties hereto and their respective personnel,
representatives, heirs, successors and assigns.
15. Each party to this Amendment acknowledges that it has reviewed this
Amendment and hereby declares that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Amendment. In the event that any terms or
provisions of this Amendment are held invalid or unenforceable, the remaining
terms and conditions of this Amendment shall continue to be fully enforceable
without change, and this Amendment shall be interpreted as if the unenforceable
provision had not been a part hereof.
16. NMAC AND DEALER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY AND ALL RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION (INCLUDING, BUT NOT LIMITED TO, ANY CLAIMS, CROSS-CLAIMS OR A
THIRD-PARTY CLAIMS) ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT,
THE LOAN AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH OR THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER WRITTEN OR VERBAL) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR NMAC TO ENTER INTO THIS AMENDMENT. THE
DEALER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF NMAC NOR NMAC'S
COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT NMAC WOULD NOT, IN THE
EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION."
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Signed, sealed and delivered in the presence of:
NISSAN MOTOR ACCEPTANCE CORPORATION
/s/ Christine Daba By: /s/ Mark Doi Witness
Print Name: Christine Daba Print Name: Mark Doi
Title: Commercial Credit Manager
/s/ Todd Ryan
Witness
Print Name: Todd Ryan
FIRST CHOICE STUART 1, INC.,
a Florida corporation d/b/a Stuart Nissan
/s/ Phyllis A. George By: /s/ Gary R. Smith
Witness Print Name: Gary R. Smith
Print Name: Phyllis A. George Title: President
/s/ Lori J. Arp
Witness
Print Name: Lori J. Arp
EXHIBIT 10.68
NISSAN
DEALER TERM SALES AND SERVICE AGREEMENT
THIS AGREEMENT is entered into effective the day last set forth below by and
between the Nissan Division of NISSAN MOTOR CORPORATION IN U.S.A., a California
corporation, hereinafter called "Seller," and the entities and natural persons
identified in the Final Article of this Agreement.
INTRODUCTION
The purpose of this Agreement is to establish Dealer as an authorized dealer of
Nissan Products and to provide for the sale and servicing of Nissan Products in
a manner that will best serve owners, potential owners and purchasers of Nissan
Products as well as the interests of Seller, Dealer and other Authorized Nissan
Dealers. This Agreement sets forth: the rights which Dealer will enjoy as an
Authorized Nissan Dealer; the responsibilities which Dealer assumes in
consideration of its receipt of these rights; and the respective conditions,
rights and obligations of Seller and Dealer that apply to Seller's grant to
Dealer of such rights and Dealer's assumption of such responsibilities. It is
understood that each term and undertaking hereinafter described is material, and
relied upon, as the quid pro quo and consideration for this Agreement.
This is a personal services Agreement. In entering into this Agreement and
appointing Dealer as provided below, Seller is relying, among other things, upon
the personal qualifications, expertise, reputation, integrity, experience,
ability and representations of the individual named in the Final Article of this
Agreement as Dealer Principal (the "Dealer Principal") the individual named in
the Final Article of this Agreement as Executive Manager and the representations
of Smart Choice Automotive Group, Inc. ("SMCH"), Smart Cars, Inc. ("Smart Cars,
Inc."), and the Dealer. In addition to Dealer, Seller intends to look to SMCH,
Smart Cars, Inc., the Dealer Principal and the Executive Manager for the
performance of Dealer's obligations hereunder.
Nissan Products are intended for discriminate owners with the expectation that
such owners will be loyal and proud, but also demanding toward Seller and Dealer
with respect to Nissan Products and the manner in which they are sold and
serviced. Owners, potential owners and purchasers of Nissan Products are
expected to want, and are entitled to do business with, dealers who enjoy the
highest reputation in their communities and have well located, attractive and
efficient places of business, courteous personnel and outstanding service and
parts facilities. Nissan Products must be sold by enthusiastic dealers who are
not interested in short term results only but are willing to look toward long
term goals and who are devoted to creating and maintaining a positive total
ownership experience for owners of Nissan Products. Seller's standard of
excellence for Nissan Products must be matched by the dealers who sell them to
the public and who service them during their operative lives.
Achievement of the purposes of this Agreement is premised upon mutual
understanding and cooperation between Seller and Dealer. Dealer has entered into
this Agreement in reliance upon Seller's integrity and expressed intention to
deal fairly with Dealer and the consuming public. Seller has entered into this
Agreement in reliance upon the integrity and ability of the Dealer Principal and
Executive Manager and their expressed intention to deal fairly with the
consuming public and Seller.
It is the responsibility of Seller to market Nissan Products throughout the
Territory. It is the responsibility of Dealer to actively promote the retail
sale of Nissan Products and to provide courteous and efficient service of Nissan
Products. The success of both Seller and Dealer will depend on how well they
each fulfill their respective responsibilities under this Agreement. It is
recognized that: Seller will endeavor to provide motor vehicles of excellent
quality and workmanship and to establish a network of Authorized Nissan Dealers
that can provide an outstanding sales and service effort at the retail level;
and Dealer will endeavor to fulfill its responsibilities through aggressive,
sound, ethical selling practices and through conscientious regard for customer
service in all aspects of its Nissan Dealership Operations.
Seller and Dealer shall refrain from engaging in conduct or activities which
might be detrimental to or reflect adversely upon the reputation of Seller,
Dealer or Nissan Products and shall engage in no discourteous, deceptive,
misleading or unethical practices or activities.
For consistency and clarity, terms which are used frequently in this Agreement
have been defined in Section 1 of the Standard Provisions. All terms used herein
which are defined in the Standard Provisions shall have the meaning stated in
said Standard Provisions. These definitions should be read carefully for a
proper understanding of the provisions in which they appear.
To achieve the purposes referred to above, Seller, SMCH, Smart Cars, Inc.,
Dealer, the Dealer Principal and the Executive Manager agree as follows:
ARTICLE FIRST: Appointment of Dealer
Subject to the conditions and provisions of this Agreement, Seller:
(a) appoints Dealer as an Authorized Nissan Dealer and grants Dealer
the non-exclusive right to buy from Seller those Nissan Products specified in
Dealer's current Product Addendum hereto, for resale, rental or lease at or from
the Dealership Locations established and described in accordance with Section 2
of the Standard Provisions; and
(b) grants Dealer a non-exclusive right, subject to and in accordance
with Section 6.K of the Standard Provisions, to identify itself as an Authorized
Nissan Dealer, to display the Nissan Marks in the conduct of its Dealership
Operations and to use the Nissan Marks in the advertising, promotion and sale of
Nissan Products in the manner provided in this Agreement.
ARTICLE SECOND: Assumption of Responsibilities by Dealer
Dealer hereby accepts from Seller its appointment as an Authorized Nissan Dealer
and, in consideration of its appointment and subject to the other conditions and
provisions of this Agreement, hereby assumes the responsibility for:
(a) establishing and maintaining at the Dealership Location the
Dealership Facilities in accordance with Section 2 of the Standard Provisions;
(b) actively and effectively promoting the sale at retail (and, if
Dealer elects, the leasing and rental) of Nissan Vehicles within Dealer's
Primary Market Area in accordance with Section 3 of the Standard Provisions;
(c) servicing Nissan Vehicles and for selling and servicing Accessories
in accordance with Section 5 of the Standard Provisions;
(d) building and maintaining consumer confidence in Dealer and in
accordance with Section 5 of the Standard Provisions; and
(e) performance of the additional responsibilities set forth in this
Agreement, including those specified in Section 6 of the Standard Provisions.
ARTICLE THIRD: Ownership
(a) Owners. This Agreement has been entered into by Seller in reliance
upon, and in consideration of; among other things, the personal qualifications,
expertise, reputation, integrity, experience, ability and representations with
respect thereto of tile Dealer Principal and Executive Manager named in the
Final Article of this Agreement and in reliance upon the representations and
agreements of SMCH, Smart Cars, Inc., and Dealer as follows:
(i) Smart Cars, Inc., will at all times own 100% of the capital stock
of Dealer and Dealer will at all times be maintained as a separate entity.
(ii) The officers of Dealer are as set forth in attached Schedule "A".
(iii) Smart Choice Automotive Group Inc., ("SMCH") owns 100% of the
outstanding stock of Smart Cars, Inc., and First Choice Stuart 1, Inc.
("Stuart" or "Dealer"). (see Attachment "A" attached).
(b) Changes in Ownership. In view of tile fact that this is a personal
services agreement with the Dealer Principal and Executive Manager and in view
of its objectives and purposes, this Agreement and the rights and privileges
conferred on Dealer hereunder are not assignable, transferable or salable by
SMCH, Smart Cars, Inc., and Dealer, and no property right or interest is or
shall be deemed to be sold, conveyed or transferred to SMCH, Smart Cars, Inc.
and Dealer under this Agreement. SMCH, Smart Cars, Inc., Dealer, the Dealer
Principal and the Executive Manager agree that any change in tile ownership of
Dealer or in Smart Cars, Inc., other than specified herein requires the prior
written consent of Seller IF DEALER DESIRES TO REMAIN AN AUTHORIZED NISSAN
DEALER and that without the prior written consent of Seller:
(i) no sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock or partnership interest of Dealer will be
made and no additional shares of capital stock, partnership interest or
securities convertible into shares of capital stock, of Dealer will be issued or
sold.
(ii) no sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock of Smart Cars, Inc., and Dealer will be made
and no additional shares of capital stock, partnership interest or securities
convertible into shares of capital stock, of Smart Cars, Inc., and Dealer will
be issued or sold.
(iii) neither Dealer nor Smart Cars, Inc., will be merged with or into,
or consolidate with, any other entity and none of the principal assets necessary
for the performance of Dealer's obligations under this Agreement will be sold,
transferred or assigned.
(iv) Smart Cars, Inc., will not enter into any transaction, including,
without limitation, any sale, pledge, hypothecation or other transfer of any of
the currently outstanding capital stock of Smart Cars, Inc., and Dealer, the
issuance or sale of additional shares of capital stock, partnership interest or
securities convertible into shares of capital stock, of Smart Cars, Inc., and
Dealer, or the merger of Smart Cars, Inc., and Dealer with or into, or the
consolidation of Smart Cars, Inc., and Dealer with any other entity, if as a
result of such transaction, the Smart Cars, Inc., and Dealer will cease to own
at least 100% of the capital stock or interest of Dealer.
(v) If any person or entity, acquires more than 20% of SMCH's common
stock issued and outstanding at any time and Nissan determines that such person
or entity does not have interests compatible with those of Nissan, or is
otherwise not qualified to have an ownership interest in a Nissan dealership (an
"Adverse Person"), SMCH must terminate its dealer agreements with Nissan or
transfer the Nissan dealerships to a third party acceptable to Nissan unless,
within 90 days after Nissan's determination, the adverse Person's ownership
interest is reduced to less than 20%.
Any transaction involving the capital stock of Smart Cars, Inc., and
Dealer which does not violate subparagraph (iv) above may be effected without
obtaining the prior written consent of Seller and without triggering a
termination event under Section 12.A.(2) of the Standard Provisions.
Dealer shall give Seller prior notice of any proposed change in said
ownership requiring the consent of Seller and immediate notice of the death or
incapacity of any Dealer Principal or Executive Manager. No such change, and no
assignment of this Agreement or of any right or interest herein, shall be
effective against Seller unless and until embodied in an appropriate amendment
to or assignment of this Agreement, as the case may be, duly executed and
delivered by Seller and by Dealer. Seller shall not, however, unreasonably
withhold its consent to any such change, subject to Seller's Rights of First
Refusal set forth in Article Tenth of this Agreement. Seller shall have no
obligation to transact business with any person who is not named either as a
Dealer Principal or Executive Manager of Dealer hereunder or otherwise to give
effect to any proposed sale or transfer of the ownership, partnership interest
or management of Dealer and Smart Cars, Inc., (other than changes in the
ownership of Smart Cars, Inc. and Dealer which are expressly permitted by this
Article Third) prior to having concluded the evaluation of such a proposal as
provided in Section 15 of the Standard Provisions. Dealer acknowledges Seller's
right to require consent to any change in the ownership of Dealer, and agrees
that any change or transfer without such consent from Seller is void, and of no
force and effect, and grounds for termination. SMCH, Smart Cars, Inc., and
Dealer further agree that they will not challenge, contest, dispute, or
litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) in response to an attempt to transfer ownership
of Dealer (except as provided by this Agreement) without Seller's consent; or
(ii) any decisions by Seller to withhold consent to a proposed change
in ownership of Dealer.
The stock certificates representing the stock or analogous instrument
demonstrating ownership of Dealer and Smart Cars, Inc., will have legends which
notify a potential purchaser of such stock of the limitations on transfer set
forth in this Article Third. Dealer, and Smart Cars, Inc. represent and agree
that none of Smart Cars, Inc., or Dealer will register their capital stock, or
securities convertible into their capital stock for sale or resale to the public
under any state or federal securities laws. Smart Cars, Inc., and Dealer agree
that no capital stock, or securities convertible into capital stock, of Dealer
will be issued, sold or otherwise transferred by Dealer and Smart Cars, Inc.,
directly or indirectly, to any automobile manufacturer, automobile distributor,
any motor vehicle dealer, any other person who could reasonably be considered a
competitor or potential competitor of Seller, or any affiliate of any of the
foregoing. However, with the exception of the immediately preceding sentence and
the stock restriction set forth in Article Third (b)(v), Nissan does not intend
to restrict the transfer of equity or interests in SMCH.
ARTICLE FOURTH: Management
(a) This Agreement has been entered into by Seller in reliance upon,
and in consideration of; among other things, the personal qualifications,
expertise, reputation, integrity, experience, ability and representations with
respect thereto of the person named as Dealer Principal in the Final Article of
this Agreement and in reliance on the following representations and agreements
of Smart Cars, Inc., and Dealer that:
(i) Executive Manager will devote 100% of his time to the affairs of
Dealer.
(b) Dealer. Seller and Dealer agree that the retention by Dealer of
qualified management is of critical importance to the successful operation of
Dealer and to the achievement of the purposes and objectives of this Agreement.
This Agreement has been entered into by Seller in reliance upon, and in
consideration of; among other things, the personal qualifications, expertise,
reputation, integrity, experience, ability and representations with respect
thereto of the persons named as Dealer Principal and Executive Manager in the
Final Article of this Agreement and in reliance on the following representations
and agreements of SMCH, Smart Cars, Inc., and Dealer, that:
(i) There must be an approved Executive Manager, acceptable to Nissan,
employed by Dealer. As long as Smith is employed by Smart Cars, Inc., and DeRita
or Executive Manager is employed by Dealer, they will have full and complete
control over the Dealership Operations, subject only to the powers of the Board
of Directors of Dealer to manage the business and affairs of Dealer, and they
will at all times be members of the Board of Directors of Dealer. In addition,
any replacements for Gary R. Smith and Executive Manager will, so long as such
replacements are employed by SMCH, Smart Cars, Inc., and Dealer, have full and
complete control over the Dealership Operations, subject only to the powers of
the Board of Directors of Dealer to manage the business and affairs of Dealer,
and such replacements will at all times be members of the Board of Directors of
Dealer.
(ii) the Board of Directors of Dealer shall delegate the management of
the Dealership Operations to the Executive Manager, and SMCH and Smart Cars,
Inc., will not amend its Certificate of Incorporation or By-laws to provide that
its Board of Directors is entitled to exercise any extraordinary powers or
interfere unduly in the Dealership Operations.
(iii) Executive Manager, subject to any other obligations set forth in
this Agreement, shall continually provide his personal services in operating the
dealership and will be physically present at the Dealership Facilities on a
full-time basis.
(c) Changes in Management. In view of the fact that this is a personal
services Agreement with the Dealer Principal and Executive Manager and in view
of its objectives and purposes, Dealer and Smart Cars, Inc., agree that any
change in the Dealer Principal or Executive Manager from that specified in the
Final Article of this Agreement requires the prior written consent of Seller. In
addition, SMCH, Smart Cars, Inc., and Dealer agree that no chief executive
officer, or person performing services and having responsibilities similar to a
chief executive officer, of Smart Cars, Inc., will be appointed, directly or
indirectly, without the prior written consent of Seller. Dealer shall give
Seller prior notice of any proposed change in Dealer Principal or Executive
Manager or the appointment of any chief executive or similar officer of Smart
Cars, Inc., and immediate notice of the death or incapacity of any Dealer
Principal or Executive Manager. No change in Dealer Principal or Executive
Manager and no appointment of a chief executive or similar officer of Smart
Cars, Inc. shall be effective unless and until embodied in an appropriate
amendment to this Agreement duly executed and delivered by all of the parties
hereto. Subject to the foregoing, Dealer and Smart Cars, Inc., shall make their
own, independent decisions concerning the hiring and firing of its employees,
including, without limitation, the Dealer Principal and Executive Manager.
Dealer shall give Seller prior written notice of any proposed change in
Dealer -Principal or Executive Manager and immediate notice of the death or
incapacity of Dealer Principal or Executive Manager. No change in Dealer
Principal or Executive Manager shall be effective unless and until embodied in
an appropriate amendment to this Agreement duly executed and delivered by all of
the parties hereto. Dealer acknowledges Seller's right (as set forth herein and
in the Standard Provisions) to require consent to any change in the management
of Dealer and Smart Cars, Inc., and agrees that a change without such consent
from Seller is void, of no force and effect, and grounds for termination. SMCH,
Smart Cars, Inc., and Dealer further agree that they will not challenge,
contest, dispute, or litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) in response to an attempt to change the
management of Dealer without Seller's consent; or
(ii) any decision by Seller to withhold consent to a proposed change in
management of Dealer; or
(iii) any decision by Seller to withhold approval of a proposed
management candidate.
To enable Seller to evaluate and respond to Dealer concerning any proposed
change in Dealer Principal or Executive Manager or the appointment of any chief
executive or similar officer of Smart Cars, Inc.; SMCH and Smart Cars, Inc.,
agree to provide, in the form requested by Seller and in a timely manner, all
applications and information customarily requested by Seller to evaluate the
proposed change. While Seller shall not unreasonably withhold its consent to any
such change, it is agreed that any successor Dealer Principal, Executive Manager
or chief executive or similar officer of Smart Cars, Inc., must possess personal
qualifications, expertise, reputation, integrity, experience and ability which
are, in the opinion of Seller, satisfactory. Seller will determine whether, in
its opinion, the proposed change or appointment is likely to result in a
successful dealership operation with capable management that will satisfactorily
perform Dealer's obligations under this Agreement. Seller shall have no
obligation to transact business with any person who is not named as a Dealer
Principal or Executive Manager of Dealer hereunder prior to having concluded its
evaluation of such person.
Any successor Dealer Principal or Executive Manager and any chief
executive or similar officer of Smart Cars, Inc., must meet the following
minimum requirements in order to be submitted to Seller for approval:
(i) At least three years of experience as a general manager of an
automobile dealer in a major metropolitan area or similar position involving all
aspects of the day-to-day operations of such an automobile dealership
(including, without limitation, new and used vehicle sales, service, parts and
administration); and
(ii) A demonstrated track record of success in his/her prior automobile
dealership activities as measured by the dealerships' performance under his/her
management. The dealership(s) shall have consistently demonstrated at least the
following:
1. An above average level of sales performance when measured against
regional or zone averages and as measured against sales performance
objectives established by the manufacturer; and
2. An above average level of customer satisfaction when measured
against regional or zone averages for the make; and
3. A history of cooperation and good relations with manufacturer(s)
and/or distributor(s).
(d) Evaluation of Management. Dealer and Seller understand and
acknowledge that the personal qualifications, expertise, reputation, integrity,
experience and ability of the Dealer Principal and Executive Manager and their
ability to effectively manage Dealer's day-to-day Dealership Operations is
critical to the success of Dealer in performing its obligations under this
Agreement. Seller may from time to time develop standards and/or procedures for
evaluating the performance of the Dealer Principal and Executive Manager and of
Dealer's personnel generally. Seller may, from time to time, evaluate the
performance of the Dealer Principal and Executive Manager and will advise
Dealer, the Dealer Principal and the Executive Manager of the results of such
evaluations and the way in which any deficiencies affect Dealer's performance of
its obligations under this Agreement.
(e) Compensation of Executive Manager. Executive Manager will have a
substantial portion of his compensation tied to Dealer's overall performance
with respect to objectives for sales, market penetration and customer service
which will be established at quarterly intervals.
ARTICLE FIFTH: Additional Provisions
The additional provisions set forth in the attached "Nissan Dealer Sales and
Service Agreement Standard Provisions," bearing form number NDA-45/9-88, as
amended in Article Thirteenth of this Agreement, and excepting only the
provisions contained in Sections 4, 14 and 16, are hereby incorporated in and
made a part of this Agreement. The Notice of Primary Market Area, Dealership
Facilities Addendum, Product Addendum, Dealership Identification Addendum,
Holding Company Addendum, if applicable, and all Guides and Standards referred
to in this Agreement (including references contained in the Standard Provisions
referred to above) are hereby incorporated in and made a part of this Agreement.
Dealer further agrees to be bound by and comply with: the Warranty Manual;
Seller's Manuals or Instructions heretofore or hereafter issued by Seller to
Dealer; any amendment, revision or supplement to any of the foregoing; and any
other manuals heretofore or hereafter issued by Seller to Dealer.
ARTICLE SIXTH: Termination of Prior Agreements
This Agreement cancels, supersedes and annuls all prior contracts, agreements
and understandings except as stated herein, all negotiations, representations
and understandings being merged herein. No waiver, modification or change of any
of the terms of this Agreement or change or erasure of any printed part of this
Agreement or addition to it (except filling of blank spaces and lines) will be
valid or binding on Seller unless approved in writing by the President or an
authorized Vice President of Seller.
ARTICLE SEVENTH: Term
This Agreement shall have a term commencing on the effective date hereof and,
subject to its earlier termination in accordance with the provisions of this
Agreement, expiring on the expiration date indicated in the Final Article of
this Agreement. Subject to other applicable provisions hereof, this Agreement
shall automatically terminate at the end of such stipulated term without any
action by Dealer, Seller or any of the other parties hereto.
ARTICLE EIGHTH: License of Dealer
If Dealer is required to secure or maintain a license for the conduct
of its business as contemplated by this Agreement in any state or jurisdiction
where any of its Dealership
Operations are to be conducted or any of its Dealership Facilities are located,
this Agreement shall not be valid until and unless Dealer shall have furnished
Seller with written notice specifying the date and number, if any, of such
license or licenses issued to Dealer, Dealer shall notify Seller immediately in
writing if Dealer shall fail to secure or maintain any and all such licenses or
renewal thereof or, if such license or licenses are suspended or revoked,
specifying the effective date of any such suspension or revocation.
ARTICLE NINTH: Additional Representations and Warranties
(a) All of the representations and covenants made to Seller by the
other parties to this Agreement have been made jointly and severally by each of
the parties hereto which has made any such representation or covenant.
(b) In addition to the representations set forth elsewhere in
this Agreement, SMCH, Smart Cars, Inc. and Dealer jointly and severally,
represent 10 Seller that:
(i) All of the documents and correspondence provided to Seller by SMCH,
Smart Cars, Inc., and Dealer, or any of their agents in connection with the
solicitation of Seller's consent to this Agreement, are true and correct copies
of such documents.
(c) In addition to the covenants set forth elsewhere in this Agreement,
SMCH, Smart Cars, Inc., and Dealer, jointly and severally, agree with Seller
that:
(i) Dealer will at all times be involved in the operation of the Nissan
dealership currently operated by it and Dealer will not conduct any other type
of business.
(ii) No distributions will be made to the stockholders or partners of
Dealer and Smart Cars, Inc., if such distributions would cause Dealer to fail to
meet any of the Guides and Standards relating to the capitalization of Dealer.
In particular, Smart Cars, Inc., will not be permitted to voluntarily redeem any
of its preferred stock, if prior to and after giving effect to such redemption
Dealer fails to meet any of the Guides and Standards relating to capitalization
of Dealer.
(iii) SMCH, Smart Cars, Inc., and Dealer hereby, jointly and severally,
indemnify and hold harmless, Seller, its officers, directors, affiliates and
agents, and each person who controls Seller within he meaning of the Securities
Act of 1933, as amended (the "Act"), from and against any and all losses,
claims, damages or liabilities, to which they or any of them may become subject
under the Act, the Securities Exchange Act of 1934, as amended, or any other
federal or state securities law, rule or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of the sale by
SMCH, Smart Cars, Inc., or Dealer of any securities. The indemnification
provided for in this paragraph shall be exclusive of; and in addition to, any
indemnification pursuant to Section 10 of the Standard Provisions.
(iv) One of the conditions to the effectiveness of this Agreement by
Seller is the delivery of an opinion of counsel to all of the parties hereto
(other than Seller) to the effect that this Agreement has been duly executed and
delivered by each of the parties thereto (other than Seller) and is the legal,
valid and binding obligation of each of such parties enforceable in accordance
with its terms.
ARTICLE TENTH: Right of First Refusal, Exclusivity
A. Seller's Right of First Refusal, Exclusivity
In addition to its rights under this Agreement, in the event that Smart
Cars, Inc., or Dealer -should desire to enter into a transaction, which if not
approved by Seller, would result in a breach of the covenants set forth in
Article Third, Sections (a)(i), (a)(ii), (a)(iii), or (b) of this Agreement or
in the event that any of the covenants set forth in the fourth full paragraph of
Article Third, Section (b), Article Fourth, Section (a) (vii) or Article Ninth,
Section (c)(ii) of this Agreement are breached, Seller shall have the additional
right and option to purchase the dealership assets or ownership interests
pursuant to this Article Tenth.
(a) If Seller chooses to exercise its right of first refusal, it must
do so in its written refusal to consent to the proposed sale or transfer
pursuant to Section 15 of the Standard Provisions or, if Section 15 of the
Standard Provisions does not apply, within sixty (60) days of receipt of
notification that a event triggering Seller's right of first refusal hereunder
has occurred. Dealer agrees not to complete any proposed change or sale prior to
the expiration of the period for exercise of Seller's right of first refusal and
without Seller's prior written consent. Such exercise shall be null arid void if
Dealer withdraws its proposal within thirty (30) days following Dealer's receipt
of Seller's notice exercising its rights of first refusal.
(b) After being exercised, Seller's right to purchase may be assigned
to any party, and Seller hereby agrees to guarantee the full payment of the
purchase price by such assignee. Seller's rights under this Article Tenth shall
be binding on and enforceable against any assignee or successor in interest of
Dealer or purchaser of Dealer's assets. Seller shall have no obligation to
exercise its rights hereunder.
(c) If Dealer has entered into a bona fide written buy/sell agreement
respecting its Nissan dealership, Seller's right under this Article Tenth shall
be a right of first refusal, enabling Seller to assume the prospective
purchaser's purchase rights and obligations under such buy/sell agreement. The
purchase price and other terms of sale shall be those set forth in such
agreement and any related documents. Seller may request and Dealer agrees to
provide all other documents relating to Dealer and the proposed transfer,
including, but not limited to, those reflecting any other agreements or
understandings between the parties to the buy/sell agreement If Dealer refuses
either to provide such documentation or to state in writing that no such
document exists, it shall be presumed that the agreement is not bona fide.
(d) If Seller determines pursuant to paragraph (c) above that the
buy/sell agreement is not bona fide, Seller will so notify Dealer. Dealer shall
have ten (10) days from its receipt of such notice within which to withdraw its
proposal. Seller's exercise of its rights hereunder shall be null and void if
Dealer withdraws its proposal within such time period. If the proposal is not
withdrawn, Seller shall have the option, but no obligation, under this Article
Tenth to purchase the principal assets of Dealer utilized in the Dealership
Operations, including real estate and leasehold interest or to purchase the
ownership interests of Dealer, and to terminate this Agreement and all rights
granted Dealer hereunder. If the Dealership Facilities are leased by Dealer from
an affiliated company, the right to purchase the principal assets, or the
ownership interests, of Dealer, shall include the right to lease the Dealership
Facilities. The purchase price shall be at the then fair market value as
determined by an independent appraiser selected by Seller and reasonably
acceptable to Smart Cars, Inc., and the other terms of sale shall be those
agreed by Seller, Dealer and Smart Cars, Inc.,
(e) Dealer shall transfer the affected property free and clear of
liens, claims, mortgages, and encumbrances.
(f) In addition to any other rights Seller may have at law, in equity
or hereunder, any conveyance of the dealership in violation of this right of
first refusal shall be voidable by Seller.
(g) In the event that Seller elects not to exercise its right to
purchase the dealership assets or the ownership interests of the Dealer and
Smart Cars, Inc., Dealer and Smart Cars, Inc., agree that it will offer to sell
such assets or interests to the Dealer's then current management team or to some
other entity or persons acceptable to Seller. If such individuals are not
interested in such a transaction and no other entity or individuals acceptable
to Seller can be found then this Agreement will be terminable at Seller's
option, by deliver of written notice to Dealer.
B. Right of First Refusal on Sale or Lease of Property to a Third Party.
a) In addition to its rights under Articles Third and Fourth and
Section 15 of the Standard Provisions, Dealer agrees that should Dealer seek to
sell or lease all or substantially all of the Approved Site to a third party for
use as a Nissan New Motor Vehicle Dealership, Seller shall have the additional
right and option, but not the obligation, to purchase or lease the Approved Site
pursuant to this Article Tenth. A sale or lease for use other than a Nissan New
Motor Vehicle Dealership is void.
b) If Seller chooses to exercise its right of first refusal, it must do
so by written notice delivered to Dealer within 60 days of Seller's receipt of
notice of the proposed sale or lease by Dealer. Dealer agrees not to complete
any proposed sale or lease prior to the expiration of the period for exercise of
Seller's right of first refusal and without Seller's prior written consent, and
agrees to allow Seller to perform an environmental study of the property. Such
exercise shall be null and void if Dealer withdraws its sale or lease proposal
within thirty (30) days following Dealer's receipt of Seller's notice exercising
its right of first refusal.
c) After being exercised, Seller's right to purchase or lease may be
assigned to any party, and Seller hereby agrees to guarantee the full payment of
the purchase price or the rental payment by such assignee. Seller's rights under
this Article Tenth shall be binding on and enforceable against any assignee or
successor in interest of Dealer or purchaser of Dealer's assets. Seller shall
have no obligation to exercise its rights hereunder, and Seller may rescind its
offer if the property is determined to be contaminated pursuant to an
environmental study. Such contamination shall be deemed a breach of this
agreement by dealer.
d) Should Seller actually purchase or lease the facility, Dealer shall
also furnish to Seller copies of any easements, licenses, environmental studies
or other documents affecting the property.
e) Dealer shall transfer the affected property by deed conveying
marketable title free and clear of liens, claims, mortgages, encumbrances,
tenancies and occupancies, or, if applicable, by an assignment of any existing
lease. The Warranty Deed shall be in proper form for recording. Dealer shall
deliver complete possession of the property at the time of delivery of the Deed
or lease assignment. Dealer shall also furnish to Seller copies of any
easements, licenses, or other documents affecting the property and shall assign
any permits or licenses which are necessary for the conduct of the Dealership
Operations.
f) In addition to any other rights Seller may have at law, in equity or
hereunder, any sale or lease of the Approved Site in violation of this right of
first refusal shall be voidable by Seller.
C. Exclusivity Provisions.
In order for Dealer to maintain competitive Dealership Facilities to
effectively market Nissan Products, Dealer hereby agrees to abide by and never
challenge the following provisions (hereinafter "Exclusivity Provisions"). These
Exclusivity Provisions shall be effective on or before the execution of the
Agreement, and continue in effect thereafter so long as Dealer (or its
principals) are authorized Nissan dealers and these provisions shall be binding
on any successors-in-interest, assigns or purchasers of Dealer:
a) The only line-make of new, unused motor vehicles which Dealer shall
display and sell at the Dealership Facilities shall be the Nissan line and make
of motor vehicles. Dealer shall not conduct any dealership operations for any
other make or line of new, unused vehicles from the Dealership Facilities
throughout the term of this Agreement.
b) Dealer shall sell and maintain a full line of Genuine Nissan Parts
and Accessories at the Dealership Facilities and shall provide a full range of
automotive servicing for Nissan vehicles at the Dealership Facilities pursuant
to Section 5 of the Standard Provisions to the Agreement. Nothing contained
herein, however, shall preclude Dealer from offering parts, accessories or
servicing for vehicles of other lines or makes so long as such products or
services are incidental to Dealer's Nissan Dealership Operations;
c) Dealer shall not advertise or promote any make or line of new,
unused vehicles from the Dealership Facilities other than the Nissan line; and
d) Dealer shall not install or maintain any sign at or near the
Dealership Facilities which would tend to lead the public into believing that
any line or make of vehicles other than the Nissan line is sold at the
Dealership Facilities.
ARTICLE ELEVENTH: Breach By Dealer
In the event (i) that any of the representations and warranties of Dealer, Smart
Cars, Inc., SMCH, Smith or Executive Manager, contained in this Agreement shall
prove not to have been true and correct when made or (ii) of any breach or
violation of any of the covenants made by Dealer and Smart Cars, Inc., SMCH,
Smith or Executive Manager, in Articles Third, Fourth and Ninth of this
Agreement or (iii) of the occurrence of any of the events warranting termination
of this Agreement as set forth in Section 1 2.A of the Standard Provisions,
Seller may terminate this Agreement, prior to the expiration date hereof, by
giving Dealer written notice thereof, such termination to be effective upon the
date specified in such notice, or such latter date as may be required by any
applicable statute with the effect set forth in Section 13 of the Standard
Provisions.
ARTICLE TWELFTH: Execution of Agreement
This Agreement, and any Addendum or amendment or notice with respect
thereto, shall be valid and binding on Seller only when it bears the signature
of either the President or an authorized Vice President of Seller and, when such
signature is a facsimile, the manual countersignature of an authorized employee
of Seller at the Director level and a duplicate original thereof is delivered
personally or by mail to the Dealership Location. This Agreement shall bind
Dealer and the other parties hereto only when it is signed by: a duly authorized
officer or executive of Dealer or such party if a corporation; one of the
general partners of Dealer or such party if a partnership; or Dealer or such
party if an individual.
ARTICLE THIRTEENTH: Amendments to Standard Provisions
(a) Section 1.0 of the Standard Provisions is hereby amended to read as
follows:
"0. 'Principal Owners(s)' shall mean the persons named as Dealer
Principal in the Final Article of this Agreement upon whose personal
qualifications, expertise, integrity, experience, ability and representations
Seller has relied in entering into this Agreement."
(b) Section 6.1 of the Standard Provisions is hereby amended to read as
follows:
"Seller shall have the right, at all reasonable times during regular
business hours, to inspect the Dealership Facilities and to examine, audit and
make and take copies of all records, accounts and supporting data relating to
the sale, sales reporting, service and repair of Nissan Products by Dealer.
Whenever possible, Seller shall attempt to provide Dealer with advance notice of
an audit or examination of Dealer's operations. Seller shall also have the
right, at all reasonable times during regular business hours and upon advance
notice, to examine, audit and make and take copies of all records, accounts arid
supporting data of SMCH, Smart Cars, Inc., and Dealer relating to the business,
ownership or operations of Dealer."
(c) Section 1 2.A.(I) of the Standard Provisions is hereby amended to
read as follows:
"(1) Any actual or attempted sale, transfer, assignment or delegation,
whether by operation of law or otherwise, by Dealer or Smart Cars, Inc., Inc.,
of any interest in or right, privilege or obligation under this Agreement, or of
the principal assets necessary for the performance of Dealer's responsibilities
under this Agreement, without, in either case, the prior written consent of
Seller having been obtained, which consent shall not be unreasonably withheld;"
(d) Section 12.A.(3) of the Standard Provisions is hereby amended to
read as follows:
"(3) Removal, resignation, withdrawal or elimination from Dealer for
any reason of the Executive Manager; provided, however, in each case, Seller
shall give Dealer a reasonable period of time within which to replace such
person with a individual satisfactory to Dealer as the case may be, and Seller
in accordance with Article Fourth of this Agreement; or the failure of Dealer to
retain an Executive Manager who, in accordance with Article Fourth of this
Agreement, in Seller's reasonable opinion, is competent, possesses the requisite
qualifications for the position, and who will act in a manner consistent with
the continued interests of both Seller and Dealer."
(e) Section 12.B.(2)(i) of the Standard Provisions is hereby amended to
read as follows:
"(i) any dispute, disagreement or controversy between or among Dealer,
Smart Cars, Inc., Inc., or SMCH and any third party or between the owners and
management personnel of Dealer relating to the management or ownership of Dealer
and Smart Cars, Inc., develops or exists which, in the reasonable judgment of
Seller, tends to adversely affect the conduct of the Dealership Operations or
the interests of Dealer or Seller, or"
(f) Section 12.B.(2)(ii) of the Standard Provisions is hereby amended
to read as follows:
"(ii) any other act or activity of Dealer, Smart Cars, Inc., and/or
SMCH, or any of their owners or management occurs, which substantially impairs
the reputation or financial standing of Dealer or any of its management
subsequent to the execution of this Agreement:"
(g) Exhibits A and B are hereby incorporated by reference.
ARTICLE FOURTEENTH: Branding I Business Name
The parties acknowledge and agree that Dealer shall do business as
"Stuart Nissan." Dealer agrees to include in its promotional, marketing and
advertising efforts the approved name of the Dealership or another name approved
by Nissan that includes the Nissan name. In all television, radio, print and
other advertising and marketing conducted by dealer, Dealer shall refer to
itself as "Stuart Nissan" or such other approved name. Dealer shall actively and
effectively promote primarily the "Nissan" name. Under no circumstances shall
the name "Nissan" be subordinated to or promoted less aggressively than any
other name (eg. "SMCH") by Dealer.
ARTICLE FIFTEENTH: Special Conditions
(a) Adequate Representation of Entire Line of Nissan Vehicles
Dealer shall actively and effectively promote the sale of Nissan's entire line
of vehicles and products to customers located throughout the Primary Market
Area. In evaluating Dealer's sales performance, in addition to those factors
established in the Standard Provisions, Nissan will evaluate Dealer's
performance by vehicle segment. Dealer is obligated to adequately represent
Nissan in each and every model line. Adequate representation is the higher of
national, regional, state or DMA average, adjusted for segment popularity, as
set forth in the Business plan.
(b) Nissan Products
The definition of "Nissan Products" in the Standard Provisions is amended to
mean Nissan Vehicles (defined as Nissan Cars and Nissan Trucks as well as
"near-new" Nissan Vehicles of the current and three prior model years), Genuine
Parts and Accessories, Nissan Security+Plus and such other products and services
offered by Nissan to Dealer and designated by Nissan as a Nissan Product. Dealer
shall actively and effectively promote the sale of Nissan Products.
Effectiveness with respect to Nissan Security+Plus sales is measured by the
ratio of Security+Plus sales to new vehicles sales, compared to the higher of
national, regional, state or DMA average as set forth in the Business plan.
(c) Dispute Resolution Process
The parties acknowledge that, at the state and federal level,
various courts and agencies would, in the absence of this Article Fifteenth (c),
be available to them to resolve claims or controversies which might arise
between them. The parties agree that it is inconsistent with their relationship
for either to use courts or governmental agencies to resolve such claims or
controversies.
THEREFORE, CONSISTENT WITH THE PROVISIONS OF THE UNITED STATES
ARBITRATION ACT (9 U.S.C. SEC. 1 ET SEQ.), THE PARTIES TO THIS AGREEMENT AGREE
THAT THE DISPUTE RESOLUTION PROCESS OUTLINED IN THIS SECTION, WHICH INCLUDES
BINDING ARBITRATION, SHALL BE THE EXCLUSIVE MECHANISM FOR RESOLVING ANY DISPUTE,
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR
TO THE RELATIONSHIP BETWEEN THE PARTIES, INCLUDING BUT NOT LIMITED TO CLAIMS
UNDER ANY STATE OR FEDERAL STATUTES (HEREINAFTER "DISPUTES").
Section 16 of the Standard Provisions is deleted in its entirety.
There are two steps in the Dispute Resolution Process: Mediation and Binding
Arbitration. All Disputes must first be submitted to Mediation, unless that step
is waived by written agreement of the parties. Mediation is conducted by a panel
consisting of an equal number of representatives of the parties designated by
Nissan and selected by Dealer. The Mediation Panel will evaluate each position
and recommend a solution. This recommended solution is not binding.
If a dispute has not been resolved after Mediation, or if Dealer and Nissan have
agreed in 'writing to waive Mediation, the Dispute will be settled by Binding
Arbitration. SPECIFICALLY, THE PARTIES AGREE TO RESOLVE ALL SUCH DISPUTES BY
BINDING ARBITRATION CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION
PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION, WITH THE PREVAILING PARTY TO
RECOVER ITS COSTS AND ATTORNEY'S FEES FROM THE OTHER PARTY. ALL ARBITRATION
AWARDS ARE BINDING AND NON-APPEALABLE, EXCEPT AS OTHERWISE PROVIDED IN THE
UNITED STATES ARBITRATION ACT. JUDGMENT UPON ANY SUCH AWARD MAY BE ENTERED AND
ENFORCED TN ANY COURT HAVING JURISDICTION.
(d) Business Plan
Dealer and Nissan shall execute a Business Plan in the form specified
in the Business Planning Process Workbook that describes how Dealer will fulfill
it sales, service, customer relations and other commitments hereunder, including
heightened performance standards that Dealer commits to meet;
(e) Option to Purchase
If the Dealer Agreement is to expire or be terminated; i) Voluntarily
by Dealer; ii) By Nissan upon the occurrence of any of the events specified in
Section 12A. of the Standard Provisions to the Agreement (as modified herein);
or iii) As a result of the death or physical or mental incapacity of Principal
Owners, Nissan has the option to Purchase the principal assets of Dealer
utilized in the dealership business, including such real property as Nissan may
elect to purchase, and cancel the Agreement and all rights granted Dealer
thereunder. The purchase price of the dealership assets and real property and
other terms will be determined by agreement between the parties or, if the
parties are unable to reach agreement in a reasonable time, by arbitration
pursuant to the Dispute Resolution Process established in Paragraph 12 hereof.
Nissan must advise Dealer of its intent to exercise this option within 30 days
after one party notifies the other of its intent to terminate the Agreement.
Nissan may assign its right to exercise its option to purchase under this
paragraph to any third party.
<PAGE>
FINAL ARTICLE
The Dealer is First Choice Stuart 1, Inc., a corporation formed under the laws
of the State of Florida doing business as Stuart Nissan. Dealer is located in
Stuart, Florida.
The other parties to this Agreement are SMART CARS, INC. a corporation
incorporated under the laws of the State of Florida and SMART CHOICE AUTOMOTIVE
GROUP, INC. a corporation incorporated under the laws of the State of Florida,
and Gary R. Smith.
The Dealer Principal is Gary R. Smith.
The Executive Manager is Thomas DeRita.
Expiration Date: August 19, 2002
Working Capital Guide Requirement: $ 492,300
Net Worth Guide Requirement: $ 746,800
Flooring Line: $ 2 ,031,115
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
triplicate effective as of the 29th day of August, 1997 at Carson, California.
SELLER:
NISSAN DIVISION
NISSAN MOTOR CORPORATION IN USA
By: /s/ Thomas H. Eastwood By: /s/ Thomas P. Hushek
- -------------------------- -------------------------
Thomas H. Eastwood Thomas P. Hushek
Vice President Regional Vice President
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
- ----------------------
Gary R. Smith
Its: Chairman and CEO
SMART CARS, INC.
By: /s/ Gary R. Smith
- ----------------------
Gary R. Smith
Its: President
FIRST CHOICE STUART 1, INC.
By: /s/ Gary R. Smith
- ---------------------
Gary R. Smith
Its: Dealer Principal
<PAGE>
Attachment A
First Choice Stuart 1, Inc.
Nissan Dealer Term Sales & Service Agreement
First Choice Stuart 1, Inc.
100% Owner
Smart Cars, Inc.
100% Owner
Smart Choice Automotive Group, Inc.
See Schedule B for Ownership
<PAGE>
Schedule A
First Choice Stuart 1, Inc.
Officers
President Gary R. Smith
Vice President Thomas DeRita
Vice President Joseph A. Alvarez
Secretary James Neal Hutchinson, Jr.
Treasurer Gary R. Smith
<PAGE>
Schedule B
Smart Choice Automotive Group
Major Stockholders
Shareholder Shares % of Total
- ----------- ------ ----------
Ralph H. Eckler 575,375 6.7%
Thomas E. Conlan 588,694 6.8%
Gerald Parker 588,695 6.8%
EXHIBIT 10.69
WHOLESALE FINANCING AND SECURITY AGREEMENT
WHOLESALE FINANCING AND SECURITY AGREEMENT ("Agreement") dated as of the
11th day of August, 1997 between VOLVO FINANCE NORTH AMERICA, INC., a Delaware
corporation located at 25 Philips Parkway, Montvale, New Jersey 07645 ("Volvo
Finance"), and First Choice Stuart 2, Inc. ("Borrower"), a corporation organized
under the laws of Florida located at 4205 South Federal Highway, Stuart, Florida
34997 with its chief executive office at 4205 South Federal Highway, Stuart,
Florida 34997 and additional places of business at 5200 South Washington Avenue,
Titusville, FL 32780.
1. STATEMENT OF PURPOSE.
Borrower has requested Volvo Finance to make available to it loans or other
extensions of credit.
Volvo Finance may, at its option, when Borrower requests, make loans or
otherwise extend credit to Borrower to finance Borrower's acquisition of
Products to be held as inventory for ultimate sale or lease to Borrower's retail
customers, and make loans for such other purposes as may be mutually agreed in
writing by Borrower and Volvo Finance, subject to the terms of this Agreement.
Because Borrower and Volvo Finance expect that there may be numerous
separate financing transactions between Borrower and Volvo Finance, the parties
intend by this Agreement to establish a security interest as described herein,
to secure the Obligations of Borrower to Volvo Finance and to establish certain
obligations of Borrower to Volvo Finance. Accordingly, the parties hereto agree
as follows.
2. DEFINITIONS.
As used herein, the following terms shall have the following meanings (all
terms defined in this Article 2 or in other provisions of this Agreement in the
singular to have the correlative meanings when used in the plural and vice
versa). Unless the context otherwise requires, terms used in this Agreement but
not defined herein shall have the meanings, if any, ascribed to such terms under
the Code.
2.1 "Code" shall mean the Uniform Commercial Code as in effect in the State
of New Jersey from time to time.
2.2 "Collateral" shall mean any and all Products (including vehicles and
goods taken in trade) and documents of title thereto (including returned or
repossessed Products), chattel paper, accounts, contract rights, general
intangibles (including rights to receive any rebate, return, refund or payment
of any amounts from any manufacturer or seller of any Products or from any
franchisor related to such Products), instruments, rights of set-off, deposit
accounts, and proceeds of any of the foregoing, including Borrower's right,
title and interest in and to insurance proceeds payable to Borrower by reason of
loss of or damage to all or any part of the foregoing.
2.3 "Financed Products" shall mean Products on account of which Volvo
Finance makes an advance or other extension of credit or incurs an obligation to
enable Borrower to acquire rights or use.
2.4 "Financing Documents" shall mean this Agreement, the Financing Plan and
any other documents delivered by Borrower in connection herewith or therewith,
including all promissory notes and other evidences of indebtedness.
2.5 "Financing Plan" shall mean the policies announced in writing by Volvo
Finance and applicable from time to time concerning the acquisition or retention
of any Financed Products, the amounts that will be loaned for such purposes or
other purposes, the term of any such loans and the interest, service charges,
curtailments and conditions thereof and any related terms or conditions, whether
such policies are contained in Volvo Finance's publication entitled "Retailer
Floorplan Program -- Rates and Terms," a finance manual or any other document,
including any separate agreement relating to financing by Volvo Finance.
2.6 "Obligations" shall mean any and all direct or indirect obligations,
contingent or otherwise, of Borrower to Volvo Finance, of every kind and
description, now existing or hereafter arising, whether arising under this
Agreement, any other Financing Document or otherwise. "Obligations" shall
include any expenditures made on Borrower's behalf by Volvo Finance with respect
to any of Borrower's obligations and undertakings pursuant to Article 6 hereof,
including attorneys' fees. "Obligations" shall include obligations to perform
acts or refrain from taking action, as well as obligations to pay money.
2.7 "Person" shall mean any individual, corporation, limited liability
company, voluntary association, partnership, joint venture, trust,
unincorporated organization or government (or any authority, agency,
instrumentality or political subdivision thereof).
2.8 "Products" shall mean all (i) inventory now owned or hereafter acquired
by Borrower, including new and used automobiles, trucks, boats, trailers,
engines, parts, accessories, attachments and accessions, and other vehicles and
goods and (ii) equipment including tools, furniture, parts, accessories,
attachments and accessions, now owned or hereafter acquired by Borrower.
2.9 "Security Interest" shall mean any mortgage, lien, encumbrance or
charge against, pledge of or interest in property granted to Volvo Finance under
Article 3 of this Agreement and shall include the meaning ascribed to such term
by the Code and the United States Bankruptcy Code as in effect from time to
time.
3. GRANT OF SECURITY INTEREST.
To secure performance or payment of the Obligations, Borrower hereby
assigns and grants to Volvo Finance a security interest in the Collateral,
whether now owned or hereafter acquired by Borrower.
4. FINANCING TERMS.
4.1 Volvo Finance will announce in writing to Borrower from time to time
its Financing Plan applicable to Borrower.
4.2 When Borrower wishes to obtain financing from Volvo Finance, it shall
request such financing in accordance with applicable procedures established by
Volvo Finance.
4.3 If Volvo Finance, at its sole option, agrees to provide financing
requested by Borrower, then such financing shall be on such terms and subject to
such conditions as may be established in accordance with this Agreement or the
applicable Financing Plan or as may otherwise be established by Volvo Finance.
Borrower shall abide by and adhere to the applicable Financing Plan, which may
be wholly or partly changed prospectively from time to time without prior notice
to Borrower.
4.4 Borrower agrees to execute and deliver to Volvo Finance any and all
documents, including promissory notes, and to do all acts requested by Volvo
Finance in connection with any financing extended by Volvo Finance to Borrower
hereunder.
4.5 Volvo Finance is authorized by Borrower to pay the proceeds of any
financing hereunder directly to the manufacturer or other seller of Financed
Products.
5. DISPOSITION OF FINANCED PRODUCTS.
Borrower's possession of Financed Products shall be for the sole purpose of
storing and exhibiting Financed Products for sale in the ordinary course of
Borrower's business. Financed Products may be sold by Borrower only in the
ordinary course of Borrower's business and only in accordance with the terms and
upon the conditions of the Financing Plan. In no event may a Financed Product be
sold for an amount less than the principal balance, plus interest and charges,
with respect to such Financed Product. Borrower shall receive and hold all
proceeds of any disposition of Financed Products as trustee for Volvo Finance
and shall not commingle, sell, assign or otherwise dispose of all or any part of
such proceeds without the prior consent of Volvo Finance. Borrower hereby
accepts the trust so created. Borrower may not lease, exchange or sell on
consignment any Financed Products without the prior consent of Volvo Finance.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
Borrower represents, warrants and covenants to Volvo Finance as follows:
6.1 Payment or Performance of Obligations -- Borrower shall pay when due,
and shall timely observe or perform, all Obligations in accordance with the
terms thereof. The obligation of Borrower to pay, observe or perform any
Obligation shall not be affected by any offset, counterclaim or occurrence
whatsoever, whether against Volvo Finance or any other Person, including any
damage to, loss or destruction of, or defect in, any Collateral.
6.2 Maintenance of Collateral -- Borrower shall lawfully possess and own
the Collateral free of all taxes, liens, security interests, encumbrances and
charges of any kind other than the Security Interest. If Borrower does not
secure the release or discharge of all such taxes, liens, security interests,
encumbrances and charges to the satisfaction of Volvo Finance, then Volvo
Finance may, but shall have no obligation to, pay any sums necessary to effect
the release or discharge thereof, the sums so paid to be reimbursed hereunder by
Borrower upon demand. Borrower shall maintain and preserve the Collateral in
good order and condition; shall not permit the Collateral to be wasted or
destroyed; and shall otherwise protect the Security Interest. Borrower shall not
use or operate, or permit the use or operation of, the Collateral for
demonstration, hire or otherwise without the prior consent of Volvo Finance in
each case; nor shall Borrower in any event use, or permit the use of, the
Collateral illegally or improperly. If the Collateral shall not, in the opinion
of Volvo Finance, be maintained in good order and condition, Volvo Finance may,
without prejudice to any other rights, give notice to Borrower to put the
Collateral in good order and condition, and if Borrower does not, within 10 days
from the date of such notice, comply with the requirements therein set forth,
then Volvo Finance may cause the Collateral (or any part thereof) to be put in
good order and condition, the expense thereof to be paid or reimbursed by
Borrower upon demand. Borrower shall immediately notify Volvo Finance of any
loss of or damage to, or material diminution in value of (including diminution
in value through demonstration to prospective customers) or any occurrence which
adversely affects the value of, the Collateral. If Volvo Finance, in its sole
discretion, determines that there has been any such loss, damage or diminution
in value, then Borrower shall, upon demand, pay to Volvo Finance such amount as
Volvo Finance shall have determined represents such loss, damage or diminution
in value.
6.3 Location of Collateral -- Except for removal pursuant to a sale of
Collateral in accordance with this Agreement, Borrower shall keep the Collateral
in its possession or control at one of Borrower's places of business specified
in this Agreement and consented to in advance by Volvo Finance, unless Volvo
Finance consents in advance to removal of such Collateral to another location.
6.4 Taxes -- Borrower shall be liable for all taxes, fees and assessments
related to the Collateral, or the use thereof, and shall indemnify and defend
Volvo Finance against and hold it harmless from any and all losses, liabilities,
claims, damages or expenses on account of taxes, fees or assessments, including
penalties and interest levied or based on this Agreement, the Collateral or the
use or operation thereof, excepting only franchise taxes directly applicable to
Volvo Finance or taxes measured by the net income of Volvo Finance.
6.5 Liability and Insurance -- Borrower shall indemnify Volvo Finance and
its directors, officers, employees and agents against, and hold each of them
harmless from, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of bodily injury, sickness
or disease, including death, sustained by any Person, injury to or the
destruction of property, and any and all other losses, accidents, claims, suits
and expenses whatsoever and howsoever arising or incurred in the course of the
business activities carried on by Borrower or caused by or resulting from the
actions or omissions of Borrower or caused by or resulting from the Collateral.
Borrower assumes all risk of physical loss or damage to the Collateral and shall
provide and maintain insurance evidencing fire, extended coverage perils,
vandalism and malicious mischief, collision and theft insurance in an amount not
less than the full insurable value of the Collateral. Volvo Finance shall be
named in such insurance as a loss payee, as its interest may appear. Borrower,
at its own expense, shall also carry public liability insurance in such form and
amounts as Volvo Finance may reasonably require from time to time. Such
liability insurance shall name Volvo Finance as an additional insured and shall
have bodily injury and property damage limits of not less than the amounts
provided in the Financing Plan. Insurers hereunder shall be subject to Volvo
Finance's prior approval. Borrower shall furnish to Volvo Finance the original
or complete copies of the insurance policies evidencing the insurance coverage
required herein, which policies shall require that notice be given to Volvo
Finance no less than 30 days prior to cancellation. If Borrower does not secure
any or all of the insurance required to be carried hereunder, Volvo Finance may,
but shall have no obligation to, purchase such insurance, the cost thereof to be
reimbursed hereunder by Borrower upon demand. Borrower hereby appoints Volvo
Finance its attorney-in-fact to make adjustments of all insurance losses, to
sign all applications, receipts, releases and other papers necessary for the
collection of any such loss and any return of unearned premium, to execute
proofs of loss, to make settlements and to indorse and collect any check or
other item payable to Borrower issued in connection therewith.
6.6 Records -- Borrower shall maintain at its chief executive office
specified above full and complete records showing the location of each Financed
Product item at all times and maintain at such office accurate and complete
records of all accounts, chattel paper, cash and other proceeds of the
Collateral. Such records shall be available at all times to Volvo Finance or its
duly authorized representative for purposes of inspection, and Volvo Finance and
its representatives shall have free access at all reasonable times to inspect
any item of Collateral. Borrower agrees that Volvo Finance may inspect or secure
from any manufacturer or seller of any Products to Borrower or from any
franchisor related to such Products at any time copies of all financial
statements and other financial data, and all other statements, reports, records
and other information that Borrower previously has furnished or may hereafter
furnish, to any such Person, or that any such Person may have prepared or
obtained, or may hereafter prepare or obtain, in connection with any audit or
review of Borrower's business by any such Person, and this Agreement shall
constitute authorization to all such Persons to release the foregoing to Volvo
Finance. Borrower hereby authorizes Volvo Finance to furnish to any such Person
at any time copies of all financial statements and other financial data, and all
other statements, reports, records and other information that Borrower
previously has furnished, or may hereafter furnish, to Volvo Finance or that
Volvo Finance may have prepared or obtained, or may hereafter prepare or obtain,
in connection with any audit or review of Borrower's business by Volvo Finance.
6.7 Financial Statements -- Borrower shall furnish to Volvo Finance as soon
as available, and in any event within 90 days after the end of each fiscal year,
a copy of the financial statements of Borrower and each of its affiliates
(including balance sheets and statements of income, retained earnings and cash
flows) for such year, prepared in accordance with generally accepted accounting
principles consistently applied and, except as otherwise consented to in advance
by Volvo Finance, audited and certified by an independent certified public
accountant in accordance with generally accepted auditing standards. Borrower
shall instruct its independent auditors to provide to Volvo Finance the
financial statements specified in the preceding sentence with such auditor's
report. Borrower shall also furnish such other periodic financial statements and
reports as shall be requested by Volvo Finance. Borrower shall furnish to Volvo
Finance, at the time it furnishes each set of financial statements pursuant to
this Section 6.7, a certificate of a senior financial officer of Borrower to the
effect that no default has occurred and is continuing under this Agreement or,
if any default has occurred and is continuing, describing the same in reasonable
detail and describing the action that Borrower has taken and proposes to take
with respect thereto. Borrower further agrees to notify Volvo Finance
immediately of any material change in the financial condition, operations,
business or prospects of Borrower or in any information relating thereto
previously delivered to Volvo Finance.
6.8 Security Interest -- Borrower shall give, sign, deliver, file or record
or use its best efforts to procure, and pay all costs connected with, any
financing statement, release, termination, subordination, lien waiver, notice,
instrument, agreement or other document that may be necessary or desirable (in
the judgment of Volvo Finance) to create, preserve, perfect or validate the
Security Interest or its priority or to enable Volvo Finance to exercise and
enforce its rights hereunder with respect to the Security Interest, including
causing any or all of the Collateral or any security interest to be transferred
of record into the name of Volvo Finance or its nominee or assignee and
obtaining assignments, releases, termination statements or subordination
agreements in favor of Volvo Finance from such Persons as Volvo Finance may
specify. Borrower authorizes Volvo Finance to sign and file on behalf of
Borrower any financing statement or amendment thereof necessary to perfect the
Security Interest of Volvo Finance or its nominee or assignee. If a certificate
of title or ownership to a Financed Product is permitted or required by law, or
if a manufacturer's statement of origin is in effect with respect to a Financed
Product, Borrower shall, upon Volvo Finance's request, obtain the same and
deliver to Volvo Finance originals of the certificate of title or ownership,
together with the manufacturer's statement of origin, if any, with Volvo Finance
or its nominee or assignee listed as lienholder. Without the prior consent of
Volvo Finance, Borrower shall not file or suffer to be on file, or authorize or
permit to be filed or to be on file, in any jurisdiction, any financing
statement or like document with respect to the Collateral in which Volvo Finance
or its nominee or assignee is not named as the sole secured party.
6.9 Notification of Account Debtors -- Borrower agrees that at any time or
times Volvo Finance may notify any account debtor, any Person obligated on an
instrument or any organization with whom a deposit account of Borrower is
maintained of the interest of Volvo Finance in an account, chattel paper,
general intangible, instrument or deposit account of Borrower. Borrower shall,
at the request of Volvo Finance, sign any such notifications or, if Borrower is
in default under this Agreement, any other notifications to account debtors,
obligors on instruments or organizations with whom deposit accounts of Borrower
are maintained.
6.10 Name or Location Change -- Borrower has notified Volvo Finance of all
names and addresses under or at which Borrower has conducted business in the
period commencing six years prior to the execution of this Agreement. Borrower
shall notify Volvo Finance of any proposed change in its name, identity,
ownership or structure (including, if Borrower is a partnership, any proposed or
actual change in the partners comprising the partnership) not less than 30 days
before such change is effective. Borrower shall also promptly notify Volvo
Finance in advance of any proposed change of the location of its chief executive
office, its place of business and any proposed additional places of business. If
any such name or location change would, in the opinion of Volvo Finance,
adversely affect the interest of Volvo Finance under this Agreement or
otherwise, then Borrower shall take such action as is specified by Volvo Finance
(including signing and filing any financing statements evidencing such change).
6.11 Fundamental Changes -- Borrower agrees that during the term of this
Agreement it will maintain its existence, will continue to be in good standing
in all states in which Borrower conducts business, will not dissolve or
otherwise dispose of (in one transaction or a series of transactions) all or
substantially all of its assets (other than sales of inventory in the ordinary
course of Borrower's business and sales of obsolete or worn out tools or
equipment no longer used or useful in Borrower's business) and will not
consolidate with or merge into another Person or permit one or more other
Persons to consolidate with or merge into it; provided that Borrower may,
without violating the covenant contained in this Section 6.11, permit one or
more Persons merge into it, consolidate with or merge into another Person, or
sell or otherwise transfer to another Person all or substantially all of its
assets as an entirety (and, in the latter two instances, thereafter dissolve),
provided that (i) the surviving, resulting or transferee Person, as the case may
be, shall have a net worth immediately subsequent to such consolidation, merger
or transfer at least equal to that of Borrower immediately prior to such
consolidation, merger or transfer; (ii) no default shall have occurred and be
continuing under any Financing Document immediately prior to, as a result of or
immediately after such consolidation, merger or transfer; and (iii) if the
surviving, resulting or transferee Person, as the case may be, is not the
Borrower, then such Person shall be a Person organized and existing under one of
the States of the United States of America (or a resident thereof, in the case
of an individual), shall be qualified to do business in all states in which such
Person conducts business and shall assume all of the obligations of Borrower
under this Agreement and confirm Volvo Finance's prior perfected Security
Interest. Subject to the foregoing, if Borrower is a partnership, all
Obligations shall remain in force and shall apply to and be binding upon the
partners at the time this Agreement is signed and any Persons who subsequently
become partners in Borrower, notwithstanding any changes in the Persons
comprising the partnership. The term "Borrower" shall include any alternate or
successor partnerships, corporations or other Persons.
6.12 No Violation or Breach -- None of the execution and delivery of this
Agreement or any promissory note or other document to which Borrower is a party
delivered in connection herewith, the consummation of the transactions herein or
therein contemplated or compliance with the terms and provisions hereof or
thereof will conflict with or result in a breach of, or require any consent
under, the charter or by-laws of Borrower, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or governmental Person, or
any agreement or document to which Borrower is a party or by which it is bound
or to which it or its property is subject, or constitute a default under any
such agreement or document, or result in the creation or imposition of any
mortgage, lien, encumbrance or charge against, pledge of, or interest in, any of
the revenues or property of Borrower pursuant to the terms of any such agreement
or document.
6.13 Transactions with Affiliates -- Without the prior consent of Volvo
Finance, Borrower shall not sell, transfer, assign or otherwise convey any item
of Collateral to any Person which controls, is controlled by, or is under common
control with Borrower.
6.14 Litigation -- Except as disclosed to Volvo Finance in writing prior to
the date of this Agreement, there are not now pending or (to the knowledge of
Borrower) threatened, nor have there been during the last three years, any legal
or arbitral proceedings or any proceedings by or before any governmental Person,
against Borrower which, if adversely determined, could have a material adverse
effect on the financial condition, operations, business, properties or prospects
of Borrower. Borrower shall promptly give to Volvo Finance notice of all legal
or arbitral proceedings, and of all proceedings by or before any governmental
Person, and any material development in respect of any such proceeding affecting
Borrower, except proceedings which in the aggregate, if adversely determined,
could not have a material adverse effect on the financial condition, operations,
business or prospects of Borrower.
6.15 Full Disclosure; Reliance -- All information heretofore furnished by
Borrower to Volvo Finance in connection with this Agreement or any transaction
contemplated hereby was, and all such information hereafter furnished by
Borrower to Volvo Finance will be, true and accurate in every material respect
on the date as of which such information is or was stated or certified. Borrower
has disclosed to Volvo Finance in writing any and all facts regarding Borrower
which are known to Borrower or any of its affiliates or agents and which
materially and adversely affect or may so affect the financial condition,
operations, business, properties or prospects of Borrower. Borrower acknowledges
and agrees that the foregoing representations and warranties and all other
representations, warranties, agreements, covenants and acknowledgments in this
Agreement are being relied upon by Volvo Finance in entering into this
Agreement. Each such representation, warranty, agreement, covenant and
acknowledgment shall survive the execution of this Agreement, the execution and
delivery of all documents contemplated herein and shall inure to the benefit of
Volvo Finance and its successors in interest and assigns.
7. DEFAULT.
Borrower shall be in default under this Agreement upon happening of any of
the following events:
7.1 Borrower shall fail to pay when due any principal of or interest on any
Obligation or any other amount payable by it hereunder or under any promissory
note made or indorsed by Borrower in connection herewith.
7.2 Borrower shall fail timely to perform or observe any other Obligation
in accordance with its terms.
7.3 Termination of or failure to renew any sales, franchise or similar
agreement to which Borrower is a party, whether by act of Borrower, by act of
any other party to such agreement or for any other reason.
7.4 Borrower's death or incapacity (if an individual) or dissolution or
termination as a going concern.
7.5 Borrower shall admit in writing its inability to, or be generally
unable to, pay its debts as such debts become due.
7.6 A proceeding or case shall be commenced, with or without the
application or consent of Borrower, or Borrower shall otherwise apply, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts; (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of Borrower or of all or any
substantial part of its assets; (iii) relief in respect of Borrower under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; or (iv) Borrower shall take any action for
the purpose of effecting any of the foregoing.
7.7 Any representation, warranty or certification made or deemed made
herein (or in any modification or supplement hereto) by Borrower, or any
certificate furnished to Volvo Finance pursuant to the provisions hereof (or
thereof), shall prove to have been false or misleading as of the time made or
furnished in any material respect.
7.8 Breach by Borrower of any other term, condition or covenant in this
Agreement or of any term, condition or covenant in (i) any other agreement now
or hereafter entered into between Borrower and Volvo Finance, including any
Retail Operating Agreement between Borrower and Volvo Finance, or (ii) any other
Financing Document.
8. REMEDIES.
8.1 General -- If any of the events of default specified herein shall
occur, all Obligations due or to become due shall automatically accelerate and
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower,
and Volvo Finance may exercise and shall have any and all rights and remedies
accorded to it by the Code. In addition, Volvo Finance may require Borrower to
assemble the Collateral and make it available to Volvo Finance at a reasonably
convenient place designated by Volvo Finance. Volvo Finance may also, without
notice or demand and with or without legal process or prior judicial hearing,
take immediate possession of the Collateral, and Borrower waives any right to
notice, demand, legal process or prior judicial hearing. Volvo Finance may take
possession of the Collateral wherever found and Borrower hereby authorizes,
empowers and licenses Volvo Finance, its agents and representatives to enter
upon the premises wherever such property may be located and to remove such
property. In connection with the enforcement of the Security Interest, Volvo
Finance may take possession of any goods installed in, affixed to or otherwise
in or upon the Collateral at the time of repossession, and hold such goods for
Borrower at Borrower's risk without any liability on the part of Volvo Finance.
Volvo Finance may sell or lease any repossessed Collateral at public or private
sale or lease in its sole discretion. Borrower agrees that the sale by Volvo
Finance of any new or unused property repossessed by Volvo Finance to the
manufacturer or seller thereof, or to any Person designated by such manufacturer
or seller, at the invoice cost thereof to Borrower less any restocking, handling
and other fees charged by such Person, any credits granted to Borrower with
respect thereto and reasonable expenses and costs of transportation and
reconditioning, shall be deemed to be a commercially reasonable means of
disposing of such property. Borrower further agrees that if Volvo Finance shall
solicit bids from three or more other Retailers in the type of property
repossessed by Volvo Finance hereunder, then any sale by Volvo Finance of such
property in bulk or in parcels to the bidder submitting the highest cash bid
therefor also shall be deemed to be a commercially reasonable means of disposing
of such property. Borrower understands and agrees, however, that such means of
disposal shall not be exclusive and that Volvo Finance shall have the right to
dispose of any property repossessed hereunder by any commercially reasonable
means. Borrower further understands and agrees that if the proceeds of sale,
collection or other realization of or upon the Collateral pursuant to this
Article 8 are insufficient to cover the costs and expenses of such realization
and the payment in full of the Obligations, Borrower shall remain liable for any
deficiency. Borrower agrees that the notice sent to it by any of the methods
provided in Section 10.1 hereof at least five days before the action or
occurrence described in such notice shall constitute reasonable notice under
applicable law; provided, however, that if the circumstances reasonably indicate
that a shorter period of notice is necessary, such shorter period shall
constitute reasonable notice under applicable law. Borrower shall pay Volvo
Finance, on demand, any and all expenses, including reasonable attorneys' fees
and court costs, incurred or paid by Volvo Finance in protecting or enforcing
any of its rights or remedies hereunder and in protecting, insuring, storing and
readying for disposition any Collateral. Rights and remedies provided for in
this Agreement are cumulative and may be exercised or enforced successively or
concurrently, and shall not limit rights or remedies otherwise available to
Volvo Finance under this Agreement, any other agreement or applicable law.
8.2 Interim Remedies -- Without limiting any other rights or remedies of
Volvo Finance, in the event Borrower shall fail to sell a Financed Product or
receive, hold and remit the proceeds of a Financed Product in accordance with
this Agreement or any other Financing Document, Volvo Finance may, but shall
have no obligation to, station an employee or agent at Borrower's place of
business to monitor the Collateral and collect payments due under this
Agreement. Borrower shall cooperate with all Volvo Finance's requests in
connection with such monitoring and collection. In addition, if Borrower shall
fail to abide by and adhere to any Financing Document in any respect, Volvo
Finance may, in its sole judgment, suspend or terminate any financing or
commitment to provide financing under this Agreement, the other Financing
Documents or otherwise.
9. APPLICATION OF PAYMENTS; OFFSET.
Borrower waives any right it may have to direct the application of any
payments made by it to Volvo Finance, and Volvo Finance may, at its option, set
off against and deduct any Obligation of Borrower from any or all sums owed by
it to Borrower.
10. GENERAL.
10.1 Notices -- All notices and other communications provided for in this
Agreement (including any modifications of, or waivers or consents under, this
Agreement) shall be in writing and shall be given or made in person, by a
traceable, national overnight mail service or by United States certified or
registered mail, return receipt requested, postage prepaid, to the intended
recipient at any address for such Person set forth above, or, as to any party,
at such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, any such
communication shall be deemed to have been duly given, in the case of personal
delivery, when it is delivered, in the case of certified or registered mail, on
the date stated in the return receipt as the date of delivery, or, in the case
of all other communications, when it is delivered to the national overnight mail
service.
10.2 Amendment; Waivers -- Except as expressly set forth herein, this
Agreement may only be amended or modified by a document signed by Borrower and
Volvo Finance. No failure on the part of Volvo Finance to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or any other Financing Document shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or any other Financing Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
10.3 Assignment -- This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Borrower and Volvo Finance
(provided, however, that except as expressly set forth herein Borrower shall not
assign or transfer any right, including any right to credit or advances from
Volvo Finance, or delegate any obligation under this Agreement without the prior
consent of Volvo Finance). Any or all rights of Volvo Finance pursuant to the
Financing Documents or the Obligations may be freely transferred or assigned by
Volvo Finance, and upon such transfer or assignment all references to Volvo
Finance in the Financing Documents or the Obligations shall include Volvo
Finance's transferee or assignee to the extent of such assignment or transfer.
10.4 Disclaimer of Warranty -- VOLVO FINANCE ASSUMES NO RESPONSIBILITY FOR
AND MAKES NO REPRESENTATION OR WARRANTY AS TO THE EXISTENCE, CHARACTER, QUALITY,
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, QUANTITY, VALUE OR DELIVERY OF
ANY COLLATERAL. All such matters shall be the exclusive concern and
responsibility of Borrower and/or the seller of any Collateral to Borrower, as
the case may be. Borrower shall not be relieved of its Obligations to any extent
whatever by reason of the failure of all or part of the Collateral to conform to
warranty or to be free of defect, by reason of any deficiency therein of value,
quality or quantity, or by reason of the loss, theft or destruction of all or
any part of the Collateral.
10.5 Applicable Law -- THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW JERSEY. BORROWER HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY AND OF ANY NEW JERSEY STATE COURT FOR THE PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF BORROWER AND VOLVO FINANCE HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Volvo Finance in order
to carry out the intentions of the parties hereto as nearly as may be possible
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
or any other provision in any other jurisdiction.
10.6 Effective Date; Prior Agreements -- This Agreement shall take effect
on the date first above written and shall govern the relationship of the parties
in respect to its subject matter after such date. If Borrower and Volvo Finance
have previously signed a security agreement or related financing agreements,
such agreements shall not be terminated by this Agreement and the security
interest and other obligations of Borrower under such agreements shall be deemed
to have been continued in this Agreement. In the event of any conflict or
inconsistency between this Agreement and any such prior agreements, this
Agreement shall control from and after its effective date.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
VOLVO FINANCE NORTH AMERICA, INC.
By
Title
BORROWER: First Choice Stuart 2, Inc.
By: /s/ James Neal Hutchinson, Jr.
James Neal Hutchinson, Jr.
Title: Vice President
EXHIBIT 10.70
AUTHORIZED RETAILER AGREEMENT
This Authorized Retailer Agreement ("Agreement") is entered into this 22nd day
of August, 1997, by and between Volvo Cars of North America, Inc., a Delaware
corporation with its principal place of business at 7 Volvo Drive, Rockleigh,
New Jersey, 07647 ("the Company") and First Choice Stuart 2, Inc., d/b/a Stuart
Volvo ("Retailer"), having its address at 4205 South Federal Highway, Stuart,
Florida, 34997. This Agreement delineates the rights and responsibilities of the
Company and Retailer, who each believe that the goals described in the Preamble
to this Agreement can be achieved while providing the Company and Retailer with
reasonable profits, and providing Volvo Customers with a superior ownership
experience.
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration referenced herein, the sufficiency of which is hereby
acknowledged, it is mutually agreed by the parties as follows:
PREAMBLE
A. MISSION
The mission of Volvo Cars of North America, Inc., and its Retailer Partners is
to maximize the potential of Volvo products, by identifying and fulfilling
clearly defined customer needs and demands.
This will be achieved by:
Providing an ownership experience regarded as superior in the industry.
Developing and maintaining financially strong and professional Retailers
that are either exclusive, or have Volvo products as their primary
business.
Developing a superior organization where employees strive for excellence
based on individual motivation, and TQM oriented leadership; and
Exploiting Volvo virtues created by leadership in the areas of quality,
safety and environmental care.
VCNA MISSION STATEMENT
January, 1995
B. VISION
This Agreement is the very foundation of the partnership between Volvo Cars of
North America, Inc. and its Retailers. It has been carefully and diligently
constructed by a team of equals, representing both Partners in the spirit of
fairness and cooperation.
It is upon this foundation we will strive to build a preeminent organization
dedicated to fulfilling our joint vision: A seamless manufacturer/retailer
commercial entity created and maintained by:
Sharing in risks and rewards.
Building of financial strength.
Common "ownership" of the Volvo brand.
Maximizing the potential of Volvo products and delivering a superior
ownership experience.
Consistent with our vision, we mutually agree to conduct our respective
businesses with the highest level of integrity, thereby creating a strong
perception of seamlessness in the eyes of our customers.
C. PRINCIPLES OF OUR RELATIONSHIP
Both Partners have the right to expect from each other the mutual commitment to
and belief in the following Principles:
That the pursuit of the Mission Statement and the Vision is a joint
responsibility.
That the overall direction of the development of the name, trademarks and
reputation of "Volvo" is a joint responsibility.
That rewards be shared in relation to risks assumed. That the Volvo brand
be further protected and developed.
That people are important. That unique customer-value be provided.
That disputes be resolved in a fair and equitable manner. That information
be shared timely and accurately.
That honesty and integrity are fundamental to our conduct of business.
That the commitment to and fulfillment of these principles is the
foundation upon which the right to represent Volvo is awarded.
D. RETAILER PARTICIPATION
The strength of this Agreement is the mutuality principle. It has been
deliberately constructed to protect the interests of both Partners equally, for
it is our mutual interests which make us strong.
The Company and Retailer agree that their interests must be aligned to attain
these goals and achieve long term success in the automotive market. These
interests include, without limitation, the profitable marketing, promoting,
selling and servicing of Company Products while building superior levels of
customer loyalty and satisfaction with the Company and Retailer.
In consideration of Retailers' commitments, and to ensure a mutually
satisfactory relationship between Company and its Retailers, the Company has
established mechanisms for Retailer participation in the decision-making process
on matters significantly affecting Retailer's business. Retailer involvement is
provided through six principal mechanisms: the Executive Committee, Regional
Operating Teams, Retailer Action Teams, Performance Enhancement Teams, the
Market Representation Panel, and the Mediation Panel.
A. EXECUTIVE COMMITTEE
Guided by the Mission Statement, Vision, and the Principles, the Executive
Committee is a Volvo policy team whose primary focus is the future value of our
business.
Four Retailers participate along with Company executives from various
disciplines. Retailer participants must have previously served as members of a
Regional Operating Team, are selected by the Executive Committee, and serve for
staggered two-year terms.
B. REGIONAL OPERATING TEAMS
The Regional Operating Teams are comprised of an equal number of Retailers and
Company representatives. Regional Operating Teams deal with regional and local
business issues in areas such as advertising and market support.
C. RETAILER ACTION TEAMS
The Executive Committee may establish Retailer Action Teams as necessary, to
review certain specific business issues. The Executive Committee will determine
the membership of each Retailer Action Team and the scope of its assignment.
D. PERFORMANCE ENHANCEMENT TEAMS
Performance Enhancement Teams are comprised of 8-14 Retailers and two Company
representatives. These Retailer-managed teams focus on best practices sharing
and team problem solving.
E. MARKET REPRESENTATION PANEL
The Market Representation Panel, consisting of three Retailers (one of whom is
from the Executive Committee), and three Company representatives (of which one
is from the Executive Committee) review and revise the criteria used by the
Company for awarding the Retailer Agreement.
F. MEDIATION PANEL
The Mediation Panel is designed to help resolve certain disputes which may arise
between a Retailer and the Company, and is comprised of two Retailers, two
Company representatives, and one member chosen by the Mediation Panel.
Each of the above committees, teams, and panels represent each Partner's belief
in the mutuality principle and commitment to the future of the Volvo brand.
I. BUSINESS RELATIONSHIP
The Partners agree that a climate of mutual trust, respect, and shared
information is fundamental to the joint pursuit of a shared vision, which is the
foundation of this Agreement.
1. TERM OF AGREEMENT
This Agreement is for a five-year term, beginning on the date it is signed by a
Company Officer, unless the parties mutually terminate in writing, or it is
terminated as otherwise provided herein.
If Retailer is not in material breach of this Agreement when it expires, the
Company will, either offer Retailer the then current Authorized Retailer
Agreement, or renew or extend this Agreement. The Company agrees to notify
Retailer in writing, no later than one (1) year prior to the end of the term of
this Agreement, in the event that the Company does not intend to renew or extend
this Agreement, or offer Retailer the then current Authorized Retailer
Agreement.
The term of this Agreement may be extended only by written agreement between the
parties, signed by an Officer of the Company. If the parties continue their
business relationship after this Agreement expires, the relationship will be on
a month-to-month basis only, and all other terms of this Agreement will be
applicable.
2. OWNERSHIP
A. Principal Owners.
This Agreement is in the nature of a personal services contract between the
Company and Retailer. The Company enters into this Agreement in express reliance
on, and in consideration of, the expertise, reputation, character, integrity,
ability, representations and professional and personal qualifications of the
Principal Owner(s) listed below.
In addition, the Company relies upon the fact that at all times during this
Agreement's term, the individuals identified below will remain the Principal
Owner(s) of Retailer, and that each is committed to achieving the goals
described in the Preamble to this Agreement, and understands and agrees to abide
by the terms and conditions of this Agreement:
PERCENTAGE OF
NAME RESIDENTIAL ADDRESS OWNERSHIP INTEREST
1. Smart Choice Automotive 5200 S. Washington Avenue 80%
Group, Inc. Titusville, FL 32780
2. [intentionally left blank]
3. Joseph Alvarez 386 Carmel Drive 20%
Melbourne, FL 32940
4.
Retailer represents and agrees that the person(s) named as Principal Owner(s)
above, and only those person(s), will exercise the ownership, control and/or
management of Retailer and that any change in ownership, control or management
shall be made only in accordance with, and subject to, the terms and conditions
of this Agreement.
B. Investors.
The following person(s), ( "Investor(s)"), also has an ownership interest in
Retailer:
PERCENTAGE OF
NAME RESIDENTIAL ADDRESS OWNERSHIP INTEREST
Same as Section 2A.
Retailer represents and agrees that the person(s) named as investors above will
not exercise control and/or management of Retailer's operations.
3. MANAGEMENT
The Company and Retailer agree that Retailer's success under this Agreement
depends upon dedicated, full time, professional, qualified, on-site management.
The Company and Retailer agree that if no Principal Owner identified in Section
2A, either: (i) maintains his or her principal place of business at the Retailer
Facility; or (ii) is involved in Retailer Operations on a full time, on-site,
day-to-day basis, except in those circumstances when Owner operates more than
one Retail Facility in the same Area of Responsibility or Market Area, that full
managerial authority shall be granted to the person named below (the "General
Manager"), and that this General Manager shall devote his or her personal
services on a full time, on-site, day-to-day basis to Retailer's management and
operation. The Company enters into this Agreement in reliance on, and in
consideration of, Retailer's representation that: (i) the General Manager will
possess the expertise, reputation, character, integrity, ability, and
professional and personal qualifications to achieve the goals and objectives of
this Agreement; (ii) he or she is committed to achieving the goals described in
the Preamble to this Agreement; and (iii) he or she understands and agrees to
abide by the terms and conditions of this Agreement.
Retailer agrees that the General Manager identified in this Section 3 shall have
an ownership interest in Retailer of at least twenty percent (20%).
PERCENTAGE OF
NAME RESIDENTIAL ADDRESS OWNERSHIP INTEREST
Joseph Alvarez 386 Carmel Drive, 20%
Melbourne, FL 32940
4. CHANGES IN OWNERSHIP OR MANAGEMENT
Because this Agreement is in the nature of a personal services contract, and the
Company has entered into this Agreement in reliance on, and in consideration of,
the expertise, reputation, character, integrity, ability, representations and
professional and personal qualifications of the Principal Owners, Investors and
the General Manager identified in Sections 2 and 3 above, if Retailer desires to
make any change in: (i) Retailer's ownership, including, but not limited to, any
attempt to conduct a public offering of any of Retailer's shares, regardless of
the number or percentage of shares; or (ii) the relative shares among the
Principal Owners or other investors referenced in 2B, Retailer agrees to obtain
the Company's written approval, which shall not be unreasonably withheld. The
Company recognizes that Retailer may wish to make a public offering of
Retailer's shares, and that such a proposed offering of Retailer's shares shall
not constitute the sole grounds upon which Company may reasonably withhold
approval under this Section.
Retailer agrees that the Company's knowledge of any change in ownership interest
or management of Retailer will not be a waiver of the Company's rights and/or
Retailer's obligations under this Section unless the Company has approved the
change in writing.
5. LOCATION
In consideration of the Company entering into this Agreement, Retailer agrees to
at all times establish and maintain Retailer Facilities and Operations in
accordance with Company Policies, at only the following locations):
Location I Location 2 Location3
A. New Car Sales 4205 South Federal Highway
& Showroom Stuart, Florida 34997
B. Service, 4205 South Federal Highway
Parts & Stuart, Florida 34997
Accessories
C.Volvo Select 4205 South Federal Highway
Pre Owned Vehicles Stuart, Florida 34997
Display
D. Administrative 4205 South Federal Highway
Support Activities Stuart, Florida 34997
6. FACILITIES
Retailer and the Company agree that appropriate Retailer Facilities are
necessary to achieve the goals described in the Preamble to this Agreement and
to provide Volvo Customers with a superior ownership experience. Retailer agrees
to operate its Retailer Facilities in accordance with this Agreement and the
then current Retailer Facilities Guide. If Retailer operates multiple sales
and/or service facilities, the terms of this Agreement will apply to all
Retailer Facilities.
A. Location.
Retailer will provide Retailer Facilities that: (i) will enable Retailer to
perform its responsibilities under this Agreement; (ii) are satisfactory in
space, appearance, layout, equipment, and signage; and (iii) are in accordance
with the then current Retailer Facilities Guide. Retailer will conduct its
Retailer Operations only from the location(s) identified in Section 5.
B. Changes and Additions.
Retailer will not move, relocate, or substantially change the usage of Retailer
Facilities, nor will Retailer, Principal Owner, Investor, or General Manager
directly or indirectly establish or operate any other locations or facilities
for any of the Retailer Operations (or similar operations) contemplated by this
Agreement without the Company's prior written consent, which will not be
unreasonably withheld. Retailer agrees that all new Retailer Facilities shall
conform to architecture, design and style described in the then current Retailer
Facilities Guide.
The Company and Retailer agree that any changes in Retailer Facilities will be
reflected in a written addendum to this Agreement. Retailer will promptly
correct any deficiencies in Retailer's performance of its responsibilities under
this Section 6.
Retailer acknowledges that the addition and maintenance of another line of
vehicles or another automobile dealership operating simultaneously with its
Retailer Operations at Retailer Facilities could adversely affect Retailer's
sales and service performance with respect to Company Products. Accordingly,
Retailer agrees to: (i) notify the Company in writing within ten (10) days of
its execution of an agreement or letter of intent to add a new line of vehicles
to be sold or serviced at Retailer Facilities; and (ii) obtain the Company's
written approval which will not be unreasonably withheld.
C. Development of Market Studies.
The Company may, from time to time, conduct studies of various geographic areas
to evaluate market conditions. These market studies may, where appropriate,
evaluate factors including geographical characteristics, consumer shopping
patterns, existence of competitive automobile dealerships, sales opportunities
and service requirements of the geographic area in which Retailer's Area of
Responsibility or Market Area is located, trends in marketing conditions,
current and prospective trends in population, income, occupation, and other
demographic characteristics which the Company may determine to be relevant.
Based upon such studies, the Company will make recommendations concerning the
market and Retailer Facilities. The Company will give Retailer prior notice of
its intention to conduct a study which includes the geographic area in which
Retailer's Area of Responsibility or Market Area is located. Within 30 days of
notice, Retailer should provide the Company with all information Retailer
believes relevant to the market study.
D. Evaluation of Retailer Facilities and Location.
The Company will periodically evaluate Retailer's performance of its
responsibilities under this Section 6. In making evaluations, the Company will
consider: (i) the land and building space Retailer actually dedicates to its
performance under this Agreement; (ii) the then current Retailer Facilities
Guide; (iii) the appearance, condition and layout of Retailer Facilities; (iv)
the ability of Retailer Facilities to satisfy the sales opportunities and
service requirements of the Area of Responsibility or Market Area; and (v) other
factors that may directly relate to Retailer's performance of its
responsibilities under this Agreement. Evaluations prepared pursuant to this
Section 6 will be discussed with and provided to Retailer, and Retailer may
comment in writing within thirty
(30) days of its receipt of an evaluation.
7. CAPITALIZATION OF RETAILER
Retailer agrees that its ability to market, promote, sell and service Company
Vehicles and provide Volvo customers with a superior ownership experience is
dependent in part upon Retailer maintaining adequate working capital to meet its
obligations under its Business Plan. The Company will provide Retailer with a
Working Capital Guide to assist Retailer in determining its working capital
requirements. Retailer agrees that the Company may, upon prior written notice,
reasonably modify the Working Capital Guide.
8. DISPOSITION OF BUSINESS BY RETAILER
Retailer and the Company agree that to achieve the goals described in the
Preamble to this Agreement, each Authorized Retailer shall be owned and operated
by parties committed to achieving these same goals.
Retailer agrees that this Agreement is in the nature of a personal services
contract. While the Company acknowledges that Retailer has the right to sell or
otherwise transfer the stock and/or assets of the dealership. Retailer
acknowledges and agrees that this right is subject to this Section 8.
A. General.
The Company recognizes Retailer's opportunity to sell or otherwise dispose of
all or substantially all of Retailer's assets (including goodwill) related to
Retailer's obligations or performance under this Agreement at any time and on
such terms and conditions as Retailer may decide to accept. Any transfer or sale
of any stock of Retailer, or a transfer and/or sale of a majority of the assets
of Retailer to any person or entity will be subject to the prior written
approval of the Company. Retailer agrees to provide the Company with all
documents reasonably necessary for the Company's evaluation of any transfer of
Retailer's stock or assets. Retailer also agrees that the time period for the
Company's review and evaluation of any transfer of stock or assets shall not
begin until all necessary documents have been submitted to the Company. Subject
to the Company's rights in Section 8B below, the Company will not unreasonably
withhold consent to enter into a new agreement with a buyer on terms
substantially the same as the provisions of this Agreement, or the then current
Authorized Retailer Agreement. Retailer agrees that if, in the Company's
business judgment, a sale may adversely affect the Company's ability to achieve
its goals described in the Preamble to this Agreement, or the ability of the
proposed retailer to meet the obligations under the then current Authorized
Retailer Agreement, the Company may reasonably withhold approval.
B. Right of First Refusal.
(i) Request to Transfer.
If Retailer submits a written request to transfer stock and/or assets in
Retailer as described in this Section 8, the Company shall have the right of
first refusal or option to purchase Retailer's stock and/or assets. The Company
must notify Retailer of its election to exercise such right within thirty (30)
days after receiving Retailer's complete written proposal. If the Company
exercises its right of first refusal, this shall supersede any other right that
Retailer may have to transfer or otherwise dispose of its stock or assets. The
Company may assign its right or option to a third party.
(ii) Bona Fide Agreement.
If Retailer enters into a bona fide written agreement for the sale of its stock
and/or assets, the Company's right under this Section 8 shall be a right of
first refusal, enabling the Company to assume the buyer's rights and obligations
under such agreement and cancel this Agreement and all rights granted Retailer.
Upon the Company's request, Retailer agrees to provide all documents relating to
the proposed transfer, including, without limitation, those reflecting any other
agreements or understandings between the parties to the transfer agreement.
(iii) Non Bona Fide Agreement.
If Retailer fails to provide documentation as required in Section 8B (ii), or
states in writing that the requested documents do not exist, the Company will
conclusively presume that the agreement is not bona fide. If the Company
determines that the agreement is not bona fide, the Company will have the option
to purchase Retailer's stock and/or assets utilized in Retailer's Operations.
The Company may also, but shall not be required to, purchase any of Retailer's
real property or leasehold interest related to Retailer's Facilities.
(iv) Purchase Price.
If Retailer enters into a bona fide written agreement, the Company and Retailer
agree that the purchase price and other terms of sale under the right of first
refusal will be those described in such agreement and any related documents,
unless Retailer and the Company agree to other terms. In the absence of a bona
fide written agreement, the purchase price of Retailer's stock and/or assets,
excluding new and undamaged parts and accessories, and other essential terms,
will be determined by good faith negotiation between the parties. If an
agreement cannot be reached, the purchase price and any other essential terms
not agreed upon will be determined through binding arbitration conducted by the
American Arbitration Association.
Each party agrees to pay its own attorneys' fees associated with this
arbitration. If the sale involves the sale of real property, Retailer agrees to
transfer the real property by warranty deed, in recordable form, conveying
marketable title free and clear to the Company. If the sale involves the sale,
transfer, or assignment of a leasehold interest, Retailer agrees to sell,
transfer, or assign such interest in a method typically undertaken in similar
commercial transactions.
(v) Assignments.
If the Company elects to exercise its rights under this Section 8, Retailer
shall transfer or assign to the Company all licenses, authorizations, permits,
and other documents typically required in similar commercial transactions, and
shall grant all other necessary approvals to conduct Retailer Operations in a
manner similar to that immediately prior to the sale.
(vi) Successors and Assigns.
The Company's rights under this Agreement shall be binding on and enforceable
against any assignee or successor in interest of Retailer or any purchaser of
Retailer's stock and/or assets, unless the Company has previously approved the
successor under Section 9A.
C. Outstanding Obligations.
Retailer agrees that all outstanding monetary obligations to the Company shall
be paid prior to, or at the time of, transfer.
9. SUCCESSION OF OWNERSHIP OR MANAGEMENT
A. Successor Addendum.
Retailer may apply for a successor addendum designating proposed principal
owners and/or owners of a successor retailer to be established if this Agreement
expires because of the Principal Owner(s) death or incapacity. The Company may
execute the successor addendum if the proposed successor completes, to the
Company's satisfaction, the then current selection process to become an
Authorized Retailer used by the Company.
B. Rights of Heirs.
If a Principal Owner(s) or General Manager (with an ownership interest) dies and
his or her interest in Retailer's Operations passes directly to any heir who
wishes to succeed to such party's interest, the Principal Owner's or General
Manager's legal representative must notify the Company within thirty (30) days
of the Principal Owner's or General Manager's death of such heir's or heirs'
intent to succeed the Principal Owner's or General Manager's interest. If a
Principal Owner(s) or General Manager becomes incapacitated, then the Principal
Owner's or General Manager's legal representative must notify the Company within
thirty (30) days of the determination of such incapacity and provide the Company
with plans, if any, for a successor. The effect of notice of death or incapacity
from either the Principal Owner's or General Manager's legal representative will
be to suspend any notice of termination provided for in Section IOA (iv).
C. Rights of Remaining Owners and Investors.
If this Agreement would otherwise terminate because of a Principal Owner Is
death or incapacity, and Retailer and the Company have not executed a successor
addendum, the remaining Principal Owners or Investors, if any, may propose a
successor to continue the operations identified in this Agreement. The proposal
must be made in writing to the Company at least thirty (30) days prior to the
termination of this Agreement,
The proposal will be accepted if: (i) it meets the requirements of Section 2
with regard to ownership; (ii) the proposed successor successfully completes the
Authorized Retailer selection process; (iii) any proposed owner(s) satisfies
applicable Authorized Retailer selection criteria; (iv) the proposed successor
retailer and/or the proposed general manager are ready, willing and able to
comply with the requirements of the then current Authorized Retailer Agreement,
and agree to implement the Business Plan; and (v) all of the former Retailer's
outstanding monetary obligations to the Company have been satisfied.
D. Limitation on Offers.
The Company will notify the individual or entity making a proposal under
Sections 9A, B, or C in writing of the decision on a proposal under this Section
9 within sixty (60) days after: (i) Retailer has submitted all applications and
information that the Company reasonably requested, and (ii) the proposed
retailer has successfully completed the selection process to become an
Authorized Retailer. The Company's offer to enter into the then current
authorized Retailer agreement under this Section 9 will automatically expire if
not accepted by the proposed successor retailer within sixty (60) days after it
receives the offer.
E. New Successor Addendum.
Retailer may cancel an executed successor addendum in writing at any time prior
to the death or incapacity of a Principal Owner. The Company may cancel an
executed successor addendum only if the proposed Principal Owner(s) no longer
meets the selection criteria to become an Authorized Retailer. The parties may
execute a superseding successor addendum by agreement.
10. TERMINATION.
A. Immediate Termination.
This Agreement will continue in force, and will govern all transactions between
the Company and Retailer until terminated in accordance with this Section 10.
Any termination of this Agreement shall apply to all Retailer Facilities. The
Company and Retailer may also ten-ninate this Agreement by mutual written
agreement at any time.
Retailer may terminate this Agreement at any time, with or without reason, by
giving the Company sixty (60) days prior written notice. The Company may
terminate this Agreement upon written notice to Retailer if the distribution
agreement between the Company and Manufacturer is terminated.
Retailer and the Company agree that certain conduct which is within Retailer's
control is so contrary to achieving the goals described in the Preamble to this
Agreement, and to the spirit, purpose and objectives of this Agreement, that any
of the following conduct will constitute a material breach of this Agreement and
justify its immediate termination, upon written notice:
(i) Change in the control, ownership or management of Retailer as described in
Section 4 of this Agreement including, without limitation, an attempted public
offering of ownership in Retailer, without the Company's prior written approval;
or
(ii) Sale, transfer, or assignment by Retailer of this Agreement, or any of the
rights granted to it under this Agreement, or any transfer, assignment or
delegation by Retailer of any of the responsibilities assigned to Retailer under
this Agreement, without the Company's prior written approval; or
(iii) Sale, transfer or assignment by Retailer of any of the stock or
substantially all of the assets used by Retailer in its Volvo operations,
without the Company's prior written approval; or
(iv) Subject to the provisions in Section 9, death or mental incapacity of
Retailer (if Retailer is an individual) or any person identified in Section 2 of
this Agreement; or
(v) Misrepresentation by Retailer concerning Retailer's ownership or management,
or any material misrepresentation in the application for this Agreement, or at
any time thereafter; or
(vi) Undertaking by Retailer or any of its owners to conduct either directly or
indirectly, any of Retailer's Operations at locations other than those
designated in this Agreement, without the Company's prior written approval; or
(vii) Willful misrepresentation by Retailer, or any of its agents or employees,
in any claim or application for reimbursement by, or payment from the Company,
including, without limitation, warranty claims, goodwill payments, incentives,
work performed pursuant to a recall, pre-delivery inspection, or for any other
refund, credit, incentive, allowance, discount, reimbursement or payment applied
for or received under any Company program; or
(viii) Knowing acceptance by Retailer of any payment for any work not performed
or contracted for by Retailer in accordance with this Agreement, or any
applicable warranty or other Company Policies, service bulletin, procedures or
programs the Company may issue; or
(ix) Filing by Retailer of a voluntary petition in bankruptcy, or the filing of
a petition to have Retailer declared bankrupt, providing the petition is not
vacated within thirty (30) days; or any adjudication of Retailer as bankrupt
pursuant to an involuntary petition; or any appointment by a court of a
temporary or permanent receiver, trustee, or custodian for Retailer, Retailer's
assets or Retailer's business who shall not be discharged within thirty (30)
days; or execution of any assignment for the benefit of creditors provided that
the assignment is not set aside within thirty (30) days; or any material levy
under attachment, or by any process of law by which a third party acquires
rights in or to the ownership or operation of any Retailer Facility provided
that the levy is not vacated within thirty (30) days; or if Retailer is unable
to meet maturing debts on terms agreeable to its creditors; or any dissolution
of Retailer; or
(x) Use by Retailer of any unfair, misleading, deceptive or fraudulent
advertising or business practice in the marketing, sale or servicing of any
Company Product or in any program offered by Company; or
(xi) Conviction of or entry of a judgment in a court of competent jurisdiction
against a Retailer or any person named in Sections 2 or 3, of a felony, or any
unfair, misleading, deceptive or fraudulent business practice; or
(xii) Failure of Retailer to conduct its sales, service and parts operations
during the customary business hours of the trade in Retailer's Area of
Responsibility or Market Area for five (5) consecutive business days, unless any
failure is caused by contingencies beyond Retailer's reasonable control,
including strikes, civil war, riots, fires, floods, earthquakes, or other acts
of God, provided that Retailer immediately resumes its customary operation after
the cause of the closure or cessation of operation is removed; or
(xiii) Refusal or inability by Retailer to pay any amount Retailer owes to the
Company within thirty (30) days after the Company demands payment from Retailer;
or
(xiv) Failure by Retailer to comply with Section 35 of this Agreement; or
(xv) Agreement, combination, understanding or contract by Retailer, whether oral
or written, with any
other corporation, person, firm or other legal entity for the purpose of
unlawfully fixing prices of Company Products, or otherwise violating any law; or
(xvi) Failure by Retailer to procure and maintain any license or other
governmental authorization necessary to operate as a Volvo Retailer; or
(xvii) Importation, distribution or sale of Company Products which are not
originally manufactured, designed or intended for use in the United States,
without the Company's prior written approval.
B. Sixty Day Cure Period Prior to Termination.
The Company may also terminate this Agreement upon no less than thirty (30) days
prior written notice if Retailer fails to cure within sixty (60) days, to the
Company's satisfaction, any other material default in its performance under this
Agreement. These material defaults include, without limitation, the following:
(i) Any dispute, disagreement, or controversy between or among persons
identified in Section 2 of this
Agreement which, in the Company's reasonable opinion, adversely affects the
ownership, operation, management, or business of Retailer or Company; or
(ii) Retention by Retailer of any General Manager, who in the Company's
reasonable opinion is not competent, or no longer possesses the requisite
qualifications for the position, or who has acted in a manner contrary to the
continued best interests of the Company or Retailer; or
(iii) Any material modification or change in the use of Retailer's Facilities,
including, without limitation, the addition or maintenance of another line of
vehicles at Retailer's Facilities without the Company's prior written approval;
or
(iv) Failure by Retailer to improve, alter, or modify its Retailer Facility to
meet the requirements in the Company Facilities Guide or other Company Policies,
or which Retailer had agreed or represented to the Company that Retailer would
make or do; or
(v) Failure by Retailer to maintain and employ in Retailer's business and
operations under this Agreement sufficient net working capital and net worth to
enable Retailer to satisfy Retailer's responsibility under this Agreement; or
(vi) Failure by Retailer to update its Business Plan in accordance with Section
13.
(vii) Failure by Retailer to maintain adequate flooring lines of credit for
Company Vehicles; or
(viii) Failure by Retailer to maintain an inventory of new Company Vehicles of
the latest model in accordance with the objectives agreed to by Retailer and the
Company; or
(ix) Failure by Retailer to keep available at all times, in excellent condition
for demonstration purposes, a representative number and mix of the latest models
equipped with the latest accessories offered by the Company; or
(x) Failure by Retailer to, at all times, keep in Retailer's Facility(ies), an
inventory of Genuine Volvo Parts and Accessories in quantities that the Company
reasonably determines are necessary to meet the current and reasonably
anticipated service requirements of Volvo Customers; or
(xi) Failure by Retailer to keep records of its business relating to Company
Products, or any failure, after reasonable notice to Retailer, to submit
Retailer's accounts and records relating to the sale and servicing of Company
Products, or allow the Company to inspect its accounts and records; or
(Xii) Failure by Retailer to furnish the Company, within reasonable time limits
specified by the Company, and on forms prescribed by or acceptable to the
Company, statements of Retailer's financial condition and operating results; or
(xiii) Failure by Retailer to furnish the Company on such forms and at such
times as the Company may reasonably require, reports of Retailer's sales and
inventory of Company Products and used automobiles; or
(xiv) Failure by Retailer to maintain warranty records in accordance with the
Company Policies; or
(xv) Negligent or willful conduct by Retailer that the Company determines, in a
reasonable exercise of its discretion, to be harmful to the reputation of the
Company, Company Products, or Marks/Trademarks.
C. Failure to Meet Improvement Plan Objectives.
If Retailer fails to cure deficiencies identified in the improvement plans
within the periods described in Section 14, the Company may terminate this
Agreement upon thirty (30) days prior written notice to Retailer.
If Retailer refuses to enter into the applicable improvement plan, the Company
may terminate this Agreement in accordance with Section I OA.
D. Applicable Notice Provision for Termination.
Retailer and the Company acknowledge that under certain state laws, the time
period required for notice of termination may vary from those described herein.
Retailer and the Company agree that statutory and regulatory time provisions,
when greater than those provided above, shall control as applicable.
E. Failure to Terminate Shall Not Constitute a Waiver.
The Company may terminate this Agreement under any applicable provision which it
elects, notwithstanding the existence of any other grounds for termination, or
the failure to refer to such other grounds for termination. The Company's
failure to specify additional ground(s) for termination in its notice shall not
preclude the Company from later establishing, upon notice, that termination is
also supported by such additional ground(s), without regard to when those
additional grounds were discovered.
F. Procedure on Termination.
Termination of this Agreement shall end Retailer's status as an Authorized
Retailer, but shall not affect any liability of either party to the other
accruing prior to the date of termination, or arising out of this Agreement.
Upon termination, Retailer agrees to immediately: (i) discontinue the use of any
trademarks or trade names made up in whole or in part of any trademark or
tradename belonging to the Company or Manufacturer; (ii) remove all signs
containing any such trademarks or trade names; and (iii) render unfit for the
use originally intended (or to certify to the Company that Retailer will not use
for the purpose originally intended) any stationery, printed matter, or
advertising containing any such trademarks or trade names. In addition, Retailer
will not represent or continue any practices which might make it appear that it
is still an authorized Volvo retailer and will permanently discontinue any use
of the word Volvo in Retailer's corporate title, firm name or tradename and will
immediately take such steps as may be necessary or appropriate in the opinion of
the Company to change such corporate title, firm name or tradename to eliminate
the word Volvo, all without cost or expense to the Company.
Upon termination under Section IOA, all unfilled orders for Company Products
will be deemed canceled. Upon termination under Section I OB, the Company will
have the option to complete or cancel all unfilled orders for Company Products
then pending and will have a similar right to complete or cancel any firm orders
given after notice and before termination.
Upon termination of this Agreement, Retailer shall transfer to the Company: (i)
all orders for sale by Retailer of Company Products then pending with Retailer
and all deposits obtained whether in cash or in kind; (ii) all of Retailer's
warranty files regarding warranty claims on Company Products; (iii) all lists,
files and service records of Volvo Customers; and (iv) all technical or service
literature, advertising and other printed material relating to Company Products,
including, without limitation, sales instruction manuals, service manuals, and
promotional materials. All warranty claims must be closed within thirty (30)
days of such termination.
After termination, the Company's acceptance of orders from Retailer, Retailer's
continuance of sale of Company Products, or the Company's referral of inquiries
to Retailer or any business relations either party has with the other will not
be construed either as a renewal of this Agreement or a waiver of the
termination. If the Company accepts any orders from Retailer after termination,
all such transactions will be governed by the terms of this Agreement applicable
to such transactions, unless otherwise agreed in writing.
11. DISPUTE RESOLUTION
Retailer and the Company recognize that certain disputes may arise between them
as to application and interpretation of this Agreement, the Company Policies,
and the other controlling documents referenced in this Agreement. While
understanding that certain federal and state courts and agencies may be
available to resolve any disputes, Retailer and the Company agree that it is in
their mutual best interests, consistent with achieving the goals described in
the Preamble to this Agreement, and in the spirit of this Agreement, to attempt
to resolve first through mediation, described below, all disputes arising from a
notice of termination as described in Section 10. Each party agrees to pay its
own attorneys' fees, costs and expenses associated with such mediation.
A. Non-Binding Mediation.
Prior to initiating any judicial, agency or other administrative proceeding, the
Company and Retailer agree to mediate any dispute arising from a notice of
termination as described in Section 10. Mediation shall be held at the Company
regional office closest to Retailer, or at another mutually agreed upon
location, and shall begin within ten (IO) days after receipt of notice: (i)
invoking this Section II; and (ii) clearly specifying the nature of the dispute.
Mediation shall not be binding unless first agreed to in writing by Retailer and
the Company. Any mediation under this Section I I shall be conducted before a
Company/Retailer Mediation Panel (the "Mediation Panel") chosen by the Company
and Retailer at least five (5) days before such mediation is scheduled to begin,
and shall be governed by the Company's Mediation Guidelines.
B. Mediation Panel.
The Mediation Panel shall consist of: (i) two members of the Company management,
including one from Retailer's region; (ii) two Retailer Mediators, one of which
shall be from Retailer's Region, but not by an Authorized Retailer which has an
Area of Responsibility in a Market Area contiguous to or in competition with
Retailer; and (iii) one member chosen by the members identified in (i) and (ii).
Within twenty (20) days of hearing the dispute, the Mediation Panel shall
recommend, in writing, a solution to Retailer and the Company. The parties agree
that a majority vote of the Mediation Panel shall be deemed to be the final
decision of the Mediation Panel. Each party shall have five (5) days to accept
or reject the Mediation Panel's solution, in its entirety.
C. No Waiver of Rights During Mediation.
The Company and Retailer agree that neither party shall waive any rights it may
have under any federal or state law during the pendency of any mediation under
this Section II.
D. Tolling.
Each party agrees that mediation under this Section II will toll any applicable
statute of limitations during the mediation and solution review periods
referenced above. If Retailer is required under any applicable state law to file
a letter of protest before the completion of any mediation contemplated hereby,
nothing herein shall prohibit Retailer from filing such protest; however,
Retailer must continue with the mediation procedures described in this Section
II.
E. Cost of Enforcement.
If the parties are unable to resolve disputes under this Section I 1, and a
party elects to initiate administrative proceedings or civil litigation arising
from such disputes, the prevailing party shall, in addition to all other
available remedies, be entitled to recover all of its reasonable attorneys'
fees, court costs and expenses of litigation.
II. VOLVO CUSTOMER OWNERSHIP EXPERIENCE
The Partners agree that the highest priority for Retailer and Company is
providing a superior ownership experience for Volvo Customers. This will be
achieved by providing unique customer value, and by treating Volvo Customers and
prospective Volvo customers with honesty and integrity.
12. RETAILER BUSINESS PLAN
Before entering into this Agreement, Retailer has provided the Company with a
Business Plan, signed by all Principal Owners listed in Section 2A of this
Agreement, and the General Manager listed in Section 3 of this Agreement. The
Business Plan addresses all areas of Retailer's business, including, without
limitation:
Retailer's strategy for providing a superior ownership experience for Volvo
Customers;
Retailer's strategy for developing Retailer's Area of Responsibility or
Market Area;
A detailed description of Retailer's sales objectives and its method of
achieving its objectives;
A detailed description of Retailer's service objectives and its method of
achieving its objectives;
A detailed description of Retailer's Facilities;
A complete statement of Retailer's ownership and management structure;
A complete statement of Retailer's financial structure, including
capitalization and lines of credit;
Retailer's strategy for staffing and personnel development;
Retailer's strategy for advertising, merchandising, and community
relations; and
Retailer's strategy for other items as agreed to by Retailer and the
Company.
Retailer further agrees to develop its Area of Responsibility or Market Area
according to its Business Plan, and to fulfill its commitments as described in
the Business Plan.
13. REVIEW AND UPDATE OF BUSINESS PLAN
Retailer's performance under this Agreement is essential to the effective
representation of the Company in the marketing, promotion, sale and service of
Company Products and the reputation and goodwill of other Volvo retailers.
Retailer agrees to update and submit its written Business Plan to the Company at
least annually, or more often if the Company requests. All Business Plan updates
shall include Retailer's evaluation of its performance for the previous year,
and any proposed modifications to the Business Plan.
Retailer and the Company agree that Retailer's performance shall be evaluated
based on criteria agreed to in Retailer's Business Plan, or as updated. If
Retailer and the Company agree that the changes to the proposed Business Plan,
or update are necessary, Retailer will make all necessary modifications, and
resubmit the Business Plan, or update, for the Company's review and approval.
While Retailer's Business Plan is subject to update and review, the Company will
require Retailer to modify Retailer's Facilities only if the Company can show
that a material change in marketing conditions warrants modification in
Retailer's Facilities.
14. VEHICLE SALES OR SERVICE IMPROVEMENT PLAN
If the Company determines that Retailer has failed to meet any material
provision Of its Business Plan, or as updated, Retailer agrees to enter into a
written improvement plan to cure any performance deficiency. The Company agrees
that: (i) Retailer will have a minimum of six (6) months from execution of an
improvement plan to cure any performance deficiency; and (ii) the Company will
provide reasonable assistance as the Company and Retailer agree upon in advance
and in writing.
15. PRODUCT AVAILABILITY
The Company agrees to provide and allocate Company Products among its Retailers
on a fair and equitable basis.
Retailer agrees that, because Company Products may not be available in
sufficient quantities from time to time, the Company, in the exercise of its
reasonable business judgment, may determine the manner and method of allocation
among the Company's Retailers without any liability to the Company.
16. PURCHASE AND DELIVERY
A. Retailer Purchases.
(i) Company Vehicles.
From time to time the Company will advise Retailer of the number and model lines
of Company Vehicles which the Company has available for sale to Retailer and,
subject to Section 15, Retailer will have the right to purchase such Company
Vehicles. The Company will distribute Company Vehicles to Authorized Retailers
in accordance with the Company's written distribution policies and procedures in
effect from time to time, and in accordance with this Section 16.
(ii) Genuine Volvo Parts and Accessories.
Retailer will submit firm orders for Genuine Volvo Parts and Accessories to the
Company in such quantity and variety to fulfill Retailer's obligations under
this Agreement. Retailer will submit all orders in accordance with Company
Policies. The Company may accept orders in whole or in part, and all orders
shall be effective only upon acceptance by the Company (but without necessity of
any notice of acceptance by the Company to Retailer). Orders for Genuine Volvo
Parts and Accessories shall not be cancelable by Retailer after acceptance and
shipment by the Company, except as otherwise provided in this Agreement.
(iii) Other Products and Services.
Retailer may submit firm orders to the Company for other products and services
the Company may offer for sale to Retailer from time to time in such quantity
and variety to fulfill Retailer's obligations under this Agreement. Retailer
will submit all orders in accordance with Company procedures. The Company may
accept orders in whole or in part, and all orders shall be effective only upon
acceptance by the Company (but without necessity of any notice of acceptance by
the Company to Retailer). Orders for other products and services shall not be
cancelable by Retailer after acceptance and shipment by the Company, except as
otherwise set forth in this Agreement.
(iv) Changes in Company Products.
The Company may discontinue the supply, or change the design of component
materials, of Company Products at any time. The Company will be under no
liability to Retailer for any changes and will not be required, as a result of
any changes, to make any changes to Company Products previously purchased by
Retailer. No change shall be considered a model year change unless so specified
by the Company.
B. Delays in Delivery.
The Company will not be liable for failure or delay in delivery to Retailer of
Company Products if the failure or delay is beyond the control, or without the
fault or negligence of, the Company.
C. Passage of Title.
Title to each Company Product Retailer purchases under this Agreement shall pass
to Retailer, or to the finance institution designated by it, upon delivery to a
carrier for shipment to Retailer, but the Company shall retain a security
interest in, and right to repossess, any such Company Product described in
Section 16E below.
D. Shipment of Company Products.
(i) Company Vehicles.
The Company may select the mode of transportation, route and point of origin for
Company Vehicles shipped to Retailer. Retailer will pay to the Company the
applicable destination charges that the Company establishes for Retailer for
Company Vehicles delivered to Retailer that are in effect at the time of
shipment. The Company will bear the risk of loss and damage to Company Vehicles
until delivery to a transport carrier for shipment; however, the Company will,
if requested by Retailer in a manner and within the time as the Company shall
from time to time specify, prosecute for and on behalf of Retailer, at Retailers
expense, claims against the responsible transport carrier for loss of or damage
to Company Vehicles during transportation.
(ii) Genuine Volvo Parts and Accessories.
The Company will ship Genuine Volvo Parts and Accessories to Retailer by
whatever means of transportation, by whatever route, and from whatever point the
Company may select. The Company will bear the risk of loss and damage to Genuine
Volvo Parts and Accessories until delivery to a transport carrier for shipment;
however, the Company will, if requested by Retailer in a manner and within the
time as the Company shall from time to time specify, prosecute for and on behalf
of Retailer, at Retailer's expense, claims against the responsible transport
carrier for loss of or damage to Genuine Volvo Parts and Accessories during
transportation.
E. Security Interest.
As security for full payment of all sums Retailer owes to the Company under this
Agreement, whether such sums are now, or subsequently become due and owing,
Retailer grants to the Company, subject to any prior perfected secured
creditor's security interest, a security interest in all inventory, including,
without limitation, Company Products and proceeds from sales or insurance, and
all liens. Upon any non-payment or default in payment, the Company may
accelerate any then existing debt and shall have all applicable rights,
including, without limitation, those specified in the Uniform Commercial Code.
If the Company requests, Retailer agrees to perfect the Company's security
interests.
F. Charges for Storage and Diversions.
Retailer is responsible for, and will pay all charges, for demurrage, storage
and other expenses accruing after shipment to Retailer or to a carrier for
transportation to Retailer. If diversions of shipments are made upon Retailer's
request, or are made by the Company because of Retailer's failure or refusal to
accept shipments of Retailer's orders, Retailer will pay all additional charges
and expenses incident to such diversion.
17. PAYMENTS BY RETAILER
Payment for Company Products purchased by Retailer shall be made in cash in
advance or by other payment methods the Company approves in writing. The
Company's receipt of any commercial paper will not constitute payment until
collected in full. Retailer will pay all collection costs, including but not
limited to, reasonable attorneys' fees, costs and expense of litigation.
18. INVENTORY OF COMPANY VEHICLES
Retailer will maintain, and the Company shall supply, a representative inventory
of new Company Vehicles of the latest model in accordance with Retailer's
Business Plan. Retailer shall store and maintain such new Company Vehicles in
accordance with Company Policies.
19. DEMONSTRATORS
Retailer will keep available at all times, in excellent condition for
demonstration purposes, a representative number and mix of the Company Vehicles
of each of the latest models equipped with the latest accessories.
20. BUSINESS HOURS
Retailer will conduct its Retailer Operations during hours which are reasonable
and convenient for customers. All aspects of Retailer Facilities will be open
for business during days and hours reasonably necessary to provide a superior
customer experience, and consistent with local practice in Retailer's Area of
Responsibility or Market Area-
21. PARTS AND ACCESSORIES
A. Inventory.
Retailer agrees to purchase and maintain at Retailer's Facility, in accordance
with Company Policies, a sufficient inventory of Genuine Volvo Parts and
Accessories necessary to meet the current and reasonably anticipated
requirements of Volvo Customers.
B. Warranty Repairs.
When performing warranty repairs, or other repairs paid for, or reimbursed, in
whole or in part by the Company, Retailer shall only use Genuine Volvo Parts and
Accessories.
C. Non-Genuine Volvo Parts and Accessories.
When performing repairs on any Company Vehicle, other than warranty repairs or
repairs paid for, or reimbursed in whole or in part by, the Company, Retailer
may sell and install non-Genuine Volvo Parts and Accessories.
D. Quality of Parts.
If Retailer sells, and/or installs non-Genuine Volvo Parts and Accessories
during repairs or service of Company Products under Section 2 IC, Retailer will
not use parts or accessories that do not meet Company standards or that could
adversely affect the mechanical operation, safety, integrity or reputation of
Company Products.
E. Disclosure.
If Retailer sells and/or installs non-Genuine Parts and Accessories during
repairs or service as described in Section 21C above, Retailer will, prior to
repair or installation, conspicuously disclose to the customer in writing on all
copies of the customer's repair order and invoice the following:
(i) Those parts and accessories which are non-Genuine Volvo Parts and
Accessories; and
(ii) That non-Genuine Volvo Parts and Accessories are not covered by the Company
or Manufacturer warranty
22. WARRANTIES ON COMPANY PRODUCTS
The Company provides a written warranty for the Company Products it markets. The
Company and Retailer shall each fulfill promptly their respective obligations
under such warranties.
Retailer agrees to furnish each retail purchaser or end user of a Company
Vehicle purchased from, or delivered by Retailer, excepting used vehicles not
covered under the Volvo Select Pre Owned Program, with such form of warranty and
maintenance record, owner's manual, and/or other documentation then currently
provided by the Company.
EXCEPT AS OTHERWISE PROVIDED BY LAW, THE WRITTEN COMPANY WARRANTIES ARE THE ONLY
WARRANTIES APPLICABLE TO COMPANY PRODUCTS. EXCEPT FOR ITS LIMITED LIABILITY
UNDER SUCH WRITTEN WARRANTIES, THE COMPANY AND MANUFACTURER DO NOT ASSUME ANY
OTHER WARRANTY, OBLIGATION OR LIABILITY RETAILER IS NOT AUTHORIZED TO CREATE OR
ASSUME ANY ADDITIONAL WARRANTY OBLIGATION OR LIABILITY ON BEHALF OF THE COMPANY
OR MANUFACTURER. ANY SUCH UNAUTHORIZED ASSUMPTION OR CREATION OF OBLIGATIONS
WITHOUT THE PRIOR WRITTEN AUTHORIZATION OF THE COMPANY SHALL BE THE SOLE
RESPONSIBILITY OF RETAILER. AS TO RETAILER, THE WRITTEN WARRANTIES ARE IN LIEU
OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE
COMPANY DISCLAIMS ANY LIABILITY TO RETAILER FOR COMMERCIAL LOSSES BASED ON
NEGLIGENCE OR MANUFACTURER'S STRICT LIABILITY, OR ANY OTHER THEORY OF RECOVERY.
23. PRE-DELIVERY SERVICE
Retailer agrees to inspect, service, condition and prepare each new Company
Vehicle before delivery to a customer in accordance with applicable pre-delivery
inspection, service and conditioning standards and schedules the Company
furnishes from time to time to Retailer, and to perform such other normal
service and conditioning work as may be prescribed in the Company Policies.
Retailer will maintain adequate pre-delivery service and inspection records, and
upon request, Retailer will provide to the Company evidence that it has
performed pre-delivery services.
24. REPAIR AND MAINTENANCE SERVICE
Retailer agrees to perform: (i) warranty service and repairs; (ii) services
included in On CallO (or other roadside assistance plan the Company may offer
from time to time); (iii) extended contract service repairs; (iv) recall and
service campaign repairs; (v) inventory maintenance; and (vi) other maintenance
required on Company Products in accordance with the Company's then current
recommendations and specifications, regardless of where customer purchased
Company Products. Warranty, recall, service campaign and On Call services are
provided for the customer's benefit, and Retailer agrees that the customer shall
not be obligated to pay for any charges for these services for which Retailer is
reimbursed by the Company or a third party designated by the Company.
25. TRAINING
Retailer and the Company agree that ongoing training and development of Retailer
employees is necessary to provide Volvo Customers with a superior ownership
experience, and achieve the goals described in the Preamble to this Agreement.
To help accomplish this, the Company agrees to provide or make training programs
available to Retailer, and Retailer will require all appropriate employees, as
the Company may determine, to participate in such training programs the Company
offers. Retailer shall be responsible for reasonable charges and expenses
related to such training, unless otherwise advised by the Company.
III. OPERATING PROVISIONS
The Partners agree that the success of Volvo, its name, trademarks and
reputation is their joint responsibility.
26. USE OF VOLVO TRADEMARK
Retailer agrees that the Company has been authorized by AB Volvo, Gothenburg,
Sweden, to permit Retailer to use the name "Volvo" under the following terms and
conditions:
A. Ownership of Mark.
AB Volvo is the owner of numerous trademarks and trade names: (i) the name
"Volvo" is a valid and existing trademark presently owned by AB Volvo and is
registered by AB Volvo in the United States Patent and Trademark Office; (ii) AB
Volvo presently has the sole right to use such trademarks (except to the extent
that it has previously expressly authorized others to do so) and to authorize
others to use such trademarks; and (iii) valuable goodwill has accrued to, and
is attached to, such trademarks.
B. Company Rights.
The Company has been granted the right to enforce rights associated with the
trademark "Volvo" in the United States. In addition, the Company's rights
hereunder shall inure to the benefit of, and are assignable to, any successor to
its business.
C. Right to Use.
During the term of this Agreement, Retailer has been granted the limited,
non-assignable, non-exclusive right to use the name "Volvo" in the tradename
used in connection with the sale and service of Company Products described in
this Agreement. Retailer will not claim or make any attempt to register any
corporate or other name or trademark which includes the name "Volvo" in any
place or office, but Retailer may, in connection with Retailer's operations
under this Agreement and upon prior approval of the Company, register a
tradename containing the name "Volvo" where registration of businesses under
fictitious names are conducted as required by law. The rights conferred herein
will ten-ninate upon termination of this Agreement.
D. Alterations.
Retailer will not alter any Company Product furnished under this Agreement or
change or substitute any of its equipment, nor do anything that will in any way
infringe, impeach or lessen the value or validity of the trademarks associated
with any Company Product.
E. Non-assignability.
Retailer's interest in this trademark license is personal and non-assignable.
F. Assignability.
All rights exercisable by AB Volvo as the owner of the "Volvo" trademark and
tradenames shall, in the event of any assignment of such trademarks and
tradenames, be fully exercisable by, and inure to the benefit of, the assignee.
27. DISCONTINUANCE OF RIGHT TO USE TRADEMARK
A. Immediate Termination.
The permission to use the Trademarks granted in Section 26 will terminate
automatically if, at any time:
(i) Retailer ceases to act as an Authorized Retailer in Company Products;
(ii) Retailer sensor attempts to sell non-Company Vehicles or non-Genuine Volvo
Parts and Accessories as Company Products; (iii) Retailer assigns or attempts to
assign any interest in this Agreement without the written consent of the
Company; or (iv) This Agreement expires or is terminated pursuant to Sections I
or 10.
B. Delayed Termination.
The Company or AB Volvo, upon thirty (30) days prior written notice to Retailer,
may terminate the permission given by Section 26 at any time.
C. Discontinue Use.
Upon termination of the rights granted by Section 26, Retailer will immediately
discontinue the use of the name "Volvo" in Retailer's tradename, and will also
immediately discontinue the use of any signs, structures, and forms of
advertising based upon Retailer's tradename which include the name "Volvo."
Immediately after termination, Retailer will take all necessary and appropriate
action to change Retailer's tradename to eliminate the name "Volvo" or any
combination, variation, or similar name. Immediately after termination, Retailer
shall, at its expense, remove any signage containing or referring to the name
"Volvo."
28. LINES OF CREDIT
During the term of this Agreement, Retailer will maintain a line of credit with
a responsible financing institution at a level permitting Retailer to inventory
Company Products commensurate with the Business Plan.
29. ACCOUNTING AND RECORD KEEPING
A. Accounting.
Retailer will keep accurate records of its business relating to the marketing,
promoting, selling or servicing of Company Products. Retailer agrees to maintain
a uniform accounting system in accordance with Company Policies.
B. Inspection.
During regular business hours, the Company will have the right to inspect
Retailer Facilities and to examine, audit and make and take copies of all
records, accounts and supporting data relating to Retailer Operations. Whenever
reasonably possible, the Company will provide Retailer with advance notice of an
audit or inspection of Retailer Facilities. Retailer may be present at any such
audit or inspection.
C. Financial Statements.
On or before the tenth (10th) day of each month, Retailer will deliver to the
Company, in a form prescribed by or acceptable to the Company, accurate
statements of the financial condition and operating results of Retailer's
Operations with regard to Company Products through the last day of the previous
month. Within ninety (90) days after the end of Retailer's fiscal year, Retailer
shall provide the Company with financial statements that have been reviewed by
an independent Certified Public Accountant, as well as a copy of such
accountant's review report.
D. Sales and Inventory Reports.
Retailer shall furnish to the Company, on forms prescribed by or acceptable to
the Company, accurate reports of Retailer's sales and inventory of Company
Products and Select Pre Owned Vehicles.
30. RETAILER INFORMATION SYSTEMS
Retailer agrees to install and maintain, at its expense, electronic data
processing equipment and software applications that are compatible with, and
supported by, the Company's computer network and business operational
strategies, as the Company may determine from time to time.
31. CHANGE IN PRICES
Upon ten (10) days prior written notice to Retailer, the Company may change the
Retailer Price and the Company's charge for distribution and delivery of any
Company Vehicle. Except with regard to any discounts authorized in writing by
the Company, the changed price and charge shall be the price and charge in
effect, and delivery to Retailer shall be deemed to have been made and the order
deemed to have been filled, upon Company's delivery to a transport carrier for
delivery to Retailer or its designee. The Company will provide Retailer with
price protection for Company Vehicles in accordance with the Company Policies.
32. EXPORT OF COMPANY VEHICLES
Retailer is authorized to sell Company Products only to customers located in the
United States and agrees to abide by any export policy established by the
Company.
33. FACTORY SUGGESTED PRICE LABELS
If Retailer finds that any new Vehicle has been delivered to Retailer with an
incorrect label, or without a completed label affixed thereto pursuant to the
Federal Automobile Information Disclosure Act, 15 U.S.C. Section 1232, as
amended (the "Act"), Retailer will immediately notify the Company. If the
Company gives written instructions to Retailer with respect to replacing or
affixing a label in a manner that conforms with the Act, Retailer agrees to
comply with such written instructions.
34. INDEMNIFICATION
A. Indemnification by the Company.
The Company will indemnify and hold Retailer harmless from any and all
liability, loss, cost or expense, including, without limitation, reasonable
attorneys' fees, resulting from or relating to any legal action against Retailer
by third parties concerning bodily injury or property damage arising out of an
occurrence caused solely by a defect in the design or manufacture of a Company
Product; provided, however, Retailer could not have discovered that defect in
the reasonable pre-delivery inspection or servicing of the Company Product.
If any legal action identified in this Section 34 is brought against Retailer,
and if Retailer promptly notifies the Company in writing of the commencement of
the action and cooperates fully in the defense of the action as the Company may
reasonably require, the Company agrees to undertake, at its sole expense, the
defense of said action on behalf of Retailer when so requested by Retailer, and
to indemnify and hold Retailer harmless in the event of an adverse judgment. The
Company shall have the right to continue the suit in the name of Retailer if the
Company deems such action to be necessary. Should the Company refuse to
undertake the defense on behalf of Retailer, Retailer may conduct its own
defense and, if the Company is determined to be solely liable, the Company shall
be liable for the cost of the defense, including, without limitation, reasonable
attorneys' fees, court costs and expenses of litigation, together with any
verdict, judgment or settlement paid by Retailer.
B. Indemnification by Retailer
Retailer shall indemnify the Company and/or Manufacturer (for purposes of this
Section 34, individually and collectively referred to as "Indemnified
Party(ies)") and hold each of them harmless from any and all liability, loss,
cost or expense, including, without limitation reasonable attorneys' fees, court
costs and costs of litigation, resulting from or relating to any legal action
against Volvo by third parties alleging or concerning:
(i) Retailer's failure to comply, in whole or in part, with any obligations
assumed by Retailer pursuant to this Agreement; or
(ii) Retailer's negligent or improper inspection, repairing or servicing of new
or used Company Products; or
(iii)Retailer's breach of any contract between Retailer and Retailer's customer
or supplier; or
(iv) Retailer's unfair, misleading, deceptive or fraudulent trade practices.
If any legal action arising out of the causes specified above is brought against
any Indemnified Party, and provided that the Indemnified Party promptly notifies
Retailer in writing of the commencement of any such action, Retailer agrees to
undertake, at its sole expense, the defense of said action on behalf of the
Indemnified Party when so requested, and to indemnify and hold the Indemnified
Party harmless in the event of an adverse judgment. Should Retailer refuse to
undertake the defense on behalf of the Indemnified Party, such party may conduct
its own defense and Retailer shall be liable for the cost of such defense,
including, without limitation, reasonable attorneys' fees, court costs and costs
of litigation, together with any verdict, -judgment or settlement paid by the
Indemnified Party.
C. Joint Defense.
Whenever a legal action claims liability on the part of both the Company, as
described in Section 34A, and Retailer, as described in Section 34B, each party
shall be responsible for its own defense. Any Indemnified Party's or Retailer's
responsibility for its own defense pursuant to this Section 34 shall in no way
affect their respective obligations to indemnify and hold harmless.
35. COMPLIANCE WITH LEGAL REQUIREMENTS
Retailer agrees to pay all taxes and to take all actions required by law,
including, without limitation, those actions required to comply with the
National Traffic and Motor Vehicle Safety Act of 1966, the Clean Air Act, the
Consumer Product Safety Act, the Magnuson-Moss Warranty Act (all as amended from
time to time), and any other federal, state or local legislation or regulation
pertaining to safety, air pollution, noise control, water pollution, handling,
transportation, storage and disposal of hazardous and non-hazardous waste and
materials, warranties to consumers, the sale of Company Vehicles, or other
actions which may be required of automobile retailers or which the Company may
reasonably request.
36. COMPLIANCE WITH CONSUMER PROTECTION LAWS AND REGULATIONS
Because certain Volvo Customer complaints may have legal significance for, or
impose liability upon, Retailer and/or the Company under various "Repair or
Replace" or other consumer protection laws and regulations, Retailer agrees to
provide the Company with prompt notice of all such complaints. Retailer agrees
to take other steps as the Company may reasonably require, including, without
limitation, providing notice to Retailer's regional office when a vehicle is
brought into Retailer which may become subject to such law or regulation prior
to a presumption of liability arising under such law or regulation from the
inability to repair or correct a nonconformity or condition of a Vehicle.
Retailer hereby agrees to do nothing to affect adversely the Company's rights
under such laws and regulations, and recognizes that failure to comply with this
Section 36 may result in a chargeback from the Company for monies expended in
remedying such complaints which in the reasonable opinion of the Company were
caused wholly or predominantly by Retailer.
37. TRADE PRACTICES
The Company and Retailer each recognize the importance of dealing with each
other in an open and honest manner. In addition, each party understands the
importance of treating Volvo Customers and prospective Volvo customers with the
utmost respect and honesty. Retailer agrees to conduct its business in a manner
which will develop and maintain superior levels of customer loyalty and
satisfaction, continually striving to improve Retailer's reputation, the
Company, Company Products and the Volvo name, trademarks and service marks.
Retailer will not engage in any unfair, deceptive, misleading, unethical,
fraudulent or otherwise prohibited practice. Retailer will immediately
discontinue any such advertising or practice upon written notice of objection
from the Company. Any notice by the Company and discontinuance by Retailer will
not prejudice any other rights the Company may have under this Agreement.
38. REPURCHASE OF COMPANY PRODUCTS BY THE COMPANY Within sixty (60) days after
termination of this Agreement under Section 10, the Company will repurchase the
following:
All new, unused, undamaged, standard, current model year Company Vehicles with
less than 200 miles which Retailer may own or have an interest in on the date of
termination, at a price paid by Retailer to the Company for such Company
Vehicles less: (i) any price reduction allowance credited or paid to Retailer
(net discounts, allowances or adjustments); and (ii) transportation charges paid
by Retailer;
All current model year demonstrator vehicles (as defined by the Company) and
registered Volvo service loaners which are no more than one year old;
All new, unused, standard, current model year Company Vehicles which Retailer
may own or has an interest in on the date of termination, which were received by
Retailer from the Company in a damaged condition and were not repaired by
Retailer to standard condition, at the price specified in this Section 38, but
provided that Retailer shall subrogate all claims for the repair of such Company
Vehicles to the benefit of the Company;
All new, undamaged Genuine Volvo Parts and Accessories offered for sale by the
Company to its retailers on the date of termination which Retailer may own or
have an interest in on the date of termination, at the then current wholesale
price for such Genuine Volvo Parts and Accessories on the date of termination,
less: (i) a handling charge of fifteen (I 5 %) percent; and (ii) any charges
actually paid by the Company for transportation to the Company; and
All special tools, signs, and other special equipment and information which are,
because of design, applicable only to Company Products, which Retailer may own
or have an interest in on the date of termination and which are in useable and
good condition (except for reasonable wear and tear), at the price paid by
Retailer less: (i) an amount equal to the accrued straight line depreciation on
such equipment during Retailer's (assumed) ownership, if such equipment has a
useful life of at least five (5) years; and (ii) any charges actually paid by
the Company for the transportation of such equipment from Retailer's place of
business to the Company's place of business. Retailer will furnish to the
Company satisfactory evidence of the date on which Retailer acquired an interest
in such equipment, and of the price paid by Retailer.
For purposes of this Section 38, Company Vehicles, Genuine Volvo Parts and
Accessories, special tools and equipment specified in the four preceding
paragraphs are referred to collectively in this Section 38 as "Repurchase
Products."
As a condition precedent to the Company's obligations under this Section 38 to
purchase the Repurchase Products, Retailer shall permit the Company and
Company's designee or designees, to enter the Retailer Facility at such time as
the Company may reasonably determine, for the purpose of inspecting and/or
taking an inventory of all or any part of Retailer's stock of Company Products.
In connection with the Company's purchase of the Repurchase Products pursuant to
this Section 38:
(i) Retailer shall promptly deliver such Repurchase Products to the Company;
(ii) Retailer shall comply with any and all applicable laws and requirements
which may be necessary or proper to transfer good title to Repurchase Products
to the Company, free and clear of any charge, lien, or encumbrance; and
(iii) Promptly following Retailer's fulfillment of its obligations under this
Section 38, the Company shall pay Retailer for the Repurchase Products acquired
by it pursuant to this Section 38 (subject to all rights of set-off for any
outstanding debt of Retailer to the Company).
IV. MISCELLANEOUS PROVISIONS
39. LICENSING REQUIREMENTS
Retailer will procure and maintain any license(s) or other applicable
governmental authorizations) necessary to operate as a new motor vehicle
retailer for Company Products.
40. INSURANCE
Retailer will acquire and maintain insurance as follows: (i) Worker's
Compensation insurance prescribed by law in the state in which Retailer is
located, and Employers Liability Insurance, each with a limit of at least
$500,000 per occurrence; (ii) Comprehensive general liability insurance in a
form approved by the Company with a combined single limit of $ 1,000,000; (iii)
automobile liability insurance in the amount of at least $ 1,000,000; (iv) an
umbrella policy to cover comprehensive general liability and auto insurance in
the amount of at least $5,000,000; (v) Casualty insurance insuring Retailer
Facilities in an amount, as determined by the Company, necessary to repair any
casualty in an expedited manner thus enabling Retailer to continue the sales and
service of Company Products; and (vi) any other type of insurance as may be
deemed reasonably necessary by the Company. From time to time, the Company
reserves the right to modify these insurance requirements and limits in
accordance with reasonably accepted industry custom and practice.
41. TAXES
Retailer will comply with all applicable laws concerning collection or payment
by Retailer of taxes applicable to all transactions by Retailer concerning
Company Products, and Retailer shall furnish evidence of compliance to the
Company within thirty (30) days after delivery of a written request.
42. WAIVER
Failure by either party at any time to require performance by the other party,
or to claim a breach of any provision of this Agreement, will not be construed
as a waiver of any subsequent breach, nor affect the enforceability of any part
of this Agreement, nor prejudice either party as regards to any subsequent
action.
43. AGENCY
Retailer is an independently operated business entity in which the Company has
no ownership interest. This Agreement does not make Retailer the legal
representative of the Company, or in any way create the relationship of
principal and agent between the Company and Retailer, nor does this Agreement
create any fiduciary or employment relationship between Retailer and the
Company. Retailer hereby agrees that it will not act or attempt to act, or
represent itself directly or by implication, as agent of the Company or in any
manner create or attempt to create any obligation on behalf of, or in the name
of, the Company.
44. SUBRETAILERS
Retailer has no authority to establish an associate retailer or subretailer for
Company Products.
45. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES
This Agreement is in the nature of a personal services agreement and Retailer
has no authority to assign the whole or any part of this Agreement, or any right
or interest hereunder, without the prior written consent of an Officer, which
shall not be unreasonably withheld.
46. NOTICE AND SERVICE OF NOTICE
Notice from Retailer to the Company will be effective only if: (i) signed by the
Principal Owner or General Manager; and (ii) directed to the Company President
or his authorized designee. Notice from the Company shall be effective only if:
(i) signed by an Officer; and (ii) directed to a Principal Owner or General
Manager at the Retailer's address given on page I of this Agreement. Any such
notice shall be sent by Certified Mail, Return Receipt Requested or by overnight
mail or carrier service. In the case of Certified Mail, notice shall be deemed
given upon the earlier of actual receipt or seven (7) days after such notice is
sent. In the case of overnight mail or carrier service, notice shall be deemed
given upon the next business day after such notice is sent. Notice may be given
by facsimile, but only with the written consent of the other party.
47. APPLICABLE LAW AND SEVERABILITY
This Agreement will be construed in accordance with New Jersey law with respect
to its interpretation and construction, but in all other respects governed by
the laws of the state of Retailer's Facilities identified in Section 5.
If any provision of this Agreement is declared invalid, unenforceable, or
prohibited by the laws of the applicable state, such provision shall be
severable from the balance of this Agreement, which will remain in full force
and effect. Should the Company determine that any federal or state law or
regulation, or any condition referred to in Section 34 or 35 requires a change
or changes in any of the provisions of this Agreement, the Company may offer to
Retailer an amendment or an amended Agreement embodying such change or changes.
If Retailer fails to execute such amendment or amended Agreement and return it
to the Company within thirty (30) days after it is delivered to Retailer, the
Company may terminate this Agreement by giving notice to Retailer, with
termination to be effective upon receipt by Retailer of notice.
48. FINANCIAL INFORMATION
Retailer agrees that the Company may provide to, or obtain financial information
from, financial institutions which have an actual or prospective relationship
with Retailer.
49. ENTIRE AGREEMENT
This Agreement supersedes all prior agreements between the parties relative to
the sale and servicing of Company Products. This Agreement contains the entire,
integrated agreement between the parties and any amendment, modification, or
waiver of any provision of this Agreement must be in writing and signed by an
Officer, and on behalf of Retailer by a person identified in Section 2A.
50. NO FRANCHISE FEE OR ADDITIONAL PAYMENTS
Retailer represents and warrants that it has paid no fee, nor has it provided
any funds, goods or services to any Company employee or agent in lieu of a fee,
as consideration for the Company's entering into this Agreement, and that the
sole consideration for the Company's entering into this Agreement was Retailer's
Principal Owners' and General Manager's abilities, integrity, assurances of
personal services and expressed intention to deal fairly and equitably with the
Company and the public and all other promises recited in this Agreement.
In addition, Retailer represents and warrants that neither it nor any Principal
Owner has received any consideration, except as described in this Agreement, for
entering into this Agreement.
51. CAPTIONS
The captions for the sections of this Agreement are for convenience and
reference only and will not be construed to explain, modify, amplify or aid in
the interpretation, construction or meaning of the provisions of this Agreement,
or be a part of this Agreement.
52. TIME OF THE ESSENCE
Time is of the essence with respect to each provision of this Agreement.
53. DATE OF PERFORMANCE
If any date for the performance of obligations by any party under this Agreement
falls on any day that is not a business day, the date on which such obligation
is to be perfon-ned will be deemed to be the next business day.
54. RULES OF CONSTRUCTION
The following rules shall apply to the construction and interpretation of this
Agreement:
A. Singular words connote the plural number as well as the singular and vice
versa, and the masculine includes the feminine and the neuter.
B. All references herein to particular articles, sections, subsections or
exhibits are references to articles, sections, subsections or exhibits of this
Agreement.
C. Each party and its legal counsel have reviewed and revised (or requested
revisions of) this Agreement and, therefore, any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement.
V. DEFINITIONS
55. DEFINITIONS
In addition to certain terms defined elsewhere in this Agreement, the following
definitions shall apply throughout this Agreement:
AREA OF RESPONSIBILITY: The non-exclusive area that the Company designates from
time to time as Retailer's primary geographic territory for the marketing,
promoting, selling and servicing of Company products.
AUTHORIZED RETAILER(S): Retailers authorized by the Company to conduct Retailer
Operations in connection with the marketing, promoting, selling and servicing of
Company Products pursuant to the then current, duly executed Authorized Retailer
Agreement.
BUSINESS PLAN: The written business plan, in a form satisfactory to the Company,
and any updates thereto, produced by Retailer and provided to the Company, which
describes how Retailer will develop and maintain its Volvo business.
COMPANY POLICY(IES): All guidelines, regulations, programs, manuals, bulletins,
policies, and procedures and subsequent amendments established by the Company
from time to time.
COMPANY PRODUCTS: Company Vehicles and Genuine Volvo Parts and Accessories that
bear the Volvo trademark(s), and special tools, all of which from time to time
the Company may offer to Retailer.
COMPANY VEHICLES: Volvo passenger cars manufactured by or for Manufacturer, and
offered by the Company to Retailer for purchase.
GENUINE VOLVO PARTS AND ACCESSORIES: Those parts and accessories, bearing the
Marks/Trademarks, manufactured by or for Manufacturer or the Company, and
offered for sale to Retailer by the Company.
MANUFACTURER: Volvo Car Corporation, Gothenburg, Sweden, and any affiliate or
successor in interest.
MARKET AREA: The non-exclusive area, encompassing one or more Areas of
Responsibility, that the Company designates from time to time as Retailer's
primary geographic territory for the marketing, promoting, selling and servicing
of Company products.
MARK(S)/TRADEMARK(S): Any trademark or service mark that the Company either
owns, or is authorized to use and/or license, with rights of enforcement.
MEDIATION GUIDELINES: The policies to be followed in mediating a dispute between
the Company and Retailer as described in Section II.
MEDIATION PANEL: The panel of Retail Mediators, as described in Section I 1.
OFFICER: The president or any executive vice president, senior vice president or
vice president of the Company.
PARTNER(S)(SHIP)(ING): The terms partnership, partner(s) and partnering, as used
in this Agreement and the Preamble, shall refer to the cooperative and mutually
advantageous relationship that this Agreement is intended to foster between the
Company and Retailer. The use of the terms partnership, partner(s) and
partnering in this Agreement is not intended to create a legal partnership or
joint venture between the parties to this Agreement. The Company and Retailer
understand that each party is and shall remain, during the term of this
Agreement, a wholly independent entity and that this Agreement does not create a
fiduciary or agency relationship between the parties. PRINCIPAL OWNER(S): Those
owners of Retailer described in Section 2A.
REMAINING OWNER(S): Those owners of Retailer that remain after the death or
incapacity of a Principal Owner, as referenced in Section II.
REPURCHASE PRODUCTS: Company Products, described in Section 38.
RETAILER: The entity that is authorized to market, promote, sell and service
Company Products under this Agreement.
RETAILER FACILITY(IES): Retailer's land, buildings, improvements, and fixtures
described in Section 6.
RETAILER FACILITIES GUIDE: The Company's guide for retail facilities, as such
may be issued from time to time.
RETAILER MEDIATORS: Retailers selected by the Company and a representative group
of Authorized Retailers to serve as mediators in the resolution of a dispute
between the Company and a Retailer in accordance with Section II.
RETAILER OPERATIONS: Retailer's business of marketing, promoting, selling and
servicing Company Products.
VOLVO: A trademark, tradename and service mark of AB Volvo, a Swedish
corporation.
VOLVO CUSTOMER: A person or entity that has purchased, leased or obtained
service for, any Company Product.
VOLVO SELECT PRE OWNED VEHICLE: A Volvo vehicle that has been reconditioned by a
participating Retailer in accordance with Company Policies.
WORKING CAPITAL GUIDE: The guide produced by the Company to assist Retailer in
determining, establishing, modifying, and maintaining Retailer's capital
necessary to provide a superior ownership experience for Volvo Customers in
Retailer's Area of Responsibility or Market Area.
This Agreement will not be binding unless it bears the signatures of an Officer
on behalf of the Company and of a person named in Section 2A on behalf of
Retailer.
VOLVO CARS OF NORTH AMERICA, INC. RETAILER
By: /s/ Stephen J. Gamble By: /s/ Joseph Alvarez
- ------------------------- -----------------------
Stephen J. Gamble Joseph Alvarez
Title: Regional Vice President Title: General Manager
EXHIBIT 10.71
THIS DEBENTURE AND THE SECURITIES 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. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (i) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (ii) AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID SECURITIES ACT.
EXHIBIT A
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
AMOUNT: ($750,000.00) CLOSING DATE: November 3, 1997
FOR VALUE RECEIVED, the undersigned, SMART CHOICE AUTOMOTIVE GROUP, INC., a
Florida Corporation, ("Maker", "Borrower", or "Company"), promise to pay to
the order of BANKERS LIFE INSURANCE COMPANY, a Florida corporation, together
with any other subsequent holder hereof ( collectively referred to as "Holder"),
the principal sum of Seventy Five HUNDRED AND FIFTY THOUSAND AND NO/100THS
($750,000.00) together with interest thereon at the Prime Rate, as defined
herein, until maturity, on the balance of the principal from time to time
remaining unpaid (the applicable interest rate per annum at any given time being
hereinafter referred to as the "Interest Rate"), provided that such Interest
Rate shall not in any case exceed the highest rate of interest permitted by
applicable law. Both principal and interest being payable at 360 Central Avenue,
St. Petersburg, FL 33701 in the following manner:
SUCH INTEREST SHALL BE PAYABLE TO THE EXTENT ACCRUED, QUARTERLY, ON EACH
JANUARY 1ST, APRIL 1ST, JULY 1ST AND OCTOBER 1ST, IN EACH YEAR COMMENCING
ON JANUARY 1, 1998 UNTIL THE PRINCIPAL HEREOF SHALL HAVE BECOME DUE AND
PAYABLE. ALL UNPAID INTEREST AND PRINCIPAL SHALL BE DUE AND PAYABLE IN FULL
ON THE 31st DAY OF December, 2000. THERE SHALL BE NO PENALTY FOR
PRE-PAYMENT OF EITHER INTEREST OR PRINCIPAL.
All payments shall be credited by the Holder hereof first on the interest then
accrued on said principal sum remaining unpaid, and then in reduction of such
unpaid principal.
The Makers hereof shall not incur any penalty upon the prepayment of all or any
part of the indebtedness evidenced hereby.
The Prime Rate existing on the date of issue of this Note shall be used to
determine the Interest Rate to be paid by the Maker on all quarterly payments
due in year one. Thereafter, the Prime Rate in effect on the January 1st billing
date, of any given year, shall be used to determine the Interest Rate applicable
on all quarterly payments due in that immediate year. The Holder of this Note
shall inform the Maker of the applicable Interest Rate existing prior to the
January 1st billing date of any given year.
As used herein, the term "Prime Rate" shall mean the rate published in the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of the
nation's largest banks.
This Note is made pursuant to and is entitled to the benefits of a Loan
Agreement, dated of even date herewith ("Agreement") between Smart Choice
Automotive Group, Inc. and Bankers Life Insurance Company, and certain other
documents, as may be required to protect and preserve the rights of Maker and
Holder as more specifically described in the Agreement. Reference is made to the
Agreement for a statement of the rights of the Holder of this Note and of the
rights and limitations of the rights of the Maker. Capitalized terms not defined
herein shall have the meanings defined in the Agreement.
This Note is Subordinated Debt, as defined in the Agreement, and is expressly
subordinated to Senior Debt of the Company as provided in the Agreement. In case
an Event of Default as defined in the Agreement shall occur and be continuing,
the principal amount of this Note may be declared due and payable in the manner
and with the effect provided in the Agreement.
If any payment of principal or interest hereby required is overdue for more than
30 days, the Holder of this Note may, at its option, and without notice, declare
the entire balance of principal then remaining unpaid to be immediately due and
payable, and any failure to exercise said option shall not constitute a waiver
of the right to exercise the same at any other time. Upon default in making any
payment hereby required, each maker and endorser, jointly and severally, promise
to pay all costs and expenses, including reasonable attorney's fees (including
the cost of any appeals or any attorney's fees incurred in any bankruptcy
proceeding), incurred in collecting this Note by legal proceedings or through an
attorney.
Interest shall be calculated on all amounts advanced based on the actual number
of days said amounts are outstanding. Interest shall be computed on the basis of
a year of 360 days and charged for the actual number of days in the payment
period.
Time is of the essence hereunder. Any payment of principal or interest which is
not paid when due, whether upon maturity or acceleration or otherwise as
provided herein, shall bear interest at the rate of 18% per annum from the due
date until paid.
The Maker shall have no obligation to pay interest or payments in the nature of
interest in excess of the maximum rate of interest allowed to be contracted for
by law, as changed from time to time, applicable to this Note (the "Maximum
Rate"). Any interest in excess of the Maximum Rate paid by the Maker ("excess
sum") shall be credited as a payment of principal, or, if the Maker so requests
in writing, returned to the Maker, or, if the indebtedness and other obligation
evidenced by this Note have been paid in full, returned to the Maker together
with interest at the same rate as was paid by the Maker during such period. Any
excess sum credited to principal shall be credited as of the date paid to
Holder. Holder may, without such action constituting a breach of any obligation
to the Maker, seek judicial determination of the applicable rate of interest,
and its obligation to pay or credit any proposed excess sum to the Maker.
Provided Holder has not exercised its right to accelerate this Note, then the
Maker hereof shall pay Holder a one time late charge late charge of five percent
(5%) of any required quarterly payment which is not received by Holder on or
after the expiration of the 30-day grace period. The parties agree that said
charge is a fair and reasonable charge for the late payment and shall not be
deemed a penalty.
Acceptance of partial payments or payments marked "payment in full" or "in
satisfaction" or words to similar effect shall not affect the duty of the Maker
to pay all obligations due hereunder, and shall not affect the right of Holder
to pursue all remedies available to it hereunder or under any other agreement
between the maker hereof and the Holder.
The remedies of Holder shall be cumulative and concurrent, and may be pursued
singularly, successively or together, at the sole discretion of Holder, and may
be exercised as often as occasion therefor shall arise. No action or omission of
Holder, including specifically any failure to exercise or forbearance in the
exercise of any remedy, shall be deemed to be a waiver or release of the same,
such waiver or release to be effected only through a written document executed
by Holder and then only to the extent specifically recited therein. A waiver or
release with reference to any one event shall not be construed as continuing or
as constituting a course of dealing, nor shall it be construed as a bar to, or
as a waiver or release of, any subsequent remedy as to a subsequent event.
The Maker hereby consents and submits to the jurisdiction of the courts of the
State of Florida, and, notwithstanding its place of residence or organization or
the place of execution of this Note, any litigation relating hereto, whether
arising in contract or tort, by statute or otherwise, shall be brought in (and,
if brought elsewhere, may be transferred to) a State court of competent
jurisdiction in Orange County, Florida.
The Maker and any other Person liable for the payment hereof respectively,
hereby (a) expressly waive any presentment, demand for payment, notice of
dishonor, protest, notice of nonpayment or protest, all other forms of notice
whatsoever, and diligence in collection; and (b) agree that Holder, in order to
enforce payment of this Note against any of them, shall not be required first to
institute any suit or to exhaust any of its remedies against the Maker (or any
co-maker) or against any other Person liable for payment hereof or to attempt to
realize on any Collateral for this Note.
THE MAKER AND ANY OTHER PERSON LIABLE FOR PAYMENT HEREOF, BY EXECUTING THIS NOTE
OR ANY OTHER DOCUMENT CREATING SUCH LIABILITY, WAIVE THEIR RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, WHETHER ARISING IN CONTRACT OR TORT, BY STATUTE OR
OTHERWISE, IN ANY WAY RELATED TO THIS NOTE. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR HOLDER'S EXTENDING CREDIT TO THE MAKER AND NO WAIVER OR
LIMITATION OF HOLDER'S RIGHTS UNDER THIS PARAGRAPH SHALL BE EFFECTIVE UNLESS IN
WRITING AND MANUALLY SIGNED ON HOLDER'S BEHALF.
The Maker acknowledges that the above paragraph has been expressly bargained for
by Holder as part of the loan evidenced hereby and that, but for the Maker's
agreement and the agreement of any other Person liable for payment hereof
thereto, Holder would not have extended the loan for the term and with the
interest rate provided herein.
THIS LOAN IS PAYABLE IN FULL ON THE 3RD DAY OF NOVEMBER, 2000. AT MATURITY,
MAKER MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST
THEN DUE. LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME.
MAKER WILL, THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS MAKER MAY
OWN, OR MAKER WILL HAVE TO FIND A LENDING INSTITUTION, WHICH MAY BE THE LENDER
WITH RESPECT TO THIS LOAN, WILLING TO LEND MAKER THE MONEY. IF MAKER REFINANCES
THIS LOAN AT MATURITY, MAKER MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS
NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF MAKER OBTAINS REFINANCING FROM THE
SAME LENDING INSTITUTION.
CONVERSION
Conversion Privilege. Subject to and upon compliance with the provisions hereof,
the Holder of this Note shall have the right, at its option and at its sole
discretion, at any time and from time to time after December 31, 1998 and
continuing until the expiration of the Term of the Agreement, to convert the
principal amount of the Note, or any portion thereof, into that number of
authorized but not yet issued, fully paid and non-assessable shares of Common
Stock of the Maker, par value $.01 per share ( "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 $9.00 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 ( "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 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 provision 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 of shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder of holders of record of the shares
represented thereby to 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
conversions 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 proceeding 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 (i) a Target Secondary Offering (as defined in the
Agreement) has not been consummated, (ii) the Maker shall not have received
the purchase price of the securities of Maker offered thereunder on or
before December 31, 1998 the current market price per share of Common Stock
(determined as provided in subparagraph (c) 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, 1998 does not exceed $9.00, then 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 (c) of the this
paragraph), or (ii) the then current Conversion Price.
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 the case the Maker shall hereafter issue rights or warrants to holders
of its outstanding shares of Common Stock generally entitling him 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 paragraph) of the Common Stock on the record date
mentioned in this subparagraph (d) 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 of 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 not 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 values as shall be determined by the Board of Directors.
f) Whenever the Conversion Price is adjusted as herein provided, Maker shall
promptly deliver to the Holder (i) certificate appropriate officer of the
Maker 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, and (ii) a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted Conversion Price.
g) 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 receiver 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 form 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 (g) hereof.
Certain Notices. In case:
a) the Maker shall take any action which would require an adjustment in the
Conversion Price; 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 that a subdivision or combination of the outstanding Common
Stock and other that 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
Sock of record shall be entitled to exchange their share 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 convenants 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 purposes 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 form 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
requiring 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 non-assessable, free of all liens and charges
and not subject to any preemptive rights.
Mergers, 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 an 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. The above provisions of
this paragraph shall similarly apply to successive consolidations, mergers,
statutory exchanges, sales or conveyances.
IN WITNESS WHEREOF, this Convertible Subordinated Promissory Note has been
duly executed as of the 3RD day November of 1997.
Signed sealed and delivered
MAKER:
SMART CHOICE AUTOMOTIVE GROUP, INC.
ATTEST:
/s/ Ernie Restina By: /s/ Gary R. Smith
- ----------------- ----------------------
Secretary As Its: Gary R. Smith
EXHIBIT 10.72
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") dated this 3rd day of
November, 1997, by and among SMART CHOICE AUTOMOTIVE GROUP, INC., a Florida
corporation (the "Company"), BANKERS LIFE INSURANCE COMPANY, a Florida
corporation (Bankers Life Insurance Company and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders".)
W I T N E S S E T H :
WHEREAS, Holder has made a loan to Company in the amount of Seven Hundred and
Fifty Thousand and no/lOOths Dollars ($750,000.00) pursuant to the terms of a
Convertible Subordinated Promissory Note ("Note") and related Loan Agreement
("Loan Agreement");
WHEREAS, as an inducement to Holder making the above-referenced loan, the terms
of the Note provide that the outstanding principal balance thereof shall be
convertible into shares of Common Stock of the Company ("Common Stock") at the
option of and at the sole discretion of the Holder of the Note (the shares of
Common Stock issued or issuable upon conversion of the Note hereinafter referred
to as the "Conversion Shares");
WHEREAS, as a further inducement to Holder making the above referenced loan,
Company has granted Holder, pursuant to a certain Stock Option Agreement ("Stock
Option Agreement") dated of even date herewith by and among the Company and
Holder, an option ("Option") to purchase 50,000 shares of authorized but not yet
issued shares of Company's Common Stock (the shares of Common Stock transferred
or transferable upon exercise of this Option hereinafter referred to as "Option
Shares").
WHEREAS, as a further inducement to Holder making the above-referenced loan,
Company has agreed to grant Holder certain rights to Register (as defined in
Section 7 hereof) Conversion Shares and Option Shares not previously registered
(such Conversion Shares and Option Shares hereinafter referred to as the
"Registrable Securities").
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. "Piggyback" Registration.
(a) Notice and Procedures. If the Company at any time after December
31, 1998 proposes to register any of its securities under the Securities Act
other than in connection with: (i) a merger or pursuant to Form S-4 or Form S-8
or other comparable form not available for registering the Registrable
Securities for sale to the public; or (ii) a registration statement filed on the
exercise of demand registration rights held by a holder of securities of the
Company), 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 delivered to the Company within ten (10) days after giving such
notice (which request shall specify the Registrable Securities intended to be
disposed of by the Holder), the Company shall use its best efforts to 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 or all 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 give 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 1(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), including, without limitation, Underwriter's Cutback,
and the Holder agrees to promptly 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 1(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 Company
filed under the Securities Act, provided that all officers and directors of the
Company are subject to similar lock-up (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 2. Expenses of Registration.
(a) Company Expense. The Company shall pay all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1 hereof.
(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.
Section 3. 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 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.
Section 4. Obligations of Holder.
(a) It shall be a condition precedent to the obligations of the Company
to complete a registration pursuant to this Agreement with respect to the
Registrable Securities that the Holder shall furnish to the Company in writing
and in a timely manner (which shall mean not sooner than three (3) 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 and shall execute such documents in connection
with such registration as the Company or the underwriter may reasonably request
(b) In the event Holder determines to engage the services of an
underwriter, Holder agrees to enter into and perform such Holder's obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities.
(c) Holder may not participate in any underwritten registration
hereunder unless such Holder (i) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 2.
Section 5. 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 6. Survival of Rights: Termination of Registration Rights. This
Agreement shall be binding upon and inure to the benefit of any subsequent
holder of the Note, and the provisions of this Agreement shall survive the
payment in full and/or the conversion of the Note.
Section 7. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used 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:
"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 Florida are authorized to close.
"Conversion Shares" shall mean the shares of Common Stock issued or issuable
upon conversion of the Note, in whole or in part.
"Holder" shall mean Banker Life Insurance Company or any of its wholly-owned
subsidiaries, or any other holders of the Note or any other Registrable
Securities.
"Option Shares" shall mean the shares of Common Stock transferred or
transferable upon the 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, fees and
disbursements of counsel for the Company, blue sky fees and expenses (including
counsel fees for the Company), expenses of any special audits incident to or
required by any such registration, 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.
"Registrable Securities" shall mean all (i) Conversion Shares, and (ii) shares
of Common Stock issuable upon exercise of that certain Stock Option Agreement of
even date herewith between the parties; 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 and
fees and disbursements of counsel for any stockholder (other than the 25% of the
fees and disbursements of counsel for the Holder, as a selling stockholder,
included in Registration Expenses).
"Underwriters 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 adverse 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 8. 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 9. 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,
faxed, 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 fax
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:
As to Holder: Bankers Life Insurance Company
360 Central Avenue
St. Petersburg, Florida 33701
Attention: G. Kristen Delano, General Counsel
Fax Number: (813) 823-6518
As to Company: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Attention: Neal Hutchinson, Jr.
Corporate Counsel
Fax Number: (407) 383-8822
Section 10. 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 11. 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 12. Governing Law and Amendments. This Agreement shall be construed and
enforced under the laws of the State of Florida 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 13. 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 14. Jurisdiction and Venue. The Company hereby consents to the
jurisdiction of the courts of the State of Florida and the United States
District Court for the Middle District of Florida, 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.
By: /s/ Gary R. Smith
----------------------
Name: Gary R. Smith
As Its: President
HOLDER:
BANKERS LIFE INSURANCE COMPANY
By: /s/ G. Kristin Delano
-------------------------
Name: G. Kristin Delano
As Its: Corp. Secretary
EXHIBIT 10.73
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is entered into among
Smart Choice Automotive Group, Inc., First Choice Auto Finance, Inc., First
Choice Stuart 2, Inc., Jack Winters Enterprises, Inc., Jack Winters, F. Craig
Clements, Killgore Pearlman P.A. and Mark L. Ornstein:
RECITALS
1. First Choice Auto Finance, Inc. entered into an Asset Purchase Agreement
on or about December 19, 1996, for certain assets of Jack Winters Enterprises,
Inc. used in its operation of a retail automobile dealership for Volvo
automobiles and other consumer vehicles.
2. Jack Winters Enterprises, Inc., Jack Winters and F. Craig Clements and
First Choice Auto Finance, Inc. entered into a Management Agreement on March 27,
1997.
3. First Choice Auto Finance, Inc. assigned some of the rights and
obligations of the December 19, 1996 Asset Purchase Agreement to First Choice
Stuart 2, Inc.
4. Smart Choice Automotive Group, Inc. is the parent company of First
Choice Auto Finance, Inc. and First Choice Stuart 2, Inc.
5. Jack Winters and F. Craig Clements are the shareholders of Jack Winters
Enterprises, Inc.
6. Mark L. Ornstein and his law firm, Killgore Pearlman, P.A., were the
attorneys for Jack Winters Enterprises and its' shareholders in regard to the
transaction contemplated by the December 19, 1996 Asset Purchase Agreement. Mark
L. Ornstein and Killgore Pearlman provided limited assistance to Smart Choice
Automotive Group, Inc, First Choice Auto Finance, Inc. and First Choice Stuart
2, Inc. in preparing dealer applications with the full knowledge and consent of
all parties involved.
7. The transaction contemplated by the December 19, 1996 Asset Purchase
Agreement closed on August 21, 1997.
8. Amongst other consideration, Jack Winters Enterprises, Inc. and/or Jack
Winters and/or F. Craig Clements received 18,362 shares of Smart Choice
Automotive Group, Inc. stock and a Promissory Note from First Choice Auto
Finance, Inc. in the principal amount of $900,000 due and payable on 16 February
1998.
9. Smart Choice Automotive Group, Inc., First Choice Auto Finance, Inc. and
First Choice Stuart 2, Inc. have raised defenses to the Promissory Note
described in paragraph 8.
10. Jack Winters Enterprises, Inc., Jack Winters and F. Craig Clements deny
that any defense to the Promissory Note described in paragraph 8 exists.
11. Smart Choice Automotive Group, Inc., First Choice Auto Finance, Inc.
and First Choice Stuart 2, Inc. have alleged that a confidential attorney/client
relationship existed with Mark L. Ornstein and Killgore Pearlman P.A. and was
breached, causing undisclosed damages.
12. Mark L. Ornstein and Killgore Pearlman P.A. deny that a confidential
attorney/client relationship existed or was breached with Smart Choice
Automotive Group, Inc., First Choice Auto Finance, Inc. and First Choice Stuart
2, Inc. and maintain that they are owed fees for services rendered.
13. The parties desire to resolve any and all claims that may exist between
them, including but not limited to those arising out of the transaction
contemplated by the December 19, 1996 Asset Purchase Agreement, the March 27,
1997 Management Agreement, and the alleged relationship between Mark L. Ornstein
and Killgore Pearlman P.A. and Smart Choice Automotive Group, Inc., First Choice
Auto Finance, Inc. and First Choice Stuart 2, Inc..
AGREEMENT
In consideration of the mutual promises and releases set forth below and
other valuable consideration, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
1. Jack Winters Enterprises, Inc., Jack Winters and F. Craig Clements will
return the $900,000 Promissory Note executed by First Choice Auto Finance, Inc.
marked "Canceled" in exchange for three new Promissory Notes. These three
Promissory Notes will be as follows:
a. Note 1. First Choice Auto Finance, Inc. will promise to pay to Jack
Winters Enterprises, Inc., Jack Winters and F. Craig Clements the
principal sum of $300,000, together with interest at 6% on or before
February 16, 1998;
b. Note 2. First Choice Auto Finance, Inc. will promise to pay to Jack
Winters Enterprises, Inc., Jack Winters and F. Craig Clements the
principal sum of $200,000, together with interest at 6% on or before
May 16, 1998;
c. Note 3. First Choice Auto Finance, Inc. will promise to pay to Jack
Winters Enterprises, Inc., Jack Winters and F. Craig Clements the
principal sum of $100,000, together with interest at 6% on or before
September 16, 1998.
Smart Choice Automotive Group, Inc., First Choice Auto Finance, Inc., and
First Choice Stuart 2, Inc. acknowledge by execution of this Release that no
defenses will exist as to payment of these Promissory Notes. Further, should
First Choice Auto Finance, Inc. fail to timely satisfy any Promissory Note when
due, all other outstanding Promissory Notes will be accelerated and become due.
2. Jack Winters Enterprises, Inc., Jack Winters and F. Craig Clements will
cause to be returned to Smart Choice Automotive Group, Inc. on February 16,
1998, upon payment of the first Promissory Note referenced hereinabove the
18,362 shares of stock tendered at closing and bearing Certificate Number
SC0247.
3. First Choice Stuart 2, Inc. and First Choice Auto Finance, Inc. will
cooperate with Clement-Winters Group, Inc. in its efforts to sell the property
described as 4205 South Federal Highway, Stuart, Florida 34997. Said actions
will include, but will not be limited, to:
a. Providing Clements-Winters Group, Inc. and its Buyer with a
Certificate of Insurance issued to First Choice Stuart 2, Inc., naming
Buyer as an additional insured and providing coverage as set forth in
the current Lease of the property with First Choice Stuart 2, Inc. by
February 4, 1998;
b. Providing Clements-Winters Group, Inc. with an estoppel certificate
from First Choice Stuart 2, Inc. setting forth the current status of
the Lease by February 4, 1998 in a form approved by counsel for
Clements-Winters Group, Inc.;
c. Providing Clements-Winters Group, Inc. with a letter advising that
First Choice Stuart 2, Inc. will not be exercising its option to
purchase the lease premises by February 4, 1998.
4. Smart Choice Automotive Group, Inc. and/or First Choice Auto Finance,
Inc. and/or First Choice Stuart 2, Inc. will immediately bring the Reyna
Financial Corporation lease payments current and will assume said lease,
removing Jack Winters Enterprises, Inc., Jack Winters and F. Craig Clements from
all obligations under said lease.
5. Mark L. Ornstein and the law firm of Killgore Pearlman P.A. will waive
right to all outstanding invoices directed to Smart Choice Automotive Group,
Inc. in exchange for the releases set forth in this Agreement.
RELEASE OF LIABILITY CLAIMS
6. For and in consideration, the receipt and sufficiency of which is hereby
acknowledged, Smart Choice Automotive Group, Inc., First Choice Auto Finance,
Inc., First Choice Stuart 2, Inc., their subsidiaries, parent companies, holding
companies, and their respective officers, directors, employees, assigns, heirs
and representatives, do hereby fully, finally and completely release Jack
Winters Enterprises, Inc., Clements-Winters Group, Inc., Jack Winters, F. Craig
Clements, and their officers, directors, employees, assigns, heirs and
representatives from any and all claims, damages and causes of action, whether
known or unknown, whether accrued or not; it being the purpose hereof to forever
release and lay to rest all rights, claims and benefits which they may have or
have had against said parties from the beginning of time to this date without
limitation or qualification.
7. For and in consideration, the receipt and sufficiency of which is hereby
acknowledged, Smart Choice Automotive Group, Inc., First Choice Auto Finance,
Inc., First Choice Stuart 2, Inc., their subsidiaries, parent companies, holding
companies, and their respective officers, directors, employees, assigns, heirs
and representatives, do hereby fully, finally and completely release Killgore
Pearlman, P.A. and Mark L. Ornstein, and their officers, directors, employees,
assigns, heirs and representatives from any and all claims, conflict, damages
and causes of action, whether known or unknown, whether accrued or not; it being
the purpose hereof to forever release and lay to rest all rights, claims and
benefits which they may have or have had against said parties from the beginning
of time to this date without limitation or qualification. Smart Choice
Automotive Group, Inc., First Choice Auto Finance, Inc. and First Choice Stuart
2, Inc. specifically warrant that they have reviewed this Release with their
attorney, Michael S. Hacker.
For and in consideration, the receipt and sufficiency of which is hereby
acknowledged, Jack Winters Enterprises, Inc., Jack Winters, F. Craig Clements,
Killgore Pearlman, P.A., Mark L. Ornstein, and their respective officers,
directors, employees, assigns, heirs and representatives, do hereby fully,
finally and completely release Smart Choice Automotive Group, Inc., First Choice
Auto Finance, Inc., First Choice Stuart 2, Inc., their subsidiaries, parent
companies, holding companies, and their officers, directors, employees, assigns,
heirs and representatives from any and all claims, damages and causes of action,
whether known or unknown, whether accrued or not; it being the purpose hereof to
forever release and lay to rest all rights, claims and benefits which they may
have or have had against said parties from the beginning of time to this date
without limitation. Notwithstanding the foregoing, nothing in this Agreement is
meant to release Smart Choice Automotive Group, Inc., First Choice Auto Finance,
Inc. and First Choice Stuart 2, Inc. from the obligations pursuant to the Lease
referenced in paragraph 3 of the Agreement section and the lease guaranty and
obligations under the Reyna lease and the Promissory Notes executed with this
Agreement and referenced in paragraph 1 of the Agreement section.
COMPLETE AGREEMENT/SUBSEQUENT MODIFICATIONS
8. This Agreement constitutes the complete agreement of the parties. No
verbal representations made prior to or contemporaneously with this agreement
are enforceable against any party hereto unless such representations are
included herein. The terms of this agreement may be altered or amended, in whole
or in part, only upon written consent of all the parties to this agreement. No
oral agreement may modify any term of this agreement.
SEVERABILITY
9. In the event that any portion of this agreement is found to be
unenforceable for any reason whatsoever, the unenforceable provision shall be
considered to be severable, and the remainder of this agreement shall continue
in full force and effect.
ATTORNEYS' FEES
10. The parties shall each bear their own attorneys' fees and costs arising
from this agreement and the matters referred to herein. Any party successfully
bringing an action to enforce this Agreement shall be entitled to its reasonable
attorneys' fees and cost.
REPRESENTATION OF UNDERSTANDING OF AGREEMENT
11. In entering into this Agreement, the parties are represented by an
attorney(s) of his/its own choice. The parties represent and warrant that he/it
has read all the terms of this Agreement and that he/it fully understands and
voluntarily accepts these terms.
EXECUTION
12. This Agreement may be executed in counterparts with the same force and
effect as if all signatures appeared on one documents.
WAIVER
13. No waiver of any of the terms of this Agreement shall constitute a
waiver of any other terms, whether or not similar, nor shall any waiver be a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver. Any party may waiver any provisions of this Agreement
intended for its benefit, but such waiver shall in no way excuse the other party
from the performance of any of its other obligations under this Agreement.
GOVERNING LAW
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
Dated this 30th day of January, 1998.
Smart Choice Automotive Group, Inc.
By: /s/ Gary R. Smith 1-30-98
-------------------------------
President
First Choice Auto Finance, Inc.
By: /s/ Gary R. Smith 1-30-98
-------------------------------
President
First Choice Stuart 2, Inc.
By: /s/ Gary R. Smith 1-30-98
-------------------------------
President
/s/ Michael S. Hacker
---------------------
Michael S. Hacker, Counsel for
Smart Choice Automotive Group, Inc.,
First Choice Auto Finance, Inc., and
First Choice Stuart 2, Inc.
Jack Winters Enterprises, Inc.
By: /s/ Jack Winters
--------------------
President
/s/ Jack Winters
----------------
Jack Winters
/s/ F. Craig Clements
---------------------
F. Craig Clements
/s/ Mark L. Ornstein
--------------------
Mark L. Ornstein, Counsel for
Jack Winters Enterprises, Inc.,
Jack Winters and F. Craig Clements
KILLGORE PEARLMAN, P.A.
By:
President
/s/ Mark L. Ornstein
--------------------
Mark L. Ornstein
EXHIBIT 10.74
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), entered into this 6th day of
May, 1997, by and among FIRST CHOICE STUART I, INC., a Florida corporation (the
"Buyer" or "First Choice") and THOMAS DERITA, JR., an individual (the
"Stockholder");
W I T N E S S E T H:
WHEREAS, B&B Florida Enterprises, Inc. ("B&B"), a Florida corporation, is
engaged in the business of operating a Nissan automobile dealership in Martin
County, Florida (the "Business");
WHEREAS, First Choice is electing to acquire such Business pursuant to the
rights and options granted to it pursuant to that certain Implementation
Agreement dated December 16, 1996 between DeRita and First Choice;
WHEREAS, the Stockholder is the record owner of fifty one percent (51%) of
the issued and outstanding shares of common stock of B&B (the "B&B Stock" or the
"Stock");
WHEREAS, the Buyer has an agreement to acquire another forty nine percent
(49%) of such common stock of B&B pursuant to the letter agreement referenced in
Section 7.6 hereinbelow; 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 through such Stock ownership, the Business, as a going concern;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as of the date hereof, as follows:
1. ACQUISITION OF THE STOCK.
1.1 Exchange of Shares. Subject to the terms and conditions of this
Agreement, at the Closing (hereinafter defined) Buyer shall purchase and acquire
from the Stockholder, and the Stockholder shall sell and transfer to Buyer, all
(and not less than all) of the Stock, in exchange for the consideration provided
in Article 2 below. In furtherance thereof, the Stockholder shall have caused
the certificates representing all of the Stock, (duly endorsed for transfer or
accompanied by stock powers executed in blank for transfer) to be delivered to
Buyer by the Pledgee thereof (to wit, Smart Choice of Stuart, L.C., pledgee
pursuant to that certain Stock Pledge Agreement dated December 9, 1996). Smart
Choice of Stuart, L.C. is executing this Agreement for the sole purpose of
expressing its agreement to deliver said Stock to Buyer free and clear of the
aforementioned December 9, 1996 Stock Pledge Agreement upon the satisfaction of
all the terms and conditions of this Agreement.
1.2 Books and Records. In addition to the delivery and transfer of the
Stock to the Buyer, the Stockholder at Closing shall deliver, and cause B&B to
deliver, to the Buyer all of the stock books, records and minute books of each
of them, all financial and accounting books and records of each of them, and all
referral, client, customer and sales records of each of them.
2. CONSIDERATION.
2.1 Purchase Price. The total purchase price ("Purchase Price") for the B&B
Stock shall be 76,546 shares of the common capital stock ($.01 par value) of
Smart Choice Automotive Group, Inc. (the "SMCH Stock"), which First Choice will
cause to be issued to Stockholder by its parent corporation, Smart Choice
Automotive Group, Inc. Smart Choice Automotive Group, Inc. is executing this
Agreement for the sole purpose of expressing its agreement to issue and deliver
said SMCH Stock to Stockholder.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
The Stockholder represents and warrants to First Choice as follows and
agrees to indemnify, defend and hold First Choice harmless from and against any
and all liabilities, obligations, assessments, suits, actions, proceedings,
claims or demands asserted against First Choice, the Business or any rights to
be acquired or purchased by First Choice from the Stockholder pursuant to this
Agreement as a result of any inaccuracy of such warranties and representations:
3.1 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 (except for the pledge arising under the December 9, 1996 Pledge
Agreement between Stockholder and Smart Choice of Stuart, L.C.), 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). Schedule 3.1 contains a list of all the shareholders of B&B,
the number of shares held by each and a certification that there are no options,
warrants or other rights to acquire any equity, ownership, or profit interests
in B&B. 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).
3.2 Valid and Binding Agreement; No Breach. 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.
3.3 Organization, Good Standing and Qualification B&B 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. True and complete copies
of the Articles of Incorporation and Bylaws of B&B (including all amendments
thereto), a correct and complete list of the officers and directors of B&B and
copies of the minutes of the proceedings of the board of directors and
shareholders of B&B, are annexed hereto as Schedule 3.3.
3.4 Capital Structure; Equity Ownership.
(a) The authorized capital stock of B&B is as set forth in their Articles
of Incorporation as included in Schedule 3.3, and the Stock constitutes and
represents fifty-one percent (51%) of the outstanding capital stock of B&B.
(b) There are no outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or calls, demands or commitments
obligating B&B 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 B&B are reserved for issuance pursuant to stock options,
warrants, agreements or other rights to purchase capital stock.
3.5 Subsidiaries and Investments. B&B 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 B&B.
3.6 Financial Information.
(a) Annexed hereto as Schedule 3.6(a) are the financial statements
(including balance sheet, income statement, statement of stockholders' equity,
statement of cash flows, and notes thereto) for B&B as of December 31, 1995 and
December 31, 1996 and for each of the years then ended, and the financial
statements for B&B as of September 30, 1996 and as of March 31, 1997 for nine
months, three months and the month then ended (collectively, the "Financial
Statements"), all of which (to the best of Stockholder's knowledge) fairly
reflect, in all material (see Article 12) respects, the financial condition and
results of operations of B&B in accordance with generally accepted accounting
principles consistently applied, as of the dates thereof and for the periods
then ended; and, without limitation of the foregoing, B&B has no 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 their businesses. To the best knowledge of Stockholder
the Financial Statements (as of the dates thereof and for the periods covered
thereby) are in accordance with the books and records of B&B, which are complete
and accurate in all material respects. Notwithstanding the foregoing, the
parties hereto understand and agree that B&B owes the sum of approximately
$245,000 to Mr. Cook pursuant to a promissory note and no representation or
warranty is being made by Stockholder as to how said obligation is reflected on
B&B's Financial Statements.
(b) Annexed hereto as Schedule 3.6(b) is a listing of all material debts
and obligations and guaranties to which B&B is a party (except for debts,
obligations and guaranties which have arisen in the ordinary course of business
of B&B or which are otherwise reflected in the Financial Statements) and all
obligations of others which are secured by property of B&B, and the current
principal amount of, accrued interest on, and any amount guaranteed under all
such debts, obligations, or guarantees. Schedule 3.6(b) contains a separate
listing of all debt obligations of B&B to the Stockholder (and/or prior
stockholders) and members of the Stockholder's (and prior stockholders'
families) family. Except as set forth on Schedule 3.6(b), to the best knowledge
of Stockholder B&B is not in default under any material debt obligations or
guaranties.
3.7 No Material Changes. Except as disclosed in Schedule 3.7 annexed
hereto, since the date of the most recent of the Financial Statements, (a) the
business of B&B has been operated solely in the normal course, (b) there have
been no changes (other than those arising in the ordinary course of business)
which in the aggregate would have a material adverse effect on the financial
condition, operations or business of B&B from that reflected in such Financial
Statements, (c) B&B has not incurred any material obligation or liability except
in the normal course of business, and (d) there has not been any (i) sale,
assignment or transfer by B&B of any assets or other part of its business,
excluding the sale or disposition of inventory in the ordinary course of
business, (ii) acquisitions or commitments to acquire (whether by purchase,
lease or otherwise) any capital assets by B&B wherein the aggregate payments
will exceed $10,000 (other than those set forth in Schedule 3.7), (iii) increase
or commitment to increase the compensation or benefits of any employees of B&B,
(iv) implementation or institution of any bonus, benefit, profit-sharing,
pension, retirement or other plan or similar arrangement which was not in
existence on September 30, 1996, or (v) new employment agreement (except for the
April 9, 1997 Employment Agreement between B&B and Stockholder, which agreement
is referenced in Section 7.5), or modification of any existing employment
agreement, by B&B.
3.8 Tax Matters.
(a) To the best knowledge of Stockholder, B&B has, to the date hereof
timely filed all tax reports and tax returns required to be filed by B&B, and
B&B has paid all taxes, assessments and other impositions as and to the extent
required by applicable law. To the best knowledge of Stockholder 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 B&B as of the date
hereof have been fully paid, and all taxes and other assessments and levies
which B&B 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. To the best knowledge of Stockholder there are no
outstanding or pending claims, deficiencies or assessments for taxes, interest
or penalties with respect to any taxable period of B&B.
(b) To the best knowledge of Stockholder there are no audits pending with
respect to any federal, state or local tax reports or tax returns of B&B, and no
waiver of statutes of limitations have been given or requested with respect to
any tax years or tax filings of B&B.
(c) B&B has to the date hereof been an electing small business corporation
under Subchapter S of the Internal Revenue Code of 1986, as amended (the
"Code"), and the corresponding tax provisions of Florida law, and has filed all
tax reports required to be filed by B&B on or prior to the date hereof. B&B has
previously distributed to the Stockholder all amounts which have been, are, or
will be distributable to such persons in respect of all completed tax years of
B&B and the 1997 tax year to date. The amounts distributed in respect of the
1996 tax year were not (on a proportionate basis) in excess of the distribution
for prior years, and there have been no 1997 distributions. Schedule 3.8(c)
contains all federal and state tax returns filed for the years 1994, 1995 and
1996.
3.9 Title to Assets. B&B has good and marketable title to all of its
assets, subject to no mortgage, conditional sales agreement, charges, liens or
encumbrances other than those set forth in Schedule 3.9.
3.10 Claims. Except as set forth on Schedule 3.10, there are no legal,
quasi-judicial or administrative actions, suits or proceedings of any kind or
nature now pending or threatened before any court or administrative body in any
manner involving B&B, Business or the Stockholder or any of their assets or
shares of capital stock, or which may adversely affect the power or authority of
B&B or the Stockholder to carry out the transactions to be performed by B&B and
the Stockholder hereunder.
3.11 Contracts.
(a) Except as listed on Schedule 3.11(a), B&B is not a party to any written
or oral (i) contract not made in the ordinary course of business, (ii)
employment contract which is not terminable without cost or other liability to
B&B, or any successor, upon notice of thirty (30) days or less, (iii) contract
with any labor union, (iv) bonus, pension, profit-sharing, retirement, share
purchase, hospitalization insurance or similar plan providing employee benefits,
(v) lease or sublease with respect to any property, real or personal, whether as
lessor or lessee, (vi) advertising contract or contract for public relations
services, (vii) continuing contract for a period of more than thirty (30) days
or which is not terminable without cost or other liability to B&B or its
successors.
(b) Attached hereto as Schedule 3.11(b) is a list of all material contracts
to which B&B is a party. To the best knowledge of Stockholder, B&B has in all
respects performed all material obligations required to be performed by it to
date, and (except as set forth in Schedule 3.11(b)) is not in default in any
respect under any such material agreements or obligations.
3.12 Legal Compliance.
(a) To the actual knowledge of the Stockholder, B&B 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 B&B is not in default or violation in
respect of or under any of the foregoing. The Stockholder is not aware of any
past or present condition or circumstance in the business of B&B (including,
without limitation, with respect to any real property now or previously occupied
by B&B) which could give rise to any material liability under any such law,
statute, regulation, rule or ordinance.
(b) Neither B&B nor the Stockholder has received any written notice of
default or violation, nor, to the best of the Stockholder's knowledge, is B&B 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 business, affairs, properties
or assets of B&B. Neither B&B 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 business, affairs, properties
or assets of B&B, which violation would have a material adverse effect on B&B,
its business or any material portion of its assets.
3.13 The SMCH Stock. The Stockholder hereby confirms that the shares of
SMCH Stock constitute "restricted securities" under applicable federal and state
securities laws, and that the SMCH Stock 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 SMCH Stock will be registered under federal or state securities laws
(except as provided herein).
4 4. 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:
4.1 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.
The Buyer is qualified to do business in each foreign jurisdiction in which its
business requires it to be qualified.
4.2 Title to the Stock. Smart Choice Automotive Group, Inc. ("SMCH") has
the legal capacity and power to issue the SMCH Stock. All of the SMCH Stock has
been duly authorized and when issued will be validly issued and fully paid and
non-assessable. Further, when issued such SMCH Stock will be 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). Stockholder is receiving from
SMCH good, valid and marketable title to all of the SMCH 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).
4.3 Investment. Buyer hereby confirms that the Stock constitutes
"restricted securities" under applicable federal and state securities laws and
that the Stock 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 Buyer further confirms that he has received
no assurance whatsoever as to whether or when any of the Stock will be
registered under federal or state securities laws (except as provided herein).
5. ADDITIONAL AGREEMENTS.
5.1 Resignations. In addition to the other deliveries being made pursuant
to this Agreement at the Closing, the Stockholder will cause to be executed and
delivered to B&B, the resignations of all officers and directors of each of them
(except to the extent that such resignations are not being required by the Buyer
or are inconsistent with the Employment Agreement referenced in Section 7.5
hereinbelow).
5.2 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 either B&B, in order that the Buyer and its
accountants may obtain copies of all work papers utilized or prepared by B&B's
accountants in connection with their review of the Financial Statements, and
consult with their accountants as and to the extent necessary or appropriate in
connection with the preparation of audited financial statements of them.
5.3 Covenants of the Stockholder. The Stockholder represents and covenants
to First Choice that pending completion of the closing contemplated hereby and
as of the Closing Date:
(a) Each representation and warrant set forth in Article 3 hereof shall be
true and correct in all material respects;
(b) B&B will maintain itself at all times up to and including the Closing
Date as a duly licensed corporation in good standing under the laws of the State
of Florida;
(c) B&B and the Stockholder will not mortgage, pledge or subject to a lien
or other encumbrance any of the assets of the Business, except for the floor
planning of new vehicles; and
(d) B&B will keep all of its insurable assets insured in accordance with
its present practice, and it will maintain, preserve and keep all improvements
on property constituting a part of its assets in a good condition and state of
repair, reasonable wear and tear or damage or loss by fire, storm or other
casualty loss excepted.
5.4 Securities Compliance. Smart Choice Automotive Group, Inc. ("SMCH")
shall from the date hereof through December 31, 1998 use its best efforts to
make on a current basis all filings required under the Securities Exchange Act
of 1934, as amended, so as to afford to Stockholder the opportunity to take
advantage of Rule 144 promulgated under the Securities Act of 1933, as amended
(after taking into account the Rule's relevant holding period).
6. B&B and the Stockholder's Resignation.
6.1 Manufacturer Arrangements. Stockholder shall use his best efforts to
assist B&B in reactivating its dealership privileges with Subaru and Suzuki and
after the Closing Stockholder will not seek to obtain such dealership rights for
his own account, but shall instead use his best efforts to cause such rights to
be granted to B&B.
6.2 The Business' Records. B&B shall make available to First Choice at the
Closing all of its sales and service records for the past five years (to the
extent the same are in existence and are either in the possession of B&B or
reasonably obtainable by the Stockholder), including registration lists (new and
used cars and trucks), owner follow-up lists, service files, used "hard" copies
of shop repair orders and lists of new car and truck orders on hand.
6.3 Representations and Warranties. The Stockholder shall execute and
deliver to First Choice a certificate confirming the true and correctness of all
representations and warranties set forth in Article 4 hereof as of the Closing
Date.
7. Conditions Precedent to Closing. Closing shall be conditioned upon
accomplishment of the following conditions precedent:
7.1 Environmental Audit. Prior to Closing, Buyer shall complete an
environmental audit on the property outside the building of the Business
premises. The cost of such audit shall be paid for by Buyer. If any hazardous
waste condition is discovered, appropriate governmental agencies shall be
notified as may be required by applicable law, and Buyer may retain, at its own
cost, a qualified consulting firm to assess the extent of contamination of the
property and to prepare a plan of remedial action to clean up the contamination
to levels acceptable to all applicable federal, state and local regulations and
standards. The consulting firm shall deliver to B&B and Buyer a contamination
assessment report and remedial action plan which shall include the estimated
cost for clean up of any of the contamination found on or under the real
property owned or leased by B&B (the "Property") (the "Clean-Up Report").
If the audit or any follow-up report indicates any hazardous waste
conditions as to the Property which is unacceptable to Buyer, Buyer may
terminate this Agreement by giving written notice to Stockholder, whereupon this
Agreement shall immediately be terminated and all obligations of the parties
hereunder shall cease, except for the obligation of Buyer to pay the costs of
the audits as set forth herein.
7.2 Consent to Assignment of Lease. All real estate leases to which B&B is
a party shall be approved by Buyer and the lease affixed hereto as Schedule 7.2
(said lease reflecting a ten year lease from the date of Closing and two five
year renewal options, at a rental equal to the current fair market rental, all
as required by the Implementation Agreement set forth in Article 17 of this
Agreement) shall be in full force and effect and to the extent that said
attached lease requires the consent of the lessor for the sale of stock
anticipated hereby, such consent shall have been provided.
7.3 Manufacturer's Approval. First Choice shall have received the approval
of Nissan as to the purchase of B&B. B&B and Nissan shall have effective and in
place at the time of Closing customary dealer agreements with terms no less
favorable than those generally offered to other dealers of Nissan, which
appoints B&B (as then owned by First Choice) as an authorized dealer for the
sale and service of Nissan's automobiles from B&B's present location in Martin
County, Florida. Stockholder will use his best efforts to assist First Choice in
obtaining such appointment as authorized dealer, including giving
recommendations, executing assignments and releases of its agreements, and all
other actions, other than payment of money reasonably acquired.
7.4 State and Local Approval. First Choice (or its permitted assigns) shall
have all necessary motor vehicle licenses, permits and approvals (the
"Licenses") to operate the Business in Martin County from all applicable
governmental agencies.
7.5 Employment Agreement. The Employment Agreement set forth in Schedule
7.5 shall be is in full force and effect at Closing.
7.6 49% Shareholders. The December 16, 1996 letter agreement between Smart
Choice Holdings, Inc. and Messrs. Cianfrogna and Ostowski (the "49%
Shareholders") attached hereto and made a part hereof as Schedule 7.6 shall have
been consummated and all conditions therein satisfied to the satisfaction of
First Choice, with the result that First Choice shall have acquired 49% of the
Stock of B&B from the 49% Shareholders.
7.7 Material Error or Omission. First Choice shall not have discovered any
material error, misstatement or omission in any of the representations or
warranties made by B&B and the Stockholders herein; and
7.8 Act of God. There shall not have been any fire, accident or other
casualty or any labor disturbance, civil commotion, riot, act of God or the
public enemy, or any material change in the business or property of B&B or the
Business, or applicable laws, regulations and ordinances pertaining to the
business or property of B&B or the Business, which would have a material adverse
effect on the conduct of any automobile business at the premises where the
business of B&B is now being conducted, or which would interfere with the use
and occupancy by First Choice of such premises in the conduct of an automobile
dealership business.
7.9 No Breaches. Neither Stockholder nor B&B shall be in breach of Articles
4 or 6 of this Agreement.
7.10 Schedule Updates. The Schedules appended hereto shall have been
completed to the satisfaction of Stockholder and First Choice and such completed
Schedules executed by the parties hereto within one week from the execution of
this Agreement.
7.11 At Closing B&B shall have released Stockholder from those financial
obligations of Stockholder set forth in Schedule 7.11 and Stockholder shall have
released B&B from all financial obligations owed by B&B to Stockholder except
for those obligations arising under the Employment Agreement referenced in
Section 7.5. The releases described herein shall be in form customary for stock
sale transactions. In addition at Closing B&B, Smart Choice Automotive Group,
Inc. and the Buyer shall have entered into an indemnification agreement with
Stockholder indemnifying Stockholder from all liabilities, costs or damages
arising under the agreements and instruments listed on Schedule 7.11.
7.12 The loan documentation set forth in Schedule 7.12 shall have been
fully executed by the parties thereto.
8. Closing. The transaction provided for by this Agreement shall close (the
"Closing") at the offices of Buyer in Titusville, Florida, or at such other
place that the parties may agree to in writing, on or before the later to occur
of the following:
(A) Five (5) business days after the receipt in writing of all necessary
Nissan's approval as contemplated herein; or
(B) Five (5) business days after the satisfaction of the other
preconditions to closing set forth in Section 7 hereof.
The parties shall in good faith endeavor to cause the Closing to occur on
or about May ___, 1997. The date of Closing is referred to herein as the
"Closing" or the "Closing Date". If the Closing Date shall be on a Saturday,
Sunday or local or national holiday, the Closing shall be extended to the next
business day. The parties agree that to the greatest extent possible they desire
that the Closing occur on a Monday after an inventory which is conducted during
the immediately preceding weekend. The parties understand and agree that if
Nissan does not provide its written approval as required under Article 7 hereof
within sixty (60) days after the date of the execution of this Agreement, then
this Agreement shall automatically terminate and the parties shall have no
further obligation to close the transactions contemplated under this Agreement.
9. Notice. Any notice, communication, request, reply or advice hereunder (a
"Notice") must be in writing and may be given by registered or certified mail,
with return receipt requested, or by hand delivery to an officer of such party,
or facsimile. Notice deposited in the mail as set forth above shall be effective
three business days after it is so deposited. Notice given in any other manner
shall be effective when received by the party to whom it is given. For purposes
of notice, the addresses of the parties shall be as follows:
(a) if to First Choice:
Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Attn: President
with a copy to:
James Neal Hutchinson, Jr., Esq.
Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
(b) if to the Stockholder to:
Mr. Thomas DeRita, Jr.
Stuart Nissan
4313 South Federal Highway
Stuart, Florida 34997
with a copy to:
Scott L. McMullen, Esq.
Jones, Foster et al
Post Office Box 3475
West Palm Beach, Florida 33402-3475
10. Execution of Further Documents. From and after the Closing, upon the
reasonable request of First Choice, the Stockholder shall execute, acknowledge
and deliver all such further deeds, bills of sale, assignments, transfers,
conveyances, powers of attorney and assurances as may be required or appropriate
to convey and transfer to and vest in First Choice and protect its right, title
and interest in the Business and to carry out the transactions contemplated by
this Agreement.
11. Survival of Representations and Warranties. Each of the representations
and warranties made by B&B and the Stockholder in this Agreement or pursuant
hereto shall survive for a period of three (3) years after the Closing Date.
Notwithstanding any knowledge of facts determined or determinable by any party
by investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant and agreement. Each of the representations
and warranties of First Choice shall expire on the Closing Date.
12. Definition of Material. Whenever in this Agreement the word "material"
is used in a context which requires a calculation of a monetary amount, the
amount shall be considered "material" if it involves an amount greater than
$2,000 or a matter that has economic significance greater that $2,000.
13. Section and Other Headings. Section or other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14. Schedules. Each Schedule attached hereto shall be deemed to be a part
of this Agreement to the same extent as if set forth verbatim in the body of
this Agreement.
15. Enforcement. The laws of the State of Florida shall govern the
interpretation, validity, performance and enforcement of this Agreement. If any
provision of this Agreement should be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
16. Parties. This Agreement shall be binding upon and enforceable against,
and shall inure to the benefit of, the parties hereto and their respective
successors or assigns.
17. December 16, 1996 Agreement. This Agreement has been entered into by
First Choice and the Stockholder hereto in recognition of the fact that Smart
Choice of Stuart, L.C., an affiliate of First Choice has the option ("Option")
to purchase the Business for a purchase price of $1.00 and the assumption of
certain liabilities all as more particularly set forth in that certain
Implementation Agreement between B&B and Mr. DeRita dated December 16, 1996. It
is agreed by the parties hereto that the consummation of the closing
contemplated by this Agreement shall constitute the consummation and exercise of
the Option. It is further agreed by DeRita that upon the issuance of the SMCH
stock referenced herein, First Choice's affiliate Smart Choice Automotive Group,
Inc. (formerly known as Smart Choice Holdings, Inc.), shall have no further
obligation to issue to DeRita shares of preferred stock ("Preferred") of Smart
Choice Holdings, Inc. as was originally contemplated by reason of Section 3 of
the aforementioned December 16, 1996 Agreement. Notwithstanding the foregoing in
the event that the closing contemplated by this Agreement is not consummated
DeRita agrees that all terms and provisions of the Implementation Agreement
shall survive in form and substance as if this Agreement had not been executed;
provided, however, that DeRita hereby and herewith agrees to accept the SMCH
Stock referenced herein in lieu of the Preferred. B&B and the other parties
hereto agree that upon the closing as contemplated by this Agreement the other
transactions contemplated by Section 4 of the aforesaid December 16, 1996
Agreement shall have been satisfied and completed; it being understood and
agreed that such transactions are conditions precedent to the closing
contemplated herein.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
set forth above.
FIRST CHOICE STUART I, INC.,
a Florida corporation
By: /s/ Gary R. Smith
---------------------
Name: Gary R. Smith
Its: President
/s/ Thomas DeRita, Jr.
----------------------
THOMAS DeRITA, JR.
The undersigned Smart Choice of Stuart, L.C. hereby joins in this Agreement
for the sole purpose of acknowledging its agreement expressed in the last
sentence of Section 1.1 hereof.
SMART CHOICE OF STUART, L.C.
By: /s/ Gary R. Smith
---------------------
Its: President
First Choice Auto Finance, Inc.
By: /s/ Gary R. Smith
----------------------
Its: President
The undersigned Smart Choice Automotive Group, Inc. hereby joins in this
Agreement for the sole purpose of acknowledging its agreement expressed in the
last sentence of Section 2.1 and in Section 5.4 hereof.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
---------------------
Its: President
EXHIBIT 10.75
RACC
PROMISSORY NOTE
- -------------------------------------------------------------------------------
RAYTHEON AIRCRAFT CREDIT CORPORATION
1. PROMISE TO PAY. FOR VALUE RECEIVED, the undersigned (hereinafter
collectively referred to as "Debtor") jointly and severally (if more than one)
promise(s) to pay to the order of Raytheon Aircraft Credit Corporation, at 9709
East Central, Wichita, Kansas 67206 (hereinafter referred to as "RACC") the
principal sum of $2,199,900, together with interest from the date hereof as
specified below, until paid in full.
2. RATE OF INTEREST. Debtor agrees to pay to RACC interest on the unpaid
principal balance hereunder, as follows (check appropriate box):
The rate of interest during months 1 - 24 of this loan shall be 8.5 percent
per annum.
The rate of interest during months 25 - 144 of this loan shall be the
"prime" rate of interest in effect at the Bank of America plus 0 percent.
The rate of interest shall increase or decrease in accordance with the
"prime" rate of interest in effect at the Bank of America on the first day
of each calendar quarter. The Bank of America "prime" rate of interest as
of the date hereof is 8.5 percent.
3. PAYMENT SCHEDULE. Payment of the principal balance together with accrued
interest in accordance with paragraph 2, above, shall be made in 144 consecutive
monthly installments. The amount of each installment payment shall be $**See
Below. This installment payment amount will increase or decrease in the event
the applicable, variable rate of interest changes, to adjust the installment
payments as of the date of such change to an amount which will fully amortize
the indebtedness, with interest at the adjusted rate, over the remaining term of
this loan. In such event, RACC shall notify Debtor of the adjusted payment
amount. The first installment payment is due on January 18, 1998 and all
subsequent payments shall be due on or before the 18th day of each succeeding
month, until December 18, 2009, when the entire remaining balance of principal
and interest shall be paid in full. During the period Debtor is in default in
payment of any installment hereunder, when and as due, the rate of interest on
the unpaid principal balance hereunder shall be increased by two percent per
annum.
Additional terms, if applicable: Payments for Months 1 - 24 shall be
$19,995. Balloon Payments of $100,000 due in months 9 and 21. Payments for
months 25 - 144 to be determined and debtor advised.
4. PAYMENT OF LOAN PROCEEDS. Debtor hereby directs RACC to pay or credit
the loan proceeds to Raytheon Aircraft Company
5. PREPAYMENT. Debtor may prepay this obligation in part or in full at any
time. Any partial prepayment shall be first applied to accrued interest.
6. SECURITY AGREEMENT. To secure the payment of the indebtedness evidenced
by this Promissory Note and any renewals, extensions or changes hereof and of
any and all other indebtedness of Debtor to RACC, either direct or indirect,
absolute or contingent, whether now existing or hereafter arising, Debtor has
contemporaneously herewith executed a Security Agreement (the "Security
Agreement") granting RACC a purchase money security interest in the following
described aircraft and/or other property (collectively the "Collateral") to be
purchased by Debtor with the proceeds of the loan evidenced by this Promissory
Note.
Raytheon Aircraft Company Model No. King Air C90B, Serial Number LJ-1477,
Registration Number N1107W, together with all other property used in the
operation of the aircraft or reflecting use or maintenance of the aircraft,
including but not limited to all engines, propellers, instruments,
avionics, equipment and accessories attached to, connected with, located in
or removed from the aircraft and all logs manuals and maintenance records.
Aircraft Engines: Make Pratt & Whitney Model PT6A-21, Shaft Horsepower
550., Serial Number (L) PCEPE0067, Serial Number(R) PCEPE0071 together with
any replacement engines. Aircraft Propellers: Hub Make McCauley, Hub Model
4HFR34C768-C, Hub Serial Number (L) 970225 Hub Serial Number (R) 970575,
together with any replacement propellers.
7. PURPOSE OF LOAN. Debtor warrants and represents to RACC that this loan
is for business and commercial purposes and not for personal, family, household
or agricultural purposes.
<PAGE>
8. PRINCIPALS AND WAIVERS. All signers, makers, guarantors, endorsers and
sureties hereof are to be regarded as principals, jointly and severally. Every
maker, endorser, guarantor and surety hereof hereby waives presentment, notice,
protest and impairment of collateral, and consents to all extensions, deferrals,
partial payments and refinancings hereof before or after maturity.
9. DEFAULT. Upon Debtor's failure to make any payment required under this
Promissory Note, or if the prospect of payment, performance or realization on
the Collateral is significantly impaired, RACC may employ all remedies allowed
by law including, where permissible, declaring all indebtedness due under the
Promissory Note, as well as any other indebtedness or liability of Debtor to
RACC, immediately due and payable. The parties agree (by way of illustration
only, and without attempting to list all events which may do so) that the
occurrence of any of the following events will significantly impair the prospect
of payment, performance or realization on the Collateral: (1) failure of Debtor
to perform any covenant made herein or in the Security Agreement; (2) loss,
theft, substantial damage, destruction, sale or encumbrance to or of any of the
Collateral, or the making of any levy, seizure or attachment thereof or thereon;
(3) death, dissolution, termination of existence, insolvency, business failure,
inability to pay debts as they accrue, appointment of a receiver for any part or
all of the property, assignment for the benefit of creditors, or the
commencement of any proceedings under any bankruptcy or insolvency laws by or
against Debtor.
10. WAIVER OF DEFAULT. No waiver by RACC of any default shall be effective
unless in writing, nor operate as a waiver of any other default or of the same
default in the future.
11. LOAN APPLICATION. Debtor hereby certifies that there are presently no
pending actions or proceedings before any court or administrative agency which
might adversely effect Debtor's financial condition, and that all information
and statements made in any financial or credit statement or application for
credit are true and correct. Debtor acknowledges that RACC has relied upon such
information and statements in making this loan.
12. CHANGE OF ADDRESS. Debtor will immediately notify RACC in writing of
any change of address from that shown herein.
13. GOVERNING LAW AND CHOICE OF FORUM. THIS AGREEMENT WAS MADE AND ENTERED
INTO IN THE STATE OF KANSAS AND THE LAW GOVERNING THIS TRANSACTION SHALL BE THAT
OF THE STATE OF KANSAS AS IT MAY FROM TIME TO TIME EXIST. THE PARTIES AGREE THAT
ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF THIS AGREEMENT SHALL BE
BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF KANSAS AT WICHITA, KANSAS, OR IN THE EIGHTEENTH JUDICIAL DISTRICT COURT OF
SEDGWICK COUNTY, KANSAS, TO THE EXCLUSION OF ALL OTHER COURTS AND TRIBUNALS.
NOTWITHSTANDING THE ABOVE, IN THE EVENT AN EVENT OF DEFAULT SHOULD OCCUR, RACC
(AT ITS SOLE OPTION) MAY INSTITUTE LEGAL PROCEEDINGS IN ANY JURISDICTION AS MAY
BE APPROPRIATE IN ORDER FOR RACC TO OBTAIN POSSESSION OF THE COLLATERAL. THE
PARTIES HEREBY CONSENT AND AGREE TO BE SUBJECT TO THE JURISDICTION OF THE
AFORESAID COURTS IN SUCH PROCEEDINGS.
14. ENFORCEABILITY. The unenforceability of any provision hereof shall not
affect the validity of any other provision hereof.
15. BINDING AGREEMENT. All obligations of Debtor hereunder shall bind the
heirs, legal representatives, successors and assigns of Debtor. If there be more
than one Debtor, their liabilities shall be joint and several. All rights of
RACC hereunder shall inure to the benefit of its successors and assigns. 16.
ASSIGNMENT. RACC may transfer or assign all or any part of its interest in this
Promissory Note, including any guaranties, without the consent of Debtor or any
other party. Debtor shall not sell, assign, transfer, encumber or convey any of
its interests in the Collateral or in this Promissory Note without the prior
written consent of RACC.
<PAGE>
17. ENTIRE AGREEMENT. This Promissory Note and the Security Agreement
constitute the entire agreement between and among the parties with respect to
the subject matter hereof. There are not verbal understandings, agreements,
representations or warranties not expressly set forth herein. Neither this
Promissory Note nor the Security Agreement shall be changed orally, but only by
writing signed by the parties hereto.
DEBTOR HEREIN ACKNOWLEDGES THAT IT HAS READ AND FULLY UNDERSTANDS ALL OF THE
TERMS AND CONDITIONS OF THIS PROMISSORY NOTE. BY EXECUTION HEREOF, THE
UNDERSIGNED HEREBY CERTIFIES THAT HE/SHE IS DULY AUTHORIZED TO EXECUTE THIS
PROMISSORY NOTE IN THE CAPACITY STATED BELOW.
Executed this 19th day of December, 1997, at Wichita, Kansas.
Debtor: First Choice Melbourne 1, Inc.
/s/ Gary R. Smith
-----------------
President
Address: 5200 South Washington Avenue
Titusville, FL 32780
RAYTHEON AIRCRAFT CREDIT CORPORATION
By:
EXHIBIT 10.76
GUARANTY
FOR VALUE RECEIVED, the undersigned, whether one or more, as primary obligor,
hereby unconditionally guarantees prompt payment and performance of all
obligations of Debtor under the terms of this Promissory Note and the Security
Agreement and hereby waives diligence, presentment, demand, protest, notice of
acceptance, or notice of any kind whatsoever, as well as impairment of
collateral and any requirement that RACC or any assignee exercise or exhaust any
right to take any action against Debtor or any other person or any collateral
hereunder and hereby consents to any extension of time, renewal or any other
modification thereof. The undersigned confirms and acknowledges to RACC that
this guaranty is given as an inducement to the extension of credit by RACC to
Debtor and that the undersigned will derive benefit from such extension of
credit. The undersigned further confirms and acknowledges reading and fully
understanding all of the terms and conditions of this Promissory Note and the
Security Agreement.
By: /s/ Gary R.Smith
- ---------------------
GUARANTOR, Smart Choice Automotive Group, Inc.
Gary R. Smith, President
EXHIBIT 10.77
RACC
SECURITY AGREEMENT
- -------------------------------------------------------------------------------
RAYTHEON AIRCRAFT CREDIT CORPORATION
1. GRANT OF SECURITY INTEREST. To secure the payment of the indebtedness
due Raytheon Aircraft Credit Corporation
(hereinafter referred to as "RACC") by First Choice Melbourne 1, Inc.
(hereinafter referred to as "Debtor") under that certain Promissory Note
(hereinafter referred to as the "Promissory Note"), dated of even date herewith,
and any renewals, extensions or changes in form thereof, and of any and all
other indebtedness of Debtor to RACC, either direct or indirect, absolute or
contingent, whether now existing or hereafter arising, Debtor grants to RACC a
security interest in the following property and in all additions and accessions
thereto and substitutions and replacements thereof, all unearned insurance
premiums and insurance proceeds, and the proceeds of all of the foregoing (all
of said property is hereinafter collectively referred to as the "Collateral"):
Raytheon Aircraft Company Model No. King Air C90B, Serial Number LJ-1477,
Registration Number N1107W, together with all other property used in the
operation of the aircraft or reflecting use or maintenance of the aircraft,
including but not limited to all engines, propellers, instruments,
avionics, equipment and accessories attached to, connected with, located in
or removed from the aircraft and all logs manuals and maintenance records.
Aircraft Engines: Make Pratt & Whitney Model PT6A-21, Shaft Horsepower
550., Serial Number (L) PCEPE0067, Serial Number(R) PCEPE0071 together with
any replacement engines. Aircraft Propellers: Hub Make McCauley, Hub Model
4HFR34C768-C, Hub Serial Number (L) 970225 Hub Serial Number (R) 970575,
together with any replacement propellers.
The security interest granted herein is a purchase money security interest under
the Kansas Uniform Commercial Code.
2. DEBTOR'S WARRANTY OF TITLE AND CITIZENSHIP. Except for the security
interest granted under this Security Agreement, Debtor warrants that Debtor is
(or, to the extent that the Collateral is to be acquired hereafter, will be) the
owner of the Collateral free from any prior security interest, lien or
encumbrance. Debtor will defend the Collateral against all claims and demands of
all persons claiming interest therein. Debtor further warrants that it is a
Citizen of the United States as defined by 49 U.S.C. 1301(13).
3. DEBTOR WILL EXECUTE AND DELIVER DOCUMENTS. Debtor will, at RACC's
request, furnish RACC such information and execute and deliver to RACC such
documents and do all such acts and things as RACC may reasonably request as are
necessary or appropriate to assist RACC in establishing and maintaining a valid
security interest in the Collateral and to assure that the Collateral is
properly titled and registered and the security interest perfected to RACC's
satisfaction. Debtor will pay the cost of filing all appropriate documents in
all public offices where RACC deems such filings necessary or desirable.
4. OPERATION, MAINTENANCE AND REPAIR. Debtor shall operate, maintain and
repair the Collateral and retain actual control and possession thereof in
accordance with the following provisions:
4a. Debtor shall have complete use of the Collateral until default, and
Debtor shall use, operate, maintain and store the Collateral, or any part
thereof, properly, carefully and in compliance with all applicable
statutes, ordinances, regulations, policies of insurance and manufacturer's
recommendation and operating and maintenance manuals.
4b. Debtor agrees that the Collateral will be operated only by duly
certificated and qualified pilots and shall be based within the
geographical boundaries of the United States.
4c. Debtor shall be responsible for and pay for all expenses of owning and
operating the Collateral, including but not limited to storage, fuel,
lubricants, service, inspections, overhauls, replacements, maintenance and
repairs, all in compliance with the manufacturer's operating and
maintenance manuals and with FAA rules and regulations. Debtor shall
properly maintain all records pertaining to the maintenance and operation
of the Collateral.
<PAGE>
5. INSURANCE. Debtor will, at its own expense, keep the Collateral insured
at all times against loss, damage, theft and such other casualties as RACC may
reasonably require (including hull insurance) in such amounts, under such forms
of policies, upon such terms, for such periods and with such companies or
underwriters as RACC may (but has no obligation to) approve. Losses or refunds
in all cases shall be payable to RACC and Debtor as their interests may appear.
In no event shall the amount of such insurance be less than the amount of
indebtedness due under the Promissory Note. All policies of insurance shall
provide for at least 30 days prior written notice of cancellation to RACC, and
shall contain a breach of warranty endorsement in favor of RACC. RACC may obtain
such insurance if such insurance is not provided by Debtor. Debtor shall furnish
to RACC proof satisfactory to RACC of compliance with the provisions of this
paragraph. RACC, and its assigns, are hereby irrevocably appointed
attorney-in-fact for Debtor to endorse for Debtor any checks, drafts or other
instruments whatsoever payable to Debtor as proceeds or refunds for any such
insurance and to make claims of loss and to sign proofs of loss against any
insurance company and to receive all payments. Debtor will pay any deductible
portion of such insurance. All risk of loss, damage, destruction or confiscation
shall at all times be on Debtor.
6. DEBTOR'S POSSESSION. Until default, Debtor may have possession of the
Collateral and use it in any lawful manner not inconsistent with this Security
Agreement. RACC may examine and inspect the Collateral, wherever located, at all
reasonable times. At its option, but without assuming any obligation to do so,
RACC may discharge taxes, liens or security interests, or other encumbrances
levied or asserted against the Collateral, may place and pay for insurance
thereon, may order and pay for the repair, maintenance and preservation thereof,
and may pay any necessary filing or recording fees. Amounts paid by RACC under
the preceding sentence shall be added to Debtor's unpaid balance under the
Promissory Note, shall be secured by the Collateral and shall be payable upon
demand, together with interest at the rate computed as provided in Paragraph 2
of the Promissory Note until paid in full. Debtor shall at all times keep the
Collateral and any proceeds therefrom separate and distinct from other property
of the Debtor and shall keep accurate and complete records of the Collateral and
any such proceeds.
7. DEFAULT. Upon Default as defined in the Promissory Note, RACC may
require Debtor to assemble the Collateral and make it available to RACC at a
place to be designated by RACC which is reasonably convenient to both parties.
The requirements of the Kansas Uniform Commercial Code for reasonable
notification to Debtor of the time and place of any proposed public sale of the
Collateral or of the time after which any private sale or other intended
disposition is to be made shall be met if such notice is mailed, postage
prepaid, to Debtor's address, as shown herein, at least ten (10) days before the
time of the sale or disposition. After deduction of all reasonable expenses of
retaking, holding, preparing for sale or lease, selling, leasing and the like,
together with costs of collection, attorneys' fees and legal expenses of RACC,
and after the payment of the principal and interest due under the Promissory
Note, the balance, if any, of the proceeds of the sale may be applied to the
payment of any or all other indebtedness of Debtor to RACC, whether due or note,
whether direct or indirect, absolute or contingent, whether now existing or
hereafter arising, and whether owing individually or in connection with others
not parties hereto, and to the satisfaction of indebtedness secured by any
subordinate security interest in the collateral of which RACC has received
notice prior to distribution of the proceeds. Debtor shall be liable for any
deficiency after application of such proceeds, to the extent permitted by law.
If after a default by Debtor, the Collateral is returned to or recovered by
RACC, Debtor agrees RACC may fly or otherwise move the Collateral for
demonstration and other purposes reasonably related to a proposed public or
private sale or other disposition of the Collateral.
8. WAIVER OF DEFAULT. No waiver by RACC of any default shall be effective
unless in writing, nor operate as a waiver of any other default or of the same
default in the future.
9. RESTRICTION ON TRANSFER OR LIENS. Debtor will not, without the prior
written consent of RACC, sell or otherwise transfer or encumber the Collateral,
or any interest therein, or offer to do so or remove or attempt to remove the
Collateral from the United States. Debtor will keep the Collateral free from any
adverse security interest, lien or encumbrance and will not permit the
Collateral to be attached or replevied.
10. TAXES. Debtor will promptly pay, when due, all taxes and assessments
upon the Collateral or upon its use or operation or upon this Security Agreement
and the obligations evidenced by the Promissory Note.
11. CHANGE OF ADDRESS. Debtor will immediately notify RACC in writing of
any change of address from that shown in this Security Agreement and any change
of base for the Collateral. Debtor will keep the Collateral based at
5200 South Washington Avenue, Titusville, FL 32780
<PAGE>
12. GOVERNING LAW AND CHOICE OF FORUM. THIS AGREEMENT WAS MADE AND ENTERED
INTO IN THE STATE OF KANSAS AND THE LAW GOVERNING THIS TRANSACTION SHALL BE THAT
OF THE STATE OF KANSAS AS IT MAY FROM TIME TO TIME EXIST. THE PARTIES AGREE THAT
ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF THIS AGREEMENT SHALL BE
BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF KANSAS AT WICHITA, KANSAS, OR IN THE EIGHTEENTH JUDICIAL DISTRICT COURT OF
SEDGWICK COUNTY, KANSAS, TO THE EXCLUSION OF ALL OTHER COURTS AND TRIBUNALS.
NOTWITHSTANDING THE ABOVE, IN THE EVENT AN "EVENT OF DEFAULT" SHOULD OCCUR, RACC
(AT ITS SOLE OPTION) MAY INSTITUTE A LEGAL PROCEEDING IN ANY JURISDICTION AS MAY
BE APPROPRIATE IN ORDER FOR RACC TO OBTAIN POSSESSION OF THE COLLATERAL. THE
PARTIES HEREBY CONSENT AND AGREE TO BE SUBJECT TO THE JURISDICTION OF THE
AFORESAID COURTS IN SUCH PROCEEDINGS.
13. ENFORCEABILITY. The unenforceability of any provision hereof shall not
affect the validity of any other provision hereof.
14. BINDING AGREEMENT. All obligation of Debtor hereunder shall bind the
heirs, legal representatives, successors and assigns of Debtor. If there be more
than one Debtor, their liabilities shall be joint and several. All rights of
RACC hereunder shall inure to the benefit of its successors and assigns.
15. ASSIGNMENT. RACC may transfer or assign all or any part of its interest
in this Security Agreement without the consent of Debtor or any other party.
Debtor shall not sell, assign, transfer, encumber or convey any of its interests
in the Collateral or in this Security Agreement without the prior written
consent of RACC.
16. ENTIRE AGREEMENT. This Security Agreement and the Promissory Note
constitute the entire agreement between and among the parties with respect to
the subject matter hereof. There are no verbal understandings, agreements,
representations or warranties not expressly set forth herein. Neither this
Security Agreement nor the Promissory Note shall be changed orally, but only by
writing signed by the parties hereto.
DEBTOR HEREIN ACKNOWLEDGES THAT IT HAS READ AND FULLY UNDERSTANDS ALL OF THE
TERMS AND CONDITIONS OF THIS SECURITY AGREEMENT. BY EXECUTION HEREOF, THE
UNDERSIGNED HEREBY CERTIFIES THAT HE/SHE IS DULY AUTHORIZED TO EXECUTE THIS
SECURITY AGREEMENT IN THE CAPACITY STATED BELOW.
Executed this 19th day of December, 1997, at Wichita, Kansas.
Debtor: First Choice Melbourne 1, Inc.
/s/ Gary R. Smith
-----------------
Gary R. Smith, President
Address: 5200 South Washington Avenue
Titusville, FL 32780
RAYTHEON AIRCRAFT CREDIT CORPORATION
By: /s/
"RACC"
EXHIBIT 10.82
MANHEIM AUTOMOTIVE FINANCIAL SERVICES, INC. SECURITY AGREEMENT
(INVENTORY FINANCE AND BRIDGE LINE OF CREDIT)
This Agreement is dated and entered into as of the date listed below between
Manheim Automotive Financial Services, Inc. ("Lender") and the undersigned
borrower ("Borrower").
A. WHEREAS, Borrower wishes to purchase motor vehicles ("Vehicle(s)") either
through various automotive auctions, wholesale motor vehicle dealers or
directly from motor vehicle dealers from time to time; and
B. WHEREAS, Borrower requests and Lender agrees to finance the acquisition of
such Vehicles for Borrower under two types of financing pursuant to this
Agreement:
(i) regular inventory financing; and/or
(ii) a bridge line of credit to facilitate the purchase of a Vehicle to be
repaid within seven (7) to twenty-one (21) days.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the parties agree as follows:
1. Definitions.
When used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Advance" shall mean any amount actually disbursed by Lender by cash,
check, draft, or otherwise.
"Advance/Fee Schedule" shall mean the schedule to this Agreement which
indicates: (i) the maximum amount of advance which may be outstanding under
the Inventory Finance Loan and Bridge Line of Credit and (ii) amount of
fees applicable to each Advance.
"Agreement Date" shall mean the date on which this Agreement is executed.
"Average Daily Outstanding Balance" shall mean the total of the outstanding
balances of the Advances with respect to a Loan for all days in the Billing
Period divided by the number of days in the Billing Period.
"Billing Period" shall mean a calendar month or such other period announced
by the Lender as the billing period for Advances under this Agreement
"Borrower" shall have the meaning set forth in the introduction to this
Agreement.
"Bridge Line of Credit" shall have the meaning set forth in Section 2(b).
"Business Day" shall mean a day other than Saturdays, Sundays, bank
holidays or other days on which the principal office of Lender is not open
for business.
"Collateral" shall have the meaning set forth in Section 5.
"Environmental Laws" shall mean all federal, state and local laws,
regulations, codes, plans, orders, decrees, judgments, injunctions, notices
or demand letters issued, entered, or promulgated, approved or otherwise
relating to pollution or protection of he environment.
"Event of Default" shall mean any of the events specified in Section 14 of
this Agreement.
"Guarantors" shall mean those Persons who have executed and delivered
Guaranties.
"Guaranties" shall mean the guaranties of payment and performance of all or
some of Borrower's indebtedness under the Loans, executed and delivered by
the Guarantors.
"Index Rate" shall mean the base rate which is quoted as the "Prime Rate"
in the column entitled "Money Rates" published in The Wall Street Journal
(in the event no such rate is published in The Wall Street Journal on such
date, the Index Rate shall be the "Prime Rate" shown in such column for the
most recent Business Day preceding the last Business Day of such month on
which such rate was published) or, in the event The Wall Street Journal
does not quote a "Prime Rate", the rate quoted as the "Prime Rate" in a
publication as Lender may, from time to time, hereafter designate in
writing.
"Interest Rate" shall mean the Index Rate plus an applicable percentage.
"Inventory Finance Loan" shall have the meaning set forth in Section 2(a)
"Lender" shall have the meaning set forth in the introduction to this
Agreement.
"Loans" shall mean, collectively, the Inventory Finance Loan and Bridge
Line of Credit.
"Maturity Date" shall mean the date upon which an Advance is due as
determined by the Lender, provided however if no such date is specified by
Lender then the advance shall be deemed due upon demand of Lender.
"Original Term" shall mean the period from the Agreement Date to the first
anniversary of the Agreement Date.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation (whether or not for profit), joint venture, association,
estate, trust, or unincorporated organization, (whether foreign,
territorial, national, federal, state, commonwealth, parish, county, city,
municipal, local or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof). Unless the
context otherwise requires, "Person" shall not include Lender.
"Promissory Note" shall have the meaning set forth in Section 2(a).
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted
in the state where the Collateral is located and the version in effect as
of the Agreement Date.
"Vehicle(s)" shall have the meaning set forth in the recitals to this
Agreement.
All other terms contained in this Agreement shall, when the context so
indicates, have the meanings provided for by the Uniform Commercial Code.
2. Loan Terms.
Lender agrees to make the following Loans to Borrower, in a total aggregate
principal amount not to exceed the amount set forth on the Advance/Fee
Schedule for all such Loans, and Borrower promises to repay such Loans on
the following terms and conditions:
(a) Inventory Finance Loan. Each Advance, from time to time as necessary on
or after the Agreement Date, for the purchase of a vehicle as evidenced by
a promissory note substantially in the form of Exhibit A (the "Promissory
Note") shall be payable in full on the earliest of:
(i) forty-eight (48) hours from the time of the Vehicle sale or within
twenty-four (24) hours from the time Borrower receives payment by or
on behalf of the purchaser of such Vehicle; or
(ii) the Maturity Date for such Advance; or
(iii) the termination of this Agreement.
In addition, payments of principal may be required from time to time if the
Vehicle is subject to the Lender's curtailment program. The maximum amount
of Advances outstanding at any one time under the Inventory Finance Loan
shall not exceed the amount set forth on the Promissory Note. The proceeds
of the Inventory Finance Loan may only be used to purchase Vehicles to be
held as inventory of the Borrower.
(b) Bridge Line of Credit. Each Advance, from time to time as necessary on
or after the Agreement Date, to finance a Vehicle payable within seven (7)
to twenty-one (21) days from the date of the Advance as evidenced by a
written approval from the Lender. The maximum amount of Advances
outstanding at any one time under the Bridge Line of Credit shall not
exceed the amount set forth on the Advance/Fee Schedule. The proceeds of
the Bridge Line of Credit may only be used to purchase Vehicles through
automotive auctions.
(c) Payments Received from Manufacturers or Distributors. At the request of
the Lender, in the event that Borrower receives any payments from holdback
reserves, manufacturer rebates, incentive payments or any other form of
payment from a manufacturer or a distributor, such payments shall be
immediately forwarded to Lender and Lender shall apply such sums to the
outstanding principal balance with respect to the applicable Loans.
(d) Time of Payments. Payments on the Loans received by Lender no later
than 1:00 P.M. in the time zone where Lender is located, shall be credited
to the Average Daily Outstanding Balance within one (1) Business Day after
the date of Lender's receipt of such payments or within one (1) Business
Day after the date the Lender's bank records a wire transfer of such
payment.
3. Interest/Fees.
(a) Rates of Interest. The Average Daily Outstanding Balance of the
Inventory Finance Loan shall bear interest until paid in full at a per
annum rate equal to the Index Rate plus the percentage set forth on the
Promissory Note.
(b) Interest Rate. The Interest Rate shall initially be determined by
Lender as of the Business Day preceding the Agreement Date, and shall
remain in effect for the remainder of such calendar month in which the
Agreement Date occurs; thereafter, the Index Rate shall be determined by
Lender on the last Business Day of each month and the Interest Rate on said
date shall be based on the Index Rate used in calculating the rates which
are payable for the following month or as announced by Lender from time to
time pursuant to the Program. Interest shall be calculated on the basis of
a 360-day year for actual days elapsed and shall be payable on the
fifteenth (15th) day of each month for the preceding month or on such other
(c) Default Rate of Interest. Any Advance which is in default hereunder
shall bear interest at a rate equal to the Interest Rate plus three percent
(3%) until such Advance is paid in full.
(d) Interest Accrual on Advances. Interest on each Advance made under the
Inventory Finance Loan, shall begin to accrue on the date of Lender's
Advance for such Vehicle.
(e) Administration Fees. In addition to interest on each Advance under the
Inventory Finance Loan, the Borrower shall pay, at the time the Vehicle is
sold, an administration fee in the amount set forth on the Advance/Fee
Schedule.
(f) Bridge Line of Credit Fees. In lieu of the payment of interest, for
each Advance under the Bridge Line of Credit, the Borrower shall pay within
seven (7) days to twenty-one (21) days after the date of the Advance, as
applicable, a Bridge Line of Credit fee in the amount set forth on the
Advance/Fee Schedule.
4. Term.
The term of this Agreement shall commence on the Agreement Date and shall
continue for one (1) year thereafter. After the initial term, this
Agreement shall be automatically renewed for one (1) year and from
year-to-year thereafter unless terminated by either party notifying the
other in writing no later than ninety (90) days prior to any anniversary of
this Agreement. This Agreement may be terminated at any time by Lender and,
if Borrower is not in default, by Borrower, by either party providing the
other party ninety (90) days' prior written notice.
5. Collateral.
For the purpose of securing any indebtedness under this Agreement and any
other indebtedness of Borrower to Lender, Borrower hereby grants Lender a
security interest in all Vehicle inventory, parts and accessories
inventory, equipment, fixtures, accounts, holdback reserves, manufacturer
rebates and incentive payments, general intangibles of the Borrower now
owned and hereafter acquired, wherever located; all accessions to,
substitutions for and all replacements of any of the foregoing; all chattel
paper, documents, instruments, monies, residues and property of any kind
related to any of the foregoing; all books and records of Borrower related
to any of the foregoing, including without limitation, computer programs,
print-outs, and other computer hardware and software materials and records
pertaining to any of the foregoing; together with all proceeds and products
of the foregoing, including, without limitation, proceeds of insurance
policies insuring any of the foregoing ("Collateral").
The security interest granted in this Agreement is in addition to and not
in substitution of any right of offset or netting which Lender may have
against Borrower pursuant to any contract or under applicable law. Borrower
agrees to execute such supplemental documents or financing statements as
Lender may require to evidence or perfect the security interest granted in
this Agreement. Lender may obtain and retain the certificate of title in
its possession until any vehicle is sold by Borrower and Borrower's
obligation is paid in full.
Lender shall have the right to inspect the Vehicles and other Collateral
and Borrower's books and records at any time and without advance notice.
Borrower agrees to retain and preserve its books and records at its
principal place of business for a period of three (3) years from the date
of final billing under this Agreement.
6. Use and Protection of Collateral.
(a) Borrower may exhibit and sell Vehicles and may use and sell other
Collateral in the ordinary course of business; (b) Borrower shall protect
and secure such Vehicles and other Collateral; (b) Borrower shall maintain
and preserve the Vehicles and other physical assets in good order and
condition and shall not impair the value of such Vehicles or physical
assets; (c) Borrower will keep the Vehicles and other Collateral free of
taxes, liens or encumbrances, and any sums which may be paid by Lender, in
its discretion, in release or discharge thereof shall be paid by Borrower
to Lender upon demand; and (d) Vehicles and other Collateral shall not be
used illegally, improperly or for hire.
7. Insurance.
Borrower is responsible for insurance covering the Vehicles and other
Collateral against all risks, including without limitation, business
interruption insurance of such types and in such amounts as Lender may
reasonably require and will provide to the Lender copies of insurance
policies and certificates properly endorsed to show Lender's interest as
loss payee and additional insured. Such endorsement shall provide that the
insurance companies will give Lender at least thirty (30) days prior
written notice before any such policy or policies of insurance shall be
altered or canceled and that no act or default of Borrower or any other
Person shall affect the right of Lender to recover under such policy or
policies of insurance in case of loss or damage. Borrower hereby directs
all insurers under such policies of insurance to pay all proceeds payable
thereunder directly to Lender. Proceeds payable to Lender under any such
policies shall be applied to the indebtedness due Lender under this
Agreement on such basis as Lender shall determine.
In the event Borrower, at any time or times hereafter, shall fail to obtain
or maintain any of the policies of insurance required in this Agreement or
to pay any premium in whole or in part relating thereto, then Lender,
without waiving or releasing any obligation or default by Borrower under
this Agreement, may (but shall be under no obligation to do so) at any time
or times thereafter obtain and maintain such policies of insurance and pay
such premium and take any other action with respect thereto which Lender
deems advisable. All sums so disbursed by Lender, including, without
limitation, attorneys' and paralegals' fees, court costs, expenses and
other charges relating thereto, shall be payable, on demand, by Borrower to
Lender and shall be additional indebtedness due Lender under this Agreement
and be secured by the Collateral.
8. Borrower's Financial Condition.
Borrower represents that it now has and covenants that it will have at the
time of any Advance through the date of repayment of the applicable Loan
(a) reasonably adequate cash and equity capital to conduct its business and
pay its debts as they mature, (b) capital and other financial resources
reasonably adequate to engage in the business in which it is engaged or in
any business or transaction in which it is about to engage, (c) the ability
to pay its debts and all debts it intends to incur as they mature, and (d)
ownership of property unencumbered and not collateralized to the benefit of
a third party, having a value, at a fair valuation, greater than the sum of
its debts.
9. Borrower's Financial Statements.
(a) As soon as possible, but not later than six (6) months after the close
of each fiscal year of Borrower, Borrower agrees to provide Lender with the
audited financial statements of Borrower as certified by the Borrower's
independent certified public accountant, or in lieu of audited financial
statements, certified copies of the Borrower's federal income tax returns
from previous calendar year;
(b) as soon as possible, but not later than thirty (30) days after the end
of each month hereafter, Borrower's unaudited interim financial statements,
including balance sheets and statements of income and expense as at the
month-end and for the portion of Borrower's fiscal year then elapsed, as
prepared in accordance with generally accepted accounting principles and
fairly presenting the financial position at such date and results of
operations of Borrower for such period; and
(c) Borrower certifies that each monthly financial statement and each
audited annual financial statement shall be complete, accurate and current
in all respects.
10. Other Agreements of Borrower.
Without Lender's prior written consent, which Lender may or may not, in its
sole discretion, give concurrently herewith or hereafter, Borrower agrees
that it shall not:
(a) Make any distributions of its property or assets, except distributions
of earnings or payments of principal and interest to service indebtedness
in the ordinary course including shareholders loans, or sell, issue, or
redeem, retire, purchase or otherwise acquire, directly or indirectly any
of its stock;
(b) Make any material change in its capital structure, or make any material
change in any of its business objectives, purposes and operations; nor
(c) Make any loans or other advances of money or any loans or advances of
inventory or other property, to any Person, including, without limitation,
any officer, director, stockholder, employee, or affiliate of Borrower,
other than (1) advances against commissions, and other similar advances to
employees in the ordinary course of business, and (2) loans not exceeding
an aggregate of ten percent (10%) of the outstanding balance of the Loan at
any time.
11. Environmental Matters.
(a) Borrower represents that it is currently in compliance, and covenants
and agrees that it shall continue to manage and operate its business in
compliance, with all Environmental Laws.
(b) Borrower shall send to Lender within five (5) days of receipt, any
citation, notice of violation or other notice of potential liability from
any governmental or quasi-governmental authority empowered to regulate or
oversee any of the foregoing activities.
(c) Borrower agrees to indemnify, defend with counsel reasonably acceptable
to Lender, at Borrower's sole cost, and hold Lender harmless against any
claim, response or other costs, damages, liability or demand (including,
without limitation, attorneys' fees and costs incurred by Lender) arising
out of any claimed violation of Borrower or Borrower's agents of any of the
foregoing laws, regulations or ordinances or breach of any of the foregoing
covenants or agreements. The foregoing indemnity shall survive repayment of
all indebtedness due Lender under this Agreement.
12. Conditions Precedent.
Lender shall have no obligation to make the Loans on the Agreement Date
unless and until the following conditions have been satisfied, all in form
and substance satisfactory to Lender and its counsel: (a) No Proceedings.
No action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of
this Agreement, or the consummation of the transactions contemplated hereby
or thereby, or which, in Lender's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement;
(b) No Material Adverse Change. There shall not have occurred any material
adverse change in the financial condition, results of operations,
businesses or prospects of the Borrower, or any event, condition or state
of facts which could materially adversely affect the financial condition,
results of operations, businesses or prospects of the Borrower, as
determined by Lender in its sole discretion; and
(c) Loan Documentation. Lender shall have received, on or prior to the
Agreement Date, the following documents, each duly executed and delivered
to Lender, and each to be in form and substance satisfactory to Lender and
its counsel:
(1) copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary
to perfect the security interests of Lender in the Collateral and
evidence in a form acceptable to Lender that such security interests
constitute valid and perfected first priority interests in the
Collateral;
(2) certified copies of Borrower's casualty and liability insurance
policies, together with loss payable and additional insured
endorsements to the casualty insurance policies, as required under
Section 7;
(3) the Promissory Note, executed and delivered to Lender;
(4) Articles of Incorporation and Bylaws from the Borrower;
(5) Certified resolutions from Borrower's Board of Directors
authorizing execution of this Agreement, the Promissory Note and
related documents;
(6) An opinion from Borrower's counsel in form and substance
satisfactory to Lender which opines on the Borrower's ability to
execute the documents required by this Agreement and perform its
obligations thereunder;
(7) an incumbency certificate from the Borrower's Secretary in form
and substance satisfactory to the Lender;
(8) Power of Attorney in form and substance satisfactory to the
Lender;
(9) an intercreditor agreement in form and substance satisfactory to
the Lender;
(10) good standing certificates from each state where the Borrower is
incorporated;
(11) written instructions from Borrower to Lender as to the
disbursement to any Person of the proceeds of the Loan; and
(12) such other documents, instruments and agreements as Lender shall
reasonably request.
13. Termination or Suspension of Financing.
Lender may terminate or suspend financing under this Agreement as follows:
(a) Upon the occurrence of an Event of Default as defined in Section 14 of
this Agreement or in any other Agreement with Lender; or
(b) If Lender, in its sole discretion, elects to terminate the program
provided, however, that Lender shall give Borrower ninety (90) days' prior
written notice of such termination; or
(c) If Lender in its judgment believes that future financing of Vehicles
for Borrower is not justified due to changes in Borrower's financial
condition or any other material change in the Borrower's business.
All debts, obligations and remedies existent at the time of any suspension
or termination shall continue in effect until the indebtedness of Borrower
under this Agreement is paid in full.
14. Event of Default.
An "Event of Default" shall include the following: (a) a default by
Borrower in the payment or performance of any obligation under this
Agreement or any other agreement with Lender; (b) the institution of a
proceeding in bankruptcy, receivership or insolvency by or against Borrower
or its property or by or against any Guarantor; (c) an assignment by
Borrower or any Guarantor for the benefit of creditors; (d) a default by
any Guarantor in the payment or performance of any obligation under a
Guaranty; (e) the death or incompetence of any Guarantor; or (f) if Lender
shall deem itself insecure.
15. Offset
As additional security for payment and performance of all indebtedness due
Lender under this Agreement and any other agreement with Lender, Borrower
hereby gives Lender a lien on and Lender shall also have right of offset
against all of Borrower's deposits, credits and any other property now or
hereafter in the possession or control of Lender or in transit to Lender.
Lender may at any time apply any or all of the property (or the proceeds
thereof) to any amounts due under said indebtedness.
16. Rights and Remedies upon Default.
Upon the occurrence of an Event of Default as set forth in Section 14 or if
Vehicles and other Collateral are in danger of misuse, loss, seizure or
confiscation, Lender may, in its discretion, accelerate the entire
outstanding amount due from Borrower under this Agreement and may take
immediate possession of Vehicles and other Collateral without demand or
further notice and without legal process. In furtherance thereof, Borrower
shall, if Lender so requests, assemble Vehicles and other Collateral and
make them available to Lender at a reasonable place designated by Lender.
Lender shall have the right, and Borrower hereby authorizes and empowers
Lender to enter upon the premises wherever Vehicles and other Collateral
may be and remove same.
Borrower shall pay all expenses and reimburse Lender for any expenditures,
including reasonable attorneys' fees and legal expenses, in connection with
Lender's exercise of any of its rights and remedies under this Agreement.
In the event of such repossession by Lender, in addition to the rights
specified in this Agreement, all the rights and remedies afforded by
applicable law shall apply.
17. Indemnity.
Borrower agrees to indemnify Lender from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, attorneys' fees and court costs incurred by
Lender) which may be imposed on, incurred by, or asserted against Lender in
any litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or
any matter related to, this Agreement, whether or not Lender is a party
thereto, except to the extent that any of the foregoing arises out of the
gross negligence or willful misconduct of Lender.
18. Successors and Assigns.
This Agreement shall be binding upon the parties' successors and assigns,
provided, however, that Borrower shall have no right of assignment, without
the prior written consent of Lender.
19. Savings Clause.
Any provision in this Agreement prohibited by law shall be ineffective to
the extent of such prohibitions without invalidating the remaining
provisions in this Agreement.
20. Power of Attorney.
(a) Upon the occurrence of an Event of Default, Borrower irrevocably
appoints Lender as Borrower's lawful attorney and Lender may, without
notice to Borrower, in Borrower's or Lender's name(s):
(1) endorse the name of Borrower upon any items of payment or
proceeds of Collateral and deposit the same to the account of
Lender on account of the indebtedness due under this Agreement;
(2) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Collateral; and
(3) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating
to the Collateral to which Borrower has access.
(b) At all times under this Agreement, with or without the occurrence of an
Event of Default, Borrower irrevocably appoints Lender as Borrower's lawful
attorney and Lender may, without notice to Borrower, in Borrower's name or
Lender's name, (1) execute such security agreements and related
documentation as may be necessary for Borrower to acquire Vehicles; (2)
make, settle and adjust claims under policies of insurance, as are required
under Section 7, and to endorse any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance and for making
all determinations and decisions with respect to such policies of
insurance; and (3) endorse the name of Borrower upon any document,
instrument, evidence of title or related or similar documents as necessary
to protect the collateral.
(c) On the date of this Agreement, Borrower agrees to execute and deliver
to Lender a Power of Attorney in form and substance satisfactory to the
Lender.
21. Applicable Law.
This agreement shall be governed by the internal laws of the state of the
principal place of business of the Borrower.
22. Amendments.
Any amendment or modification to this Agreement must be made in writing and
must be executed by the Borrower and Lender; provided, however, that this
Section 22 may not be amended in any circumstance.
Executed this 21TH day of MARCH 1997.
BORROWER: FIRST CHOICE AUTO FINANCE, INC.
-------------------------------
By: /s/ Joseph M. Barnes
- -------------------------
Joseph M. Barnes
Title: Vice President Finance
Address: 5200 S. WASHINGTON AVENUE
TITUSVILE, FL 32780
LENDER: Manheim Automotive Financial Services, Inc.
-------------------------------------------
By: /s/
Title: DIRECTOR OF OPERATIONS
EXHIBIT 10.83
FOR VALUE RECEIVED, the undersigned, (jointly and severally, if more than
one) promises to pay to CARL SCHMIDT ENTERPRISES, INC., a Florida corporation,
formerly known as SCHMIDT ENTERPRISES, INC., a corporation existing under the
laws of the state of Florida, or order, in the manner hereinafter specified, the
principal sum of EIGHT HUNDRED TWENTY-FIVE THOUSAND AND XX/100 DOLLARS
($825,000.00) with interest from date at the rate of 8.00 per cent per annum on
the balance from time to time remaining unpaid. The said principal and interest
shall be payable in lawful money of the United States of America at 3570 Hield
Road, Melbourne, Florida 32935 or at such place as may hereafter be designated
by written notice from the holder to the maker hereof, on the date and in the
manner following; PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF TEN THOUSAND NINE AND
53/100 ($10,009.53) DOLLARS PER MONTH COMMENCING JULY 17, 1997 AND ON THE 17TH
DAY OF EACH AND EVERY MONTH THEREAFTER UNTIL PAID IN FULL. THERE SHALL BE NO
PREPAYMENT PENALTY. ANY PAYMENT NOT POSTMARKED WITHIN 15 DAYS OF ITS DUE DATE
SHALL BE SUBJECT TO A LATE PENALTY OF FIVE PERCENT (5%).
This note with interest is secured by a mortgage on real estate, of even
date herewith, made by the maker hereof in favor of the said payee, and shall be
construed and enforced according to the laws of the State of Florida.
If default be made in the payment of any of the sums or interest mentioned
herein or in said mortgage, or in the performance of any of the agreements
contained herein or in said mortgage, then the entire principal sum and accrued
interest shall at the option of the holder hereof become at once due and
collectible without notice, time being of the essence; and said principal sum
and accrued interest shall both bear interest from such time until paid at the
highest rate allowable under the laws of the State of Florida. Failure to
exercise this option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
Each person liable hereon whether maker or endorser, hereby waives
presentment, protest, notice, notice of protest and notice if dishonor and
agrees to pay all costs, including a reasonable attorney's fee, whether suit be
brought or not, if, after maturity of this note or default hereunder, or under
said mortgage, counsel shall be employed to collect this note or to protect the
security of said mortgage.
Whenever used herein the terms "holder", "maker" and "payee" shall be
construed in the singular or plural as the context require or admit.
FIRST CHOICE AUTO FINANCE, INC.
By: /s/ James Neal Hutchinson, Jr.
----------------------------------
JAMES NEAL HUTCHINSON, JR.
VICE PRESIDENT
Maker's address:
5200 S. WASHINGTON AVENUE
TITUSVILLE, FL 32780
EXHIBIT 10.84
REAL ESTATE MORTGAGE
This mortgage made this 17th day of June A.D. 1997, between FIRST CHOICE
AUTO FINANCE, INC., a corporation existing under the laws of the state of
FLORIDA herein called Mortgagor, in consideration of the sum named in the
promissory note herein described received from CARL SCHMIDT ENTERPRISES, INC., a
Florida corporation, formerly known as SCHMIDT ENTERPRISES, INC., a corporation
existing under the laws of the state of Florida herein called Mortgagor, (the
terms "Mortgagor" and Mortgagee" include all parties in each capacity to this
instrument and their respective heirs, personal representatives, successors and
assigns; the term "note" includes all promissory notes described herein)
Mortgagor hereby mortgages to Mortgagee the real property in BREVARD County,
Florida, described as:
Lots 11 through 22, inclusive, Block B, Morningside Addition to the City of
Melbourne, according to the plat thereof as recorded in Plat Book 7, Page
1, of the Public Records of Brevard County, Florida.
SO LONG AS THE MORTGAGE IS NOT IN DEFAULT AND THE PREMISES ARE BEING KEPT
IN GOOD REPAIR, BUYER MAY OBTAIN SECONDARY FINANCING AS IT MAY DEEM
NECESSARY, PROVIDED MORTGAGEE IS NOTIFIED.
THIS MORTGAGE IS NOT ASSUMABLE WITHOUT THE CONSENT OF THE MORTGAGEE, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD.
MORTGAGOR AGREES THAT IT WILL NOT ALTER THE PREMISES IN ANY WAY WHICH WOULD
IMPAIR THE SECURITY OF THE MORTGAGEE.
THIS IS A PURCHASE MONEY FIRST MORTGAGE.
Mortgagor will maintain insurance coverage reflecting Mortgagee as a loss
payee in an amount equal to the outstanding principal balance, and shall
provide evidence of renewal annually. Failure to maintain said coverage
shall constitute a default hereunder.
Mortgagor shall provide proof of payment of ad valorem taxes annually prior
to April 1st of the year in which they would become delinquent. Failure to
pay the taxes or provide proof of payment shall constitute a default
hereunder.
TOGETHER with all easements connected therewith, improvements now or
hereafter made thereon, fixtures attached thereto, any furniture or furnishing
located thereon or therein and any revisions, remainders, rents, issues and
profits thereof as security and for the payment of the promissory note, a copy
of which is attached.
AND Mortgagor hereby covenants:
1. That Mortgagor is in actual possession and seized of said real property
in fee simple with full power and lawful right to mortgage the same; that said
property is free from all liens and encumbrances except as set forth herein;
that Mortgagor fully warrants the title to said real property and will defend
the same against lawful claims of all persons whomsoever.
2. To pay all money required by said note and this mortgage, or either,
promptly when due.
3. To pay all taxes, assessments, levies, liabilities, obligations and
encumbrances of every description now on or which may hereafter accrue on said
property, the mortgage and the debt secured hereby, or any of these, when due.
If any part thereof is not paid when due, Mortgagee may pay it without waiving
the option to foreclose this mortgage or any other right hereunder.
4. To pay all costs and expenses together with reasonable attorney's fees
(including appellate proceedings) incurred by Mortgagee because of any default
by Mortgagor under this mortgage and said note, or either.
5. To keep the improvements now or hereafter on said property insured
against loss by fire or other hazards included in the terms "extended coverage"
and "other perils" in the amount secured by this mortgage by an insurer approved
by Mortgagee. The policy shall be held by and made payable to Mortgagee by
standard New York mortgagee clause without contribution an Mortgagee's interest
may appear. If any money becomes payable under such policy, then all checks for
said money will be made payable to Mortgagor and Mortgagee and the proceeds
shall be first applied to restore the mortgaged property to the condition it was
immediately before the loss occurred and if there be any excess or if the
property not so restored then Mortgagee may apply the same to the payments last
due on the debt secured hereby or may permit Mortgagor to use it, or any part
thereof, for other purposes without waiving or impairing any lien or right
hereunder. If Mortgagor fails to obtain such policy, Mortgagee may procure it
and pay therefor without waiving the option to foreclose this mortgage or any
other right hereunder.
6. To permit, commit or suffer no waste, impairment or deterioration of
said property or any part thereof.
7. That if said property, or any part thereof, is taken by eminent domain,
Mortgagee shall have the right to receive and apply all money paid for such
taking to the payments last due on the debt secured hereby or may permit
Mortgagor to use it, or any part thereof, for other purposes without waiving or
impairing any lien or right under this mortgage. If the remaining part of said
property is inadequate security for the unpaid balance of said debt, Mortgagee
may accelerate payment thereof immediately.
8. That if Mortgagee shall hold another mortgage or lien on said property,
a default under such other mortgage or lien shall constitute a default under
this mortgage also. Any default under this mortgage shall likewise constitute a
default under such other mortgage or lien. If foreclosure proceedings under any
mortgage or lien (whether held by Mortgagee or another) affecting said property
are instituted, this shall constitute a default under this mortgage.
9. That Mortgagee may forbear to enforce defaults under this mortgage and
said note, or either, or may extend the time for payment of any money secured
hereby or may take other or additional security and may deal directly with any
owner of said property in all respects pertaining to this mortgage and said
note, or either, without notice to or the consent of any person liable under
this mortgage and said note, or either, and without discharging or affecting the
liability of any person liable under this mortgage and said note, or either.
10. That the rents, profits, income, issues and revenues of said property
(including any personal property located thereon or therein) are assigned and
pledged as further security for the payment of the debt secured hereby with the
right (but no duty) on the part of Mortgagee to demand and receive and apply
them on said debt at any time after a default hereunder. If suit is instituted
to foreclose or reform this mortgage or to determine the validity or priority
thereof, Mortgagee shall be entitled to appointment of a receiver pendente lite
without notice for said property of all rents, income, profits, issues and
revenue thereof. It is covenanted and agreed that the court shall forthwith
appoint a receiver of said property and of such rents, income, profits, issues
and revenues. Such appointment shall be made as a matter of strict right to
Mortgagee without reference to the adequacy of inadequacy of the value of the
property hereby mortgaged or to the solvency or insolvency of Mortgagor.
11. That if any dispute arises involving said note and this mortgage, or
either, wherein Mortgagee incurs any costs (regardless of whether or not legal
proceedings are instituted) or if any action or proceeding (including appellate
proceedings) shall be maintained by any person other than Mortgagee wherein
Mortgagee is made a party, all expenses incurred by Mortgagee to prosecute or
defend the rights created by this mortgage and said note, or either, together
with reasonable attorney's fees and costs, whether same be rendered for
negotiation, trial or appellate work, shall be paid by Mortgagor.
12. That if any money secured hereby is not fully paid within thirty (30)
days after it becomes due, or if any covenant or agreement of said note and this
mortgage, or either, is breached, Mortgagee shall have the option to accelerate
payment of the entire principal and any other money secured hereby as
immediately due and payable without notice. Time is of the essence of this
mortgage. Any payment made by Mortgagee under paragraphs 3, 4,5 or 11 shall bear
interest at the maximum legal rate from date of payment and shall be secured by
this mortgage. No waiver of or failure to enforce any default or obligation
under this mortgage and said note, or either, shall constitute a waiver of any
subsequent default or of the terms of either instrument. If there is any
conflict between the terms of this mortgage and said note, the terms of this
mortgage shall prevail.
In Witness Whereof, the mortgagor has hereunto set his hand and seal the day and
year first above written Signed, sealed and delivered in our presence:
FIRST CHOICE AUTO FINANCE, INC.
/s/ Larry G. Rightmyer By: /s/ James Neal Hutchinson, Jr.
Printed Name: Larry G. Rightmyer James Neal Hutchinson, Jr.
Witness Vice President
/s/ Jennifer L. LeBlanc P.O. Address 5200 S. Washington Ave.
Printed Name: Jennifer L. LeBlanc Titusville, FL 32780
Witness
EXHIBIT 10.87
TWENTY FOURTH
AMENDMENT
TO
LICENSE AGREEMENT
This TWENTY FOURTH AMENDMENT, effective as of the later date of the signatures
below, is to that certain Reproduction and Service Part Tooling License
Agreement effective December 1, 1993 by and between Service Parts Operations,
General Motors Corporation ("LICENSOR") and Eckler Industries, Inc. ("LICENSEE")
as amended by the FIRST through TWENTY THIRD AMENDMENTS (collectively the
"AGREEMENT").
WHEREAS, the parties have entered into the AGREEMENT and mutually desire to
amend such AGREEMENT as specifically provided herein;
NOW THEREFORE for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Exhibit I of the AGREEMENT is hereby amended to specifically identify the
following TRADEMARKS as being included in the original Exhibit I and I-A:
CHEVROLET
CORVETTE
Corvette "Crossed Flags" Emblem
GM Restoration Parts Emblem (as shown on Exhibit IV
of the AGREEMENT)
2. Exhibit I is further amended to specifically include the following
additional TRADEMARKS:
VETTE
STINGRAY
STING RAY
ZR-1
LT-1
L98
L82
*GRAND SPORT
*CORVETTE COLLECTOR'S EDITION
*CORVETTE
"Genuine Chevrolet"
Chevrolet "Bow Tie" Emblems
"The Heartbeat of America" (with or without Bow Tie Emblems)
GM Official Licensed Products Emblem (as shown on Attachment A
to this TWENTY FOURTH AMENDMENT)
* It is understood and agreed between the parties that LICENSEE may
also use Body Designs for the GRAND SPORT, COLLECTOR'S EDITION, and
CORVETTE (through production vehicle model year 1997) on packaging and
promotional materials only, with LICENSOR'S prior approval to Paragraph
9.6 of the AGREEMENT.
3. Exhibit I is further amended to specifically include the following
non-restoration automotive parts and accessories ("LICENSED PRODUCTS"):
Dash mats (1968-96 production vehicle model years) Cargo mats (1968-96
production vehicle model years) Nose masks (1980-96 production vehicle
model years) Console control covers (1984-89 production vehicle model
years)
Door sill plates (metal and plastic) (1968-96 production vehicle model
years) Valve stem caps and aluminum valve covers Fender covers
Accessory rubber floor mats (clear and black) (1963-82 production
vehicle model years) Dash accessories
It is understood and agreed that all of the LICENSED PRODUCTS described
must be submitted to LICENSOR for its inspection and approval in
accordance with Paragraph 9.3 of the AGREEMENT.
4. Paragraph 6.3 of the AGREEMENT is hereby amended to also require LICENSEE
to use the GM Official Licensed Product Emblem in conjunction only with the
LICENSED PRODUCTS identified in Paragraph 3 herein (and as may be included
in future amendments to this AGREEMENT) in the same manner as said
Paragraph 6.3 requires LICENSEE to use the GM Restoration Parts Emblem in
conjunction with LICENSED PARTS.
5. It is understood that the TRADEMARKS identified in paragraph 2 and the
LICENSED PRODUCTS identified in Paragraph 3 were previously licensed under
that certain Trademark License Agreement between the parties which expired
on December 31, 1995 and which was not renewed.
6. Other than as specifically set forth in this TWENTY FOURTH AMENDMENT, the
AGREEMENT remains unchanged and of full force and effect; any conflict
between the AGREEMENT and this TWENTY FOURTH AMENDMENT shall be controlled
by this TWENTY FOURTH AMENDMENT.
GENERAL MOTORS CORPORATION, ECKLER INDUSTRIES, INC.
SERVICE PARTS OPERATIONS
By: /s/ Robert D. Cheyne By: /s/ Ralph H. Eckler
- ------------------------ -----------------------
Name: Robert D. Cheyne Name: Ralph H. Eckler
Title: Manager, Trademark Licensing Title: President/CEO
Date: December 6, 1996 Date: January 7, 1997
EXHIBIT 10.88
TWENTY SIXTH
AMENDMENT
TO
LICENSE AGREEMENT
This TWENTY SIXTH AMENDMENT, effective as of the later date of the signatures
below, is to that certain Reproduction and Service Part Tooling License
Agreement effective December 1, 1993 by and between Service Parts Operations,
General Motors Corporation ("LICENSOR") and Eckler Industries, Inc. ("LICENSEE")
as amended by the FIRST through TWENTY FIFTH AMENDMENTS (collectively the
"AGREEMENT").
WHEREAS, the parties have entered into the AGREEMENT and mutually desire to
amend such AGREEMENT as specifically provided herein;
NOW THEREFORE for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Paragraph 4.1 of the AGREEMENT is hereby amended to extend the Initial Term
from July 31, 2001 to December 31, 2001.
2. Paragraph 4.2 of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Paragraph 4.2:
"4.2 Renewal Term. Upon expiration of the Initial Term, LICENSEE shall
have the right to two successive automatic five-year renewal terms
(i.e., January 1, 2002 to December 31, 2006 and January 1, 2007 to
December 31, 2011) provided: a) LICENSEE has paid earned Net Royalties
(defined in Exhibit III) in the amount of $750,000 during the 12 months
immediately preceding the start of the first renewal term (i.e., in the
12 months ending December 31, 2001) and in the amount of $1,000,000
during the 12 months immediately preceding the start of the second
renewal term (i.e., in the 12 months ending December 31, 2006), and b)
LICENSEE is not otherwise in breach of the AGREEMENT at the time of
renewal."
3. Exhibit I of the AGREEMENT, as amended, is hereby further amended to delete
the LICENSED PARTS identified on ATTACHMENT A to this TWENTY SIXTH
AMENDMENT. These parts are being deleted because LICENSOR has thus far been
unable to locate, and make available to LICENSEE, the GM TOOLS used to
produce such LICENSED PARTS and LICENSEE is not currently manufacturing and
selling such parts, nor does LICENSEE plan to do so in the future.
4. Exhibit I of the AGREEMENT, as amended, is further amended to also delete
the LICENSED PARTS identified on ATTACHMENT B to this TWENTY SIXTH
AMENDMENT. These parts are currently being sold by LICENSEE; however,
LICENSEE is purchasing these parts from other General Motors licensees, and
provided the parts remain officially licensed, LICENSEE is not required to
also be licensed on the parts and pay a royalty thereon.
5. In accordance with Paragraph 8 of this TWENTY SIXTH AMENDMENT, LICENSEE and
LICENSOR have identified the GM part numbers for additional parts LICENSEE
is currently selling. As a result, Exhibit I of the AGREEMENT, as amended,
is further amended to specifically include the LICENSED PARTS MADE WITHOUT
TOOLS, as first referenced in the SECOND AMENDMENT, identified on
ATTACHMENT C to this TWENTY SIXTH AMENDMENT.
6. Exhibit III, "ADVANCE ROYALTY" and "MINIMUM GUARANTEED ROYALTIES" of the
AGREEMENT are hereby stricken in their entirety and are replaced by the
following new sections:
"ADVANCE ROYALTY
Pursuant to Paragraphs 5.2 and 5.3, LICENSEE has paid LICENSOR a
non-refundable advance royalty ("Advance") in the amount of U.S.
$1,000,000, and such amount may be credited by LICENSEE against Net
Royalties earned up through December 31, 1998. No carry-over of excess
Net Sales (over the Advance) or deficiency of Net Sales (under the
Advance) into subsequent years within the Initial Term or any renewal
term shall be allowed except only as may be applicable under "Minimum
Guaranteed Royalties" below.
MINIMUM GUARANTEED ROYALTIES
The minimum annual royalty guarantees ("Guaranteed Minimum") to be paid
by LICENSEE to LICENSOR shall be as follows:
For the period December 1, 1993 through December 31, 1998, there shall
be no Guaranteed Minimum due LICENSOR in addition to the Advance
already paid; and For each twelve month period from January 1, 1999
through December 31, 2001, and annually thereafter during any Renewal
Term, the Guaranteed Minimum shall be $500,000; provided, however, if
during the period of December 1, 1993 through December 31, 1998
aggregate Net Royalties earned in the amount of at least $1,000,000 are
not achieved, then LICENSEE shall be permitted to reduce the $500,000
Guaranteed Minimum for the period January 1, 1999 to December 31, 1999
by an amount equal to the difference between the $1,000,000 Advance and
actual Net Royalties earned up to a maximum of $350,000.
The Guaranteed Minimum amounts due after January 1, 1999, are due and
payable in equal quarterly installments at the end of each calendar
quarter within the applicable time period of the Initial Term or any
Renewal Term unless otherwise paid as Net Royalties or the Advance
during such period. The Guaranteed Minimum shall stand alone. No
carry-over of excess Net Sales (over the Guaranteed Minimum) or
deficiency of Net Sales (under the Guaranteed Minimum) into subsequent
time periods within the Term or any renewal term shall be allowed
unless otherwise specifically noted above."
7. Exhibit III, "ROYALTY RATE" of the AGREEMENT, as amended by the SECOND
AMENDMENT, is further amended as follows:
"The parties agree that the Net Royalty Rate for LICENSED PARTS MADE
WITHOUT TOOLS, as referenced in the SECOND AMENDMENT, shall be five
percent (5%) effective, retroactively, October 1, 1996, as such is the
date agreed to by the parties that the parts were matched to a GM part
number and entered by LICENSOR into its parts database."
8. LICENSEE and LICENSOR will continue to work diligently to identify specific
GM part numbers for additional parts which LICENSEE is now selling which
presently are not identified by a GM part number. When additional GM part
numbers are identified for any such parts, then the Net Royalty Rate on
such parts will increase from the two percent (2%) rate to five percent
(5%) rate when the specific part numbers are added to the AGREEMENT by an
amendment fully-executed by the parties. Execution of such an amendment by
the parties shall trigger the process for LICENSOR to add such part numbers
to the GMSPO system.
9. LICENSOR will continue to consider requests by LICENSEE to add more
products as "GM Official Licensed Products" under the AGREEMENT at the
applicable eight percent (8%) royalty rate.
10. In an effort to provide further detail on LICENSEE'S license rights under
Exhibit I of the AGREEMENT, as amended, LICENSEE shall have the Right of
First Refusal on the GM Catalog Groups specifically identified on
ATTACHMENT D to this TWENTY SIXTH AMENDMENT. In the event LICENSOR learns
during the Term or any renewal term that additional GM part
numbers/products in the GM Catalog Groups specifically identified on
ATTACHMENT D to this TWENTY SIXTH AMENDMENT are discontinued and eligible
for licensing, or a third party has made a bona fide offer to become
licensed on such GM part numbers/products, LICENSOR will advise LICENSEE of
the opportunity to exercise its Right of First Refusal and become licensed
thereto; LICENSEE shall expressly notify LICENSOR in writing (within 15
days of receiving notice from LICENSOR of the specific part number/product
license opportunity) of its intent to exercise its Right of First Refusal
thereon. If exercised, such part numbers/products will be added to the
AGREEMENT by amendment. LICENSEE'S rejection of the right, or failure to
timely respond in writing, shall allow LICENSOR to offer a license on such
part numbers/products to a third party.
11. Other than as specifically set forth in this TWENTY SIXTH AMENDMENT, the
AGREEMENT remains unchanged and of full force and effect; any conflict
between the AGREEMENT and this TWENTY SIXTH AMENDMENT shall be controlled
by this TWENTY SIXTH AMENDMENT.
GENERAL MOTORS CORPORATION, ECKLER INDUSTRIES, INC.
SERVICE PARTS OPERATIONS
By: /s/ Robert D. Cheyne By: /s/ Ron V. Mohr
- ------------------------ -------------------
Name: Robert D. Cheyne Name: Ron V. Mohr
Title:Manager, Trademark Licensing Title: Vice President
Date: May 7, 1997 Date: April 30, 1997
EXHIBIT 10.89
THIRTY FOURTH AMENDMENT TO
GENERAL MOTORS SERVICE PARTS OPERATIONS
LICENSE AGREEMENT
This THIRTY FOURTH AMENDMENT, effective as of the later date of the signatures
below, is to that certain Reproduction and Service Part Tooling License
Agreement effective December 1, 1993 by and between Service Parts Operations,
General Motors Corporation ("LICENSOR") and Eckler Industries, Inc. d/b/a
Eckler's ("LICENSEE") as amended by the FIRST through THIRTY THIRD AMENDMENTS
(collectively the "AGREEMENT").
WHEREAS, the parties have entered into the AGREEMENT and mutually desire to
amend such AGREEMENT as specifically provided herein;
NOW THEREFORE for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Exhibit I of the AGREEMENT is hereby amended to specifically include the
following additional LICENSED PARTS:
GM Part # Description Vehicle Line Model
--------- ----------- ------------ -----
3876569 1966-67 Handle, Frt S/D Pull Chevrolet Corvette
3876570 1966-67 Handle, Frt S/D Pull Chevrolet Corvette
2. Article I of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Article I:
1.1 Transfer of Technology. If appropriate, within a reasonable time after
execution of the AGREEMENT, LICENSOR shall furnish LICENSEE available
GM TECHNOLOGY in documented or recorded form developed by or for
LICENSOR and which LICENSOR had used or released to its suppliers for
the manufacture of LICENSED PARTS and which may be furnished by
LICENSOR without violation of the rights of third parties.
1.2 Use and Protection. The GM TECHNOLOGY furnished to LICENSEE shall be
used by LICENSEE for the sole purpose of enabling LICENSEE to utilize
the license granted under this AGREEMENT and such GM TECHNOLOGY shall
be treated by LICENSEE with the same degree of high care it applies to
its own technology and shall not be disclosed by LICENSEE to third
parties without LICENSOR'S consent for any purpose other than to
utilize this license.
1.3 To the best of LICENSOR'S knowledge, LICENSEE'S use of the GM
TECHNOLOGY will not infringe the patent rights of any third party.
LICENSOR, however, does not assume and expressly disclaims any and all
responsibility or liability of any kind whatsoever for infringement by
LICENSEE or its suppliers of any patents as a result of the
manufacture, use, or sale by LICENSEE of the LICENSED PARTS, and
LICENSEE shall indemnify and hold LICENSOR harmless against any and
all claims and liabilities of any kind whatsoever that may arise from
such infringement.
1.4 EXCEPT AS STATED IN THIS SECTION 1.4, THERE ARE NO WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO GM TECHNOLOGY AND ASSISTANCE TO BE
FURNISHED TO LICENSEE HEREUNDER. LICENSOR SHALL NOT BE RESPONSIBLE OR
LIABLE IN ANY RESPECT FOR ANY DEFECTS OR INACCURACIES IN SUCH GM
TECHNOLOGY OR ANY INADEQUACIES IN SUCH ASSISTANCE OR FOR THE
PERFORMANCE OR FAILURE TO PERFORM OF ANY LICENSED PARTS ASSEMBLED BY
LICENSEE OR ANY PART THEREOF MANUFACTURED BY LICENSEE OR FOR LICENSEE
BY ANY PARTY OTHER THAN LICENSOR. LICENSEE SHALL INDEMNIFY AND HOLD
LICENSOR HARMLESS AGAINST ANY AND ALL CLAIMS AND LIABILITIES,
INCLUDING THOSE INVOLVING DEATH OR INJURY TO PERSON OR DAMAGE TO
PROPERTY, ARISING OUT OF SUCH ASSEMBLY OR MANUFACTURE, OR THE SALE,
LEASE OR OTHER DISPOSAL OF SUCH LICENSED PARTS OR COMPONENT PARTS
THEREOF.
1.5 Use and Location of LICENSOR'S TOOLS. In using the available TOOLS,
LICENSEE shall give priority to the reasonably requested supply
requirements of LICENSOR (or its designees) (although it is understood
that LICENSOR is not obligated to purchase any LICENSED PARTS from
LICENSEE). Subject to filling the purchase orders of LICENSOR,
however, LICENSEE shall have the exclusive right to use the available
TOOLS to manufacture LICENSED PARTS which it will promote and sell to
third parties other than LICENSOR, upon such terms and conditions as
determined by LICENSEE. If LICENSEE does not use a particular TOOL (or
set of TOOLS) at least once during any twelve (12) month period of the
Term (or applicable renewal term) and LICENSEE has not sold any
LICENSED PARTS applicable to such TOOL(S) during such time period,
then LICENSOR has the right to demand that LICENSEE explain to
LICENSOR, in writing, the reasons or circumstances surrounding the
non-use or non-sale. If LICENSEE does not explain, to the sole
satisfaction of LICENSOR, that there are reasonable and verifiable
mitigating circumstances surrounding such non-use or non-sale, then
LICENSEE'S right to use the TOOL(S) shall become non-exclusive and
LICENSOR shall have the right to license a third party (or parties) to
use the TOOL(S). LICENSEE shall keep the TOOLS at the facilities
identified on Exhibit I or at other facilities which LICENSEE has
previously advised LICENSOR in writing of before moving them. LICENSEE
shall at all times keep LICENSOR advised in writing regarding the
physical location of the TOOLS and shall provide LICENSOR with a
written report for the quarter ending December 31 of each year stating
the condition and location of the TOOLS.
1.6 LICENSOR'S Inspection of the TOOLS. LICENSOR may from time to time
during normal business hours and with reasonable notice to LICENSEE
enter upon the premises of LICENSEE or LICENSEE'S supplier to inspect
the TOOLS and to examine and audit the records of LICENSEE pertaining
to the manufacture and sale of the LICENSED PARTS and the maintenance
and repair of the TOOLS.
1.7 Ownership of the TOOLS. LICENSOR is the owner of the TOOLS; any and
all parts and accessories for, and any replacements to, the TOOLS
shall be the property of LICENSOR. LICENSEE shall not make any
modification to the TOOLS without the prior express written approval
of LICENSOR. LICENSEE shall not assert any claims of ownership to the
TOOLS or sell, lend, rent, encumber, pledge, lease, transfer, or
otherwise dispose of the TOOLS. LICENSEE shall, upon the request of
LICENSOR, execute such documents as LICENSOR may reasonably require
for filing in public records to give notice that the TOOLS are the
property of LICENSOR.
1.8 LICENSEE'S Inspection of the TOOLS. LICENSEE acknowledges that the
TOOLS have been furnished on an "as is", when available basis.
LICENSEE shall from time to time inspect the TOOLS, make all repairs
that are necessary and appropriate, and supply and pay for any parts
and accessories necessary therefore.
1.9 Legal Compliance. LICENSEE shall use the TOOLS in a careful and proper
manner and shall comply with all federal, state, and local laws,
ordinances, rules, regulations, and guidelines relating to possession
or use of the TOOLS. LICENSEE shall not use the TOOLS for any purpose
other than as expressly authorized in this AGREEMENT.
1.10 Risk of Loss. LICENSEE shall assume all risks of damage, destruction,
or loss to the TOOLS in its possession or under its control caused by
fire, theft, or other casualties or by the negligent acts or omissions
of LICENSEE, its agents and employees. Such negligent acts are those
causing damage not occasioned by the deterioration of the TOOLS by
reason of normal wear and tear. LICENSEE shall replace or repair all
such TOOLS lost or damaged at its expense.
1.11 TOOL Repair or Movement. If, in accordance with this AGREEMENT,
LICENSEE makes any repairs, modifications, or improvements to the
TOOLS or moves the TOOLS to a different manufacturing location, then
LICENSEE shall resubmit samples of LICENSED PARTS for testing (when
requested by LICENSOR) in accordance with Article IX of the AGREEMENT.
1.12 TOOL Handling Upon Termination. Upon the termination of this
AGREEMENT, LICENSEE shall:
A. Advise LICENSOR in writing of the condition and location of the
TOOLS;
B. Promptly return the GM TECHNOLOGY to LICENSOR; and
C. At the request of LICENSOR, promptly prepare the TOOLS for
shipment to the location designated by LICENSOR.
The TOOLS will be delivered, at LICENSOR'S reasonable expense,
to such LICENSOR-designated location by carriers expressly
approved by LICENSOR. LICENSOR and LICENSEE shall jointly
inspect the TOOLS before they are shipped. If LICENSOR has any
claim against LICENSEE regarding the condition of any TOOL,
the parties shall mutually agree to a reasonable settlement
regarding any repair or replacements required. Except as
provided in the preceding sentence, LICENSOR shall waive its
claims and rights against LICENSEE regarding the condition of
the TOOLS by removing them from the possession of LICENSEE.
1.13 LICENSEE'S Tools. The parties agree that, to the extent LICENSEE uses
its own tools and not LICENSOR'S TOOLS in manufacturing the LICENSED
PARTS, Sections 1.5 through 1.13 of Article I shall not apply.
3. Article VI of the AGREEMENT is hereby amended to strike Section 6.3 in its
entirety and replace it with the following new Sections 6.3 and 6.4, and to
include the following new Section 6.5:
6.3 Trademark License Notice. LICENSEE shall prominently display the
notice described below (or such other notice expressly approved or
directed by LICENSOR in writing such as in any separate written
guidelines or licensing program handbook provided by LICENSOR to
LICENSEE) in the Collateral Materials (as defined in Section 9.2) and
appropriately on or in direct connection with the LICENSED PARTS
and/or packaging in accordance with LICENSOR'S guidelines, rules,
and/or requests ("Trademark License Notice"). Moreover, LICENSEE shall
use the appropriate trademark notification symbol, either in the form
of "(R)" for a registered trademark in the pertinent class(es) of
goods or "(TM)" for an unregistered trademark (or alternative symbols
in compliance with the trademark laws of the country(ies) in which
LICENSEE uses the TRADEMARKS), in conjunction with the TRADEMARKS at
all times as directed by LICENSOR or as provided in such guidelines
given to LICENSEE.
"[particular Trademark(s), Emblem(s), and vehicle model body
design(s)] are General Motors Trademarks used under license to
Eckler Industries, Inc."
6.4 Hang Tags/Merchandising Symbol. LICENSEE will also affix hang tags or
stickers to all LICENSED PARTS or packaging, that prominently display
a LICENSOR-supplied Emblem (as further described and defined in
Section 6.5 and Exhibit I) designating the LICENSED PARTS as (i) "GM
Restoration Parts" or (ii) "GM Official Licensed Product", as may be
appropriate. LICENSEE shall purchase the hang tags or stickers from
LICENSOR or LICENSOR'S designated vendor. However, if the LICENSED
PARTS and/or any appropriate Collateral Materials are not conducive to
use and/or display the LICENSOR required hang tags or stickers, then
LICENSEE may request LICENSOR to provide (at LICENSOR'S discretion)
the necessary artwork to incorporate the Emblem(s) directly into the
LICENSED PARTS and/or such appropriate Collateral Materials. In this
case, LICENSEE agrees to pay LICENSOR a non-refundable fee of $250 (or
other reasonable amount as LICENSOR may require) in consideration of
LICENSOR providing LICENSEE with the artwork for such Emblem(s). If
Emblem artwork is provided to LICENSEE, then an invoice will be sent
to LICENSEE regarding such additional fee (unless other reasonable
payment procedures are adopted by LICENSOR and LICENSEE is advised
thereof). LICENSEE will use the Emblem(s) and the TRADEMARKS only in
the manner specified in writing by LICENSOR.
6.5 Use of the GM Restoration Parts and GM Official Licensed Product
Emblems. In addition to use of the hang tags or stickers required in
Section 6.4, LICENSEE shall also display the GM Restoration Parts
Emblem and/or GM Official Licensed Product Emblem (whichever is
appropriate) (collectively, the "Emblem(s)") on all packaging and in
all promotional and advertising materials. To ensure control over and
proper use of the Emblem(s), LICENSEE may use the Emblem(s) only in a
manner which complies with the express written guidelines and
requirements of LICENSOR. All products, catalogs, sales materials, and
other items of LICENSEE using or displaying the Emblem(s) must be
submitted to LICENSOR'S exclusive licensing representative, Equity
Management Inc. ("EMI"), and expressly approved in writing by LICENSOR
in accordance with this AGREEMENT before their use or distribution.
Purchasers, redistributors, or resellers of LICENSEE'S products may
not use or display the Emblem(s) (other than on LICENSEE'S original
packaging) unless they have a separate trademark license agreement
with LICENSOR directly.
4. Article VII of the AGREEMENT is hereby to strike Section 7.2 in its
entirety and replace it with the following new Section 7.2, and to include
the following new Section 7.3:
7.2 Trademark Protection. LICENSEE agrees to provide LICENSOR with such
reasonable assistance as LICENSOR may require in procuring any
protection of LICENSOR'S rights to the TRADEMARKS, and LICENSOR (if it
so desires) may commence or prosecute any claims or suits in its own
name or in the name of LICENSEE or join LICENSEE as a party thereto.
LICENSOR shall reimburse LICENSEE for its reasonable expenses incurred
in providing such assistance to the extent that LICENSOR has
pre-approved such expenses. In addition, LICENSEE shall promptly
notify LICENSOR in writing of any infringement or imitation by others
of the TRADEMARKS on products the same as or similar to those covered
by this AGREEMENT which may come to LICENSEE'S attention, and LICENSOR
shall have the sole right to determine whether or not any action shall
be taken on account of any such infringement or imitation.
7.3 Customs Documents and Costs. If LICENSED PARTS are imported into or
exported from the United States and/or other countries within the
LICENSED TERRITORY, then LICENSEE shall be required to:
A. Provide all appropriate documents to customs officials which are
necessary to prove that LICENSOR has authorized LICENSEE to
import and/or export the LICENSED PARTS within the LICENSED
TERRITORY ("Customs Documents"). Such Customs Documents shall
include, at a minimum, relevant pages of this AGREEMENT;
specifically, LICENSEE shall include a copy of the first page (to
verify the names of the parties), a copy of the fully-executed
signature page (to verify that the parties executed the
AGREEMENT), Exhibit I (to verify the TRADEMARKS and LICENSED
PARTS authorized by LICENSOR), Article IV (to verify the Term of
the AGREEMENT), and Exhibit II (to verify the LICENSED TERRITORY
authorized by LICENSOR). The Customs Documents should also
include such other documents as LICENSEE may regularly present to
customs officials in its importing and exporting activities;
B. Bear all costs and expenses which LICENSEE incurs, or which are
incurred on LICENSEE'S behalf, in dealing with customs officials.
Such costs and expenses would include, but are not limited to,
fines, penalties, storage fees, and other charges levied and
costs incurred as a result of threatened or actual product
seizure; and
C. Reimburse LICENSOR and/or its licensing representative for
administrative costs which they may incur or assess against
LICENSEE when LICENSEE'S failure to provide the required Customs
Documents necessitates LICENSOR'S and/or its exclusive licensing
representative's intervention to avoid the seizure of the
LICENSED PARTS or to procure their release.
In accordance with Article V of this AGREEMENT, none of the costs and
expenses contemplated in this Section 7.3 shall be deducted from Net
Sales or royalties payable by LICENSEE.
5. Article VIII of the AGREEMENT is hereby amended to strike Sections 8.2
through 8.5 and replace them with the following new Sections 8.2 through
8.5:
8.2 Indemnification of LICENSOR. LICENSEE agrees to hold harmless, defend,
and indemnify LICENSOR and LICENSOR'S exclusive licensing
representative, Equity Management Inc. ("EMI"), and their respective
officers, directors, employees, and agents against any and all
third-party claims of liability, demands, judgments or causes of
action, and damages, costs and expenses related thereto (including but
not limited to reasonable attorneys' fees and costs), arising out of
the manufacture, distribution, use, sale or marketing of the LICENSED
PARTS for which the TRADEMARKS are licensed hereunder, provided that
(a) prompt written notice is given to LICENSEE of any such suit or
claim, (b) LICENSEE shall have the option and right to undertake and
conduct the defense of any such suits or claims brought against
LICENSOR, and (c) no settlement of any suit or claim is made or
entered into without the prior express written consent of LICENSEE'S
authorized legal counsel. Such indemnification shall further extend to
third-party claims related to LICENSEE'S failure to comply with the
terms of this AGREEMENT, and to LICENSEE'S unauthorized use of any
patent, process, idea, method or device, or unfair trade practice,
false advertising, trademark infringement, or the like in connection
with the manufacture, distribution, use, sale, or marketing of the
LICENSED PARTS. The indemnification shall continue beyond the
termination or expiration of this AGREEMENT.
8.2 Indemnification of LICENSEE. LICENSOR agrees to hold harmless, defend
and indemnify, LICENSEE and their respective officers, directors,
employees, and agents against any and all third-party claims of
liability, demands, judgments, or causes of action of trademark or
copyright infringement or damages, costs, and expenses related thereto
(including but not limited to reasonable attorneys' fees and costs)
dealing with the use of the TRADEMARKS in the LICENSED TERRITORY on
the LICENSED PARTS as expressly authorized by this AGREEMENT, provided
that such claim(s) arises out of use of the TRADEMARKS on the LICENSED
PARTS in the United States of America or, if not in the United States
of America, the TRADEMARKS have been registered by LICENSOR for the
LICENSED PARTS in the LICENSED TERRITORY which is the subject of such
claim(s), and provided that: (a) prompt written notice is given to
LICENSOR of any such suit or claim; (b) LICENSOR shall have the option
and right to undertake and conduct the defense of any such suits or
claims brought against LICENSEE; and (c) no settlement of any suit or
claim is made or entered into without the prior express written
consent of LICENSOR'S authorized legal counsel. LICENSEE agrees and
understands that LICENSOR makes no representations or warranties
regarding the use of the TRADEMARKS in any LICENSED TERRITORY outside
the United States in connection with those LICENSED PARTS for which
the LICENSOR has not obtained and currently holds a valid trademark
registration in such LICENSED TERRITORY. Upon being advised that a
third party has claimed or alleged rights to any TRADEMARK in the
LICENSED TERRITORY for the LICENSED PARTS, or upon receiving a request
from a third party to cease manufacture, distribution, and/or sale of
the LICENSED PARTS based upon such third party's claimed or alleged
rights to the TRADEMARKS in the LICENSED TERRITORY, LICENSEE shall
immediately notify LICENSOR in writing. Upon the request of LICENSOR,
LICENSEE agrees to cease manufacture, distribution, and/or sale of the
LICENSED PARTS in such LICENSED TERRITORY which is the subject of such
claim or allegation until such time as LICENSOR can evaluate the
validity of the third party's claimed or alleged rights and provide
pertinent information and further direction to LICENSEE.
8.3 Insurance. LICENSEE shall acquire and maintain at its sole cost and
expense throughout the Term (and any renewal term) of this AGREEMENT
and for five years after termination or expiration, Comprehensive
General Liability Insurance including coverages of or for products,
completed operations, and contractual liability (which specifically
insures the hold harmless and indemnification provisions under this
AGREEMENT) at a limit of not less than $5,000,000 on a per occurrence
combined single limit basis for personal injury and property damage.
All coverages must be underwritten by an insurance company acceptable
to LICENSOR and qualified to do business in the LICENSED TERRITORY.
The insurance policies shall name LICENSOR and EMI as additional
insureds and not as mere certificate holders, and provide adequate
protection for LICENSEE, LICENSOR and EMI against any and all claims,
demands, causes of action or damages, including attorneys fees,
arising out of this AGREEMENT, including but not limited to any
alleged defects in the LICENSED PARTS or any use thereof.
8.4 Certificate of Insurance. LICENSEE shall furnish to LICENSOR
certificate(s) issued by the insurance company(ies) that: (a) sets
forth the amount of insurance, the policy number, and the date of
expiration; (b) names LICENSOR and EMI as additional insureds and not
as mere certificate holders; and (c) provides that the LICENSOR shall
receive thirty (30) days written notice prior to termination,
reduction, or modification of the coverages. LICENSEE'S purchase of
insurance or furnishing of the certificate(s) of insurance shall not
relieve LICENSEE of any other of its obligations or liabilities under
this AGREEMENT.
6. Article IX of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Article IX:
IX.
QUALITY CONTROL/RECALL
9.1 Quality Standards. LICENSEE agrees that the LICENSED PARTS on which it
will use the TRADEMARKS shall be of a standard of quality equally as
high as that of the samples provided to LICENSOR for review and
expressly approved in writing by LICENSOR in accordance with Section
9.2 of this AGREEMENT. Moreover, the LICENSED PARTS shall be
manufactured according to LICENSEE'S standard quality control and
manufacturing procedures, and shall meet or exceed all government
standards, regulations, guidelines, rules, laws, or the like regarding
such product(s) including (without limitation), as applicable, the
Consumer Products Safety Act and Federal Motor Vehicle Safety
Standards. LICENSOR may inspect LICENSEE'S facilities at any time with
or without prior notice. LICENSOR shall, however, use its best efforts
not to interfere with LICENSEE'S regular business activities in
conducting such inspections.
9.2 Submission of LICENSED PRODUCT Samples and Collateral Materials.
LICENSEE shall not market, promote, sell, and/or distribute any
LICENSED PARTS (or Collateral Materials, defined in this Section
below) unless and until such have been submitted to and expressly
approved in writing by LICENSOR. LICENSEE shall make available, free
of cost, a reasonable number of samples (generally not to exceed two)
of the LICENSED PARTS (including each variation thereof) for
LICENSOR'S inspection, testing, and approval prior to production,
marketing, promotion, and/or sale of LICENSED PRODUCT(S). At
LICENSOR'S request, LICENSEE shall also provide a reasonable number of
samples (generally not to exceed two) of LICENSED PARTS (and each
variation thereof) at reasonable intervals during the Term for
purposes of product review and quality control verification. At
LICENSOR'S request, samples of the LICENSED PARTS shall be sent by
LICENSEE to an independent laboratory or other test facility selected
by LICENSOR. All costs associated with inspection and testing shall be
borne by LICENSEE. Prior to use, LICENSEE also agrees to provide
LICENSOR samples of all printed or electronic medium related
collateral materials such as packaging, promotional materials, sales
brochures, catalogs, advertisements, and any other materials
(including, without limitation, in the form of television, cable
television, and/or the Internet) containing the TRADEMARKS
(hereinafter "Collateral Materials") for LICENSOR'S inspection and
approval, including but not limited to all materials of any kind which
LICENSEE desires to distribute to LICENSOR'S vehicle dealers. Until
such time as LICENSOR expressly approves LICENSED PRODUCT or
Collateral Materials samples in writing, such samples shall be deemed
disapproved.
9.3 Non-conforming LICENSED PARTS. If at any time the LICENSED PARTS fall
below the Quality Standards of Section 9.1 and this AGREEMENT,
LICENSEE shall immediately: (a) take all necessary and appropriate
action to correct and/or address such deficiency(ies) or
non-conformance(s) in accordance with this Section 9.3 and Article IX;
and (b) advise LICENSOR in writing of such deficiency(ies) or
non-conformance(s). If LICENSOR first learns of such deficiency(ies)
or non-conformance(s), it shall give LICENSEE immediate written notice
of the deficiency(ies) or non-conformance(s). In all such instances,
LICENSEE shall promptly take the necessary steps to cause the LICENSED
PARTS to conform to the Quality Standards within thirty (30) days from
notice of the deficiency(ies) or non-conformance(s). If the LICENSED
PARTS do not conform to the Quality Standards after the thirty (30)
day period, LICENSOR may immediately terminate this AGREEMENT without
any further notice being required. If LICENSEE is working in good
faith and needs additional time in which to make such corrections or
modifications, then LICENSEE may request in writing to LICENSOR (at
LICENSOR'S sole discretion) an additional period of time not to exceed
thirty (30) days in which to effect the corrections or modifications.
In addition, if LICENSOR discovers a defect or inaccuracy in any GM
TECHNOLOGY furnished to LICENSEE under this AGREEMENT, and if any
LICENSED PARTS manufactured pursuant to such GM TECHNOLOGY are
subsequently determined to be defective or inaccurate, then LICENSEE
shall, upon written notification from LICENSOR, modify such LICENSED
PARTS to correct the defect or inaccuracy before LICENSEE'S next
regularly scheduled manufacturing run of such LICENSED PARTS. In any
event and in both instances, LICENSOR can require LICENSEE to
immediately discontinue the use of the TRADEMARKS in connection with
the sale of the non-conforming LICENSED PARTS.
9.4 Product Recall. LICENSEE shall bear any and all costs related to any
product recall of LICENSED PRODUCT(S), whether voluntary or required
by government or LICENSOR. LICENSOR shall have the ability to declare
such a recall if it determines in good faith that any product recall
is necessary for any reason of public health, safety, or welfare or to
ensure compliance with the terms of this AGREEMENT. In the event of
such a recall, LICENSEE will consult with LICENSOR and get LICENSOR'S
approval regarding all aspects of handling such recall.
9.5 Consumer Inquiries. LICENSEE will at its sole cost handle all product
warranty and/or guarantee/satisfaction issues, response and compliance
requirements, and consumer inquiries or complaints (collectively
"Consumer Inquiries") relative to any of the LICENSED PARTS. LICENSOR
shall promptly forward to LICENSEE for handling any and all such
Consumer Inquiries. Upon request by LICENSOR, LICENSEE shall advise
LICENSOR in writing of the manner in which it handled a particular
Consumer Inquiry and provide LICENSOR with aggregate consumer
complaint information.
7. Article X of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Article X:
X.
TERMINATION
10.1 Notice of Termination and Cure Periods. If LICENSEE breaches any
material term or condition of this AGREEMENT, LICENSOR shall have the
right to terminate this AGREEMENT upon thirty (30) days written
notice, provided that LICENSEE fails to cure such breach during the
thirty (30) day period. If LICENSEE is working in good faith to cure
such breach and needs additional time in which to do so, then LICENSEE
may request in writing to LICENSOR (at LICENSOR'S sole discretion) an
additional period of time not to exceed thirty (30) days in which to
effect the cure. Such termination shall be effective upon the
expiration of such thirty day period without further notice to
LICENSEE being required. LICENSOR'S failure to terminate this
AGREEMENT for any such breach shall not be construed as a waiver or
acquiescence, and LICENSOR expressly reserves the right to
subsequently terminate this AGREEMENT for the same or any other
breach, whether of the same or different character.
10.2 Automatic Termination. If (a) any LICENSED PRODUCT is recalled for any
reason and LICENSEE fails or refuses to correct the problem or defect
which caused the recall, (b) LICENSEE violates the non-assignment
provisions of Section 11.1, (c) LICENSEE files a petition in
bankruptcy or is adjudicated a bankrupt or if a petition in bankruptcy
is filed against LICENSEE or if it becomes insolvent, or makes an
assignment for the benefit of its creditor(s) or an arrangement
pursuant to any bankruptcy law, or (d) LICENSEE discontinues all or a
significant portion of its business or if a receiver is appointed for
it or its business, or (e) LICENSEE commits multiple material breaches
or repeats a material breach or default previously cured under Section
10.1, then LICENSOR in its discretion shall have the right to
automatically terminate this AGREEMENT upon written notice to LICENSEE
without any opportunity to cure. If the AGREEMENT is so terminated,
LICENSEE, its receivers, representatives, trustees, agents,
administrators, successors, or assigns shall have no right to sell,
exploit, or in any way deal with any LICENSED PARTS or any carton,
container, packing or wrapping material, advertising, promotional or
display material pertaining thereto.
10.3 Other Rights Not Prejudiced. Termination of the AGREEMENT under the
provisions of Article X shall be without prejudice to any rights which
LICENSOR may otherwise have against LICENSEE. Upon such termination or
expiration, all royalties theretofore earned and minimum royalties or
advances required under Article V shall become immediately due and
payable.
10.4 Inventory Statement. Sixty (60) days before the expiration of this
AGREEMENT or, in the event of its termination, ten (10) days after the
effective date of the termination or the happening of the event which
terminates this AGREEMENT where there is no opportunity to cure,
LICENSEE shall provide LICENSOR with a statement showing the number
and description of LICENSED PARTS on hand or in process. LICENSOR
shall have the right to take physical inventory to ascertain or verify
such inventory and statement. LICENSEE'S failure or refusal to provide
such statement or to submit to such physical inventory may result in
LICENSEE'S forfeiture of the inventory sell-off rights granted in
Section 10.5.
10.5 Inventory Sell-Off Period. Except as otherwise provided in Section
10.6, upon termination or expiration of this AGREEMENT, LICENSEE shall
have six (6) months within which to dispose of any existing inventory
of the LICENSED PARTS (if the LICENSED PARTS comply with the Quality
Standards), and thereafter LICENSEE shall promptly discontinue the use
of the TRADEMARKS on and in connection with such LICENSED PARTS. Sales
under this Section 10.5 shall require the payment of royalties as
provided in Section 5.2, but such royalties shall not be applied
against any other royalties (i.e., Earned Royalties, Advance and/or
Minimum Guaranteed Royalties) otherwise required in Section 5.3. In
the event LICENSEE elects to sell LICENSED PRODUCT under this Section
10.5 at a price lower than LICENSEE'S "normal selling price" of the
LICENSED PRODUCT (as determined by LICENSEE'S prior course of
business) the gross sales for calculating Net Sales shall be the
higher of actual gross invoice price or sixty percent (60%) of the
value of the LICENSED PARTS as if sold at their "normal selling
price". All other duties and obligations of LICENSEE shall remain in
force during the sell-off period.
10.6 Forfeiture of Inventory Sell-Off Period. LICENSEE shall automatically
forfeit all of its rights to sell off inventory under Section 10.5 if:
A. This AGREEMENT is terminated for material breach under Section
10.1, or because of product recall under Section 10.2(a), or for
multiple or repeated material breach(es) under Section 10.2(e);
or,
B. LICENSEE is in breach under Section 10.1 or 10.2(e) or the
LICENSED PARTS are the subject of a recall under Section 10.2(a)
when the Term (or renewal term) of this AGREEMENT expires in its
normal course.
In such event(s), LICENSEE shall not be permitted to sell off or
otherwise dispose of any existing inventory of the LICENSED
PARTS, but shall be required to destroy such inventory and
certify to LICENSOR in writing, signed by an officer of LICENSEE,
that the inventory has been so destroyed.
8. Section 11.1 of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Section 11.1:
11.1 Non-Assignment. This AGREEMENT and all of the benefits, rights, and
duties hereunder are personal to LICENSEE. If there is a change (or
proposed change) in the ownership, control, or direction of LICENSEE'S
business such as (without limitation): through a merger with another
entity, a sale of LICENSEE'S business, and/or any of its assets to
another entity; through consolidation, reorganization, formation of a
partnership, or sale of a controlling interest in LICENSEE'S common or
preferred stock; a change in LICENSEE'S senior or executive management
that relates directly to the business of this AGREEMENT; or any other
transaction which alters LICENSEE'S business and/or structure; then in
such event, LICENSEE must obtain LICENSOR'S prior express written
consent (which consent will not be unreasonably withheld) before such
instances are deemed accepted and before this AGREEMENT may be
assigned, sold, transferred, or otherwise affected or encumbered by
LICENSEE or by operation of law in connection with such transaction or
instance(s).
9. Section 11.4 of the AGREEMENT is hereby stricken in its entirety and is
replaced with the following new Section 11.4:
11.4 Notices and Payments. Any notices, payment of fees, or other
communication required or permitted under this AGREEMENT shall be in
writing and mailed by first-class mail (or, in the case of a
termination notice pursuant to Article X or other similar legal
notices or communications, by certified mail and/or by facsimile
transmission with confirmation receipt as evidence of delivery or
together with a copy mailed by first-class mail) to the respective
parties as identified below.
Notices to LICENSEE:
Eckler's Industries, Inc.
5200 S. Washington Avenue
Titusville, FL 32780
Attn: Mr. Ron Anderson, Chief Operating Officer
Fax number: (407) 383-2059
Notices to LICENSOR (in care of its exclusive licensing
representative):
Equity Management Inc.
201 W. Big Beaver Rd., Suite 1101
Troy, MI 48084-4169
Attn: Business Manager, GMSPO Licensing
Fax number: (248) 680-9868
Payments to LICENSOR (in care of its exclusive licensing
representative):
Equity Management Inc.
4365 Executive Drive, Suite 1000
San Diego, CA 92121-2123
Attn: Contract Administration
Fax number: (619) 558-2507
10. Article XI of the AGREEMENT is hereby amended to include the following new
Sections 11.7 and 11.8:
11.7 Standards of Distribution. LICENSEE shall be allowed to market,
distribute, and sell LICENSED PARTS only in the DISTRIBUTION CHANNEL
defined in Exhibit II. LICENSEE agrees that during the Term of this
AGREEMENT it will diligently and continuously, in accordance with its
regular business practices and applicable industry standards,
manufacture or have manufactured, distribute, promote, and sell the
LICENSED PARTS and that it will make and maintain adequate
arrangements for the distribution of the LICENSED PARTS in the
DISTRIBUTION CHANNEL. Such arrangements shall include, but are not
limited to, participating in LICENSOR'S "Licensed Parts Reference
Guide" and other promotional and/or marketing programs which LICENSOR
shall implement from time to time.
11.8 Sales to LICENSOR. If LICENSOR or LICENSOR'S vehicle dealers desire to
purchase LICENSED PARTS from LICENSEE, then LICENSEE agrees to sell
the LICENSED PARTS (if available) to LICENSOR and such vehicle dealers
at a price at least as low as its lowest wholesale price to any of
LICENSEE'S other customers.
11. The AGREEMENT is hereby amended to include the following new Article XII:
XII.
RECORDS/AUDITS
12.1 Record Keeping. LICENSEE shall keep accurate books of account and
records covering all transactions relating to this AGREEMENT, and
shall keep the same available for at least two (2) years after
termination or expiration of the AGREEMENT.
12.2 Audits. LICENSOR or its nominee (which nominee shall be bound by the
confidentiality provisions of Section 11.5 herein) shall have the
right at all reasonable business hours upon five business days advance
notice to LICENSEE to examine said books of account and records and
all other documents and material in the possession or under the
control of LICENSEE regarding this AGREEMENT, and shall have free and
full access thereto for said purposes and for the purpose of making
extracts therefrom. LICENSEE must segregate its records in such a
manner as to facilitate a complete audit and agrees that such audit
may be used as a basis for settlement of charges in accordance with
this AGREEMENT. If, as a result of such verification, examination, or
audit of LICENSEE'S books, records, and/or statements, it is
determined that there is a deficiency or discrepancy in the payment of
any amounts owed (including but not limited to) royalties, to
LICENSOR, then LICENSEE must immediately pay such amount owed to
LICENSOR. If it is determined that such deficiency or discrepancy is
five percent (5%) or more of the amounts owed to LICENSOR, then
LICENSEE shall bear all reasonable expenses related to such
examination or audit by LICENSOR or its nominee.
12.3 LICENSEE'S Separate Statement. Upon LICENSOR'S reasonable request,
LICENSEE shall at its own expense furnish a detailed written statement
certified by an officer of LICENSEE to be true and accurate, showing
the number, description, gross sales price, itemized deductions from
gross sales price, and net sales price of the LICENSED PARTS.
12. Other than as specifically set forth in this THIRTY FOURTH AMENDMENT, the
AGREEMENT remains unchanged and of full force and effect; any conflict
between the AGREEMENT and this THIRTY FOURTH AMENDMENT shall be controlled
by this THIRTY FOURTH AMENDMENT.
GENERAL MOTORS CORPORATION ECKLER INDUSTRIES, INC.
SERVICE PARTS OPERATIONS d/b/a ECKLER'S
Name: /s/ Robert D. Cheyne Name: /s/ Ronald W. Anderson
- -------------------------- -----------------------------
By: Robert D. Cheyne By: Ronald W. Anderson
Title: Manager, Trademark Licensing Title: Executive Vice President
Date: March 11, 1998 Date: March 5, 1998
EXHIBIT 10.90
Return to:
A. KURT ARDAMAN, ESQUIRE
170 E. Washington Street
Orlando, Florida 32801-2397
This Instrument Prepared by:
A. KURT ARDAMAN, ESQUIRE
170 E. Washington Street
Orlando, Florida 32801-2397
SPACE ABOVE THIS LINE FOR PROCESSING DATA SPACE ABOVE THIS LINE FOR RECORDING
DATA
LEASE AGREEMENT
BY AND BETWEEN
Florida Auto Auction of Orlando, Inc.,
d/b/a Imperial Auto Auction
AS
LANDLORD
AND
FIRST CHOICE AUTO FINANCE, INC.
AS TENANT
<PAGE>
THIS TRIPLE NET LEASE AGREEMENT (this "Lease") is made and entered into
this 12th day of May, 1997 by and between FLORIDA AUTO AUCTION OF ORLANDO, INC.
d/b/a Imperial Auto Auction (hereinafter called "Landlord"), and FIRST CHOICE
AUTO FINANCE, INC. (hereinafter called "Tenant").
W I T N E S S E T H:
LANDLORD and TENANT hereby agree as follows:
ARTICLE 1
DEMISED PREMISES, TERM AND USE
A. Landlord, for and in consideration of the covenants hereinafter
contained and made on the part of the Tenant, does hereby demise and lease unto
the Tenant, and Tenant does hereby lease from Landlord, the parcel of land more
particularly shown on Exhibit "A", consisting of six and seven tenths (6.7)
acres, including those certain improvements located therein and thereon
(collectively, the "Demised Premises"). The Demised Premises are located in the
northeast corner of the intersection of I-4 and County Line Road, in Polk
County, Florida, and constitute a portion of Landlord's larger parcel at this
location.
B. The initial or primary term of this Lease (the "Primary Term") shall
begin on the date hereof (the "Rent Commencement Date") and shall end one (1)
year after the Rent Commencement Date, unless sooner terminated or extended as
herein provided. Any reference herein to the "Term" shall mean the Primary Term.
C. Provided Tenant is not in default of any material term, condition or
covenant contained in this Lease either at the end of the Primary Term or any
applicable Renewal Term and at the time of the Tenant's notice of renewal,
Tenant shall have the option of renewing this Lease for up to five (5), one (1)
year periods (with each one year renewal referred to as a "Renewal Term") on the
same terms and conditions as provided in this Lease with the first Renewal Term
to commence immediately following the expiration of the Primary Term if Tenant
properly and timely exercises its right to renewal. In the event the Tenant
fails to properly exercise its right to continue the Lease for any Renewal Term,
the Tenant shall have no right to any further Renewal Terms. Notice of the
exercise for each Renewal Term must be given by Tenant to Landlord in writing
not later than sixty (60) days prior to commencement of the relevant Renewal
Term. The Renewal Terms shall run consecutively without any time periods between
the consecutive Renewal Terms.
D. Tenant shall have the right and privilege to use and occupy the Demised
Premises solely for the purpose of vehicular storage, inspection, repair
("repair") only allows mechanical work on engines, transmissions, brakes,
suspensions, tires, electrical, diagnostic, air conditioning via A.S.C.
certified technicians, lubrication with all matters to be properly stored and
disposed of in accordance with state law and regulation by state licensed
recyclers only), and automobile detailing, which allows cleaning, vacuuming,
washing, striping, minor body work and touch-up painting, and automobile retail
sales. Tenant shall have no right to use or occupy the Demised Premises for any
purpose, including but limited to, wholesale and retail auto auctions and any
type of auction, except for those purposes expressly allowed to Tenant under
this Lease.
E. Landlord may, in its sole and absolute discretion, terminate this Lease
upon one hundred eighty (180) days written notice to Tenant. Upon the effective
date of the termination, both parties shall be relieved of all obligations under
this Lease except those that expressly survive termination.
ARTICLE 2
EXHIBITS
The exhibits listed below and attached to this Lease are incorporated
herein by reference:
EXHIBIT A - Legal Description for the Demised Premises
ARTICLE 3
RENTAL, TRIPLE NET, AND SECURITY DEPOSIT
A. The Rental Amount and all additional charges shall begin to accrue on
the Rent Commencement Date. Tenant does hereby covenant and agree to pay to
Landlord, for the use and occupancy of the Demised Premises, during the Primary
Term at the times and in the manner hereinafter provided, an agreed rental in an
amount equal to One Hundred Sixty-seven Thousand Three Hundred Thirty-three and
32/100 Dollars ($167,333.32) (referred to in this Lease as the "Rental Amount")
which shall be paid in U.S. Dollars, in advance in ten (10) equal monthly
installments, without notice or invoice from Landlord, on the first day of each
and every calendar month during the Term hereof, commencing upon the first day
of the third calendar month after the Rent Commencement Date and ending three
hundred sixty-four (364) days after the Rent Commencement Date. The Rental
Amount is based upon a yearly rental of Two Hundred Thousand Eight Hundred
Dollars ($200,800.00) with the Landlord foregoing the first and second month's
rental. If the Rent Commencement Date is other than the first day of a calendar
month, then the monthly payment due on the first day of the third calendar month
after the Rent Commencement Date shall be increased by that portion of the
rental for the prior month for which rental is due, taking into account that the
first and second month's rent have been waived by the Landlord (the $167,333.32
Rental Amount was calculated by waiving the first and second month's rental).
The rental for the first Renewal Term shall be Two Hundred Thousand Eight
Hundred Dollars ($200,800.00). The rental for each subsequent Renewal Term shall
be $200,800.00 as increased by any percent increase in the Consumer Price Index
measured from the Rent Commencement Date to the day before commencement of the
applicable Renewal Term. The Consumer Price Index means the statistics published
in the Monthly Labor Review by the U.S. Department of Labor, Bureau of Labor
Statistics (the "Bureau") designated Consumer Price Index for all urban
consumers (CPI-U), unadjusted U.S. City Average, with a standard reference base
period of 1982-1984 = 100. If the completion and/or publication of the Consumer
Price Index shall be transferred from the Bureau to any other Department,
Bureau, or Agency of the United States of America, or if the Bureau shall adopt
a successor index, the index published by such successor department, bureau or
agency or such successor index shall be adopted and used as a standard of
computing cost of living adjustments to the interest rate. In the event no index
is published for the date or dates at issue, the percentage increase in rental
shall be established by interpolation from the published index(es) nearest to
the date on which the index is to be determined. The rental from the Primary
Term to the first Renewal Term and from Renewal Term to Renewal Term shall not
decrease notwithstanding any decrease in the Consumer Price Index.
The rental for each Renewal Term shall be paid in the same manner and upon
the same time periods as the Rental Amount except that the rental for each
Renewal Term shall be paid in twelve (12) equal monthly installments. All
payments provided for in this Lease shall be paid or mailed to:
Imperial Auto Auction
c/o Hauger-Bunch, Inc.
P. O. Box 3648
Lakeland, Florida 33802
Or to such other Payee or address as Landlord may designate, in writing, to
Tenant.
B. This Lease is, and is intended to be, a "triple net lease" with the
Tenant bearing all fees, taxes, assessments, charges, costs and expenses related
to this Lease, the Demised Premises and the Rental Amount and rents such that
the Landlord shall receive the Rental Amount for the Term and rents for all
Renewal Periods, net from all costs, fees, taxes, assessments and expenses
related to this Lease and the Demised Premises. Accordingly, Tenant shall be
responsible for all insurance, taxes, special assessments, liens, repairs,
maintenance, replacement and all other fees, costs, assessments, taxes and
expenses related to the Demised Premises during the Term and all Renewal Terms.
The Rental Amount and rents for all Renewal Terms shall be adjusted upward in an
amount sufficient to reimburse Landlord for the cost of sales, use or enjoyment
taxes levied by the government of the State of Florida during the term of this
Lease or any extension thereof, as well as other taxes levied by all regularly
constituted authorities, upon the underlying fee, the leasehold interest, or the
economic benefits therefrom, including but not limited to, sales taxes upon the
monthly Lease payments and economic benefits accruing to Landlord by Tenant's
payment of real estate taxes and insurance premiums. Failure of Landlord to
require these payments monthly shall not relieve Tenant of Tenant's obligation
for the payment of such amounts. The provisions in this Lease shall all be
construed to effect this "triple net lease" intent and purpose.
C. Tenant shall pay to Landlord on the Rent Commencement Date a security
deposit. The amount of the security deposit shall be the sum of $16,733.34, and
Tenant will keep continuously on deposit with the Landlord a sum which will
never be less than this original deposit, as security for the faithful
performance by the Tenant of Tenant's obligations, including, but not limited to
rental payments, under this Lease and for any Renewal Term, holdover or
occupancy of the Demised Premises. If the Landlord is obliged, or opts, to spend
any part of the security deposit to comply with provisions in this Lease which
the Tenant has failed to perform, the Tenant agrees to forthwith deposit such
additional sums as will keep the amount of the security deposit not less than
the amount originally deposited. After the date of the termination and
expiration of this Lease and all Renewal Terms, holdover or other occupancy and
upon the Demised Premises being vacated by the Tenant and all keys and
possession surrendered to the Landlord, and after the Tenant has paid all
amounts due under this Lease for rental or otherwise and complied with Tenant's
obligations, 30 days thereafter the Landlord agrees to return the security
deposit, less such amounts as the Landlord has expended or withheld pursuant to
the terms of this Lease and less all damages sustained by the Landlord on the
Demised Premises by reason of any breach by the Tenant of any of the terms of
this Lease. If the damages sustained exceed the deposit, the Tenant agrees to
immediately pay to the Landlord such excess. No interest will be paid to the
Tenant on the security deposit.
ARTICLE 4
TAXES
Tenant shall pay all real estate, sales, and other taxes and assessments
imposed upon or applicable to the Demised Premises and Rental Amount during the
Term and all Renewal Terms of this Lease as and when due and payable to the
applicable governing authority. Tenant shall pay all assessments and taxes in
any way caused by or related to Tenant's business, or use or occupancy of the
Demised Premises.
ARTICLE 5
CONDITION OF PREMISES
Tenant shall be responsible for paying any and all fines or penalties
assessed by any governmental authority if Tenant fails to keep the Demised
Premises in compliance with codes and regulations of governmental authorities
during the Term and any Renewal Terms of this Lease, excluding, however, fines
or penalties assessed with respect to code violations actually caused by
Landlord.
ARTICLE 6
REPAIRS AND MAINTENANCE
Tenant shall pay, provide, and be responsible for any and all repairs,
replacements, service and other matters relating to the heating, plumbing and
air conditioning systems on the Demised Premises and tenant shall maintain said
systems in at least as good a condition as presently exists. Tenant shall
provide, pay and be responsible for all glass repair, maintenance, and
replacement and for repair, maintenance and replacement of all roofs, walls,
floors, partitions, structural matters, equipment, electrical matters, plumbing
matters, heating and air conditioning matters, fixtures and buildings, in
addition to all paving and other on-site related matters. Tenant shall provide,
pay and be responsible for all maintenance and repairs to the Demised Premises
unless otherwise expressly herein provided and Tenant shall maintain and repair
the Demised Premises during the Term of this Lease and surrender them to
Landlord at the termination of said Lease in at least as good a condition as
presently exits. Normal wear and tear and condemnation is excepted but repairs
and maintenance necessitated by normal wear and tear shall be performed by
Tenant at Tenant's expense.
ARTICLE 7
ENVIRONMENTAL MATTERS
A. Tenant agrees to indemnify, defend and hold Landlord and its officers,
employees and agents harmless from any claims, judgments, damages, fines,
penalties, costs, liabilities (including sums paid in settlement of claims) or
loss including reasonable attorneys' fees, consultants' fees, and experts' fees,
which arise during or after the Term and any Renewal Terms in connection with
the presence or suspected presence of toxic or hazardous substances released
after the Rent Commencement Date on or at the Demised Premises or in the soil,
groundwater or soil vapor on or under the Demised Premises. Without limiting the
generality of the foregoing, this indemnification does specifically cover costs
incurred in connection with any investigation of site conditions and any
cleanup, remedial, removal or restoration work required by any federal, state or
local governmental agency or political subdivision because of the presence or
suspected presence of toxic or hazardous substances on or at the Demised
Premises or in the soil groundwater or soil vapor on or under the Demised
Premises.
B. Tenant shall comply with all applicable Environmental Laws in the use
and occupancy of the Demised Premises under this Lease.
ARTICLE 8
ALTERATIONS
Tenant shall not make any exterior or structural alterations in any portion
of the Demised Premises without, in each instance, first obtaining the written
consent of Landlord, which consent shall be in Landlord's discretion. All
alterations, additions and improvements shall unless otherwise provided herein
become, upon termination of this Lease, the property of Landlord, at the option
of the Landlord.
ARTICLE 9
FIXTURES AND PERSONAL PROPERTY
Any trade fixtures, business equipment, inventory, trademarked items, signs
and other removable personal property installed in or on the Demised Premises by
Tenant, at its expense, shall remain the property of Tenant. Landlord agrees
that Tenant shall have the right, at any time or from time to time, to remove
any and all of such items. Tenant at its expense shall immediately repair any
damage occasioned by the removal of its fixtures and other personal property,
and upon expiration or earlier termination of this Lease, shall leave the
Demised Premises in a neat and clean condition, free of debris, normal wear and
tear excepted. Tenant shall pay before delinquency all taxes, assessments,
license fees and public charges levied, assessed or imposed upon its use,
occupation and business operation on the Demised Premises as well as upon its
trade fixtures, merchandise and other personal property in or upon the Demised
Premises.
ARTICLE 10
LIENS
Tenant shall not permit to be created nor to remain undischarged any lien,
encumbrance or charge arising out of any work or work claim of any contractor,
mechanic, laborer or material supplied by a materialman which might be, or
become, a lien or encumbrance or charge upon the Demised Premises.
ARTICLE 11
LAWS AND ORDINANCES
A. Tenant agrees to comply with all laws, ordinances, orders and
regulations affecting the use and occupancy of the Demised Premises and the
cleanliness, safety or operation thereof. Tenant covenants and agrees to comply
with the reasonable regulations and requirements of any insurance underwriting,
inspection bureau or similar agency at the request of the Landlord.
B. Tenant agrees not to (i) permit any illegal practice to be carried on or
committed on the Demised Premises; (ii) make use of or allow the Demised
Premises to be used for any purpose, except those for the purposes permitted
pursuant to Subparagraph D of Article 1, that might invalidate or increase the
rate of insurance therefor; (iii) use the Demised Premises for any purpose
whatsoever which might create a nuisance; (iv) deface or injure the building of
the Demised Premises; or (v) commit or suffer any waste.
ARTICLE 12
SERVICES
A. Tenant shall be solely responsible for and promptly pay all charges for
the use and consumption of water, sewer, gas, phone and electricity and all
other utility and other services used within or related to the Demised Premises.
B. Landlord shall not be liable to Tenant in damages or otherwise if the
said utilities or services are interrupted or terminated because of necessary
repairs, installations or improvements, or any cause beyond the Landlord's
reasonable control, nor shall any such interruption or termination relieve
Tenant of the performance of any of its obligations hereunder, except that if
Tenant is unable to operate its business as a result of interruption to services
caused by the negligence or willful misconduct of Landlord, its employees,
contractors or agents, there shall be an abatement of all rental obligations
hereunder during such time period.
ARTICLE 13
DAMAGE TO PREMISES
In the event the Demised Premises are hereafter damaged or destroyed or
rendered partially untenantable for their accustomed use, by fire or other
casualty, then Landlord shall within thirty (30) days after such casualty notify
Tenant of its determination to repair or not repair said Demised Premises. If
Landlord elects to repair the Demised Premises, it shall commence such repairs
within one hundred twenty (120) days after such casualty, to restore the Demised
Premises to substantially the condition in which the Demised Premises were
immediately prior to the occurrence of the casualty, at Landlord's option. From
the date of such casualty until the Demised Premises are so repaired and
restored, the Rental Amount payments and all other charges and items payable
hereunder shall equitably abate to the extent that the portion of the Demised
Premises is rendered unusable by Tenant for its normal operations including
appropriate abatement for loss of use of parking areas and other portions of the
Demised Premises; provided, however, that if the destruction or damage was
caused by the act or omission to act of Tenant, its employees, agents,
contractors or invitees, there shall be no abatement of the Rental Amount. Any
and all insurance proceeds payable as a result of such destruction or damage
shall be paid directly to Landlord, excluding insurance proceeds attributable to
property owned by Tenant. If Landlord elects not to restore or repair the
Demised Premises, it shall so notify Tenant and the Lease shall terminate along
with Tenant's obligations to pay any Rental Amount due from and after the date
of such casualty.
ARTICLE 14
INSURANCE AND INDEMNITY
A. Tenant agrees to carry, during the Term hereof, insurance for fire,
extended coverage, vandalism and malicious mischief, insuring the improvements
in the Demised Premises and all appurtenances thereto for the full replacement
value thereof. Tenant shall name Landlord as the Insured and provide Landlord
with a copy of the insurance policy which shall not be cancellable without
thirty (30) day written notice from the insurance company to Landlord.
B. Tenant and all parties claiming under Tenant releases and discharges
Landlord from all claims and liabilities arising from or caused by any casualty
or hazard covered by Landlord's insurance on the Demised Premises or in
connection with property on or activities conducted on the Demised Premises, and
Tenant waives any right of subrogation which might otherwise exist in or accrue
to any person on account thereof. Each insurance policy procured hereunder shall
provide that the insurance company waives all right of recovery by way of
subrogation against either Landlord or Tenant in connection with any damage
covered by its policy. This waiver shall not be required if the insurance
carrier charges an additional premium in order to provide such waiver and the
party benefitting from the waiver does not agree to pay the additional premium.
C. Tenant hereby agrees to indemnify and hold Landlord harmless from any
and all claims, damages, liabilities or expenses arising out of or in connection
with Tenant's use of Demised Premises except to the extent covered and paid by
any of the foregoing insurance or to the extent caused by the negligence of,
wilful misconduct of or breach of the terms of this Lease by Landlord, its
employees, contractors or agents. Nothing contained in this provision, Article
14(C), shall apply with respect to claims, damages, liabilities or expenses
arising under, from or in connection with Environmental Laws, all of which shall
be governed solely by Article 7 above.
D. From the Rent Commencement Date and during the Term and all Renewal
Terms, Tenant shall maintain liability insurance covering the Demised Premises
for the protection of Landlord and Tenant as their interests may appear, with
limits of not less than $1,000,000.00 for death or injury to any one person,
$2,000,000.00 for death or injury to more than one person, and $1,000,000.00 for
property damage. Tenant shall promptly, within ten (10) days after the Rent
Commencement Date, provide Landlord with a certificate or certificates from the
insurer evidencing that all insurance is in force, that Landlord and tenant are
covered by such policy or policies as their interests may appear, and that such
policy or policies are noncancellable without thirty (30) days advance notice to
the Landlord, and, in the event that Tenant fails to furnish said certificates
to Landlord, this Lease shall be terminable at Landlord's option.
ARTICLE 15
ASSIGNMENT, SUBLETTING AND OWNERSHIP
Tenant shall have no right to assign this Lease or sublet all or any
portion of the Demised Premises unless Tenant has secured Landlord's prior
written approval, which approval Landlord may withhold in its sole discretion.
Any permitted assignee or sublessee shall expressly assume the obligations of
Tenant under the Lease and after such assignment or subletting, both Tenant and
the assignee or sublessee shall be jointly and severally liable for the
obligations of Tenant under the terms of the Lease.
ARTICLE 16
ACCESS TO PREMISES
Landlord may enter the Demised Premises during Tenant's business hours (or
at any time during emergencies) for purposes of inspection or to perform
maintenance and repair obligations, if any, imposed upon, or allowed to,
Landlord by this Lease; provided that Landlord shall not unreasonably interfere
with Tenant's business by such entry.
ARTICLE 17
DEFAULTS BY TENANT
A. The occurrence of any of the following shall constitute a material
default and breach of this Lease by Tenant:
(i) Any failure by Tenant to pay all or any portion of the Rental
Amount or any rental or make any other payment required to be made by
Tenant hereunder within ten (10) days after such payment is due.
(ii) A failure by Tenant to observe and perform any other material
provision of this Lease to be observed or performed by the Tenant, where
such failure continues for ten (10) days after written notice thereof by
Landlord to Tenant, except that this ten (10) day period shall be extended
for a reasonable period of time if the alleged default is not reasonably
capable of cure within said ten (10) day period and Tenant proceeds to
diligently cure the default; or
(iii) Subject to Tenant's rights under the applicable law then in
effect, the making by Tenant of any general assignment for the benefit of
creditors, the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt, or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days), the
appointment of a trustee or receiver to take possession that is not
restored to Tenant within thirty (30) days, or the attachment, execution or
other judicial seizure that is not discharged within thirty (30) days.
B. Upon the occurrence of any of the foregoing events of default, Landlord
shall have the option to pursue any one or more of the following remedies
without any notice or demand whatsoever.
(i) Subject to Tenant's rights under the applicable law then in
effect, terminate this Lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which Landlord may have
for possession or arrearages in rent hereunder, enter upon and take
possession of the Demised premises and expel Tenant and any other person
who may be occupying said Demised premises or any part thereof, by force if
necessary, without being liable for prosecution of any claims or damage
therefor, and Tenant agrees to pay to Landlord on demand the amount of all
loss and damage which Landlord may suffer by reason of such termination,
whether through inability to relet the Demised Premises on terms similar to
those of this Lease or otherwise;
(ii) Subject to Tenants rights under the applicable law then in
effect, with or without terminating the Lease, enter the Demised Premises
as the agent of Tenant, by force if necessary, without being liable to
prosecution or any claim for damages therefor, and relet the Demised
premises as the agent of Tenant, and receive rentals therefor, and Tenant
shall pay to Landlord any deficiency that may arise by reason of such
reletting, inclusive of costs and expenses (including reasonable attorneys'
fees and brokerage commissions and costs to improve the Demised Premises
for such reletting), on demand at any time and from time to time;
(iii) Subject to Tenant's rights under the applicable law then in
effect, with or without terminating the Lease, enter upon the Demised
Premises by force if necessary without being liable for prosecution of any
claim for damages therefor, and do whatever Tenant is obligated to do under
the terms of this Lease; and Tenant agrees to reimburse Landlord on demand
for any expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease, with interest at 18% per annum, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action; and
(iv) All remedies provided to Landlord under the applicable law.
ARTICLE 18
DEFAULTS BY LANDLORD
If Landlord should be in default in the performance of any of its
obligations under this Lease, which default continues for a period of more than
thirty (30) days after receipt of written notice from Tenant specifying such
default, or if such default is of a nature to require more than thirty (30) days
for remedy and continues beyond the time reasonably necessary to cure (and
Landlord has not undertaken procedures within such thirty (30) days period to
cure the default and diligently and continuously thereafter pursues such efforts
to complete cure), Tenant may, incur expenses reasonably necessary to perform
the obligation of Landlord specified in such notice and invoice Landlord for the
reasonable expenses or setoff said expense against the Rental Amount.
ARTICLE 19
SURRENDER OF PREMISES
Tenant shall, upon expiration of the Term granted herein, or any earlier
termination of this Lease pursuant hereto, surrender to Landlord the Demised
Premises, including, without limitation, all buildings and paving then upon the
Demised Premises, and all alterations, improvements and other additions which
may be made or installed by either party to, in, upon or about the Demised
Premises, other than trade fixtures, signs and other personal property which
remain the property of Tenant as provided in Article 9 hereof, without any
damage, injury or disturbance thereto, or payment therefor.
ARTICLE 20
EMINENT DOMAIN
In the event that any portion or all of the Demised Premises is taken by an
entity with the power of eminent domain or any portion or all of the Demised
Premises is obtained by an entity with the power of eminent domain, this Lease
will terminate as to that portion of the Demised Premises so taken or obtained
by the condemnor, with a pro rata reduction in the Rental Amount for the
remaining land based on the area acquired. However, if the portion of the
Demised Premises which is acquired by an entity with the power of eminent domain
renders the remainder of the Demised Premises unusable, then Tenant shall have
the right to terminate this Lease as to the entire Demised Premises. All monies,
awards, proceeds and other benefits from the acquisition of all or any portion
of the Demised Premises shall be owned by and paid to the Landlord.
In the event of termination of this Lease as to all or a portion of the
Demised Premises pursuant or related to any of the provisions in this Article,
the Tenant and Landlord shall be relieved of all obligations under this Lease as
to that portion of the Demised Premises for which the termination is effective,
except that Landlord shall continue after termination to be entitled to all
monies, awards, proceeds and other benefits from the acquisition as such
provision shall survive the termination and expiration of this Lease. Tenant is
aware that the Florida Department of Transportation (DOT) has acquired property
and rights from Landlord adjacent to the Demised Premises and the DOT will be
constructing matters adjacent to the Demised Premises. Further, Tenant consents
to Landlord's negotiation and settlement, whatever that may involve, with the
DOT as such may affect the Demised Premises.
ARTICLE 21
ATTORNEYS' FEES
In the event that at any time during the Term or any Renewal Terms of this
Lease either Landlord or Tenant shall institute any action or proceeding against
the other relating to the provisions of this Lease, or any default hereunder,
the unsuccessful party in any such action or proceeding wherein a final
adjudication is rendered by a court of law or equity, the unsuccessful party
agrees to reimburse the successful party for the reasonable expenses of
attorneys' fees and paralegal fees and disbursements incurred therein by the
successful party. Such reimbursement shall include all legal expenses incurred
prior to trial, at trial and at all levels of appeal and post judgment
proceedings. In the event the final adjudication is such that an "unsuccessful
party" cannot be determined from the order of the Court, then this Article 21
shall not apply.
ARTICLE 22
NOTICES
Notices and demands required, or permitted, to be sent to those listed
hereunder shall be sent by certified mail, return receipt requested, postage
prepaid, or by Federal Express or other reputable overnight courier service and
shall be deemed to have been given upon the date the same is postmarked if sent
by certified mail or the day deposited with Federal Express or such other
reputable overnight courier service, but shall not be deemed received until one
(1) business day following deposit with Federal Express or other reputable
overnight courier service or three (3) days following deposit in the United
States Mail if sent by certified mail, return receipt requested, to the
addresses shown below:
If to Tenant: FIRST CHOICE AUTO FINANCE, INC.
3445 34th Street North
St. Petersburg, Florida 33713
With Copy to:
If to Landlord: John Stower
Manheim Auctions
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
With Copy to: A. Kurt Ardaman, Esquire
170 East Washington Street
Orlando, Florida 32801
or at such other address requested in writing by either party upon thirty 930)
days' prior written notice to the other party.
ARTICLE 23
REMEDIES
All rights and remedies of Landlord herein created or otherwise existing at
law or equity are cumulative, and the exercise of one or more rights or remedies
may be exercised and enforced concurrently or consecutively and whenever and as
often as deemed desirable.
ARTICLE 24
SUCCESSORS AND ASSIGNS
All covenants, promises, conditions, representations and agreements herein
contained shall be binding upon, apply and inure to the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
ARTICLE 25
WAIVER
The failure of either Landlord or Tenant to insist upon strict performance
by the other of any or the covenants, conditions and agreements of this Lease
shall not be deemed a waiver of any subsequent breach or default in any of the
covenants, conditions and agreements of this Lease.
ARTICLE 26
HOLDING OVER
If Tenant or any party claiming under Tenant remains in possession of the
Demised Premises or any part thereof after any termination or expiration of this
Lease, Landlord, in Landlord's sole discretion, may treat such holdover as an
automatic renewal of this Lease for a month to month tenancy subject to all the
terms and conditions of this Lease provided herein except that the rental shall
increase by one hundred percent (100%) over the rental payable immediately prior
to such holdover.
ARTICLE 27
INTERPRETATION
The parties hereto agree that it is their intention hereby to create only
the relationship of Landlord and Tenant, and no provision hereof, or act of
either party hereunder, shall ever by construed as creating the relationship of
principal and agent, or a partnership, or a joint venture or enterprise between
the parties hereto. Further, neither party shall be considered the drafter of
this Lease for purposes of interpretation of all or any portion of the Lease.
ARTICLE 28
ZONING, DEED RESTRICTIONS, AND CONDITION OF DEMISED PREMISES
Tenant is satisfied that the Demised Premises can be used and occupied by
Tenant as contemplated under Subparagraph D of Article 1 of this Lease. Further,
Tenant accepts the Demised Premises in the condition they are in on the Rent
Commencement Date. No representation, statement or warranty, express or implied,
has been made by or on behalf of Landlord as to such condition, and as to the
use that may be made of the Demised Premises. In no event shall Landlord be
liable for any defect in such property or for any limitation of its use. The
taking of possession of the Demised Premises by Tenant shall be conclusive
evidence that Tenant accepts the same "as is" and that the Demised Premises was
in good condition at the time possession was taken.
ARTICLE 29
SEVERABILITY
Any provision of this Lease which is held by a court of competent
jurisdiction to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provisions hereof and such other provisions shall remain in
full force and effect.
ARTICLE 30
GOVERNING LAW AND VENUE
This Lease shall be governed by the laws of Florida.
ARTICLE 31
BROKERS
Tenant and Landlord represent to each other that neither has had any
dealings with any real estate brokers or agents in connection with the
negotiation of this Lease except for Hauger-Bunch, Inc. Landlord and Tenant
shall indemnify and hold each other harmless from and against any and all
liability and cost which the indemnified party may suffer in connection with
real estate brokers claiming by, through or under the indemnifying party for any
commission, fee or payment in connection with this Lease. Landlord shall pay a
brokerage fee or commission to Hauger-Bunch, Inc.
ARTICLE 32
TIME OF THE ESSENCE
Time shall be of the essence in interpreting and complying with the
provisions of this Lease.
ARTICLE 33
ENTIRE AGREEMENT
This Lease contains all of the agreements of the parties hereto with
respect to matters covered or mentioned in this Lease and no prior agreement,
letters, representations, warranties, promises or understandings pertaining to
any such matters shall be effective for any such purpose. This Lease may be
amended or added to only by an agreement in writing signed by the parties hereto
or their respective successors in interest.
ARTICLE 34
RECORDING
Neither this Lease nor any memorandum of this Lease shall be recorded in
the Public Records. IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized officer to execute this Lease Agreement on the day and year
first mentioned.
Signed, sealed and delivered
in the presence of:
FLORIDA AUTO AUCTION OF ORLANDO, INC.
d/b/a Imperial Auto Auction
/s/ Sara Owens By: /s/ John E. Stower
- -------------- ----------------------
(Signature) John E. Stower
Sara Owens Its: V.P. Operations
(Print Name)
/s/ Bernice Hunt
- ----------------
(Signature)
Bernice Hunt
(Print Name) LANDLORD
FIRST CHOICE AUTO FINANCE, INC.
/s/ Joseph Alvarez
- ------------------
(Signature) By: /s/ Gary R. Smith
Joseph Alvarez Title: President
(Print Name)
/s/ Larry G. Rightmyer
- ----------------------
(Signature)
Larry G. Rightmyer
(Print Name)
EXHIBIT 21.1
List of Subsidiaries
of
SMART CHOICE AUTOMOTIVE GROUP, INC.
Subsidiary State of Incorporation
American Insurance Group, Inc. Florida
Dealer Development Services, Inc. Florida
Dealers Insurance Services, Inc. Florida
Easy Pay Insurance, Inc. Florida
Eckler Corvette Sales, Inc. Florida
Eckler Industries, Inc. Florida
First Choice Auto Finance, Inc. Florida
First Choice Cocoa 1, Inc. Florida
First Choice Melbourne 1, Inc. Florida
First Choice Stuart 1, Inc. Florida
First Choice Stuart 2, Inc. Florida
Florida Finance Group, Inc. Florida
Liberty Finance Company Florida
Premium Bonding & Ins. Services, Inc. Florida
Smart Cars, Inc. Florida
Smart Choice Holdings, Inc. Delaware
Smart Choice Receivables Holding, Inc. Delaware
Team Automobile Sales & Finance, Inc. Florida
Wholesale Acquisitions, Inc. Florida
EXHIBIT 23.1
Smart Choice Automotive Group, Inc.
Titusville, Florida
We hereby consent to the incorporation by reference of our report dated
March 30, 1998, relating to the consolidated financial statements of Smart
Choice Automotive Group, Inc. appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, into the Company's previously filed
Form S-3 Registration Statements, File Nos 333-39669 and 333-44455 and Post
Effective Amendment No. 4 on Form S-3 to Form SB-2 Registration Statement, File
No. 33-96520-A.
/s/ BDO Seidman
----------------
BDO Seidman, LLP
Orlando, Florida
April 13, 1998
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Form 10-K for the Year Ending December 31, 1997
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<NAME> SMART CHOICE AUTOMOTIVE GROUP INC
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