U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report August 26, 1999
Commission file number 1-14082
SMART CHOICE AUTOMOTIVE GROUP, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-1469577
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5200 S. Washington Avenue, Titusville, Florida 32780
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(Address of principal executive offices)
(Zip Code)
(407) 269-0834
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(Registrant's telephone number, including area code)
---------------------
(Former name, former address and former fiscal year,
if changed since last report)
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SMART CHOICE AUTOMOTIVE GROUP, INC.
Form 8-K
TABLE OF CONTENTS
HEADING PAGE
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Item 2. Disposition of Assets ...........................................3
Item 5. Other Information ...............................................3
Item 7. Exhibits ........................................................4
SIGNATURES..................................................................4
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ITEM 2. DISPOSITION OF ASSETS.
On August 26, 1999 the Company sold two of its wholly owned subsidiaries,
Ecklers Industries, Inc. and Eckler's Racing Bodies, Inc. by means of a merger
of these subsidiaries into Ecklers Industries LLC ("LLC"). LLC is a newly formed
wholly owned subsidiary of Sun Automotive Partners L.P. The Company received
$10,250,000 in cash proceeds that were used primarily to repay two 10% term
notes totaling $8.5 million in principal, plus accrued interest. The notes were
collateralized by substantially all of the assets as well as all of the issued
and outstanding capital stock of Eckler Industries, Inc. the remainder of the
proceeds were used for working capital purposes.
The cash consideration received from this merger is subject to a Working Capital
Adjustment to be determined thirty days after the closing. This adjustment is to
be computed based on the difference of the then results of a Working Capital
formula compared to the Working Capital Target. The Company does not believe
that this adjustment will materially affect, either positively or negatively,
the amount of cash consideration already received.
In addition, the Company issued 488,000 shares of its common stock to Stevens
Inc. as payment for broker fees due in connection with the sale of Ecklers
Industries, Inc. and Eckler's Racing Bodies, Inc. valued at $610,000. Based on
the knowledge, experience and economic strength of Stevens Inc., the company
believes this transaction was exempt from registration with the Commission under
section 4(2) of the Securities Act of 1933, as amended.
These two subsidiaries of the Company represented the Corvette parts and
accessories segment, which sold and distributes Corvette parts and accessories
throughout the United States, primarily through its catalog. In January 1999,
management of the Company made a decision to discontinue the operations of the
new car dealerships segment and the Corvette parts and accessories segment in
order to focus the Company's continuing operations exclusively on the retail
sale of used cars through its used car stores, as well as the financing of the
used cars sold.
During the first quarter of 1999, the Company recorded an estimated loss on the
disposal of discontinued operations of $800,000. The actual net proceeds
received as a result of the sale of the Corvette parts and accessories segment
of these discontinued operations is approximately $600,000 less than the value
used in determining the estimated loss at the end of the first quarter of 1999.
The Company anticipates that it will be required to recognize an additional loss
on the disposal of its discontinued operations of approximately $400,000 during
the third quarter ending September 30, 1999.
Additionally, on August 26, 1999 the Company entered into a lease with Eckler
Industries LLC ("Tenant") for the lease of certain parcels of land, buildings,
machinery and equipment, fixtures and improvements located at the Company's
headquarters in Titusville, Florida. The terms of this lease include an annual
basic rent of $130,000, payable monthly, for a period of ten (10) years with two
five (5) year renewal options. The lease requires the Tenant to pay all real
estate taxes, special and general assessments, insurance premiums, and the
maintenance and repair costs and expenses relating to the Premises. The Company
has provided a sum not to exceed $275,000 to be used for tenant improvements to
the premises.
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ITEM 5. OTHER EVENTS.
On August 27, 1999 the Company announced that Crown Group Inc. had entered into
a non-binding Letter of Intent which provides for the merger of Crown Group,
Inc.'s Paaco Automotive Group, Inc. subsidiary into the Company in exchange for
approximately 51 million shares of the company's common stock. Additional
provisions of the agreement include, the conversion of approximately $20 million
of the Company's outstanding indebtedness and preferred stock into approximately
30 million shares of the Company's common stock, the sale of up to 4 million
shares of the Company's common stock for $2 million to Crown Group Inc. and a
loan to the Company by Crown Group of $1 million in the form of a secured
debenture convertible into the Company's common stock at $0.50 per share.
This proposed transaction is subject to the execution of a Definitive Agreement
and conditions of closing, including the negotiation of an agreement with the
Company's senior lender, approval by both companies' boards of directors and the
Company's shareholders, satisfactory completion of due diligence, necessary
regulatory approvals, and the conversion of substantially all of the $20 million
of indebtedness and preferred stock into the Company's common stock. The
Company's senior lender and respective holders of the indebtedness and preferred
stock have not yet agreed to the terms of the proposal; consequently, there is
no assurance that these transactions can be completed.
If this transaction is completed, Crown will become the major shareholder of the
Company, which will remain a publicly-traded company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits filed herewith.
EXHIBIT
NO. EXHIBIT DESCRIPTION
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2.1 Agreement and Plan of Merger by and among Smart Choice
Automotive Group, Inc., Eckler Industries, Inc., Eckler's
Racing Bodies, Inc., Eckler Industries LLC and Sun Automotive
Partners L.P. without Exhibits.
10.92 Lease between the Company, Lessor and Eckler Industries LLC,
Lessee, dated August 26, 1999 with attached Exhibit "F" Tenant
Work Letter.
99.1 Press release dated August 27, 1999 announcing the Crown
Group's intent to acquire a majority ownership of the
Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on September 9, 1999.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ GARY R. SMITH
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Gary R. Smith, President
and Chief Executive Officer
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
by and among
SMART CHOICE AUTOMOTIVE GROUP, INC.,
ECKLER INDUSTRIES, INC.,
ECKLER'S RACING BODIES, INC.,
ECKLER INDUSTRIES, LLC
and
SUN AUTOMOTIVE PARTNERS L.P.
August 26, 1999
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TABLE OF CONTENTS
PAGE
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1. Definitions............................................................1
2. The Merger.............................................................5
(a) The Merger.......................................................5
(b) Merger Effective Date............................................5
(c) The Merger Consideration.........................................6
(d) Certificate of Formation of Surviving Company....................6
(e) Delivery of Shares...............................................6
(f) Effectiveness of Merger..........................................6
(g) Working Capital Adjustments......................................6
(h) The Closing......................................................7
(i) Deliveries at the Closing........................................8
3. Representations and Warranties Concerning the Transaction..............8
(a) Representations and Warranties of Seller.........................8
(b) Representations and Warranties of Buyer and Parent..............10
4. Representations and Warranties Concerning the Companies...............11
(a) Organization, Qualification and Corporate Power.................12
(b) Capitalization..................................................12
(c) Noncontravention................................................12
(d) Brokers' Fees...................................................12
(e) Property........................................................13
(f) Subsidiaries....................................................13
(g) Financial Statements............................................13
(h) No Undisclosed or Contingent Liabilities........................13
(i) Absence of Certain Changes......................................14
(j) Compliance with Law; Licenses...................................15
(k) Tax Matters.....................................................16
(l) Real Property...................................................18
(m) Intellectual Property...........................................18
(n) Contracts.......................................................19
(o) Powers of Attorney..............................................20
(p) Litigation, Orders..............................................20
(q) Employee Benefits...............................................20
(r) Environmental Matters...........................................22
(s) Severance Arrangements..........................................23
(t) Insurance.......................................................23
(u) Suppliers.......................................................23
(v) Accounts Receivable.............................................24
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(w) Certain Interests...............................................24
(x) Labor Matters...................................................24
(y) Bank Accounts...................................................25
(z) Transactions with Affiliates....................................25
(aa) Product Warranties, Defects and Liabilities.....................26
(bb) Inventories.....................................................26
(cc) Prices; Financial Condition.....................................26
(dd) Disclosure......................................................26
5. Pre-Closing Covenants.................................................26
(a) General.........................................................27
(b) Notices and Consents............................................27
(c) Conduct of Business.............................................27
(d) Full Access.....................................................29
(e) Notice of Developments..........................................29
(f) Exclusivity.....................................................29
(g) Environmental Matters...........................................30
6. Post-Closing Covenants................................................30
(a) General.........................................................30
(b) Litigation Support..............................................30
(c) Transition......................................................31
7. Conditions to Obligation to Close.....................................32
(a) Conditions to Obligation of Buyer and Parent....................32
(b) Conditions to Obligation of Seller and the Companies............34
8. Remedies for Breaches of this Agreement...............................35
(a) Survival of Representations and Warranties......................35
(b) Indemnification Provisions for Benefit of Buyer.................36
(c) Indemnification Provisions for Benefit of Seller................37
(d) Matters Involving Third Parties.................................37
(e) Determination of Adverse Consequences...........................37
(f) Other Indemnification Provisions................................38
9. Termination...........................................................38
(a) Termination of Agreement........................................38
(b) Effect of Termination...........................................38
10. Tax Indemnification...................................................39
11. Miscellaneous.........................................................41
(a) Press Releases and Public Announcements.........................41
(b) No Third-Party Beneficiaries....................................42
(c) Entire Agreement................................................42
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(d) Succession and Assignment.......................................42
(e) Counterparts....................................................42
(f) Headings........................................................42
(g) Notices.........................................................42
(h) Governing Law...................................................43
(i) Waiver of Jury Trial............................................43
(j) Amendments and Waivers..........................................44
(k) Severability....................................................44
(l) Expenses........................................................44
(m) Construction....................................................44
(n) Incorporation of Exhibits and Schedules.........................44
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Exhibit A Actual Working Capital Accounts
Exhibit B Articles of Merger
Exhibit C Certificate of Merger
Exhibit D Historical Financial Statements
Exhibit E Assignment of Trademarks
Exhibit F Form of Lease
Exhibit G Transition Services Agreement
Exhibit H Opinion of Seller
Exhibit I Opinion of Buyer
Disclosure Schedule Exceptions to Representations and Warranties Concerning the
Companies
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AGREEMENT AND PLAN OF MERGER
This Agreement is entered into as of August 26, 1999, by and among SMART
CHOICE AUTOMOTIVE GROUP, INC., a Florida corporation ("Seller"), ECKLER
INDUSTRIES, LLC, a Delaware limited liability company ("Buyer"), SUN AUTOMOTIVE
PARTNERS, L.P., a Delaware limited partnership ("Parent"), ECKLER INDUSTRIES,
INC., a Florida corporation ("Sub 1"), and ECKLER'S RACING BODIES, INC., a
Florida corporation ("Sub 2"). Seller, Parent, Buyer, Sub 1 and Sub 2 are
referred to collectively herein as the "Parties."
Seller owns all of the outstanding capital stock of Sub 1 and Sub 2 (Sub 1
and Sub 2 are hereinafter collectively referred to as the "Companies"). This
Agreement contemplates a transaction in which the Companies would be acquired by
Buyer by means of a merger of the Companies into Buyer (the "Merger") for the
consideration and upon the terms set forth herein and in accordance with the
Delaware General Corporation Law ("DGCL") and the Florida Business Corporation
Act ("FBCA").
The Board of Managers of Buyer and the respective Boards of Directors of
Seller and the Companies believe that the Merger, upon the terms set forth
herein, is in the best interests of their respective companies and in the best
interests of the members and stockholders of their respective companies and such
Boards have unanimously approved the Merger.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACTUAL WORKING CAPITAL" is the sum of $557,000, book cash (whether
positive or negative, with negative book cash being generated by, among other
things, checks drawn on the bank accounts and not yet paid to or cashed by
recipient), accounts receivable, inventory and prepaids minus accounts payable,
accrued wages and vacation and other accrued expenses, as reflected on the
Closing Balance Sheet calculated using the accounts set forth on EXHIBIT A and
adjusted for any amounts distributed by Buyer to the Parent on the Closing Date;
provided, however, such calculation will exclude all intercompany accounts.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
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"BUYER" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents (including marketable securities
and short-term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(h) below.
"CLOSING DATE" has the meaning set forth in Section 2(h) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning set forth in the preface above.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Companies that is not already generally available to the
public.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan) or (d) Employee Welfare Benefit Plan or other employee
benefit plan, stock option, bonus or incentive plan, severance pay policy or
agreement, deferred compensation agreement or similar plan, arrangement or
agreement, in each case referred to in the foregoing clauses (a) through (d),
maintained, sponsored by or contributed to by Sub 1 or Sub 2, or by Seller with
respect to employees of Sub 1 or Sub 2.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
(ss)3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
(ss)3(1).
"ENVIRONMENTAL LAWS" means all federal, state and local, provincial and
foreign, civil and criminal laws, regulations, rules, ordinances, codes,
decrees, judgments, directives or judicial or administrative orders relating to
pollution or protection of the environment, natural resources or human health
and safety, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances (including, without limitation,
releases to ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport, disposal or handling
of Hazardous Substances. "Environmental Laws" include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
(ss)601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (ss)1801
et seq. ), the Resource Conservation and Recovery Act (42 U.S.C. (ss) 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. (ss) 251 et seq.),
the Clean Air Act (42 U.S. C. (ss)7401 et seq.) , the
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Toxic Substances Control Act (15 U.S.C. (ss)2601 et seq.), the Oil Pollution Act
(33 U.S.C. (ss)2701 et seq.), the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. (ss)11001 et seq.), the Occupational Safety and Health Act
(29 U.S.C. (ss)651 et seq.) and all other state laws analogous to any of the
above.
"ENVIRONMENTAL LIABILITIES" means all liabilities of the Companies which
(i) arise under or relate to violations of Environmental Laws or arise in
connection with or related to any matter disclosed or required to be disclosed
in Section 4(q) of the Disclosure Schedule and (ii) are attributable to actions
occurring or conditions existing on or prior to the Closing Date.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FBCA" means the Florida Business Corporation Act.
"FINANCIAL STATEMENT" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect as of the Closing Date or as of such date as otherwise stated herein.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HAZARDOUS SUBSTANCES" means any toxic or otherwise hazardous substance,
which is regulated under Environmental Laws.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)(i) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d)(i) below.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 4(m) below.
"KNOWLEDGE" means actual knowledge of an executive officer of the Party
without independent investigation.
"LICENSES" has the meaning set forth in Section 4(j) below.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Companies, taken as a whole, PROVIDED that in determining whether there has been
a Material Adverse Effect, the following matters will not be considered: (i) any
changes in the pricing of products purchased by the Companies and (ii) any
changes in the financial condition of a customer or supplier of the Companies.
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"MERGER CONSIDERATION" has the meaning set forth in Section 2(c) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4(g) below.
"MOST RECENT FISCAL QUARTER END" has the meaning set forth in Section 4(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA (ss)3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARENT" has the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"REPORTABLE EVENT" has the meaning set forth in ERISA /section/4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SUB 1 SHARE" means any share of the common stock, par value $.01 per
share, of Sub 1.
"SUB 2 SHARE" means any share of the common stock, par value $.01 per
share, of Sub 2.
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"SUBSIDIARY" means any entity with respect to which a specified Person (or
a Subsidiary thereof) owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
board of directors or Persons performing similar functions.
"TAX AFFILIATE" means any affiliated, combined or unitary group of which
the Companies are or were a member, as the case may be.
"TAXES" means all taxes, charges, fees, imposts, levies or other
assessments of any kind, including, without limitation, all income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, and property
taxes, customs duties, fees, assessments and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) and will include
any transferee liability in respect of taxes and any liability under any tax
sharing, tax indemnity, tax allocation or similar agreement (whether or not
written).
"TAX RETURN" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 8(d) below.
"WORKING CAPITAL ADJUSTMENT" means the amount, if any, by which the
Working Capital Target exceeds the Actual Working Capital.
"WORKING CAPITAL TARGET" means $936,000.
2. THE MERGER.
(a) THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement, the DGCL and the FBCA, the Companies and Buyer will execute
and deliver for filing to (i) the Department of State of the State of Florida
Articles of Merger in the form attached hereto as EXHIBIT B and (ii) the
Secretary of State of the State of Delaware a Certificate of Merger in the form
attached hereto as EXHIBIT C. Upon filing of the Articles of Merger and the
Certificate of Merger, the Companies will be merged (the "Merger") with and into
Buyer, which will be the surviving corporation. The terms and conditions of the
Merger and the Plan of Merger will be as provided in the Certificate of Merger,
the Articles of Merger, the DGCL and the FBCA.
(b) MERGER EFFECTIVE DATE. At the Merger Effective Time (as defined in
Section 2(h)), the Companies will be merged with and into Buyer in accordance
with the Articles of Merger and the Certificate of Merger, and the separate
existence of the Companies will cease. Buyer, as the party surviving the Merger,
is hereinafter sometimes referred to as the "Surviving Company."
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(c) THE MERGER CONSIDERATION. For purposes of this Agreement, the "Merger
Consideration" will consist of a $10,250,000 payment (the "Closing Payment"),
payable on the Closing Date by Buyer to Seller by wire transfer of immediately
available funds to such account as Seller designates. The Merger Consideration
may be adjusted pursuant to Section 2(g) of this Agreement.
(d) CERTIFICATE OF FORMATION OF SURVIVING COMPANY. At the Merger Effective
Time, the Certificate of Formation of Buyer will become the Certificate of
Formation of the Surviving Company; and, subsequent to the Merger Effective
Time, such Certificate of Formation will be the Certificate of Formation of the
Surviving Company until changed as provided by law.
(e) DELIVERY OF SHARES. At the Merger Effective Time:
(i) in exchange for the outstanding shares of Sub 1 and Sub 2, Buyer
will pay to Seller the Merger Consideration; and
(ii) Seller will deliver to Buyer at the Closing (as defined in
Section 2(h) hereof) the certificates representing the Sub 1 Shares and
Sub 2 Shares, duly endorsed in blank by Seller or accompanied by blank
stock powers. Seller agrees to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with
respect to such Sub 1 Shares or Sub 2 Shares or with respect to the stock
powers accompanying the Sub 1 Shares or Sub 2 Shares. The certificates
representing the Sub 1 Shares and Sub 2 Shares so delivered will forthwith
be canceled.
(f) EFFECTIVENESS OF MERGER. The Merger will become effective and all
transactions contemplated by this Agreement, including the delivery of Sub 1
Shares and Sub 2 Shares and the delivery by wire transfer of the Merger
Consideration will occur on the Closing Date. The time at which the Merger is
effected will be referred to as the "Merger Effective Time."
(g) WORKING CAPITAL ADJUSTMENTS.
(i) WORKING CAPITAL. Within 30 days following the Closing Date, the
Surviving Company will prepare a balance sheet of the Surviving Company as
of the Closing Date (the "Closing Balance Sheet"). The Closing Balance
Sheet will be prepared in accordance with Sub 1's or Sub 2's internal and
actual accounting practices as of June 30, 1999, whether in accordance
with GAAP or otherwise. In the event that the Closing Balance Sheet states
that the Actual Working Capital was less than the Working Capital Target,
then the Surviving Company will deliver a written notice (the "Working
Capital Adjustment Notice") to Seller setting forth the Actual Working
Capital and the Working Capital Adjustment due to the Surviving Company
from Seller; PROVIDED, HOWEVER, the parties acknowledge that the Working
Capital Target was prepared in accordance with Sub 1's or Sub 2's internal
and actual accounting practices as of June 30, 1999, whether in accordance
with GAAP or otherwise. In the event that the Actual Working Capital is
more than the Working Capital Target, then Seller will deliver a Working
Capital Adjustment Notice to Buyer setting forth the Actual Working
Capital and the Working
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Capital Adjustment due to Seller from the Surviving Company. Any amounts
due pursuant to this Section 2(g)(i) will be paid in cash to the Surviving
Company or Seller, as the case may be, within 15 business days after
delivery of the Working Capital Adjustment Notice; PROVIDED, HOWEVER, that
if the party obligated to make such payment disputes any portion of the
Working Capital Adjustment Notice, no such disputed amounts will be
required to be paid until the resolution of such dispute in accordance
with Section 2(g)(ii), whereupon any amounts due will be paid within five
business days of such resolution, provided that all undisputed amounts
will be promptly paid.
(ii) DISPUTES. Notwithstanding anything in this Section 2(g) to the
contrary, if there is any Working Capital Adjustment and Seller or the
Surviving Company disputes any item on the Working Capital Adjustment
Notice, then such party will notify the other in writing of each disputed
item (collectively, the "Disputed Amounts") and specify the amount thereof
in dispute within 15 business days after the delivery of the Working
Capital Adjustment Notice. If the Surviving Company and Seller cannot
resolve any such dispute, then such dispute will be resolved by an
independent accounting firm which is reasonably acceptable to the
Surviving Company and Seller (the "Independent Accounting Firm"). If the
Surviving Company and Seller cannot agree upon a mutually acceptable
Independent Accounting Firm within 10 days after delivery of the notice
with respect to the Disputed Amounts, the Surviving Company and Seller
will each select an independent accounting firm, and the Independent
Accounting Firm will be selected by the firms chosen by the Surviving
Company and Seller. The determination of the Independent Accounting Firm
(i) will be made as promptly as practicable; (ii) will be prepared in
accordance with Sub 1's or Sub 2's internal and actual accounting
practices as of June 30, 1999, whether GAAP or otherwise, and based solely
on the accounts set forth on EXHIBIT A (Parent, Buyer and Seller
acknowledge that the accounts set forth on EXHIBIT A were used to
calculate the Working Capital Target of $936,000 as of June 30, 1999); and
(iii) will be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm
will be allocated evenly between the Surviving Company and Seller. Pending
resolution of any such dispute by the Independent Accounting Firm, no such
Disputed Amount will be due to the Surviving Company or Seller, provided
that all undisputed amounts will be promptly paid. Upon the final
determination of the amounts due, if any, such amounts will be paid in
accordance with the provisions of this Section 2(g)(ii).
(h) THE CLOSING.
(i) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Troutman Sanders, LLP in
Atlanta, Georgia, on or before five business days from the date of
execution of this Agreement, or such other date as agreed by the Parties
(the "Closing Date").
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(ii) On the Closing Date, the Articles of Merger, the Certificate of
Merger and any other documents executed in accordance with the DGCL and
the FBCA, together with any required certificates, will be filed with the
Secretary of State of Delaware and the Secretary of State of Florida in
accordance with the provisions of the DGCL and the FBCA. The Merger will
become effective upon such filing or at such later time as may be
specified in such filing (the "Merger Effective Time").
(i) DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver to
Buyer the various certificates, instruments and documents referred to in Section
7(a) below, (ii) Buyer will deliver to Seller the various certificates,
instruments and documents referred to in Section 7(b) below, (iii) Seller will
deliver to Buyer stock certificates representing all of the outstanding Sub 1
Shares and Sub 2 Shares, endorsed in blank or accompanied by duly executed
assignment documents and (iv) Buyer will deliver to Seller the Closing Payment.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Buyer that the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made on such date and as though the Closing Date
were substituted for the date of this Agreement throughout this Section 3(a))
with respect to itself.
(i) ORGANIZATION OF SELLER. Seller is duly organized, validly
existing and in good standing under the laws of the State of Florida.
(ii) AUTHORIZATION OF TRANSACTION. Seller has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by Seller. This Agreement has been duly executed
and delivered by Seller and constitutes the valid and legally binding
obligation of Seller, enforceable against Seller in accordance with its
terms and conditions, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies may
be limited by equitable principles of general applicability. Except those
that have been made or waived by Buyer in writing, Seller is not required
to give any notice to, make any filing with or obtain any authorization,
consent or approval of any governmental or regulatory body or authority or
other Person in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate its charter or bylaws, (B) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government,
governmental agency or court to which Seller is subject or (C) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the
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right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other
arrangement to which Seller is a party or by which it is bound or to which
any of its assets is subject, except, in the case of clauses (B) and (C),
for such violations, conflicts, breaches or defaults as (i) do not and
will not affect the validity and enforceability of this Agreement or (ii)
do not and will not have, in the aggregate, any Material Adverse Effect.
(iv) BROKERS' FEES. Except as set forth on Section 3(a)(iv) of the
Disclosure Schedule, Seller has no liability or obligation to pay any fees
or commissions to any broker, finder, agent or other Person with respect
to the transactions contemplated by this Agreement.
(v) COMPANIES' SHARES. Seller holds of record and owns beneficially
all of the outstanding Sub 1 Shares and Sub 2 Shares free and clear of any
restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), taxes, pledges, liens, encumbrances, charges,
security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands except as set forth in Section
3(a)(v) of the Disclosure Schedule. Seller is not a party to any option,
warrant, purchase right or other contract or commitment that could require
Seller to sell, transfer or otherwise dispose of any capital stock of the
Companies (other than this Agreement). Seller is not a party to any voting
trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of the Companies.
(vi) CONSENTS AND APPROVALS. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit
from, any domestic or foreign governmental or regulatory body or authority
or any other Person is required to be made or obtained by Seller in
connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, except for
such permits, consents, licenses, approvals or authorizations or
declarations, exemptions, filings or registrations (a) disclosed in
Section 3(a)(vi) of the Disclosure Schedule hereto or (b) the failure of
which to obtain or make do not and will not (A) affect the validity and
enforceability of this Agreement or (B) either individually or in the
aggregate have a Material Adverse Effect.
(vii) LITIGATION. Except as set forth in Section 3(a)(vii) of the
Disclosure Schedule, there is no action, suit or proceeding pending
against, or to the Knowledge of Seller threatened against or affecting,
Seller before any court or arbitrator or any foreign or domestic
governmental or regulatory body or agency which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement.
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REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and Parent
represent and warrant to Seller that the statements contained in this Section
3(b) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made on such date and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
(i) ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation. Parent is a limited partnership duly formed, validly
subsisting and in good standing under the laws of the jurisdiction of its
formation.
(ii) AUTHORIZATION OF TRANSACTION. Buyer has the requisite corporate
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. Parent has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by Buyer and
Parent. This Agreement has been duly executed and delivered by Parent and
Buyer and constitutes the valid and legally binding obligation of Buyer
and Parent, enforceable against Buyer and Parent in accordance with its
terms and conditions, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies may
be limited by equitable principles of general applicability. Neither Buyer
nor Parent is required to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any governmental or
regulatory body or authority or other Person in order to consummate the
transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction
of any government, governmental agency or court to which Buyer is subject
or any provision of its charter or bylaws or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel,
or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Buyer or Parent is a party or by
which they are bound or to which any of their assets are subject, except
for such violations, conflicts, breaches or defaults as (i) do not and
will not affect the validity and enforceability of this Agreement and have
a Material Adverse Effect on Buyer or Parent.
(iv) BROKERS' FEES. Neither Buyer nor Parent has any liability or
obligation to pay any fees or commissions to any broker, finder, agent or
other Person with respect to the transactions contemplated by this
Agreement.
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(v) FINANCING. Buyer has sufficient funds available to pay the
Merger Consideration.
(vi) LITIGATION. There is no action, suit or proceeding pending
against, or to the Knowledge of Buyer or Parent threatened against or
affecting, Buyer or Parent before any court or arbitrator or any foreign
or domestic governmental or regulatory body or agency which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
(vii) DUE DILIGENCE.
(A) Each of Buyer and Parent is an informed and sophisticated
Person and is experienced in the evaluation and purchase of
companies such as the Companies. In making the decision to enter
into this Agreement and consummate the transactions contemplated
hereby, each of Buyer and Parent has relied on its own independent
investigation of the Companies as of this date and upon the
representations and warranties and covenants in this Agreement and
has relied on the investigations conducted by Buyer's agents
(including, without limitation, Sun Capital Partners, Inc.).
(B) Each of Buyer and Parent acknowledges that Seller has made
no representation or warranty as to the prospects, financial or
otherwise, of the Companies. Buyer has conducted its own inspection
and examination of the Companies or has relied on the inspection and
examination of the Companies conducted by Buyer's agents (including,
without limitation, Sun Capital Partners, Inc.) and is not relying
on representations or warranties of any nature made by or on behalf
of or imputed to Seller except as expressly set forth in this
Agreement.
(viii) NO KNOWLEDGE OF BREACH. Neither Buyer, Parent nor
Buyer's agents (including, without limitation, Sun Capital Partners,
Inc.) knows of any breach of warranty or any misrepresentation by
Seller or the Companies hereunder.
(ix) TOTAL ASSETS AND SALES. Neither Buyer nor Parent and their
subsidiaries, taken in the aggregate, has total assets or annual net sales
of $100,000,000 or more.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES. Seller and the
Companies represent and warrant to Buyer and Parent that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made on such date and as though the Closing Date were substituted for the date
of this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by Seller to Buyer on the date hereof and
initialed by the Parties (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein) (the "Disclosure Schedule").
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(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Companies are
corporations duly organized, validly existing and in good standing under the
laws of the State of Florida. The Companies are duly authorized to conduct
business and are in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect. The copies of the articles of incorporation and
bylaws of the Companies, as previously delivered to Buyer by Seller, are
complete and correct copies of such instruments as currently in effect. The
Companies have the requisite corporate power and authority to carry on the
business in which they are engaged and to own and lease the properties used by
them. Section 4(a) of the Disclosure Schedule lists the directors and officers
of the Companies.
(b) CAPITALIZATION. The entire authorized capital stock of Sub 1 consists
of 100 Sub 1 Shares, all of which are issued and outstanding. The entire
authorized capital stock of Sub 2 consists of 100 Sub 2 Shares, all of which are
issued and outstanding. All of the issued and outstanding Sub 1 Shares and Sub 2
Shares have been duly authorized, are validly issued, fully paid and
nonassessable, and are held of record by Seller. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require the
Companies to issue, sell or otherwise cause to become outstanding any of their
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to the
Companies.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any governmental or
regulatory body or authority or court to which Sub 1 or Sub 2 is subject (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Sub 1 or Sub 2 is a party or by which
Sub 1 or Sub 2 is bound or to which any of their assets are subject (or result
in the imposition of any pledge, lien, encumbrance, charge or security interest
upon any of their assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice or Security Interest would not have a Material Adverse Effect or (iii)
violate or conflict with any provision of the articles of incorporation or
bylaws of Sub 1 or Sub 2. Except for any notice which has been provided or will
be provided on or before Closing and which is described in Section 4(c) on the
Disclosure Schedule, the Companies do not need to give any notice to, make any
filing with or obtain any authorization, consent or approval of any governmental
or regulatory body or authority or other Person in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file or to obtain any authorization, consent or
approval would not have a Material Adverse Effect.
(d) BROKERS' FEES. The Companies do not have any liability or obligation
to pay any fees or commissions to any broker, finder, agent or other Person with
respect to the transactions contemplated by this Agreement.
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(e) PROPERTY. The Companies have good and valid title to, or a valid
leasehold interest in, all personal property owned, leased or used by the
Companies, free and clear of all liens, charges and encumbrances, except for
Security Interests. Section 4(e) of the Disclosure Schedule contains a schedule
of all assets that have been transferred between Seller or any of its Affiliates
on the one hand and Sub 1 or Sub 2 on the other hand since the Most Recent
Financial Statements.
(f) SUBSIDIARIES. Neither Sub 1 nor Sub 2 directly or indirectly owns any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest, in any corporation,
partnership, joint venture or other business association or entity.
(g) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT D are the following
financial statements (collectively the "Financial Statements"): (i) for Sub 1,
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended September 30, 1994,
September 30, 1995 and September 30, 1996, as of and for the three months ended
December 31, 1996 and for the period from January 1, 1997 through January 28,
1997, in each case, together with the reports thereon of BDO Seidman LLP,
independent certified public accountants; (ii) for Sub 1 and Sub 2, Seller's
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended December 31, 1997,
which include information for the Companies in each case, together with the
reports thereon of BDO Seidman LLP independent certified public accountants;
(iii) for Sub 1, combined audited balance sheet (the "Audited Balance Sheet")
and Statement of Income, Changes in Stockholder's Equity and Cash Flow (together
with the Audited Balance Sheet, the "Audited Financial Statements") as of and
for the year ended December 31, 1998, in each case, together with the reports
thereon of BDO Seidman LLP, independent certified public accountants; and (iv)
Sub 1's unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the six months ended June 30, 1999 (the "Most Recent Fiscal Quarter
End") and Sub 1's unaudited balance sheet and statement of income, changes of
stockholders' equity and cash flow for the month ended July 31, 1999 ("July 1999
Financials"). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly, in all material respects, the
financial condition of the Companies as of such dates and the results of
operations of the Companies for such periods; PROVIDED, HOWEVER, that the
Audited Financial Statements, Most Recent Financial Statements and the July 1999
Financials may be subject to year-end adjustments and the Most Recent Financial
Statements and the July 1999 Financials lack footnotes and other presentation
items.
(h) NO UNDISCLOSED OR CONTINGENT LIABILITIES. Neither Sub 1 nor Sub 2 has
any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that are not fully
reflected on the Audited Balance Sheet, except for liabilities and obligations
incurred in the Ordinary Course of Business since the date thereof and which
would not have a Material Adverse Effect.
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(i) ABSENCE OF CERTAIN CHANGES. Since July 31, 1999, each of Sub 1 and Sub
2 has conducted its business only in the Ordinary Course of Business and has
not:
(i) suffered any material adverse change in its operations,
condition (financial or otherwise), assets, liabilities, earnings or
working capital;
(ii) incurred any liabilities or obligations (absolute, accrued,
contingent or otherwise) except in the Ordinary Course of Business or
which would not have a Material Adverse Effect (including obligations or
liabilities arising from one transaction or a series of related or similar
transactions, and all periodic installments or payments under any lease or
other agreement providing for periodic installments or payments, as a
single obligation or liability), or increased, or experienced any change
in any assumptions underlying or methods of calculating, any bad debt,
contingency or other reserves;
(iii) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities and obligations reflected or reserved against in the Most
Recent Financial Statements, the July 1999 Financials or incurred in the
Ordinary Course of Business since July 31, 1999.
(iv) permitted or allowed any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind;
(v) written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for writeoffs in
the Ordinary Course of Business;
(vi) canceled any material debts or, to Seller's Knowledge, waived
any claims or rights of substantial value;
(vii) sold, transferred or otherwise disposed of any of its
properties or assets, except in the Ordinary Course of Business;
(viii) disposed of or, to Seller's Knowledge, permitted to lapse any
rights to the use of any material patent, trademark, trade name, service
mark or copyright, or disposed of or disclosed to any Person other than an
Affiliate any trade secret, formula, process or know-how not theretofore a
matter of public knowledge or subject to a confidentiality agreement;
PROVIDED, HOWEVER, that Buyer acknowledges that the new General Motors
Service Parts Operations License Agreement will require a letter of credit
in the amount of $315,000 to be provided by Buyer;
(ix) granted any material general increase in the compensation of
employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any material increase in
the compensation payable or to become
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payable to any management employee, and no such increase is customary on a
periodic basis or required by agreement or understanding;
(x) except as set forth in Section 4(i)(x) of the Disclosure
Schedule, made any material capital expenditure or material commitment for
additions to its property, equipment or intangible capital assets;
(xi) made any change in any method of accounting or accounting
practice or failed to maintain its books, accounts and records in the
Ordinary Course of Business;
(xii) failed to maintain in full force and effect all material
existing policies of insurance at least at such levels as were in effect
prior to such date or canceled any such insurance or taken or failed to
take any action that would reasonably be expected to enable the insurers
under such policies to avoid liability for claims arising out of
occurrences prior to the Closing;
(xiii) except for the transaction contemplated hereby, entered into
any material transaction or made or entered into any material contract or
commitment, or terminated or amended any material contract or commitment,
except in the Ordinary Course of Business, and not in excess of current
requirements;
(xiv) to the Knowledge of Seller, taken any action that would
reasonably be expected to have a material adverse effect on its business
organization or its current relationships with its employees, suppliers,
distributors, advertisers, subscribers or others having business
relationships with it;
(xv) declared, paid or set aside for payment any distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its capital stock; or
(xvi) agreed to take any action with respect to any of the matters
described in this Section 4(i).
(j) COMPLIANCE WITH LAW; LICENSES. Except as set forth in Section 4(j) of
the Disclosure Schedule, the businesses of Sub 1 and Sub 2 have not been and are
not being conducted in violation of any laws (whether statutory or otherwise),
rules, regulations, orders, ordinances, judgments, decrees, writs and
injunctions of all federal, state, local or foreign governmental authorities
(collectively, "Laws"), including all Laws relating to the safe conduct of Sub
1's and Sub 2's business, environmental protection and conservation, antitrust,
taxes, consumer protection, currency exchange, equal opportunity, health,
sanitation, fire, zoning, building, occupational safety, pension, securities and
trademark and copyright, except for such violations as would not, individually
or in the aggregate, have a Material Adverse Effect. Each of Sub 1 and Sub 2
holds all licenses, permits, variances, exemptions, authorizations, operating
certificates, orders and approvals of all governmental and regulatory bodies and
authorities (collectively, "Licenses") that are required for it to own, lease
and operate its properties as currently owned, leased and/or operated, as
applicable, and conduct its business as currently
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conducted, except where the failure to hold Licenses would not, individually or
in the aggregate, have a Material Adverse Effect. There has occurred no default
under or violation of any such License, except for such violations or defaults
that would not, individually or in the aggregate, have a Material Adverse
Effect.
(k) TAX MATTERS. Except as disclosed in Section 4(k) of the Disclosure
Schedule:
(i) each of the Companies or a Tax Affiliate with respect to the
Companies has timely filed (and through the Closing Date will timely file)
with the appropriate federal, state, local, foreign and other governmental
agencies all Tax Returns required to be filed by or with respect to it,
its operations and assets, and as of the time of filing, all such Tax
Returns were (and, as to Tax Returns not filed as of the date hereof, will
be) true, complete and correct in all material respects;
(ii) each of the Companies or a Tax Affiliate with respect to the
Companies has (A) timely paid (and through the Closing Date will timely
pay) all Taxes that are due and payable with respect to it, its operations
and assets, except for Taxes that are being contested in good faith by
appropriate proceedings and as to which adequate reserves have been
reflected on the Financial Statements; and (B) established (and through
and including the Closing Date will establish) reserves that are adequate
for the payment of all Taxes not yet due and payable with respect to the
results of operations through the Closing Date;
(iii) each of the Companies (or a Tax Affiliate on behalf of any of
the Companies) has complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has
timely withheld from employee wages and paid over (and through the Closing
Date will timely withhold and pay over) to the proper governmental
authorities all amounts required to be so withheld and paid over for all
periods under all applicable laws;
(iv) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has requested (or through the Closing Date will request)
any extension of time within which to file any Tax Return, which Tax
Return has not since been filed;
(v) to the Knowledge of Seller or the Companies, (a) the United
States federal income Tax Returns of each of the Companies have not been
examined by the Internal Revenue Service ("IRS"), (b) the state and local
income or franchise Tax Returns of each of the Companies have not been
examined by the relevant taxing authority and (c) no deficiencies have
been proposed, asserted or assessed by any federal, state, local foreign
or other taxing authority that have not been paid;
(vi) no federal, state, local or foreign Tax audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes for which any of the Companies would be liable;
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(vii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has executed or filed (or through the Closing Date will
execute or file) with the IRS or any other taxing authority any agreement
or other document extending or having the effect of extending the period
for assessment or collection of any Taxes for which any of the Companies
would be liable and no power of attorney granted by either of the
Companies with respect to any Tax matter is currently (or through the
Closing Date will be) in force;
(viii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has executed or entered into (or through the Closing
Date will enter into) any closing agreement pursuant to Section 7121 of
the Code, or any predecessor provision thereof or any similar provision of
state, local or foreign law;
(ix) none of the Companies is (or through the Closing Date will be)
a party to, bound by or subject to any obligation under any Tax sharing,
Tax indemnity, Tax allocation or similar agreement (whether or not
written);
(x) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) has filed (or through the Closing Date will file) a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by any of
the Companies.
(xi) no property owned by any of the Companies is property that
Buyer or such Company is or will be required to treat as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code;
(xii) none of the Companies (nor any of their Tax Affiliates on any
Company's behalf) (A) has agreed (or through the Closing Date will agree)
to or is required to make any adjustment pursuant to Section 481(a) of the
Code (or any similar provision of state, local or foreign law) by reason
of a change in accounting method initiated by a Company; (B) has Knowledge
that the IRS or any taxing authority has proposed any such adjustment or
change in accounting method, or (C) has an application pending (or through
the Closing Date will file an application) with any taxing authority
requesting permission for any change in accounting methods that relates to
the business and operations of any of the Companies;
(xiii) there is no (and prior to the close of business on the
Closing Date there will be no) contract, agreement, plan or arrangement in
respect of the Companies covering any Person that, individually or
collectively, would reasonably be expected to give rise to the payment of
any amount that would not be deductible by Buyer or any of the Companies
by reason of Section 280G of the Code (or any similar provision of state,
local or foreign law);
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(xiv) there are no liens for taxes upon the assets of the Companies
except for statutory liens for taxes not yet due;
(xv) true and complete copies of all federal, state, local and
foreign income or franchise Tax Returns of the Companies relating to
taxable periods ending on or after January 1, 1995 have been delivered or
made available to Buyer; and
(xvi) the Companies have not knowingly waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(l) REAL PROPERTY.
(i) The Companies own no real property; and
(ii) Section 4(l)(ii) of the Disclosure Schedule lists all real
property leased or subleased to the Companies. Seller has delivered to
Buyer correct and complete copies of the leases and subleases listed in
Section 4(l)(ii) of the Disclosure Schedule (as amended to date). Each
lease and sublease listed in Section 4(l)(ii) of the Disclosure Schedule
is valid, binding, enforceable against the Companies and in full force and
effect except (A) as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization and other similar laws
relating to or affecting creditors' rights generally and by the
application of general equitable principles (whether considered in
proceedings at law or equity) and (B) where the illegality, invalidity,
nonbinding nature, unenforceability or ineffectiveness would not have a
Material Adverse Effect. There is not, under any such lease, any existing
default or event of default that would have a Material Adverse Effect (or
event which with notice or lapse of time, or both, would constitute a
default and in respect of which Sub 1 or Sub 2 has not taken adequate
steps to prevent such a default from occurring).
(m) INTELLECTUAL PROPERTY.
(i) Except as set forth in Section 4(m) of the Disclosure Schedule,
each of Sub 1 and Sub 2 owns, free and clear of all liens, mortgages,
security interests, charges and encumbrances, and has good title to, or
hold adequate Licenses or otherwise possess all rights necessary to use,
all patents, trademarks, service marks, trade names, copyrights (including
any applications for any of the foregoing), inventions, discoveries,
processes, know-how, trade secrets, scientific, technical, engineering and
marketing data, object and source codes, and techniques used in the
conduct of its business as now conducted (collectively, the "Intellectual
Property").
(ii) Section 4(m) of the Disclosure Schedule contains an accurate
and complete list of (i) all such trademarks, trade names, service marks
and copyrights, and all applications therefor and, with respect to
registered items, contains a list of all jurisdictions in which such items
are registered and all registration numbers; (ii) all
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Licenses and other agreements relating thereto; and (iii) all agreements
relating to any of the Intellectual Property that Sub 1 or Sub 2 is
licensed or authorized to use by others. To the Knowledge of Seller, the
trademarks and copyrights constituting a part of the Intellectual Property
are valid, subsisting and enforceable, and are duly recorded in the name
of Sub 1 and Sub 2 except where failure to duly record will not have a
Material Adverse Effect.
(iii) To the Knowledge of Seller, no claims have been asserted by
any Person challenging or questioning the ownership, validity,
enforceability or use by Sub 1 or Sub 2 of any of the Intellectual
Property and, to the Knowledge of Seller, there is no valid basis for any
such claim; and, to the Knowledge of Seller, no other Person is infringing
on the rights of Sub 1 or Sub 2 with respect to any of the Intellectual
Property and, to the Knowledge of Seller, the use or other exploitation of
the Intellectual Property by Sub 1 and Sub 2 does not infringe on or
dilute the rights of any Person.
(iv) Seller has delivered to Buyer all documents with respect to any
invention, process, design, computer program or other know-how or trade
secret included in the Intellectual Property, which documents are accurate
in all material respects and reasonably sufficient in detail and content
to identify and explain such invention, process, design or computer
program.
(n) CONTRACTS.
(i) Section 4(n)(i) of the Disclosure Schedule lists all written
and, to Seller's Knowledge, oral contracts and other agreements to which
the Companies are a party the performance of which will involve
consideration in excess of $10,000. Seller has delivered to Buyer a
correct and complete copy of each written contract or other agreement and
a summary of each oral contract or agreement listed in Section 4(n) of the
Disclosure Schedule (as amended to date).
(ii) To the Knowledge of Seller, all parties to the contracts,
commitments, instruments and agreements listed in Section 4(n) of the
Disclosure Schedule have complied with the provisions thereof in all
material respects and no party is in material default thereunder.
(iii) Except as set forth in Section 4(n)(iii) of the Disclosure
Schedule, neither Sub 1 nor Sub 2 is a party to or bound by any contracts
that require payments in excess of $25,000 by any party thereto and are
not cancelable by Sub 1 or Sub 2, as the case may be, on notice of not
longer than 30 days.
(iv) Subject to obtaining any requisite consents of third parties,
the enforceability of the contracts and commitments referred to in Section
4(n)(i) will not be affected in any manner by the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby or by the other agreements referred to herein.
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(v) Except as set forth in Section 4(n)(v) of the Disclosure
Schedule, neither Sub 1 nor Sub 2 is a party to or bound by any contracts
or commitments with officers, employees, agents, consultants, advisors,
salesmen, sales representatives, distributors or dealers that are not
cancelable by it on notice of not longer than 30 days and without
liability, penalty or premium or any agreement or arrangement providing
for the payment of any bonus or commission based on sales or earnings.
(o) POWERS OF ATTORNEY. To the Knowledge of Seller, there are no
outstanding powers of attorney executed on behalf of the Companies.
(p) LITIGATION, ORDERS. Except as set forth in Section 4(p) of the
Disclosure Schedule, there are no claims, actions, suits or proceedings pending
before any court, arbitrator or governmental or regulatory authority
(collectively, "Legal Actions"), or, to the Knowledge of Seller, threatened
against or affecting Seller (with respect to its operation of Sub 1 and Sub 2),
Sub 1 or Sub 2, except as would not individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Section 4(p) of the Disclosure
Schedule, there are no Legal Actions questioning the validity of this Agreement,
the transactions contemplated hereby or any action taken or to be taken by
Seller, Sub 1 or Sub 2 pursuant to this Agreement or any other agreement
contemplated hereby, at law or in equity, before or by any federal, state, local
or foreign governmental authority. Neither the Company, Sub 1 nor Sub 2 is
subject to any judgment, order or decree entered in any lawsuit or proceeding
that has had or is expected to have a Material Adverse Effect.
(q) EMPLOYEE BENEFITS.
(i) Section 4(q) of the Disclosure Schedule lists each Employee
Benefit Plan that Sub 1 or Sub 2 maintains or to which Sub 1 or Sub 2
contributes.
(A) To the Knowledge of Seller, each such Employee Benefit
Plan (and each related trust, insurance contract or fund) complies
in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure to
comply would not have a Material Adverse Effect.
(B) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an employee Pension
Benefit Plan.
(C) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the
requirements of Code (ss)401(a).
(D) As of the last day of the most recent prior plan year, the
market value of assets under each such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) equaled or exceeded
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the present value of liabilities thereunder (determined in
accordance with then current funding assumptions).
(E) Seller has delivered to Buyer correct and complete copies
of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report and all related trust
agreements, insurance contracts and other funding agreements which
implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Companies
maintain or ever have maintained or to which they contribute, ever have
contributed or ever have been required to contribute:
(A) No Employee Benefit Plan is a "multiemployer plan" (as
defined in (ss)4001(a)(3) of ERISA) and neither Seller nor any
ERISA Affiliate (defined as any corporation or trade or business
(whether or not incorporated) which would be treated as a member of
a controlled group including Seller under (ss)4001(a)(14)) has
sponsored or contributed to any "multiemployer plan." No event or
condition has occurred in connection with which Seller or any of its
ERISA Affiliates would be subject to any liability, encumbrance or
lien with respect to any Employee Benefit Plan under ERISA, the Code
or any other applicable law or under any agreement or arrangement
pursuant to or under which Seller or any of its ERISA Affiliates are
required to indemnify any Person against such liability, where such
liability, individually or in the aggregate, would have a Material
Adverse Effect. Except as would not have a Material Adverse Effect,
(i) there are no pending or, to the Knowledge of Seller, threatened
claims, suits, audits or investigations related to any Employee
Benefit Plan and (ii) no Employee Benefit Plan provides
post-retirement welfare benefits to any Employees other than as
required by law.
(B) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be required
to be filed with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan has been instituted.
(C) No action, suit, proceeding, hearing or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits)
is pending, except where the action, suit, proceeding, hearing or
investigation would not have a Material Adverse Effect on the
financial condition of the Companies, taken as a whole.
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(D) The Companies have not incurred any liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(E) The consummation of the transactions contemplated by this
Agreement (alone or in connection with any subsequent event,
including a termination of employment) will not (i) accelerate the
vesting or payment of any economic benefit provided or made
available to any employees of Sub 1 or Sub 2, (ii) increase the
amount of any economic benefit provided or made available to any
such employees or (iii) accelerate or increase the funding
obligation of Sub 1 or Sub 2 with respect to any Employee Benefit
Plan.
(F) Since December 31, 1998, there has not occurred any
amendment to, or adoption of, any Employee Benefit Plan that
increases the obligations of Sub 1 or Sub 2 or any granting by
either of them to a current or former director or officer of any
increase in compensation or bonus, except as required under
then-existing employment agreements.
(r) ENVIRONMENTAL MATTERS.
(i) Except as would not reasonably be expected to have a Material
Adverse Effect or as disclosed on Section 4(r)(i) of the Disclosure
Schedule, as of the date hereof, no written notice, notification, demand,
request for information, citation, summons or complaint has been received
or order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or, to Seller's
Knowledge, threatened by any governmental entity or other Person with
respect to any (A) alleged violation by the Companies of any Environmental
Law or liability thereunder, (B) alleged failure by the Companies to have
any permit, certificate, license, approval, registration or authorization
required under any Environmental Law in connection with the conduct of
their businesses or (C) release of Hazardous Substances by the Companies.
(ii) Except as disclosed on Section 4(r)(ii) of the Disclosure
Schedule, to Seller's Knowledge, as of the date hereof, there are no
Environmental Liabilities that have had, or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
(iii) Except as set forth in Section 4(r)(iii) of the Disclosure
Schedule, to the Knowledge of Seller, no state of facts exists as to
environmental matters or Hazardous Substances that involves the reasonable
likelihood of a material capital expenditure by Sub 1 or Sub 2 or that may
otherwise have a Material Adverse Effect, and no Hazardous Substances have
been treated, stored or disposed of, or otherwise deposited, in or on or
are present beneath the properties owned, leased or used by Sub 1 or Sub 2
in violation of or which may be required to be investigated or remediated
under any applicable
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Environmental Laws. The environmental compliance programs of Sub 1 and
Sub 2 comply in all material respects with all Environmental Laws.
(iv) Except as set forth in Section 4(r)(iv) of the Disclosure
Schedule, to the Knowledge of Seller, there are no Hazardous Substances
present, and there has been no disposal, escape, seepage, leakage,
spillage, discharge, emission, release or threatened release of any
Hazardous Substance (a) on, from or affecting any of the Subject
Properties, or (b) for which Sub 1 or Sub 2 is or is alleged to be
responsible as a result of conduct occurring or conditions existing at or
before Closing except those that are used by Sub 1 or Sub 2 in the
Ordinary Course of Business and are stored and used in compliance with all
Environmental Laws.
(s) SEVERANCE ARRANGEMENTS. Except as set forth on Section 4(s) of the
Disclosure Schedule, neither Sub 1 nor Sub 2 has entered into any severance or
similar arrangement in respect of any Personnel that will result in any
obligation (absolute or contingent) of Buyer, the Companies or any other Person
to make any payment to any such Personnel following termination of employment or
consummation of the transactions contemplated hereby.
(t) INSURANCE. The assets, properties and operation of the Companies are
insured under various policies of general liability and other forms of
insurance, all of which are listed on Section 4(t) of the Disclosure Schedule.
All such policies are in full force and effect in accordance with their terms,
all premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, no notice of cancellation has been received and
there is no existing default or event which, with the giving of notice or lapse
of time or both, would constitute a default thereunder and the coverage provided
thereby, with respect to any act or event occurring on or prior to the Closing
Date, will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement. Such policies are in amounts which
are adequate in relation to the businesses and assets of the Companies. No risks
with respect to the business of Sub 1 or Sub 2 have been designated by any of
them or Seller as being self-insured. Neither Sub 1 or Sub 2, nor Seller in
respect of either of Sub 1 or Sub 2, has been refused any insurance nor has
coverage been limited by any insurance carrier to which any of them has applied
for such insurance or with which any of them has carried such insurance in the
last three years.
(u) SUPPLIERS. Section 4(u) of the Disclosure Schedule sets forth a list
of Sub 1's and Sub 2's ten largest suppliers in terms of purchases during the
five months ended May 31, 1998, showing the approximate total purchases by Sub 1
and Sub 2 from each such supplier during such year. No material adverse change
has occurred in the business relationship of Sub 1 or Sub 2 with any such
supplier since June 1, 1999, and, to Seller's Knowledge, no facts exist and no
events have occurred that would reasonably be expected result in a material
adverse change to any such relationship.
(v) ACCOUNTS RECEIVABLE. Section 4(v) of the Disclosure Schedule sets
forth a true and complete list of all accounts receivable of Sub 1 and Sub 2 as
of the date of the Most Recent Financial Statements and the Most Recent Fiscal
Quarter End and the aging thereof. All
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accounts receivable of Sub 1 and Sub 2, whether reflected on such balance sheets
or subsequently created through the Closing Date, represent sales actually made
or services actually performed in the Ordinary Course of Business and, except as
otherwise listed as uncollectible on Schedule 4(v), are current and either have
been collected in full or will be collectable in full, without any setoff
subject to any returns in the Ordinary Course of Business.
(w) CERTAIN INTERESTS. Except as set forth in Section 4(w) of the
Disclosure Schedule, neither Seller, Sub 1 nor Sub 2, nor any officer, director
or shareholder thereof, nor any of their respective Affiliates, has (a) any
direct or indirect interest (other than the ownership of less than one percent
of the outstanding securities of a publicly held company) in any corporation or
business that is involved in or competes with Sub 1 or Sub 2 and as owner of the
property leased to the Companies or (b) any direct or indirect interest in any
property or assets used by, or relating to, Sub 1 or Sub 2 or their respective
businesses, except through the ownership of common stock of Sub 1 and Sub 2. The
Disclosure Schedule sets forth a complete list of all agreements and
arrangements among Sub 1 and Sub 2, on the one hand, and each of their
respective officers, directors, shareholders and their respective immediate
family members, on the other hand, and true and correct copies of all such
agreements and arrangements have been delivered to Buyer.
(x) LABOR MATTERS.
(i) Each of Sub 1 and Sub 2 has for the past three years and is
currently complying in all material respects with all applicable laws
relating to employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practice or unlawful employment practice.
(ii) There is no unfair labor practice charge or complaint against
Sub 1 or Sub 2, or against Seller with respect to Sub 1 or Sub 2, pending
or, to the Knowledge of Seller, threatened before the National Labor
Relations Board nor, to the Knowledge of Seller, is there any basis for
any such charge or complaint.
(iii) To the Knowledge of Seller, there is no labor strike, slowdown
or work stoppage pending or threatened against Sub 1 or Sub 2.
(iv) Neither Sub 1 nor Sub 2 has experienced any significant work
stoppages or been a party (nor has Seller been a party with respect to Sub
1 or Sub 2) to any proceedings before the National Labor Relations Board
involving any issues which would have a Material Adverse Effect for the
past three years or been a party to any arbitration proceeding arising out
of or under collective bargaining agreements for the past three years.
(v) Except as set forth in Section 4(x)(v) of the Disclosure
Schedule, there is no material charge or complaint pending or, to the
Knowledge of Seller, threatened against Sub 1 or Sub 2, or against Seller
with respect to Sub 1 or Sub 2, before the Equal Employment Opportunity
Commission or the Department of Labor or any state or local agency of
similar jurisdiction. No employees of Sub 1 or Sub 2 are represented by
any
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labor union and there is no collective bargaining agreement in effect with
respect to such employees. During the past five years, to the Knowledge of
Seller, no labor union has engaged in any organizing activities with
respect to the employees of Sub 1 or Sub 2.
(y) BANK ACCOUNTS. Section 4(y) of the Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which Sub 1 or Sub 2 maintains safe deposit
boxes or accounts of any nature and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto. On and after the
Closing, all monies and accounts arising out of, relating to or established for
the businesses will be held by, and accessible only to, Sub 1 or Sub 2.
(z) TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 4(z) of
the Disclosure Schedule, (i) no Affiliate of Sub 1 or Sub 2 is an employee,
consultant, competitor, customer, distributor, supplier or vendor of, or is
party to any contractual obligations with, Sub 1 or Sub 2 and (ii) no officer or
director of Sub 1 or Sub 2 is an Affiliate of any competitor, customer,
distributor, supplier or vendor of Sub 1 or Sub 2. Except as set forth in
Section 4(z) of the Disclosure Schedule, none of the assets (real, personal,
tangible or intangible) or other property owned by or used in the conduct of the
business of Sub 1 or Sub 2 are owned by any Affiliate of Sub 1 or Sub 2 or
subject to any license or similar arrangement allowing use thereof by an
Affiliate. Seller has not willfully and intentionally made an improper
allocation of any intercompany services and charges by Seller to Sub 1 or Sub 2
for the period covered by the Most Recent Financial Statements nor has Seller
willfully and intentionally changed the method of allocation between fiscal year
1998 and the Most Recent Financial Statements, wherein the failure to make the
proper allocation or the making of such change, (individually or in the
aggregate) would have a Material Adverse Effect on Eckler; provided, however,
that Buyer acknowledges that certain intercompany services and charges have been
identified by Buyer, its Affiliates and their respective advisors and agents
(including without limitation, Sun Capital Partners, Inc. and Grant Thornton
LLP, C.P.A.), including without limitation, those listed on Schedule 4(z), or
have been provided to, or brought to the attention of, one or more of such
parties, by Seller, its Affiliates and their respective advisors and agents
(including, without limitation, BDO Seidman LLP and Stephens Inc.), also as set
forth on Schedule 4(z) ("Identified Intercompany Services and Charges"), and
Buyer acknowledges and agrees that the Identified Intercompany Services and
Charges will not be deemed to have been improperly allocated or changed (as such
changes are specifically set forth on Schedule 4(z)) for purposes of this
Section 4(z).
(aa) PRODUCT WARRANTIES, DEFECTS AND LIABILITIES. Except as set forth in
Section 4(aa) of the Disclosure Schedule, each product manufactured, sold,
leased, or delivered by Sub 1 or Sub 2 has been in conformity in all material
respects with all applicable federal, state, local or foreign laws and
regulations, contractual commitments and all express and implied warranties,
except where a failure to conform, singly or in the aggregate, would not have a
Material Adverse Effect, and, to Seller's Knowledge, neither Sub 1 nor Sub 2 has
any liability for replacement or repair thereof or other damages in connection
therewith, except for liabilities incurred in the Ordinary Course of Business.
Other than guaranties, warranties and
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indemnities granted in the Ordinary Course of Business (which guarantees,
warranties and indemnities would not, individually or in the aggregate, have a
Material Adverse Effect), no product manufactured, sold, leased or delivered by
Sub 1 or Sub 2 is subject to any guaranty, warranty, or other indemnity beyond
their standard terms and conditions of sale or lease for such products. To
Seller's Knowledge, neither Sub 1 nor Sub 2 has any material liability arising
out of any injury to individuals or property as a result of the ownership,
possession or use of any product manufactured, sold, leased, or delivered by Sub
1 or Sub 2 and, to the Knowledge of Seller, there has been no inquiry or
investigation made in respect thereof by any Person.
(bb) INVENTORIES. Except as disclosed in Section 4(bb) of the Disclosure
Schedule, the inventories of the Companies as reflected on the Most Recent
Financial Statements consist only of items in good condition and salable or
usable in the Ordinary Course of Business except to the extent of the inventory
reserve included on the Most Recent Financial Statements, which reserve is
adequate for such purpose, and are recorded on such balance sheet in accordance
with GAAP applied in a manner consistent with past practices and experience with
respect to the time required to sell slow-moving inventory.
(cc) PRICES; FINANCIAL CONDITION. To Seller's Knowledge, (i) since the
date of the Most Recent Financial Statements, there have been no changes in the
pricing of products purchased by Sub 1 or Sub 2, other than in the Ordinary
Course of Business and (ii) there have not been any changes in the financial
condition of any supplier of Sub 1 or Sub 2, which, individually or in the
aggregate, would have a Material Adverse Effect.
(dd) DISCLOSURE. No representation or warranty by Seller or the Companies
contained in this Agreement or the Disclosure Schedule, and no statement
contained in any document, list, certificate or other writing furnished or to be
furnished by or on behalf of Seller, to Buyer or any of its representatives in
connection with the transactions contemplated hereby, and no statement or other
information concerning the Companies contained in the annual report on Form 10-K
dated December 31, 1998 and the quarterly report on Form 10-Q dated June 30,
1999 filed by Seller with the Securities and Exchange Commission, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
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(b) NOTICES AND CONSENTS. Seller will cause the Companies to give all
notices to third parties, unless notice is otherwise waived by Buyer, and will
cause the Companies to use their reasonable efforts to obtain all third-party
consents, that are required to consummate the transactions contemplated hereby.
Buyer and/or Seller, as applicable, will (and Seller will cause the Companies
to) give any notices to, make any filings with, and use its reasonable efforts
to obtain any authorizations, consents and approvals of governments and
governmental agencies in connection with the matters referred to in Section
3(a)(ii), Section 3(b)(ii), Section 4(c) and Section 5(g) hereof. Without
limiting the generality of the foregoing, each of the Parties will file (and
Seller will cause the Companies to file) any Notification and Report Forms and
related material that they may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act, will use their reasonable efforts to obtain
(and Seller will cause the Companies to use their reasonable efforts to obtain)
a waiver from the applicable waiting period, and will make (and Seller will
cause the Companies to make) any further filings pursuant thereto that may be
necessary in connection therewith.
(c) CONDUCT OF BUSINESS. From the date of this Agreement to the Closing,
(a) Seller will cause each of Sub 1 and Sub 2 to conduct its business only in
the ordinary course and consistent with past practice, and (b) all intercompany
transactions between Seller, on the one hand, and Sub 1 or Sub 2, on the other
hand, will be effected only in the Ordinary Course of Business, and will be paid
in full prior to the Closing. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement or consented to in
writing by Buyer, from the date of this Agreement to the Closing, Seller will,
with respect to Sub 1 and Sub 2, and will cause each of Sub 1 and Sub 2 to:
(i) maintain its properties and equipment in substantially the same
operating condition and repair as in effect on the date hereof;
(ii) continue all existing policies of insurance in full force and
effect and at least at such levels as are in effect on the date hereof, up
to and including the Closing, and not cancel any such insurance or take or
fail to take any action that would enable the insurers under such policies
to avoid liability for claims arising out of occurrences prior to the
Closing;
(iii) not enter into any transaction or make or enter into any
material contract or commitment, or terminate or amend any material
contract or commitment, except in the Ordinary Course of Business, or
enter into any contract or commitment with any officer, director,
shareholder, consultant or Affiliate, except as contemplated by this
Agreement;
(iv) use reasonable efforts to preserve its business organization
and its current relationships with its employees, suppliers, customers,
distributors, advertisers, subscribers and others having business
relationships with it and to keep available to Sub 1 and Sub 2 the
services of their employees;
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(v) not grant any increase in the compensation payable to any
officer or other employee of Sub 1 or Sub 2, and not contribute or make
any commitment to, or representation that it will, contribute any amounts
to any Employee Benefit Plan, or adopt any new Employee Benefit Plan;
(vi) maintain its books, accounts and records in the Ordinary Course
of Business;
(vii) not incur any obligation or liability, whether absolute, fixed
or contingent, except in the Ordinary Course of Business;
(viii) not issue any capital stock, or any rights, options or
warrants to acquire any capital stock, or declare, set aside or pay any
dividend or distribution in respect of any of its capital stock, or
redeem, purchase or otherwise acquire any of its capital stock;
(ix) not terminate, discontinue, close or dispose of any facility;
(x) not make any capital expenditures or any commitments for capital
expenditures that individually exceed $50,000 or in the aggregate exceed
$100,000 except as set forth in Section 5(c)(viii) of the Disclosure
Schedule;
(xi) not transfer, lease or otherwise dispose of any property or
assets except in the Ordinary Course of Business;
(xii) not pay, discharge or satisfy any claim, lien, encumbrance,
obligation or liability (whether absolute, accrued, contingent or
otherwise and whether due or to become due) other than in the Ordinary
Course of Business;
(xiii) not permit any of its properties or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge,
lien, encumbrance, restriction or charge of any kind, except those in
effect on the date of this Agreement;
(xiv) not cancel any debts or waive any claims or rights of
substantial value;
(xv) not reduce the quality or quantity of services provided to
customers or change the prices of any of its products or services except
in the Ordinary Course of Business;
(xvi) not make any loans, advances or capital contributions to, or
investments in, any Person, except loans and advances to employees in the
Ordinary Course of Business; or
(xvii) not take any action that would result in any of the
representations or warranties of Seller set forth in this Agreement
becoming untrue or cause any of the conditions to the Closing set forth in
Section 7 to not be satisfied.
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(d) FULL ACCESS. Seller will permit, and Seller will cause the Companies
to permit, representatives of Buyer to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Companies, to all premises, properties, personnel, books, records (including
tax records), contracts and documents of or pertaining to the Companies. Buyer
will treat and hold as such any Confidential Information it receives from
Seller, and the Companies, in the course of the reviews contemplated by this
Section 5(d), will not use any of the Confidential Information except in
connection with this Agreement and, if this Agreement is terminated for any
reason whatsoever, will return to Seller and the Companies all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. No such investigation by Buyer or its representatives will affect
any of Sellers' representations and warranties in this Agreement; PROVIDED,
HOWEVER, that Buyer affirms that the representation and warranty contained in
Section 3(b)(viii) of this Agreement is true and correct.
(e) NOTICE OF DEVELOPMENTS.
(i) Seller may elect at any time to notify Buyer of any development
causing a breach of any of the representations and warranties of the
Companies in Section 4 above. Unless Buyer has the right to terminate this
Agreement pursuant to Section 9(a)(ii) below by reason of the development
and exercises that right within the period of 10 business days referred to
in Section 9(a)(ii) below, the written notice pursuant to this Section
5(e)(i) will be deemed to have amended the Disclosure Schedule, to have
qualified the representations and warranties contained in Section 4 above,
and to have cured any misrepresentation or breach of warranty that
otherwise might have existed hereunder by reason of the development.
(ii) Parent, Buyer and Seller will give prompt written notice to the
others of any material adverse development causing a breach of any of its
representations and warranties in Section 3 above. No disclosure by
Parent, Buyer or Seller pursuant to this Section 5(e), however, will be
deemed to amend or supplement the Disclosure Schedule or to prevent or
cure any misrepresentation or breach of warranty.
(f) EXCLUSIVITY. Seller will not, and will not authorize any officer,
director, employee or agent of Seller or the Companies to, or authorize any
investment banker, attorney, accountant or other representative retained by
Seller or any Affiliate of Seller to (and Seller will not cause or permit the
Companies to), directly or indirectly, solicit offers for sale or negotiate or
discuss a possible merger, sale or restructuring, refinancing or other
disposition of all or any material part of the Companies, their assets or
capital stock with any other potential purchaser, nor provide any information to
any other potential purchaser regarding the Companies in that connection until
the Closing. Seller will promptly advise Buyer of any offer, solicitation or
request for information received by it from any Person, including the identity
of the Person making such offer, solicitation or request and the nature and
terms (if any) of any such offer, solicitation or request.
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(g) ENVIRONMENTAL MATTERS.
(i) Seller will take all reasonable actions necessary to continue in
full force and effect all existing permits issued to Sub 1 or Sub 2, and,
with Buyer's prior approval, review and consent, to apply for any permits,
and/or file or submit any notices or registration statements, needed or
expected to be needed to enable the businesses of Sub 1 or Sub 2 to
continue in normal operation after Closing, including, without limitation,
any transfers of existing permits and/or any filings necessary for
existing permits to remain in full force and effect notwithstanding the
transaction contemplated by this Agreement.
(ii) Seller will provide, or will cause the Companies to provide, to
Buyer:
(A) the originals, or, if not available, copies, of any
applications, statements, or reports filed or given by or with
respect to Sub 1 or Sub 2 with or to the EPA, any state department
of environmental regulations, or any similar department of
environmental regulations, or any similar state or local regulatory
body, authority, or agency in the past five years;
(B) the originals, or, if not available, copies, of any
governmental permits, authorizations or approvals for Seller or Sub
1 or Sub 2 and/or their operations issued in the past five years;
and
(C) all reports and documentation of Sub 1 and Sub 2 (whether
or not generated internally) concerning past waste disposal and
compliance with waste disposal regulations (hazardous or otherwise).
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). Promptly following
Closing, Seller will take all actions necessary to transfer to Buyer, for no
additional consideration, (i) a Ford F150 truck (VIN# 1FTEF15NBTLA98681) and
(ii) three Router Com Super Stack II-Netbuilder (model# 3C8224C), free and clear
of all liens or other encumbrances.
(b) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Companies, each of the other Parties will cooperate with it and
its counsel in the defense or
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contest, make available their personnel, and provide such testimony and access
to their books and records as will be necessary in connection with the defense
or contest, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below).
(c) TRANSITION. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of the Companies from maintaining the same
business relationships with the Companies after the Closing as it maintained
with the Companies prior to the Closing.
(d) GUARANTEES. Buyer will use reasonable efforts to assist Seller to
secure the release of Seller from all guarantees entered into by Seller or its
Affiliates on behalf of Sub 1 or Sub 2 under letters of credit, loans,
guarantees, leases, including all equipment and real property leases, mortgages
or other similar arrangements which guarantees are set forth in Section 6(d) of
the Disclosure Schedule (the "Guaranteed Obligations"); provided that Buyer will
not be required to pay money or incur any expenses in connection therewith.
(e) COMPETITION.
(i) Seller acknowledges that Buyer would be irreparably damaged if
Seller's confidential knowledge of the business of Sub 1 or Sub 2 (the
"Business") were disclosed to or utilized on behalf of any Person that is
in competition with Sub 1 or Sub 2. Accordingly, Seller will not, and will
cause its Affiliates not to, at any time, without the prior written
consent of Buyer, disclose or use any such Confidential Information. For
purposes hereof, Confidential Information will not include information
that is approved in writing for release by Buyer or Parent, is generally
known by the recipient prior to its disclosure to the recipient, is
received by a recipient from a third party rightfully in possession of
such information or is otherwise required by law to be disclosed.
(ii) In furtherance of this Section 6(e) and to secure the interests
of Buyer hereunder, Seller will not, and will not permit any of its
Affiliates to, directly or indirectly, participate in the ownership,
management, operation or control of, or have any financial interest in or
assist any person in the conduct of, any business (a "Competitive
Operation") that competes with the Business as conducted by Sub 1 and Sub
2, respectively, at any time during the two-year period immediately
preceding the date of this Agreement in any area where the Business is
then conducted; PROVIDED, HOWEVER, that ownership of note more than one
percent of the equity securities of any publicly held Competitive
Operation will not constitute a violation of this paragraph (ii).
(iii) Seller acknowledges that a violation by it or any of its
Affiliates of any of the covenants contained in this Section 6(e) would
cause immeasurable and irreparable damage to Buyer. Seller accordingly
acknowledges that Buyer will be entitled to injunctive relief in any court
of competent jurisdiction for any actual or threatened violation of any
covenant, without posting a bond or other security, in addition to any
other remedies available to Buyer.
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(f) TRADEMARKS. Seller will cooperate with Buyer and take all action
reasonably requested by Buyer to transfer and assign to Buyer all rights of
Seller, Sub 1 or Sub 2 in the trademarks referred to in the Assignment of
Trademarks attached hereto as EXHIBIT E, including without limitation filing
such documents and other materials with the U.S. Patent and Trademark Office and
other governmental and regulatory agencies as may be necessary to effect such
transfer and assignment.
(g) NAME CHANGE OF SELLER'S SUBSIDIARY. Seller will change the name of its
wholly owned subsidiary "Eckler Corvette Sales, Inc." so as to remove the name
"Eckler" on or prior to the Closing Date.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF BUYER AND PARENT. The obligations of Buyer
and Parent to consummate the transactions contemplated by this Agreement are
subject to satisfaction at or before the Closing of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above and the statements contained in any schedule, amended
schedule, instrument, list, certificate or writing delivered by Seller or
the Companies pursuant to this Agreement, that are qualified as to
materiality will be true and correct as of the date when made and as of
the Closing Date as if made at and as of the Closing Date and each of such
representations, warranties and statements that are not so qualified will
be true and correct in all material respects as of the date when made and
as of the Closing Date as if made at and as of the Closing Date (except,
in each case, for those representations, warranties and statements that
address matters only as of a particular date, in which case they will be
true and correct, or true and correct in all material respects, as
applicable, as of such date);
(ii) Seller will have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) There will not be instituted or pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (a)
restrains or prohibits the consummation of any of the transactions
contemplated hereby, (b) would reasonably be expected to have a Material
Adverse Effect on Buyer's ability to exercise control over or manage the
Companies after the Closing or (c) would reasonably be expected to have a
Material Adverse Effect.
(iv) no statute, rule, regulation, executive order, decree or
injunction will have been enacted, entered, promulgated or enforced by any
court or governmental authority that prohibits the consummation of any of
the transactions contemplated hereby;
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(v) all Licenses, consents, approvals and authorizations of all
third parties and governmental and regulatory authorities will have been
obtained that are necessary except as set forth on Schedule 7(a)(v) of the
Disclosure Schedule , in the opinion of counsel to Buyer, in connection
with (a) the execution and delivery by Seller and the Companies of this
Agreement, (b) the consummation by Seller and the Companies of the
transactions contemplated hereby and (c) the ownership and operation by
Buyer of the Companies, and copies of all such Licenses and consents,
approvals and authorizations will have been delivered to Buyer;
(vi) from the date of this Agreement through the Closing Date, there
will not have occurred any change in the financial condition, business or
operations of Sub 1 or Sub 2 that would be reasonably likely to have a
Material Adverse Effect;
(vii) Seller will have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Section 7(a)(i)-(vi)
is satisfied in all respects;
(viii) all actions to be taken by Seller and the Companies in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer;
(ix) as of the Closing Date, none of the Companies will have any
indebtedness for borrowed money or obligations in respect of any such
indebtedness, including indebtedness to Seller or any of its Affiliates,
except for a $315,000 letter of credit required under the General Motors
Service Parts Operations License Agreement or as set forth in Section
7(a)(ix) of the Disclosure Schedule;
(x) at the Closing, Seller will have entered into a ten-year lease
agreement in the form of EXHIBIT F for Buildings Two and Three at Seller's
headquarters in Titusville, Florida;
(xi) at the Closing, Buyer and Seller will enter into a Transition
Services Agreement substantially in the form of EXHIBIT G hereto;
(xii) Buyer will have received from Morgan, Lewis & Bockius LLP,
counsel to Seller, an opinion in form and substance as set forth in
EXHIBIT H attached hereto, addressed to Buyer and dated as of the Closing
Date;
(xiii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act (if applicable) will have expired or
otherwise been terminated and the Parties and the Companies will have
received all other authorizations, consents and approvals of the
governmental or regulatory bodies or authorities referred to in Section
3(a)(ii), Section 3(b)(ii) and Section 4(c);
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(xiv) Seller will have delivered to Buyer an executed counterpart of
the Assignment of Trademarks, in the form attached hereto as EXHIBIT E;
(xv) Seller will have secured the release of Sub 1 and Sub 2 from
all guarantees entered into by Sub 1 or Sub 2 on behalf of Seller or its
Affiliates under all Guaranteed Obligations set forth on Section 6(d) of
the Disclosure Schedule unless waived by the Buyer in writing.
Buyer and Parent may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF SELLER AND THE COMPANIES. The obligation
of Seller and the Companies to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3(b)
above and the statements contained in any schedule, amended schedule,
instrument, list, certificate or writing delivered by Buyer or Parent
pursuant to this Agreement, that are qualified as to materiality will be
true and correct as of the date when made and as of the Closing Date as if
made at and as of the Closing Date and each of such representations,
warranties and statements that are not so qualified will be true and
correct in all material respects as of the date when made and as of the
Closing Date as if made at and as of the Closing Date (except, in each
case, for those representations, warranties and statements that address
matters only as of a particular date, in which case they will be true and
correct, or true and correct in all material respects, as applicable, as
of such date);
(ii) Buyer and Parent will have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) there will not be instituted or pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (a)
restrains or prohibits the consummation of any of the transactions
contemplated hereby, (b) would reasonably be expected to have a Material
Adverse Effect on Buyer's or Parent's ability to exercise control over or
manage the Companies after the Closing or (c) would reasonably be expected
to have a Material Adverse Effect;
(iv) no statute, rule, regulation, executive order, decree or
injunction will have been enacted, entered, promulgated or enforced by any
court or governmental authority that prohibits the consummation of any of
the transactions contemplated hereby;
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(v) Buyer and Parent will have delivered to Seller a certificate to
the effect that each of the conditions specified above in Section
7(b)(i)-(iv) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act (if applicable) will have expired or
otherwise been terminated and the Parties and the Companies will have
received all other authorizations, consents and approvals of governmental
or regulatory bodies or authorities referred to in Section 3(a)(ii),
Section 3(b)(ii) and Section 4(c), above;
(vii) all actions to be taken by Buyer and Parent in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Seller;
(viii) at the Closing, Buyer will have entered into a ten-year lease
agreement in the form of EXHIBIT D for Buildings Two and Three at Seller's
headquarters in Titusville, Florida;
(ix) Seller will have received the Closing Payment;
(x) at the Closing, Buyer and Seller will enter into a Transition
Services Agreement substantially in the form of EXHIBIT G hereto; and
(xi) Seller will have received from counsel to Buyer an opinion in
form and substance as set forth in EXHIBIT I attached hereto, addressed to
Seller and dated as of the Closing Date.
Seller may waive any condition specified in this Section 7(b) if it executes a
writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of Seller contained in Section 4 above will survive the Closing
hereunder (unless Buyer or Parent knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of one year thereafter. All of the
representations and warranties of the Parties contained in Section 3 above will
survive the Closing (unless the damaged Party or Party's agents (including,
without limitation, in the case of Buyer, Sun Capital Partners, Inc.) knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for the applicable statutes of
limitations.
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(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event (A) either Seller or the Companies breaches any of
its representations, warranties and covenants contained herein (other than
the covenants in Section 2(a) above and the representations and warranties
in Section 3(a) above which are covered by paragraph (ii) below), and, if
there is an applicable survival period pursuant to Section 8(a) above, (B)
any claim is asserted against Buyer or any Affiliate with respect to any
Taxes relating to Seller's, Sub 1's or Sub 2's operations or properties on
or prior to the Closing Date, (C) any Taxes that may be due from Seller
directly and solely as a result of the sale of the stock of the Companies
pursuant to this Agreement, provided that Buyer or Parent makes a written
claim for indemnification against Seller within such survival period, (D)
any liability or obligation relating to events prior to the Closing with
regard to any Employee Benefit Plan, unless otherwise accrued or provided
for in the July 1999 Financial Statements, or as otherwise provided in
this Agreement, (E) any liability arising out of products sold by Sub 1 or
Sub 2 prior to the Closing Date, unless otherwise accrued or provided for
in the July 1999 Financial Statements, or as otherwise provided in this
Agreement, (F) any violation by Seller, Sub 1 or Sub 2 of any
Environmental Law or (G) any claims, lawsuits, injunctions or other
actions brought or threatened by any Person against any of Sub 1, Sub 2,
Buyer or any of Buyer's Affiliates based on a claim by any Person of a
right to acquire Sub 1 or Sub 2 from Seller, then Seller agrees to
indemnify Buyer from and against any Adverse Consequences Buyer will
suffer through and after the date of the claim for indemnification caused
proximately by the breach; PROVIDED, HOWEVER, that Seller will not have
any obligation to indemnify Buyer or Parent from and against any Adverse
Consequences caused by (A) through (G) above (except Adverse Consequences
relating to Taxes or Employee Benefit Plans): (x) until Buyer or Parent
has suffered Adverse Consequences by reason of all such breaches in excess
of a $100,000 aggregate deductible (the "Indemnification Threshold")
(after which point Seller will be obligated only to indemnify Buyer or
Parent from and against further such Adverse Consequences, that is, for
amounts greater than $100,000) or thereafter (y) to the extent the Adverse
Consequences Buyer has suffered by reason of all such breaches exceeds a
$10,250,000 aggregate ceiling (after which point Seller will have no
obligation to indemnify Buyer from and against further such Adverse
Consequences).
(ii) In the event either Seller or the Companies breaches any of its
covenants in Section 2(a) above or any of its representations and
warranties in Section 3(a) above, and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that Buyer or Parent makes
a written claim for indemnification against Seller within such survival
period, then Seller agrees to indemnify Buyer or Parent from and against
the entirety of any Adverse Consequences Buyer or Parent will suffer
through and after the date of the claim for indemnification caused
proximately by the breach.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event either
Buyer or Parent breaches any of its representations, warranties and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that Seller makes a written claim for
indemnification against Buyer or Parent pursuant to Section 10(g) below
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within such survival period, then Buyer or Parent agrees to indemnify Seller
from and against the entirety of any Adverse Consequences Seller will suffer
through and after the date of the claim for indemnification caused proximately
by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party will notify any Party (the "Indemnified
Party") with respect to any matter (a "Third-Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
will promptly (and in any event within 10 business days after receiving
notice of the Third-Party Claim) notify each Indemnifying Party thereof in
writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third-Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; PROVIDED,
HOWEVER, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third-Party
Claim without the prior written consent of the Indemnified Party (not to
be withheld unreasonably) unless the judgment or proposed settlement
involves only the payment of money damages and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense of
the Third-Party Claim as provided in Section 8(d)(ii) above, however, the
Indemnified Party may defend against the Third-Party Claim in any manner
it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third-Party
Claim without the prior written consent of each of the Indemnifying
Parties (not to be withheld unreasonably).
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties will make
appropriate adjustments for tax benefits and insurance coverage in determining
the amount of Adverse Consequences actually incurred by a party for purposes of
this Section 8. To the extent that utilization of tax benefits, insurance
coverage or indemnification payments reduces the amount of Adverse Consequences
actually incurred by Buyer or Parent, such Adverse Consequences will not be
counted against the Indemnification Threshold. All indemnification payments
under this Section 8 will be deemed adjustments to the Merger Consideration.
(f) OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions in
this Section 8 are in addition to, and not in derogation of, any statutory,
equitable or common law remedy any Party may have for breach of representation,
warranty or covenant; PROVIDED, HOWEVER, that Buyer and Parent acknowledge and
agree that the foregoing indemnification provisions in this Section 8 will be
the exclusive remedy of Buyer for any breach of the representations and
warranties in Section 4 above.
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9. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be terminated as provided
below:
(i) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Buyer and Parent may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event (A) Seller
has within the then previous 10 business days given Buyer or Parent any
notice pursuant to Section 5(e)(i) above and (B) the development that is
the subject of the notice has had a Material Adverse Effect;
(iii) Buyer and Parent may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (A) in the event
either Seller or the Companies has breached any material representation,
warranty or covenant contained in this Agreement in any material respect,
either Buyer or Parent has notified Seller of the breach, and the breach
has continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing will not have occurred on or before August
31, 1999, by reason of the failure of any condition precedent under
Section 7(a) hereof which is not otherwise waived by Buyer (unless the
failure results primarily from either Buyer or Parent itself breaching any
representation, warranty or covenant contained in this Agreement); and
(iv) Seller and the Companies may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing (A) in the event
either Buyer or Parent has breached any material representation, warranty
or covenant contained in this Agreement in any material respect, Seller
has notified Buyer of the breach, and the breach has continued without
cure for a period of 15 days after the notice of breach or (B) if the
Closing will not have occurred on or before August 31, 1999, by reason of
the failure of any condition precedent under Section 7(b) hereof which is
otherwise waived by Seller (unless the failure results primarily from
either Seller or the Companies breaching any representation, warranty or
covenant contained in this Agreement, in which event such date will be
extended until such breach is cured).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 9(a) above, all rights and obligations of the Parties hereunder will
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 5(d) above will survive
termination.
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10. TAX INDEMNIFICATION. Notwithstanding anything to the contrary
contained in Section 8 of this Agreement:
(a) TAX SHARING AND INDEMNIFICATION. Seller will indemnify, defend and
hold harmless Buyer from and against any and all Taxes that may be imposed on or
assessed against or otherwise claimed to be due from Buyer with respect to any
of the Companies or Tax Affiliate, or the assets of any such Company or its Tax
Affiliates (A) with respect to taxable periods ending on or prior to the Closing
Date; (B) with respect to any and all Taxes of any member of a consolidated,
combined or unitary group of which any of the Companies or any predecessor
thereof is or was a member (other than a Company) on or prior to the Closing
Date, by reason of the liability of such Company pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation; (C) arising by reason of any breach by Seller of the
representations, warranties and covenants contained in Section 4(k); (D) by
reason of being a successor-in-interest or transferee of another entity on or
prior to the Closing Date; (E) with respect to any and all Taxes allocated to
Seller pursuant to Section 10(c) hereof; and (F) arising from an election or
deemed election imposed by a taxing authority under Section 338 (h)(10) of the
Code (or any comparable provision of state, local or foreign law) with respect
to the purchase of the Sub 1 Shares and Sub 2 Shares. Seller will also pay or
cause to be paid and will indemnify and hold harmless Buyer, each Company and
their Tax Affiliates from and against (x) any liability arising under any Tax
sharing, Tax indemnity, Tax allocation or similar agreement (whether or not
written) to which any of the Companies or any predecessor or transferor with
respect thereto is a party or is bound ("Tax Sharing Payments") and (y) all
losses, damages and reasonable third party costs and expenses (including
reasonable attorney, accountant and expert witness fees) ("Related Costs")
incurred in connection with the Taxes or Tax Sharing Payments for which Seller
indemnifies Buyer, each Company and their Tax Affiliates pursuant to this
Section 10(a) (or any asserted deficiency, claim, demand or assessment,
including the defense or settlement thereof relating to such Taxes or Tax
Sharing Payments) or the enforcement of this Section 10(a).
(b) Buyer will be responsible for, and will pay or cause to be paid, and
will indemnify and hold harmless Seller from and against, any and all Taxes that
may be imposed on or assessed against a Company (i) with respect to taxable
periods of the Company beginning after the Closing Date and (ii) with respect to
any and all Taxes allocated to Buyer pursuant to Section 10(c) hereof. Buyer
will also pay or cause to be paid and will indemnify and hold harmless Seller
from and against all Related Costs of Seller incurred in connection with the
Taxes for which Buyer indemnifies Seller pursuant to this Section 10(b) (or any
asserted deficiency, claim, demand or assessment, including the settlement
thereof, relating to such Taxes) or the enforcement of this Section 10(b).
(c) (i) Taxes, attributable to any taxable period of any of the Companies
beginning before and ending after the Closing Date hereof will be
allocated (A) to Seller for the portion of the period up to and including
the Closing Date, and (B) to Buyer (or such Company) for the portion of
the period subsequent to the Closing Date.
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(ii) For purposes of this Section 10(c), Taxes for the period up to
and including the Closing Date, ("Seller's Taxes"), will be determined on
the basis of an interim closing of the books as of the end of the Closing
Date, PROVIDED, HOWEVER, that in the case of a franchise tax not based on
income, such Seller's Taxes will be equal to the amount of franchise tax
for the taxable year multiplied by a fraction, the numerator of which will
be the number of days from the beginning of the taxable year through the
Closing Date, as the case may be, and the denominator of which will be the
number of days in the taxable year.
(d) (i) Except as otherwise specifically provided herein, Seller will be
responsible for filing or causing to be filed all Tax Returns required to
be filed by or on behalf of any of the Companies or their assets or
operations for taxable periods ending on or before the Closing Date
including extensions, and Buyer will be responsible for filing or causing
to be filed all other Tax Returns required to be filed by or on behalf of
any of the Companies or their assets or operations for taxable periods
ending after the Closing Date including extensions.
(ii) With respect to any Tax Returns of any of the Companies
required to be filed by Seller as set forth in clause (i) above for
taxable periods ending on or before the Closing Date, at least 15 days
prior to the due date for filing of such Tax Returns (including
extensions), Seller will provide Buyer with copies of such Tax Return for
Buyer's approval (which approval will not be unreasonably withheld).
(iii) With respect to any Tax Returns of any of the Companies
required to be filed by Buyer after the Closing Date that include any
period before the Closing Date, if any, at least 15 days prior to the due
date for filing of such Tax Return, (including extensions), Buyer will
provide Seller with copies of such Tax Return for Seller's approval (which
approval will not be unreasonably withheld), together with a statement
setting forth the amount of Tax shown due thereon that is allocable to
Seller pursuant to Section 10(c) hereof (the "Statement"). Not later that
five days before the due date for payment of Taxes with respect to such
Tax Return, Seller will pay to Buyer an amount equal to the Taxes shown on
the Statement as being allocable to Seller pursuant to Section 10(c)
hereof. No payment pursuant to this Section 10(d)(iii) will excuse Seller
from its indemnification obligations pursuant to Section 10(a) hereof
should the amount of Taxes as ultimately determined (on audit or
otherwise), for the periods covered by such Tax Return and which are the
responsibility of Seller, exceed the amount of Seller's payment under this
Section 10(d)(iii).
(iv) Any dispute with respect to any Tax Return referred to in this
Section 10(d)(iv) will be resolved by the independent accounting firm
referred to in Section 10(h) hereof.
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(e) Seller and Buyer will cooperate fully with each other and make
available to each other in a timely fashion such tax data and other information
as may be reasonably required for the preparation of any Tax Returns required to
be prepared and filed by Buyer hereunder. Seller and Buyer will make available
to the other, as reasonably requested, all information, records or documents in
their possession relating to Tax liabilities of each Company for all taxable
periods of such Company ending on, prior to or including the Closing Date and
will preserve all such information, records and documents until the expiration
of any applicable Tax statute of limitations or extensions thereof; PROVIDED,
HOWEVER, that in the event a proceeding has been instituted for which the
information, records or documents is required prior to the expiration of the
applicable statute of limitations such information, records or documents will be
retained until there is a final determination with respect to such proceeding.
(f) Buyer and Seller will promptly notify each other in writing upon
receipt by Buyer, any of the Companies or Seller, as the case may be, of any
notice of any Tax audits of or assessments against any of the Companies for
taxable periods of such Company ending on, prior to or including the Closing
Date. Seller will have the right to represent such Company's interests in any
Tax audit or administrative or court proceeding (a "Tax Proceeding") relating to
taxable periods of such Company ending on or prior to the Closing Date and to
employ counsel of its choice at its expense; PROVIDED, HOWEVER, that Seller may
not agree to a settlement or compromise thereof without the prior consent of
Buyer, if such settlement or compromise could be expected to have an adverse
effect on such Company, Buyer or its Tax Affiliates with respect to Taxes or
taxable periods for which Buyer is responsible hereunder. Buyer will have the
right, at its expense, to represent a Company's interests in any Tax Proceeding
relating to any taxable period ending after the Closing Date. Buyer and Seller
each agree that they will cooperate fully with each other and their respective
counsel in the defense against or compromise of any claim in any Tax Proceeding.
(g) Seller and Buyer agree that any payment made under Sections 8 and 10
will be treated by the parties on their Tax Returns as an adjustment to the
aggregate consideration for the Sub 1 Shares and Sub 2 Shares. If,
notwithstanding such treatment by the parties, any indemnity payment is
determined to be taxable to the indemnified party by any taxing authority, the
indemnifying party will also indemnify the indemnified party for any Taxes and
Related Costs payable by the indemnified party by reason of the receipt of such
indemnity payment.
(h) Any dispute as to any matter covered under this Section 10 will be
resolved by an independent accounting firm mutually acceptable to Seller and
Buyer. The fees and expenses of such accounting firm will be borne equally by
the parties.
41
<PAGE>
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party will issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of Buyer and
Seller; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to afford the other
Parties the opportunity to review and comment upon the disclosure prior to the
making thereof).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein and the schedules and exhibits attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement between the Parties
and supersede any prior understandings, agreements, including the letter of
intent dated April 27, 1999, between Seller and an Affiliate of Buyer, or
representations by or between the Parties, written or oral, to the extent they
have related in any way to the subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
Buyer and Seller; PROVIDED, HOWEVER, that Buyer may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates, (ii) designate
one or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases Buyer nonetheless will remain responsible for the performance
of all of its obligations hereunder) and (iii) assign all of its rights
hereunder to Deutsche Financial Services Corporation and its assigns in the
instance of default under the Loan and Security Agreement by and between
Deutsche Financial Services Corporation and Buyer dated August 23, 1999.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder will be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below, or if sent by facsimile transmission, on the date of receipt by the
recipient:
42
<PAGE>
If to Seller: Smart Choice Automotive Group, Inc.
5200 South Washington Avenue
Titusville, Florida 32780-7316
Fax: 407-264-0376
Attn: Gary R. Smith,
President and Chief Executive Officer
copy to: Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
200 South Biscayne Boulevard
Miami, Florida 33131-2339
Fax: 305-579-0321
Attn: Martin T. Schrier, Esq.
If to Buyer or Parent: Eckler Industries, LLC
c/o Sun Capital Partners, Inc.
5355 Town Center Road, Suite 802
Boca Raton, Florida 33486
Fax: 561-394-0540
Attn: Marc J. Leder and Rodger R. Krouse
copy to: Klehr, Harrison, Harney, Branzburg & Ellers LLP
260 S. Broad Street
Philadelphia, Pennsylvania 19102
Fax: 215-568-6603
Attn: Robert W. Cleveland, Esq.
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication will be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Florida without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
(i) WAIVER OF JURY TRIAL. To the extent not prohibited by applicable law
which cannot be waived, each of the Parties hereby waives and covenants that it
will not assert (whether as plaintiff, defendant or otherwise) any right to
trial by jury in any forum in respect of any issue or action arising out of or
based upon this Agreement or any other document or agreement entered into in
connection herewith or the subject matter hereof or thereof or in any way
43
<PAGE>
connected with or related or incidental to the transactions contemplated hereby
or thereby, in each case whether now existing or hereafter arising. Each Party
acknowledges that it has been informed by the other Party that this Section
11(i) constitutes a material inducement upon which such other Party is relying
and will rely in entering into this Agreement and any other agreements relating
hereto or contemplated hereby. Either party hereto may file an original
counterpart or a copy of this Section 11(i) with any court as written evidence
of the consent of each Party to the waiver of its right to trial by jury.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement will be valid unless the same will be in writing and signed by Buyer
and Seller. No waiver by any Party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, will be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Except as set forth in Section 4(d) and 9(c), each of Buyer
and Seller will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement will be construed as if drafted jointly
by the Parties and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law will be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" will
mean including without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and the
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
*****
44
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SMART CHOICE AUTOMOTIVE ECKLER INDUSTRIES, INC.
GROUP, INC.
By /s/ ROBERT J. DOWNING By /s/ ROBERT J. DOWNING
------------------------------ -----------------------------
Name: Robert J. Downing Name: Robert J. Downing
Title: Vice President Title: Vice President
ECKLER INDUSTRIES, LLC ECKLER'S RACING BODIES, INC.
By /s/ RODGER R. KRAUSE By /s/ ROBERT J. DOWNING
------------------------------ -----------------------------
Name: Rodger R. Krause Name: Robert J. Downing
Title: Vice President Title: Vice President
SUN AUTOMOTIVE PARTNERS, L.P.
By: Sun Automotive Advisers, Inc.
By /s/ RODGER R. KRAUSE
------------------------------
Name: Rodger R. Krause
Title: Vice President
EXHIBIT 10.92
LEASE AGREEMENT
----------
SMART CHOICE AUTOMOTIVE GROUP, INC.,
LANDLORD,
and
ECKLER INDUSTRIES, LLC
TENANT
PREMISES: Buildings Two and Three, 5130 and 5140 South
Washington Avenue, Titusville, Florida
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I....................................................................-1-
1.1 Demise and Premises........................................-1-
1.2 Use of Building One........................................-2-
1.3 Encumbrances...............................................-3-
1.4 Term.......................................................-3-
1.5 Renewal Options............................................-4-
ARTICLE II - RENT............................................................-5-
2.1 Basic Rent.................................................-5-
2.2 Additional Rent............................................-5-
2.3 Net Rent...................................................-6-
2.4 Interest on Rent...........................................-6-
2.5 Method of Payment..........................................-6-
2.6 Additional Rent............................................-6-
ARTICLE III - USE............................................................-7-
3.1 Use........................................................-7-
ARTICLE IV - TAXES; UTILITIES................................................-7-
4.1 Taxes Payable by Tenant....................................-7-
4.2 Installment Payments.......................................-8-
4.3 Proration..................................................-8-
4.4 Contests...................................................-8-
4.5 Taxes Not Payable by Tenant...............................-10-
4.6 Evidence of Payment.......................................-10-
4.7 Forwarding of Bills.......................................-11-
4.8 Utility Charges...........................................-11-
ARTICLE V - ALTERATIONS ....................................................-12-
5.1 Changes, Alterations and Additional Construction..........-12-
5.2 Manner of Construction....................................-13-
5.3 Title to Alterations......................................-13-
ARTICLE VI - SURRENDER......................................................-14-
6.1 Delivery of Possession....................................-14-
6.2 Removal of Personal Property..............................-15-
6.3 Retention of Personal Property............................-15-
-i-
<PAGE>
ARTICLE VII - INSURANCE ....................................................-16-
7.1 Property Insurance........................................-16-
7.2 Liability Insurance.......................................-16-
7.3 Flood Insurance...........................................-17-
7.4 General Requirements......................................-17-
7.5 Accidents.................................................-19-
7.6 Proof of Loss.............................................-19-
7.7 Restoration...............................................-19-
ARTICLE VIII - PERFORMANCE OF TENANT'S AGREEMENTS...........................-20-
8.1 Performance of Tenant's Agreements........................-20-
ARTICLE IX - REPAIRS AND MAINTENANCE .......................................-20-
9.1 Repair of Premises........................................-20-
9.2 No Obligation of Landlord to Make Repairs.................-21-
9.3 Commission of Waste.......................................-21-
ARTICLE X - COMPLIANCE WITH LAWS, ORDINANCES, ETC...........................-21-
10.1 Compliance with Laws......................................-22-
10.2 Compliance with Insurance Requirements....................-22-
10.3 Compliance with Restrictions..............................-22-
10.4 Contest by Tenant.........................................-23-
10.5 Permits...................................................-23-
ARTICLE XI - MECHANICS' LIENS ..............................................-23-
11.1 Mechanics' Liens..........................................-23-
ARTICLE XII - INSPECTION OF PREMISES BY LANDLORD............................-24-
12.1 Inspection of Premises by Landlord........................-24-
ARTICLE XIII - INDEMNIFICATION OF LANDLORD .................................-25-
13.1 Indemnification of Landlord...............................-25-
ARTICLE XIV - TENANT'S ACCEPTANCE OF CONDITION OF PREMISES..................-25-
14.1 Tenant's Acceptance.......................................-25-
ARTICLE XV - DEFAULT BY TENANT..............................................-26-
15.1 Event of Default..........................................-26-
15.2 Multiple Defaults.........................................-27-
15.3 Landlord's Remedies for Tenant's Default..................-27-
15.4 Miscellaneous Default Provisions..........................-31-
ARTICLE XVI - DAMAGE AND DESTRUCTION........................................-32-
16.1 Damage by Fire, etc.......................................-32-
-ii-
<PAGE>
16.2 Restoration...............................................-33-
16.3 No Abatement of Rent......................................-33-
16.4 ..........................................................-34-
ARTICLE XVII - CONDEMNATION.................................................-34-
17.1 Total Taking..............................................-34-
17.2 Award on Total Taking.....................................-34-
17.3 Partial Taking............................................-34-
17.4 Reconstruction............................................-35-
17.5 Award on Partial Taking...................................-35-
17.6 Settlement Agreement......................................-35-
17.7 Abatement in Basic Rent...................................-36-
ARTICLE XVIII -ASSIGNMENT, SUBLETTING AND MORTGAGING........................-36-
18.1 Voluntary Assignment or Other Transfer of Lease...........-36-
ARTICLE XIX - TENANT'S WORK.................................................-38-
19.1 Tenant's Work.............................................-38-
ARTICLE XX - NOTICES........................................................-38-
20.1 Notices...................................................-38-
ARTICLE XXI - QUIET ENJOYMENT...............................................-39-
21.1 Quiet Enjoyment...........................................-39-
ARTICLE XXII - TENANT'S ESTOPPEL CERTIFICATES...............................-39-
22.1 Estoppel Certificates.....................................-39-
ARTICLE XXIII - LEASE NOT SUBJECT TO TERMINATION............................-40-
23.1 Lease with First Mortgagee................................-40-
ARTICLE XXIV - ENVIRONMENTAL MATTERS........................................-40-
24.1 Compliance With Laws......................................-40-
24.2 Permits...................................................-41-
24.3 Site Contamination........................................-41-
24.4 Indemnification; Limitation of Liability..................-42-
24.5 Tenant's Covenants........................................-43-
ARTICLE XXV - MISCELLANEOUS PROVISIONS......................................-43-
25.1 Integration...............................................-43-
25.2 No Recording..............................................-43-
25.3 Time of the Essence.......................................-43-
25.4 No Partnership............................................-43-
25.5 Severability..............................................-43-
25.6 Authority.................................................-44-
-iii-
<PAGE>
25.7 Governing Law.............................................-44-
25.8 Counterparts..............................................-44-
25.9 Headings; Pronouns........................................-44-
25.10 Limitation of Landlord's Liability........................-45-
25.11 Survival..................................................-45-
25.12 Waiver of Subrogation.....................................-45-
25.13 Signs.....................................................-46-
25.14 Parking...................................................-46-
25.15 Brokers...................................................-48-
25.16 Prevailing Party..........................................-48-
25.17 Effect of Conveyance or Assignment by Landlord............-48-
25.18 Radon Disclosure..........................................-49-
25.19 Landlord's Default........................................-49-
25.20 Memorandum of Lease.......................................-49-
25.21 Landlord's Lien Waiver....................................-50-
25.22 Survey....................................................-50-
-iv-
<PAGE>
SCHEDULE OF EXHIBITS:
EXHIBIT "A" - THE PREMISES
EXHIBIT "A-1" - ACCESS EASEMENT
EXHIBIT "B" - INTENTIONALLY OMITTED
EXHIBIT "C" - DESCRIPTION OF INTERIM SPACE
EXHIBIT "D" - TAX PARCELS
EXHIBIT "E" - COVENANTS, RESTRICTIONS AND OTHER MATTERS AFFECTING
THE PREMISES
EXHIBIT "F" - TENANT WORK LETTER
EXHIBIT "G" - TENANT PARKING AREAS
EXHIBIT "H" - FORM OF WAIVER OF LANDLORD'S LIEN
-v-
<PAGE>
LEASE AGREEMENT
This Lease Agreement ("LEASE") is entered into as of this
_______ day of August, 1999, by and between Smart Choice Automotive Group, Inc.
("LANDLORD"), and Eckler Industries, LLC ("TENANT"). Landlord and Tenant, each
intending to be legally bound, hereby mutually covenant and agree as follows:
ARTICLE I - DEMISE, PREMISES, TERM
I.1 DEMISE AND PREMISES. Landlord hereby demises and lets unto Tenant,
and Tenant hereby leases and takes from Landlord, for the Term and upon the
covenants, terms and conditions hereinafter set forth, all those certain tracts
or parcels of land located at 5130 and 5140 South Washington Avenue, Titusville,
Florida, consisting of Parcels 1, 2 (less the easement access area shown on
Exhibit "A-1"), 5 and a portion of Parcel 4 and Parcel 6 in the areas designated
on EXHIBIT "G" (Parcel 4 and Parcel 6 being subject to relocation rights as set
forth in Section 25.14 hereof), Buildings Two and Three, and all walkways,
parking lots, driveways, utility facilities, structures and other improvements
located thereon and all rights, privileges and easements (including without
limitation, the easement for access described in EXHIBIT "A-1" attached hereto
and made a part hereof) appurtenant thereto (the "Premises"). The Premises is
described on EXHIBIT "A" attached hereto and made a part hereof (excluding
Parcel 4 and Parcel 6 which are only shown on EXHIBIT "G"). Together with all
those fixtures and building machinery and equipment which are now located in or
on the Premises (collectively, "FIXTURES"); and all furniture, furnishings,
trade fixtures and other personal property now located on or in the Premises,
(collectively, "Personalty"); and such other rights and privileges as currently
exist for
<PAGE>
the benefit, use and operation of Building Two and Building Three for storm
water runoff to the retention pond (as shown on Exhibit "D"), provided, however,
Landlord shall have the right to relocate such rights and privileges so long as
Landlord provides alternative rights and privileges of the same utility in all
material respects.
I.2 USE OF BUILDING ONE. During the interim period required for the
construction of the Tenant's Work in Building Three described in this Lease and
the Tenant's Work Letter, Landlord demises and lets unto Tenant and Tenant
leases from Landlord the space located in Building One, as more particularly
shown on EXHIBIT "C" attached hereto, consisting of approximately 9,000 square
feet of space and the shared use with Landlord of the computer room located on
the second floor of Building One (the "Interim Space"). The Interim Space shall
also include the right to use the parking areas adjacent to Building One with
respect to employees occupying the Interim Space and the customers of Tenant,
and the right to come upon, through, on and across the Landlord's property,
including Building One, to access the Interim Space.
Tenant will vacate the Interim Space upon the earlier to occur of (i)
March 1, 2000 or (ii) fifteen (15) days after the completion of the Tenant's
Work; provided, however, Tenant may extend the term of the Interim Space for
three additional consecutive months up until May 31, 2000 so long as Tenant pays
Landlord rent for such months in the amounts of $2,000.00 for March, $3,000.00
for April and $4,000.00 for May to the extent that Tenant exercises its right to
extend for such month (unless such extension is due to a force majeure event in
which event rent shall be as stated below). Notwithstanding anything to the
contrary contained in this Paragraph 1.2, Tenant's obligation to vacate the
Interim Space on the dates provided above shall be subject
-2-
<PAGE>
to force majeure events not to exceed one hundred eighty (180) days. If Tenant
extends the term of the Interim Space past March 1, 2000 due to a force majeure
event, notwithstanding the provisions above, Tenant shall pay Landlord rent for
such extended months at the rent of $2,000 per month. Any partial month during
the extended term of the Interim Space shall be prorated. Tenant will not pay
Rent or other charges with respect to Tenant's use of the Interim Space, except
as above set forth and as stated in Sections 4 and 5 of the Transition Services
Agreement between Landlord and Tenant of even date herewith.
I.3 ENCUMBRANCES. This Lease and Tenant's leasehold estate hereunder
are subject to all applicable laws, ordinances and regulations and the matters
set forth on EXHIBIT "E" attached hereto and made a part hereof. Landlord shall
cause each existing and future mortgagee to execute and deliver to the Tenant
for execution such mortgagee's standard form of subordination, attornment and
non-disturbance agreement providing, INTER ALIA, that conditioned upon there
being no Event of Default, this Lease shall not be terminated by such mortgagee
and Tenant's rights under this Lease, including possession, shall continue.
Tenant, as a condition to the effect of such covenant of non-disturbance shall
execute and deliver each such mortgagee's standard form of subordination,
attornment and non-disturbance agreement.
I.4 TERM. The term of this Lease ("TERM") shall commence 12:01 A.M. on
the date hereof ("COMMENCEMENT DATE"), and shall end at 11:59 p.m. on September
30, 2009 ("EXPIRATION DATE") unless sooner terminated as herein provided. As
used herein, "LEASE YEAR" means each consecutive twelve calendar month period
beginning with the Commencement Date, except that if the Commencement Date is
not the first day of a calendar month, then the first
-3-
<PAGE>
Lease Year shall also include the days during the Term occurring before the
first day of the first calendar month following the Commencement Date.
I.5 RENEWAL OPTIONS. Provided no Event of Default shall have occurred
and remain, Tenant shall have the option, for two (2) additional terms, to
extend the term of this Lease. The first renewal period being five (5) years
(the right to exercise same shall hereinafter be referred to as the "FIRST
RENEWAL TERM"), which right shall be exercisable by Tenant giving written notice
thereof to Landlord at least 180 days prior to the end of the tenth Lease Year.
The second renewal period being equal to five (5) years (the right to exercise
same shall hereinafter be referred to as the "SECOND RENEWAL TERM"), which right
shall be exercisable by Tenant only after Tenant exercised its option for the
First Renewal Term in accordance with this Section 1.5 and by giving written
notice to Landlord at least 180 days prior to the end of the First Renewal Term.
Both the First and Second Renewal Terms shall be on the same terms and
provisions as set forth herein, except that Landlord will provide no improvement
allowance, there shall be no Interim Space, there shall be no additional renewal
rights, and the Basic Rent for each year during each of the renewal terms shall,
in each instance, be increased to equal to the product of the Basic Rent for the
Lease Year preceding each such year, multiplied by a fraction, the denominator
of which shall be the published CPI Index (hereinafter defined) figure for the
month immediately preceding the first month of the Term (i.e., July, 1999) and
numerator of which shall be the published CPI Index figure for the month
immediately preceding the first month of the preceding Lease Year. For purposes
of this Lease, "CPI Index" means the Consumer Price Index, all Urban Consumers,
All Items (1982 - 84=100) for Brevard County, as published by the Bureau of
-4-
<PAGE>
Labor Statistics of the United States Department of Labor (or the Index
published by such Bureau closest to Brevard County if no index is published for
Brevard County), or, if the foregoing index is no longer published, then a
comparable measure of the purchasing power of the United States Dollar as
published by an agency of the United States government and designated by
Landlord.
ARTICLE II - RENT
II.1 BASIC RENT. Tenant shall pay to Landlord beginning on the
Commencement Date, for ten (10) years, an annual basic rent ("BASIC RENT") of
$130,000, in equal monthly installments of $10,833.33, plus all applicable sales
taxes. Each such monthly installment of Basic Rent shall be payable in advance
on the first day of each month during the Term, the first such installment to be
paid on the Commencement Date, provided, however, if the Commencement Date is
not the first day of a calendar month, then the Basic Rent for the calendar
month in which the Commencement Date occurs shall be prorated on the basis of
the portion of such month which occurs during the Term, which prorated amount
shall be paid on the Commencement Date.
II.2 ADDITIONAL RENT. From and after the Commencement Date, and
throughout the Term of this Lease, Tenant shall pay as additional rent
("ADDITIONAL RENT", the Basic Rent and Additional Rent, and each installment and
increment thereof, are sometimes herein collectively called "RENT") all
additional (i.e., in addition to the Basic Rent) sums, costs, expenses and other
payments which Tenant in any of the provisions of this Lease assumes or agrees
to pay or discharge, and, in the event of any non-payment thereof, Landlord
shall have all the rights and remedies provided for herein or by law or in
equity in the case of non-payment of rent.
-5-
<PAGE>
II.3 NET RENT. It is intended that the provisions of this Lease shall
require Tenant to pay all real estate taxes, special and general assessments,
insurance premiums, and the maintenance and repair costs and expenses relating
to the Premises as expressly provided in Article 9. It is intended that (a)
Landlord shall incur no cost or expense with respect to the Premises during the
Term, except as otherwise expressly provided in this Lease and (b) the Basic
Rent shall be an absolute net return to Landlord throughout the Term of this
Lease, without offset or deduction and free of all expenses, charges, diminution
and other deductions whatsoever, except as otherwise expressly provided in this
Lease.
II.4 INTEREST ON RENT. Any Rent not paid within five (5) days after due
shall bear interest at the annual rate equal to the prime rate, as published in
the WALL STREET JOURNAL plus two per cent (2%) ("DEFAULT Rate") from its due
date until the date of payment.
II.5 METHOD OF PAYMENT. All Rent shall be paid at Landlord's office
specified in Section 20.1, or to such other person and/or at such other place as
shall be designated by Landlord to Tenant. All Rent shall be paid by Tenant
without offset, deduction or demand, except as otherwise expressly provided for
herein.
II.6 ADDITIONAL RENT. All amounts other than Basic Rent which Tenant is
obligated to pay to Landlord or any other party as required by this Lease and
such sums that Tenant is required to pay to Landlord under Section 2(g) of the
Merger Agreement (as hereinafter defined), if any, as determined under Section
2(g), shall constitute additional rent ("Additional Rent").
ARTICLE III - USE
III.1 USE. The Premises may be used solely for the purpose of showroom,
offices, sales, warehouse, manufacturing and activities relating to such uses,
in each instance in
-6-
<PAGE>
accordance with Governmental Regulations (as hereinafter defined), and for no
other purpose. "Governmental Regulations" shall mean all present and future
laws, statutes, ordinances, orders, rules, regulations and requirements of any
federal, state or municipal government, agency, department, commission, board or
officer having jurisdiction, foreseen or unforeseen, ordinary or extraordinary,
which shall be applicable to the Premises, or any part thereof, or to the use or
manner of use of the Premises thereof by any of the occupants thereof.
ARTICLE IV - TAXES; UTILITIES
IV.1 TAXES PAYABLE BY TENANT. Tenant shall pay (except as hereinafter
provided in Section 4.05) all taxes, general and special assessments, excises,
levies, license and permit fees and other governmental charges, general or
special, ordinary or extraordinary, unforeseen or foreseen, of any kind and
nature whatsoever (including without limitation all penalties and interest
thereon, except as otherwise provided in Section 4.7 hereof) which at any time
during the Term may be assessed, levied, imposed upon, or grow or become due and
payable out of or in respect of, the Premises or any part thereof, which, for
the purposes of this Article IV shall mean to include Parcels 1, 2 and 5,
Tenant's pro rata share of Taxes on Parcel 4 which shall be calculated by
multiplying the Tax on Parcel 4 by a percentage in which the numerator is the
number of parking spaces on Parcel 4 leased to Tenant and the denominator is the
number of total parking spaces on Parcel 4, and Tenant's pro rata share of Taxes
on other parcels that it leases which shall be calculated by multiplying the Tax
on such parcel by a percentage in which the numerator is the square footage of
the land that Tenant uses and the denominator is the square footage of the land
of such parcel or the use or occupancy thereof, including without limitation,
sales taxes and amounts of whatever nature assessed in lieu of sales taxes, or
which at
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any time during the Term hereof may become a lien on the Premises or any part
thereof (all of the foregoing are sometimes herein collectively called "TAXES").
IV.2 INSTALLMENT PAYMENTS. If, by law, any Tax, at the option of the
taxpayer, may be paid in installments, Tenant may exercise the option to pay the
same in installments and, in such event, Tenant shall pay such installments and
all interest which shall accrue on the unpaid balance of such Tax as it becomes
due. In addition, all installments of any such Tax and all interest thereon
which are payable after the end of the Term shall be deposited, prior to the end
of the Term, by Tenant with Landlord for such payment.
IV.3 PRORATION. Any Tax assessed on the basis of a fiscal or tax period
of the relevant taxing authority, a part of which period is included within the
Term and a part of which falls before the Term or after the Term, shall be
prorated between Landlord and Tenant so that Tenant shall pay such proportion of
said Tax as applies to Term, and Landlord shall pay the remainder thereof. If
Landlord fails to pay any Tax required under this Paragraph, Tenant shall have
the right to pay any such Tax ten (10) business days after notice to Landlord.
IV.4 CONTESTS. Tenant shall have the right to contest, at Tenant's sole
cost and expense, the amount or validity, in whole or in part, of any Tax, by
appropriate proceedings diligently conducted by Tenant in good faith, but only
after payment of the amount of such Tax into an escrow account acceptable to
Landlord, in which event Tenant may postpone or defer payment of such Tax if the
right or privilege so to do is granted or sanctioned by applicable law and if
the Premises shall not, by reason of such postponement or deferment, be subject
or liable to lien, forfeiture or loss, and if Tenant shall promptly commence
proceedings for such contest and prosecute the same with all due diligence and
dispatch. Upon the termination of such
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proceedings, Tenant shall pay such amount of any such Tax or part thereof as is
finally determined in such proceedings, the payment of which, pursuant to the
foregoing provisions of this Section, shall have been deferred during the
prosecution of such proceedings, together with all costs, fees, interest,
penalties and other liabilities in connection therewith. If Tenant fails to
maintain in escrow an amount equal to all of the Taxes, penalties and interest
due, alleged to be due by the taxing authority and accruing or the Term of this
Lease shall be terminated or expire during the course of such proceedings, and
if Tenant, pursuant to the foregoing provisions, shall have deferred payment of
the contested Tax, then, unless Landlord shall instruct Tenant otherwise, Tenant
shall, prior to such termination or expiration, duly terminate such proceedings
and pay to the appropriate taxing authorities the full amount of such Tax and
all interest and penalties attributable to such deferred payment. Upon request
by Tenant, Landlord, subject to the reasonable approval of Landlord's counsel,
shall execute and deliver any and all such documents or instruments and take any
and all such other action as shall be necessary or proper to permit Tenant to
bring such proceedings in Tenant's name or otherwise to facilitate the conduct
of such proceedings by Tenant. Tenant shall, within ten days after Landlord's
demand, reimburse Landlord for all costs and expenses (including, without
limitation, counsel fees) incurred by Landlord in connection with any such
proceedings. Tenant shall defend, indemnify and save Landlord harmless from all
other liability, costs and expenses incurred in connection with any such
proceedings. Any refunds of Taxes paid by Tenant resulting from such contest by
Tenant and attributable to any period occurring during the Term shall be payable
to Tenant.
IV.5 TAXES NOT PAYABLE BY TENANT. Nothing herein contained shall be
construed to require Tenant to pay (a) any income, gross receipts, profits or
similar tax assessed on or in
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respect of the general income of Landlord, (b) any corporation, capital levy or
other franchise, license, excise, mercantile or similar tax assessed against or
payable by Landlord other than with respect to the use or occupancy of the
Premises; (c) any gift, inheritance or estate, tax assessed or imposed against
or payable by Landlord, or (d) any tax attributable to Landlord's transfer of
the property comprising the Premises or any tax relating to any property other
than the Premises; except that, if, subsequent to the date of this Lease, any
tax shall be levied, assessed or imposed upon or be required to be paid by
Landlord as a substitute for one or more of the taxes otherwise required hereby
to be paid by Tenant, or Landlord shall be required by any governmental
authority to pay any additional tax with respect to Landlord's ownership of the
Premises (other than those excluded above), the execution and delivery of this
Lease, or the receipt or accrual of any Rent or other sum payable to Landlord
under the provisions of this Lease, the same shall, to the extent of such
substitution, be deemed to be a Tax payable by Tenant hereunder.
IV.6 EVIDENCE OF PAYMENT. Tenant shall furnish to Landlord for
inspection no later than ten business days before the date when any Tax would
become delinquent, a photocopy of the official receipt of the appropriate taxing
authority, or, in lieu thereof, other proof satisfactory to Landlord evidencing
payment of such Tax.
IV.7 FORWARDING OF BILLS. Landlord shall, promptly upon receipt of a
bill for any Tax, or notice of assessment, or notice of increase, or other
change therein, forward the same to Tenant, but Tenant's nonreceipt thereof
shall not excuse Tenant from the timely payment of any Tax which Tenant is
obligated to pay hereunder or otherwise relieve Tenant of Tenant's liabilities
and duties hereunder, provided, however, Landlord shall be responsible to pay
any penalties and interest assessed upon or levied by such taxing authorities.
Tenant and Landlord shall make
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arrangements with the taxing authorities for the transmission of bills and
notices simultaneously to Landlord and Tenant.
IV.8 UTILITY CHARGES. Tenant shall pay, before any interest or penalty
shall accrue thereon, all water and sewer rentals and charges and all charges
for gas, electricity, telephone and communication services and other utility
services used, rendered or consumed by Tenant upon the Premises during the Term
hereof. Landlord represents and warrants that Building Three and Building Two
are separately metered for gas and electricity and other utilities except water.
Landlord agrees to promptly install separate meters for water usage relating to
Building Two and Building Three and the cost of such installation shall be
shared equally by Landlord and Tenant. Landlord and Tenant shall pay for their
respective share of all water, sewer and other utility charges that may be
billed to Tenant or Landlord prior to the time that Building Three and Building
Two are separately metered. Subject to causes beyond the control of Landlord,
Landlord will maintain or cause to be maintained utility pipes, conduits and
similar equipment which is located on (and only to the extent so located) on
Landlord's property other than the Premises and which serves the Premises. To
the extent such choice does not conflict or otherwise impair Landlord's ability
to freely choose Landlord's utility provider(s), Tenant may choose Tenant's
utility provider(s).
ARTICLE V - ALTERATIONS
V.1 CHANGES, ALTERATIONS AND ADDITIONAL CONSTRUCTION. Tenant shall not
construct any (a) additional building or improvement on the Premises (I.E., in
addition to the improvements existing on the date hereof), or (b) change,
alteration or addition in or to the Premises except for (i) those set forth on
EXHIBIT "F" attached hereto and made a part hereof, and (ii) interior
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changes, alterations and additions or such other changes, alterations and
additions which are less than $25,000.00 and which do not affect the foundation,
load-bearing walls, roof, structure or exterior of the Building or the
Building's plumbing, waste disposal, fire protection, heating, ventilating, air
conditioning or mechanical systems (all of which Tenant shall be permitted to
make without Landlord's approval, but with prior notice to Landlord), or (c)
wall, fence, exterior lighting facility, driveway, roadway, parking area (except
those areas shown on EXHIBIT "G") on the Premises (any and all of the foregoing
being herein collectively called an "ALTERATION"), unless and until, in each
instance (except as aforesaid with respect to permitted changes), Tenant shall
have submitted to Landlord plans, specifications and other materials as Landlord
may reasonably request, and Landlord shall have approved same. Such approval by
Landlord shall not be unreasonably withheld, conditioned or delayed. Subject to
the provisions of Paragraph 5.2 below, Landlord hereby approves Tenant's right
(i) to alter the fire wall located in Building Three to allow for additional
office and call center space, and (ii) to construct, at Tenant's sole expense,
parking areas in the space designated by Landlord in accordance with Paragraph
25.14 hereof.
V.2 MANNER OF CONSTRUCTION. (A) All Alterations shall be constructed by
Tenant, without expense to Landlord, in a good, first class and workmanlike
manner, employing new materials of first class quality, and in compliance with
the plans and specifications therefor and all applicable permits, Governmental
Regulations and in compliance with the terms and conditions of this Lease.
(B) Prior to the commencement of construction of any
Alteration costing in excess of $100,000, Tenant shall deliver to Landlord a
contractor's performance and labor
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material payment bond, with corporate surety, in form reasonably satisfactory to
Landlord, covering all contractors, subcontractors, materialmen and other
persons who might be entitled to file a mechanics' lien, naming Landlord and
Tenant, and no other person, as co-obligees, conditioned on completion of the
Alteration in accordance with the Landlord-approved plans therefor and the
provisions of this Lease, and the payment of the costs of labor and materials to
be employed in connection therewith, free and clear of all mechanics' and other
liens.
(C) Promptly upon the completion of construction of each
Alteration, which on an individual or cumulative basis cost more than $50,000,
Tenant shall deliver to Landlord one complete set of "as built" drawings
thereof.
V.3 TITLE TO ALTERATIONS. Except to the extent otherwise expressly
provided herein, upon the expiration of this Lease such Alteration shall
automatically be deemed part of the Premises for purposes of this Lease.
Notwithstanding the foregoing, upon any termination of this Lease or Tenant's
right of possession of the Premises, at Landlord's option, (a) prior to such
expiration or termination, all such Alterations, or any part or parts thereof
designated by Landlord except those with respect to Tenant's Work and the
parking areas constructed by Tenant, shall be removed from the Premises and the
Premises restored substantially to their condition immediately prior to the
construction thereof, all at Tenant's expense, or (b) upon such expiration or
termination, title to such Alterations, or any part or parts thereof designated
by Landlord, in the condition in which Tenant is obliged to maintain the
Alterations pursuant to the provisions of this Lease, shall automatically pass
to, vest in and belong to Landlord without further action on the part of either
party and without cost or charge to Landlord.
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ARTICLE VI - SURRENDER
VI.1 DELIVERY OF POSSESSION. Tenant shall, on the Expiration Date of
the Term, or upon any earlier termination of this Lease, or upon any termination
of Tenant's right to possess the Premises pursuant to the provisions of this
Lease, well and truly surrender and deliver up the Premises into the possession
and use of Landlord without delay and in the condition in which Tenant has
herein agreed to maintain them, reasonable wear and tear, casualty and
condemnation excepted, broom clean and free and clear of all lettings,
occupancies, liens and encumbrances, other than those existing immediately prior
to the commencement of the Term. If Tenant holds over in the Premises after the
expiration of the Term or any earlier termination of this Lease or of Tenant's
right to possess the Premises, then, at Landlord's option, and without
limitation to any right or remedy of Landlord with respect to such holding over,
Tenant shall be a Tenant at sufferance and shall pay Landlord Basic Rent for the
period of the hold over in an amount equal to one hundred fifty percent (150%)
of the Basic Rent in effect immediately prior to such expiration or termination,
and Tenant shall be subject to and shall perform all its agreements and
obligations, including, without limitation the payment of Additional Rent, under
this Lease. Landlord's acceptance of any such Rent and performance during the
period of Tenant's holding over shall not waive or otherwise affect any claim,
right or remedy which Landlord may have with respect to such holding over and
shall not be deemed a consent or agreement to such hold over by Landlord.
VI.2 REMOVAL OF PERSONAL PROPERTY. Any and all personal property
furnished or installed by or at the expense of Tenant which does not constitute
part of the Premises shall be removed by Tenant and all damage to the Premises
caused by such removal repaired by Tenant,
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prior to the expiration or earlier termination of the Term or the termination of
Tenant's right to possess the Premises.
VI.3 RETENTION OF PERSONAL PROPERTY. Any personal property which shall
remain on the Premises after the expiration of the Term or earlier termination
of this Lease or Tenant's right to possess the Premises may, at the option of
Landlord, be deemed to have been abandoned by Tenant and may be retained by
Landlord as Landlord's property or be disposed of, without liability of
Landlord, in such manner as Landlord may see fit, or Landlord, at its option,
may require Tenant to remove the same at Tenant's expense. In case of such
removal, all costs of removal and of repairing any damage to the Premises
arising from such removal shall be paid by Tenant upon Landlord's demand. Tenant
shall pay to Landlord on demand (a) a reasonable fee for storing and disposing
of any such personal property, and (b) all costs and expenses incurred by
Landlord in storing and disposing of any such personal property (including,
without limitation, counsel fees relating to claims against Landlord by any and
all parties claiming interests in such personal property).
ARTICLE VII - INSURANCE
VII.1 PROPERTY INSURANCE. Tenant shall at all times during the Term
keep the Premises insured for the protection of Landlord and Tenant against such
risks, and with such coverages, as Landlord shall from time to time reasonably
require, which shall be "all-risk" insurance, including without limitation, fire
and extended coverage insurance, in an amount not less than the full replacement
value (as from time to time reasonably designated by Landlord), with coverage
(in addition to the standard coverage afforded by such insurance) for theft,
vandalism, malicious mischief, and, if available at commercially reasonable
rates, and to the extent
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requested by Landlord, boiler explosion, and Tenant shall maintain rent loss
insurance with respect to the Rent payable for a one-year period. Landlord shall
at all times during the term of the Interim Space keep Building One insured in
the same manner and with the same coverages as Landlord currently maintains.
VII.2 LIABILITY INSURANCE. Tenant, at Tenant's sole cost and expense,
shall maintain commercial general liability insurance against any claims for
bodily injury, death or property damage, occurring on, in or about the Premises,
and on, in or about the Tenant Parking Areas (as hereafter defined), and against
contractual liability for any such claims, such insurance to afford minimum
protection in the amount of $1,000,000 for bodily injury, personal injury or
death to any one person and $2,000,000 for bodily injury, personal injury or
death to more than one person and a liability umbrella policy of not less than
$4,000,000, in each instance with a deductible amount of not more than $10,000,
or in such higher amount as Landlord may deem reasonably necessary and as is
customary in the industry. Landlord, and any mortgagee of the Premises
designated by Landlord, shall be named as additional insured parties under all
such policies. Tenant shall also maintain commercial general liability insurance
as provided above with respect to Building One and Tenant's use of the adjacent
parking areas used by Tenant and Tenant shall insure Tenant's personal property
located in the Interim Space during the term of the Interim Space.
VII.3 FLOOD INSURANCE. If, at any time or from time to time, the
Premises are located in a designated "flood prone" area pursuant to the Flood
Disaster Protection Act of 1973, or any amendment or supplement thereto, then
Tenant shall obtain and maintain throughout the Term flood insurance and shall
take such other action as may be necessary to comply fully with the
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National Flood Insurance Program set forth in said Act. Tenant shall comply
fully with the National Flood Insurance Act of 1968, as the same may be amended
from time to time, and all other laws, orders, rules, ordinances and regulations
concerning flood insurance, to the extent applicable to the Premises.
VII.4 GENERAL REQUIREMENTS. Without limitation to the foregoing, the
following provisions shall apply to each and every policy of insurance which
Tenant is hereby required to carry: (a) the form, amount and coverage of each
policy, and the insurer under each policy, shall be subject to Landlord's
reasonable approval, and Landlord and each of Landlord's mortgagees (after
notice of Landlord's mortgagees has been given to Tenant) shall be named as
additional insureds, (b) Tenant shall cause each carrier to deliver its
certificate of insurance to Landlord and each holder of a mortgage on the
Premises, certifying the applicable insurance provisions herein required, (c)
within ten days after Landlord's request, Tenant shall deliver to Landlord and
any holder of a mortgage on the Premises designated by Landlord an original copy
and certificate of each policy, (d) each certificate shall state that the
applicable policy has been prepaid by Tenant for a minimum period of one month
(or in lieu of such statement, Tenant shall provide Landlord with evidence of
such prepayment), and shall require thirty (30) days written notice by the
carrier to Landlord any holder of a mortgage on the Premises designated by
Landlord prior to any cancellation, expiration, amendment or lapse thereof, (e)
no policy shall name a loss payee or beneficiary other than Tenant, Tenant's
lenders (with respect only to inventory, fixtures, equipment and personal
property, in each instance owned by Tenant (the "Personal Property"), provided
the removal of the Personal Property does not require a physical detachment from
the realty or cause injury thereto and the Personal Property does not include
any furnishings, fixtures
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or equipment which are or have been affixed to the realty) and Tenant's
equipment Landlord(s) only with respect to equipment owned by any such equipment
Landlord, and any holder of a mortgage on the Premises designated by Landlord,
(f) at least 30 days prior to the expiration of each policy, Tenant shall
provide Landlord and any holder of a mortgage on the Premises designated by
Landlord with certificates (or copies of policies, if required by Landlord as
aforesaid) of renewal or replacement policies, (g) each policy shall be issued
by a carrier duly licensed in the state in which the Premises are located, (h)
Tenant shall not permit any condition to exist on the Premises, and shall not
commit any act or omission, which would wholly or partially invalidate any
insurance, (i) if any insurance shall expire, be withdrawn, lapse, become void
or unsecure by reason of Tenant's breach of any condition thereof or by reason
of the failure or impairment of the capital of any carrier thereof, Tenant shall
place new insurance on the Premises, including insurance for the lapse period,
which conforms to the insurance requirements herein set forth, and (j) in the
event of any default by Tenant with respect to its obligations pertaining to
insurance, Landlord, at its option but without being obliged to do so, and in
addition to any other rights and remedies Landlord may have on account of such
default, shall have the right to cure immediately after giving notice to Tenant
of such default (including, without limitation, the right to purchase single
interest coverage protecting only the interest of Landlord, the right to make
premium payments and the right to cause changes to be made to policies then
carried by Tenant), whereupon all costs and expenses incurred by Landlord in
curing such default together with interest at the Default Rate from the
respective dates of expenditures by Landlord, shall be paid by Tenant on demand.
Landlord acknowledges and
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agrees the insurance coverage maintained by Tenant as of the date hereof is
acceptable and approved.
VII.5 ACCIDENTS. Upon the occurrence of any accident, injury or
personal property casualty in or about the Premises, Tenant shall give immediate
notice thereof to Landlord, and shall provide Landlord with evidence that such
liability of Landlord relating thereto is covered by the insurance which Tenant
is required by this Lease to carry.
VII.6 PROOF OF LOSS. In the event of any loss or damage to the
Premises, or any part thereof, for which a claim may be rendered against any
such policy of insurance, Landlord, at its option (and without limitation to
Landlord's rights under the preceding paragraph), may, in the event there exists
an Event of Default, submit proof of loss to the appropriate insurer, and may
apply for and be named the sole payee for proceeds of any such loss or damage;
provided, however, if Landlord obtains such proceeds and fails to transfer such
funds to Tenant for use by Tenant to restore, repair and rebuild the Premises,
then, in such event, Tenant's obligation to restore shall cease.
VII.7 RESTORATION. If the Premises, or any part thereof, are destroyed
or damaged by any cause, Tenant shall give immediate notice thereof to Landlord
and Tenant shall (except as provided below) promptly restore, repair and rebuild
the Premises; provided however, in the case of an uninsurable casualty or event,
Tenant shall not be required to restore, repair and rebuild the Premises. Except
as otherwise herein provided, Landlord shall make available to Tenant and shall
cause its lenders to make available to Tenant all proceeds of insurance actually
paid under policies Tenant is hereby required to carry, to the extent necessary
to pay the actual costs and expenses of such repair or restoration of the
Premises, provided that Landlord shall have the right
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to elect from time to time: (i) to disburse such proceeds directly to Tenant, or
(ii) in the event there exists an Event of Default, to complete or not to
complete, at Landlord's option, such repair or restoration itself, using such
proceeds for such purpose.
ARTICLE VIII - PERFORMANCE OF TENANT'S AGREEMENTS
VIII.1 PERFORMANCE OF TENANT'S AGREEMENTS. If Tenant shall at any time
fail to observe or perform any of its agreements or obligations under this
Lease, and such failure shall continue beyond any default notice and cure period
specified herein, if any, then Landlord shall have the right, but not the
obligation, in addition to all its other rights and remedies, to observe or
perform all or part (as Landlord may elect) of such agreements or obligations on
behalf of Tenant, in which event Landlord shall have the right to enter the
Premises for such purposes. All reasonable costs and expenses (including without
limitation reasonable counsel fees) incurred by Landlord in exercising any of
its rights under this Article, together with interest thereon at the Default
Rate from the respective dates of Landlord's incurring of such costs or expenses
until the date of payment, shall constitute Additional Rent and shall be paid by
Tenant to Landlord on demand.
ARTICLE IX - REPAIRS AND MAINTENANCE
IX.1 REPAIR OF PREMISES. Throughout the Term of this Lease, Tenant, at
Tenant's sole cost and expense, shall take good care of the Premises and the
Tenant Parking Areas, and shall, subject to reasonable wear and tear, fire,
casualty and condemnation, keep the same in good order and condition, maintain,
make all necessary repairs thereto, ordinary and extraordinary, interior and
exterior, including without limitation, repairs to the plumbing and equipment.
Landlord shall make and pay for all replacements to the Premises and all repairs
to the
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foundation, roof, HVAC, structure of buildings and walls; provided however,
Tenant shall be responsible for those repairs and replacements caused by
Tenant's negligence or intentional misconduct or the failure of Tenant to
maintain the Premises as required in this Paragraph 9.1 in which events Tenant
shall complete such repairs and replacements at Tenant's sole cost. Landlord
shall assign, without recourse, to Tenant any warranties or guaranties, if any,
currently existing with respect to the Premises. All repairs made by Tenant
shall be substantially equivalent to or better in quality to the original work.
IX.2 NO OBLIGATION OF LANDLORD TO MAKE REPAIRS. Except as otherwise
expressly stated in this Lease, Landlord shall not be required to furnish any
services or facilities or to make any repairs in or to the Premises. Except as
otherwise stated in this Lease, Tenant hereby assumes the full and sole
responsibility for the condition, operation, repair, maintenance and management
of the Premises. Landlord's obligation to repair and/or replace the Premises
under this Article IX is limited to the Premises, including the systems and
equipment and other improvements as exists on the date of this Lease and the
improvements anticipated to be completed under Exhibit "F", but with respect to
no other Alterations of any kind made after the date hereof, for which Tenant
shall be solely responsible.
IX.3 COMMISSION OF WASTE. Tenant shall not cause or permit any waste or
damage, disfigurement or injury to any of the Premises or any part or parts
thereof.
ARTICLE X - COMPLIANCE WITH LAWS, ORDINANCES, ETC.
X.1 COMPLIANCE WITH LAWS. Throughout the Term of this Lease, Tenant
shall conform to, comply with and take any and all action necessary to avoid or
eliminate any violation of all Governmental Regulation which become effective on
or after the Commencement
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Date. Any cost incurred to comply with the foregoing sentence shall be paid and
allocated between Landlord and Tenant so that Tenant's share shall be determined
by dividing the number of Lease Years (including partial Lease Years) remaining
during the Term by the useful life of such improvement, repair or alterations,
as determined by GAAP. The Landlord shall pay the difference. Notwithstanding
the foregoing, if Tenant exercises its right to elect the First Renewal Term and
the Second Renewal Term, prior to the commencement of each such Renewal Term
Tenant shall pay to Landlord such additional amounts as would have been due
under this Section 10.1 if the foregoing calculation was made to include the
additional Lease Years elected by Tenant. Landlord represents that Landlord has
received no notice from any governmental authority of violation of Governmental
Regulation with respect to the Premises. Landlord shall be responsible for any
capital improvements, repairs, alterations or additions required by Governmental
Regulation which became effective prior to the Commencement Date.
X.2 COMPLIANCE WITH INSURANCE REQUIREMENTS. Tenant shall observe and
comply with the requirements of all policies of insurance that Tenant is
required hereby to maintain from time to time with respect to the Premises, and
all orders, rules and regulations of the Board of Fire Insurance Underwriters
(or any other body exercising similar functions) applicable thereto, or any use,
manner of use or condition thereof.
X.3 COMPLIANCE WITH RESTRICTIONS. Landlord represents that there are no
covenants and/or restrictions referred to or set forth in any instrument now of
record affecting the Premises or the use thereof except those listed on
EXHIBIT "E" attached thereto. Tenant shall observe and comply with the
requirements of all covenants and restrictions referred to or set forth in any
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instrument now of record affecting the Premises or the use thereof set forth in
EXHIBIT "E", as long as the same shall at any time during the Term of this Lease
be in force and effect.
X.4 CONTEST BY TENANT. Tenant shall have the right to contest, by
appropriate proceedings diligently conducted good faith, without cost or expense
to Landlord, the validity or application of any law, ordinance, order, rule,
regulation or requirement of the nature referred to in this Article, provided
that the delay in conformance to or compliance with the same, attendant upon and
pending the prosecution of such proceedings, shall not subject Landlord to any
fine, penalty or criminal liability or render the Premises, or any part thereof,
liable to lien, forfeiture or loss. Tenant shall, within ten (10) days after
Landlord's demand, reimburse Landlord for all costs and expenses (including,
without limitation, counsel fees) incurred by Landlord in connection with any
such contest. Tenant shall defend, indemnify and save harmless Landlord from all
other liability, costs and expenses incurred in connection with any such
contest.
X.5 PERMITS. Throughout the Term of this Lease, Tenant, at Tenant's
sole cost and expense, shall procure and maintain all permits, licenses and
authorizations required for Tenant's use, operation or occupancy of the Premises
then being made, and for the lawful and proper operation and maintenance
thereof.
ARTICLE XI - MECHANICS' LIENS
XI.1 MECHANICS' LIENS. Landlord hereby NOTIFIES ALL MECHANICS,
MATERIALMEN AND OTHER LIENORS THAT PURSUANT TO F.S. (ss)713.10, ANY LIENS
UNDER F.S. CH. 713 SHALL EXTEND TO, AND ONLY TO, THE RIGHT, TITLE AND INTEREST
OF THE PERSON WHO CONTRACTS FOR THE IMPROVEMENT IN QUESTION AND THAT NEITHER THE
INTEREST OF LANDLORD NOR ANY
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SUPERIOR INTEREST IN THE DEMISED PREMISES AND ALL OTHER PORTIONS OF THE PREMISES
SHALL NOT BE SUBJECT TO LIENS FOR ANY IMPROVEMENTS, SERVICES OR MATERIALS MADE
BY, CONTRACTED FOR OR OTHERWISE AUTHORIZED BY TENANT OR BY ANY EMPLOYEE,
CONTRACTOR OR AGENT OF TENANT. Tenant agrees that prior to contracting for any
improvements, services or materials to be made in or delivered to the Demised
Premises, Tenant shall notify the contractor of the foregoing provisions. Tenant
further agrees that upon request of Landlord, Tenant shall execute a notice
which sets forth the foregoing provisions, which notice may be recorded by
Landlord in the public records of the county where the Premises are located.
Tenant shall not suffer or permit any mechanic's lien to be filed against the
interest of Landlord or Tenant in the Premises by reason of work, services or
materials supplied to Tenant, the Premises, or any part thereof. If any such
lien shall be filed at any time, Tenant shall promptly, and in any event within
thirty (30) days after the filing thereof, cause the same to be discharged of
record, provided, if Tenant shall promptly bond such lien with a responsible
surety company, Tenant may contest the amount or validity of any such lien by
appropriate proceedings, diligently prosecuted, and such contest shall defer for
its duration Tenant's duty hereunder to discharge the same.
ARTICLE XII - INSPECTION OF PREMISES BY LANDLORD
XII.1 INSPECTION OF PREMISES BY LANDLORD. Upon a twenty-four (24) hours
prior notice, Tenant shall permit Landlord and the duly authorized
representatives of Landlord to enter the Premises, including without limitation
the interior of the Premises, at all reasonable times during usual business
hours for the purpose of inspecting the same. At Tenant's option, a
representative of Tenant may accompany Landlord or Landlord's representative
while on the Premises.
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Notwithstanding the preceding, Landlord may enter the Premises without prior
notice or accompaniment in the circumstance of an emergency condition.
ARTICLE XIII - INDEMNIFICATION OF LANDLORD
XIII.1 INDEMNIFICATION OF LANDLORD. Tenant agrees to defend with
counsel reasonably satisfactory to Landlord, indemnify and save harmless
Landlord from and against any and all claims, damages, losses, costs and
expenses, including without limitation reasonable counsel fees, suffered or
incurred by Landlord with respect to: (a) the conduct, operation or management
of, or any work, act or thing whatsoever done in, on or about the Premises, (b)
any act or forbearance of Tenant or any sublessee or concessionaire of Tenant or
any of Tenant's or such sublessee's or concessionaire's agents, contractors,
servants, employees, business invitees, licensees, visitors or guests with
respect to the Premises, except if caused by Landlord's gross negligence or
wilful misconduct, and (c) any accident, injury to or death of any person or
damage to any property howsoever caused in or on the Premises except is caused
by Landlord's gross negligence or wilful misconduct.
ARTICLE XIV - TENANT'S ACCEPTANCE OF CONDITION OF PREMISES
XIV.1 TENANT'S ACCEPTANCE. Except as otherwise specifically provided in
this Lease, Tenant hereby leases the Premises, and accepts them, "as is", with
all faults, in their present condition, as a result of whatever inspecting and
testing Tenant deemed necessary, and not as a result of or in reliance upon any
representation or warranty of any nature whatsoever by Landlord, or any employee
or agent of Landlord. Except with respect to Landlord's obligations under
Article IX and X of this Lease, Landlord shall not be liable for any latent or
patent defect in the Premises.
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ARTICLE XV - DEFAULT BY TENANT
XV.1 EVENT OF DEFAULT. Each of the following shall constitute an "EVENT
OF DEFAULT" by Tenant hereunder:
(A) Failure on the part of Tenant to pay the Rent or any other
sum of money called for herein when due and the continuation of such failure for
three (3) business days, without notice or demand; provided, however, Landlord
shall provide Tenant, with respect only to the failure to pay Basic Rent,
Additional Rent or any other sums or charges under the Lease, two (2) notices of
such failure in any twelve month period and Tenant shall have three (3) business
days after notice to cure such default with respect to Basic Rent, Additional
Rent or any other sums or charges under the Lease;
(B) Failure on the part of Tenant to observe or perform any
other covenant, agreement or undertaking of the Tenant contained in this Lease,
and the continuation of such failure for thirty (30) days after notice from
Landlord, provided however, if such failure cannot be cured within thirty (30)
days, Tenant shall not be deemed in default if, within the thirty (30) days
after said notice from Landlord, Tenant promptly commences such cure and
thereafter diligently and continuously works to complete such cure and such cure
has been completed within ninety (90) days after Landlord's original notice of
default;
(C) If Tenant shall file a voluntary petition in bankruptcy or
shall be adjudicated a bankrupt or insolvent, or in any action or proceeding
shall file any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal or state bankruptcy, reorganization or debt reduction
law, or shall seek or consent to or acquiesce in the appointment
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of any trustee, receiver or liquidator of Tenant or of all or substantially all
of Tenant's property or of the Premises; and
(D) If within ninety (90) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, debt adjustment, dissolution or similar relief under
any present or future federal or state law, such proceeding shall not have been
dismissed; or if, within ninety (90) days after the appointment, without consent
or acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant or
of all or substantially all of Tenant's property or of the Premises, such
appointment shall not have been vacated; or if, within ninety (90) days after
the expiration of any such stay, such appointment shall not have been vacated.
XV.2 MULTIPLE DEFAULTS. Notwithstanding any contrary provision hereof,
Landlord shall not be required to give any notice of default to Tenant (and the
foregoing provisions of this Article determining Events of Default shall be
deemed to exclude all provisions regarding notice of default) if, on two or more
occasions during any period of not more than six (6) months, Tenant shall have
defaulted in the observance or performance of any of its agreements or
obligations hereunder, and Landlord shall have given Tenant notice of default
with respect thereto.
XV.3 LANDLORD'S REMEDIES FOR TENANT'S DEFAULT. If any Event of Default
shall have occurred, then in addition to all rights and remedies provided by law
or equity, or provided for elsewhere in this Lease, Landlord shall have all of
the rights and remedies specified in the following paragraphs of this Section.
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(A) Landlord shall have the right, by notice to Tenant, to
accelerate all Base Rent due hereunder and otherwise payable in installments
over the remainder of the Term and, at Landlord's option, Additional Rent to the
extent that Additional Rent can be determined and calculated to a fixed sum; and
the amount of accelerated rent shall be due and payable by Tenant upon
Landlord's demand. Additional Rent which has not been included, in whole or in
part, in accelerated rent, shall be due and payable by Tenant during the
remainder of the Term, in the amounts and at the times otherwise provided for in
this Lease. Notwithstanding the foregoing or the application of any rule or law
based on election of remedies or otherwise, if Tenant fails to pay the
accelerated rent in full when due, Landlord shall have the right to terminate
Tenant's further right to possession of the Premises or, as Landlord may elect,
to terminate this Lease, as below provided. If Tenant shall tender payment of
part but not all of the accelerated rent, then Tenant's failure to make full
payment shall be deemed a separate Event of Default hereunder, without any
obligation of Landlord to give notice of default and without any opportunity of
Tenant to cure such default, and, Landlord shall have the right to refuse to
accept same, or to accept same and to apply such partial payment, or portions
thereof, to the various obligations and sums owing by Tenant hereunder in such
order and priority as Landlord, in its sole discretion, shall determine.
(B) Immediately upon the occurrence of an Event of Default or
the expiration or sooner termination of the Term, Landlord shall have the right
to bar entry into and possession of the Premises by Tenant and by any and all
other persons as Landlord, in its discretion, may elect. In addition to the
foregoing, Landlord shall have the right, whether or not Landlord elects to
terminate this Lease, to recover possession of the Premises, and to that end,
Landlord may
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enter the Premises and take possession, without the necessity of giving Tenant
any notice to quit or any other further notice, and with or without (as Landlord
may elect) legal process or proceedings, breaking locks and doors if Landlord so
chooses, and in so doing, Landlord may remove all or any part of Tenant's
property as well as all or any part of the property of others as may be in the
Premises. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed of the Premises for any cause, or in the event of
Landlord obtaining possession of the Premises, by reason of Tenant committing an
Event of Default or otherwise.
(C) If, at any time following the occurrence of an Event of
Default, Landlord, without terminating this Lease, shall recover or be entitled
to recover possession of the Premises, then: (i) Landlord may, but shall not be
obliged to, relet the Premises, or any part or parts thereof, and/or, at
Landlord's election, demolish or renovate the Improvements and relet the
remaining Premises, or any part or parts thereof, on such terms as Landlord may
deem desirable, and (ii) Tenant shall continue to be obliged to pay the full
Rent reserved by this Lease and to observe and perform all its agreements and
obligations hereunder. The failure, refusal or inability of Landlord to relet
the Premises or any part or parts thereof shall not release or affect Tenant's
liability for such Rent. If Landlord so relets the Premises, then Landlord shall
credit against Tenant's continuing obligation to pay Rent, the net rentals
actually received by Landlord for such reletting, after first deducting expenses
as Landlord may incur in connection with such reletting, including, without
limitation, counsel fees and expenses, brokerage fees and commissions,
advertising expenses and all costs and expenses of possessing and maintaining
the Premises (excluding debt service payments), of demolishing or renovating the
Improvements (if,
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and to the extent, Landlord elects to do so) and of preparing the Premises for
reletting. Landlord, in putting the Premises, or any part or parts thereof as
Landlord may elect, in good order, or in preparing the same for re-rental, may,
at Landlord's option, make such alterations, repairs, replacements, and
decorations therein as Landlord, in Landlord's sole judgment, considers
advisable, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from any
liability hereunder. Landlord shall in no event be liable in any way whatsoever
for failure to relet the Premises, or, in the event that the Premises are relet,
for failure to collect the rent under such reletting, and in no event shall
Tenant be entitled to receive any excess of such net rents, if any, over the
Rent payable by Tenant to Landlord hereunder. No re-entry or reletting of the
Premises by Landlord following Tenant's default, and no payment by Tenant of the
Rent thereafter, shall constitute a release of any of Tenant's liability
hereunder (except to the extent of such payment of Rent) or shall prejudice
Landlord's claim for and right to collect from Tenant other sums payable by
Tenant hereunder, or Landlord's actual damages with respect to any Event of
Default occurring hereunder.
(D) At any time following the occurrence of an Event of
Default, Landlord may give Tenant notice of Landlord's intention to terminate
this Lease on a date specified in such notice, and upon such date, the Term
hereof and the estate hereby granted with respect to the Premises shall
terminate, without any right of Tenant to redeem same or to prevent such
forfeiture, and Tenant shall surrender possession of the Premises to Landlord
(except to the extent Tenant shall be obliged to remove Alterations pursuant to
ARTICLE V hereof). Upon such termination, Landlord shall be entitled to recover
from Tenant in addition to all accrued rental and other sums due from Tenant as
of such termination date, damages in an amount equal to: (i)
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the amount of Rent reserved for the balance of the Term, plus (ii) all costs and
expenses incurred by Landlord in doing any and all of the following, to the
extent Landlord elects to do so: securing possession of the Premises from
Tenant, disposing of any personalty located in the Premises, restoring the
Premises to the condition in which Tenant is herein obliged to surrender same to
Landlord, preparing and attempting to relet the Premises, maintaining and
safeguarding the Premises, renovating the Premises, and recovering said damages
from Tenant. Such costs and expenses shall include, without limitation,
attorneys' fees and expenses, brokerage fees and expenses, watchmen's wages and
insurance premiums, costs of storing or disposing of property left upon the
Premises and cleaning and restoration costs. No act or proceeding done or
undertaken by Landlord with respect to an Event of Default shall constitute a
termination of this Lease by Landlord unless and until Landlord shall give to
Tenant the termination notice provided for above.
XV.4 MISCELLANEOUS DEFAULT PROVISIONS. (A) The right to
enforce all of the provisions of this Lease may, at the option of any assignee
of Landlord's rights in this Lease, be exercised by any such assignee, provided
that Tenant has had notice of such assignment.
(B) Any notation or statement by Tenant on any draft, check or
other method of payment of any obligation hereunder, or in any writing
accompanying or accomplishing such payment, which notation, or statement
purports to impose conditions on such payment or to invoke the doctrine of
accord and satisfaction, shall be absolutely void and of no effect, and may be
ignored by Landlord.
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(C) No right or remedy herein conferred upon or reserved to
Landlord is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to any other right or
remedy given hereunder or now or hereafter existing at law or in equity.
Landlord shall be entitled to injunctive relief in case of the violation, or
attempted or threatened violation, of any covenant, agreement, condition or
provision of this Lease and to a decree compelling performance of any covenant,
agreement, condition or provision of this Lease, or to any other remedy allowed
by law or in equity.
(D) No failure by Landlord to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease on the
part of Tenant to be performed, or to exercise any permitted right or remedy
consequent upon a default therein, and no acceptance of Tenant's performance or
of Tenant's payment of full or partial Rent after such default, shall constitute
a waiver by Landlord of such default or of such covenant, agreement, term or
condition, or any right or remedy of Landlord with respect thereto.
ARTICLE XVI - DAMAGE AND DESTRUCTION
XVI.1 DAMAGE BY FIRE, ETC. Subject to Section 7.7 of this Lease, in the
event that any of the Improvements shall be damaged or destroyed by fire or any
other hazard, risk or casualty whatsoever (such damaged or destroyed
Improvements being herein called the "DAMAGED IMPROVEMENTS"), then Tenant shall
give immediate notice thereof to Landlord, and shall, as soon as possible, at
Tenant's cost and expense, restore, replace and repair the Damaged Improvements
regardless of whether insurance proceeds are available to pay all of the cost
thereof. Such work by Tenant shall be done pursuant to plans, specifications and
a work schedule which shall be subject to Landlord's prior reasonable approval.
In the event that more than fifty percent of the
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floor area of the Improvements is so damaged or destroyed, and such damage or
destruction shall occur during the last two years of the Term, then provided all
policies of insurance hereby required to be maintained by Tenant are in full
force and effect and proper proof of loss shall have been filed thereunder,
Landlord and Tenant each shall have the right on or prior to the thirtieth day
after the occurrence of such damage or destruction, to terminate this Lease by
giving notice to the other respective party. Upon such termination, Tenant shall
pay to Landlord (if Landlord has failed to receive such amounts from the
proceeds of rent loss insurance required to be carried by Tenant), (a) an amount
equal to all Rent which would have been due hereunder for the six month period
following such termination, (b) all insurance proceeds theretofore received by
Tenant on account of such Damaged Improvements, and (c) assigning to Landlord
all insurance policies and unpaid proceeds with respect to the Damaged
Improvements.
XVI.2 RESTORATION. Subject to Section 7.7 of this Lease, in the event
Tenant shall be obliged to restore, repair or replace the Damaged Improvements,
then Tenant, regardless of the proceeds of insurance (provided that Tenant has
the right to use all of the proceeds from its insurance policies), shall restore
or replace the Damaged Improvements as nearly as possible to the condition
thereof as they existed prior to such damage or destruction, such restoration or
replacement to be begun after the receipt of proceeds of insurance, and
continued diligently until completion thereof.
XVI.3 NO ABATEMENT OF RENT. No damage to or destruction of any of the
Premises as a result of fire or any other hazard, risk or casualty whatsoever
shall permit Tenant to surrender this Lease or shall relieve Tenant from
Tenant's liability to pay the full Rent payable under this Lease, or from any of
Tenant's other obligations hereunder, except to the extent otherwise
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provided in this Article. Notwithstanding the foregoing, Tenant's obligation to
pay rent shall be reduced by the proceeds actually received by Landlord from
rent loss insurance policies required to be purchased by Tenant under this
Lease.
XVI.4 LANDLORD'S MORTGAGEE. Landlord shall cause any mortgagee of
Landlord to permit Tenant to use all insurance proceeds to repair, restore and
replace the Damaged Improvements.
ARTICLE XVII - CONDEMNATION
XVII.1 TOTAL TAKING. In the event that the whole of the Premises shall
be taken under the exercise of the power of eminent domain or by agreement with
any condemnor in lieu of such taking (herein called a "TOTAL TAKING"), then this
Lease shall terminate as of the earlier of the date when title thereto vests in
the condemnor or the date when possession thereof shall be delivered to the
condemnor.
XVII.2 AWARD ON TOTAL TAKING. The entire award with respect to any
Total Taking shall be paid to Landlord, except that Tenant shall be entitled to
any award which the condemnor may make, and which shall be provided for by law,
specifically for Tenant's moving expenses and business dislocation damages,
provided that same are not deducted from the award otherwise payable to
Landlord.
XVII.3 PARTIAL TAKING. In the event that any portion or portions of the
Premises shall be taken under the exercise of the power of eminent domain or by
agreement with any condemnor in lieu of such taking (herein called a "PARTIAL
TAKING"), then this Lease, only as to the portion or portions so taken, shall
terminate as of the date possession thereof shall be delivered to the condemnor,
but otherwise this Lease shall remain in full force and effect; provided,
however, if
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as a result of such Partial Taking, it is, in the opinion of Landlord,
economically unfeasible to reconstruct the remaining portion of the Premises, or
Tenant in its reasonable good faith judgment determines that it is unable to use
and operate the Premises in a satisfactory manner to conduct its business, then
(a) this Lease shall terminate thirty (30) days from the date possession of the
part taken shall be delivered to the condemnor, and (b) such Partial Taking
shall be deemed to be and treated as a Total Taking.
XVII.4 RECONSTRUCTION. If during the Term there shall be a Partial
Taking and if this Lease shall not be terminated on account thereof pursuant to
the provisions of the immediately preceding Section, then (a) Tenant shall, to
the extent of such award, repair and restore the remaining portion of the
Premises so that they constitute architectural units with the same general
character and condition to the nearest extent possible under the circumstances
as the previous Premises, (b) Landlord shall make condemnation damages received
by Landlord available to Tenant, to the extent necessary to reimburse Tenant for
Tenant's repair and restoration expenses, and (c) this Lease shall remain in
full force and effect with respect to such remaining portion of the Premises.
XVII.5 AWARD ON PARTIAL TAKING. The entire award with respect to any
Partial Taking which shall not result in a termination of this Lease and which
is not required to be used by Tenant for reconstruction shall be paid to
Landlord.
XVII.6 SETTLEMENT AGREEMENT. For the purposes of this Lease, all
amounts paid pursuant to an agreement with any condemnor in settlement of any
condemnation or any eminent domain proceeding affecting the Premises shall be
deemed to constitute an award made in such proceeding.
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XVII.7 ABATEMENT IN BASIC RENT. In the case of a Partial Taking which
does not result in a termination of this Lease, the annual Basic Rent payable
under this Lease after possession of the portion so taken shall be delivered to
the condemnor shall be reduced in the same proportion as the amount of usable
floor area of the buildings constituting part of the Premises shall have been
reduced by such Taking; but any such Partial Taking shall not relieve Tenant
from Tenant's liability to pay the full Additional Rent payable under this
Lease, or from any of Tenant's other obligations hereunder, and, except as
herein expressly provided, Tenant waives any right now or hereafter conferred
upon Tenant by statute or otherwise to any suspension, diminution, abatement or
reduction of Rent or to surrender this Lease or the Premises by reason of such
Partial Taking.
ARTICLE XVIII -ASSIGNMENT, SUBLETTING AND MORTGAGING
XVIII.1 VOLUNTARY ASSIGNMENT OR OTHER TRANSFER OF LEASE. (A) Tenant
shall not mortgage, pledge, hypothecate, or transfer this Lease or any part or
portion of the Term hereby created, or interest therein (except as herein
specifically set forth in this Lease).
(B) Tenant shall not assign this Lease, or any part or portion
of the Term hereby created or any interest therein, nor sublet all or any
portion of the Premises, without the prior written consent of the Landlord being
first obtained in each instance which consent shall not be unreasonable
withheld, conditioned or delayed; provided, that, in addition to other reasons
for which Landlord may withhold Landlord's consent, Landlord may, without other
reason, withhold Landlord's consent if any one or more of the following are not
true and correct: (i) Tenant remains fully liable under the Lease, (ii) the use
of the Premises does not materially change or, of it does, such new use will not
cause a diminution in value of the Premises as
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determined, within ten (10) days of notice to Landlord, by a mutually acceptable
independent third party real estate consultant or appraiser in the county where
the Premises are located, having a minimum of 10 years experience, and (iii)
Landlord and not Tenant, shall receive any and all rent or other consideration
paid, directly or indirectly, by or on behalf of any such assignee or subtenant
in excess of the Basic Rent with respect with any such assignment or sublet.
Notwithstanding anything to the contrary contained in this Lease, Tenant may
assign this Lease or its interest in this Lease to any of Tenant's subsidiaries,
affiliates or parent companies or in connection with a merger in which Tenant is
the surviving entity or the shareholders of Tenant own a majority of or control
the surviving entity, a merger which does not meet the above requirements but
such surviving entity has a net worth of not less than $2,500,000 as determined
by GAAP or in lieu thereof Tenant deposits $65,000 as a security deposit to be
held by Landlord to guaranty each of Tenant's obligations under this Lease,
consolidation, reorganization, sale of substantially all of the assets of
Tenant, initial public offering or stock sale without Landlord's consent;
provided that notice of such assignment shall be given Landlord, and with
respect to any assignment or sublet under any circumstances set forth in this
Article XVIII: (i) Tenant shall not be relieved of its obligations under this
Lease (I.E. Tenant shall remain fully liable under this Lease) and (ii) the use
of the Premises shall not involve any greater environmental risk than the use
anticipated by Tenant under this Lease based on past use of the Premises.
(C) Except as otherwise provided in Section 18.1(B), neither
this Lease, nor the leasehold estate of Tenant, nor any interest of Tenant
hereunder in the Premises shall be subject to involuntary assignment, transfer
or sale, or assignment, transfer or sale by operation of
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law in any manner whatsoever, and any such attempted involuntary assignment,
transfer or sale shall be void and of no effect.
ARTICLE XIX - TENANT'S WORK
XIX.1 TENANT'S WORK. Tenant shall, in a good and workmanlike manner,
cause the improvements to the space agreed to by Tenant and Landlord located in
Building Three and the other improvements to the Premises, if any, as agreed by
Landlord and Tenant, to be completed in accordance with Government Regulation
and the plans and specifications approved by Landlord and Tenant all as
described in the work letter attached hereto as EXHIBIT "F" and made part hereof
("TENANT'S WORK LETTER").
ARTICLE XX - NOTICES
XX.1 NOTICES. All notices, including, without limitation, exercises of
options, demands, requests, consents and other communications required or
relating to this Lease shall be effective only if in writing, and shall be
effective upon delivery or refusal by hand, recognized overnight carrier or
mailed United States registered or certified mail, return receipt requested,
postage prepaid, to the other respective party at its address set forth below,
or at such other address as such other party shall designate by notice. Notices
to Landlord shall be addressed to the attention of Gary R. Smith, President and
CEO, Smart Choice Automotive Group, Inc., 5200 S. Washington Avenue, Titusville,
Florida 32780-7316, with a copy to Morgan, Lewis & Bockius LLP, 5300 First Union
Financial Center, 200 S. Biscayne Boulevard, Miami, Florida 33131, Attention:
John S. Fletcher, Esq.
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Tenant's address for notice shall be:
Eckler Industries, LLC
5130 and 5140 S. Washington Avenue
Titusville, Florida 32780-7316
Attention: General Manager
and
Sun Capital Partners, Inc.
5535 Town Center Road
Suite 802
Boca Raton, FL 33486
Attention: Marc Leder
Rodger R. Krouse
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 South Broad Street
Philadelphia, PA 19102
Attention: Bradley A. Krouse, Esquire
ARTICLE XXI - QUIET ENJOYMENT
XXI.1 QUIET ENJOYMENT. Tenant, upon observing and keeping all
covenants, agreements and conditions of this Lease on Tenant's part to be kept
and observed, shall quietly have and enjoy the Premises throughout the Term
without hindrance or molestation by Landlord or by anyone claiming by, from,
through or under Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
ARTICLE XXII - TENANT'S ESTOPPEL CERTIFICATES
XXII.1 ESTOPPEL CERTIFICATES. Tenant and Landlord agree, at any time
and from time to time, upon not less than ten business days' prior written
notice by either party, to execute, acknowledge and deliver to requesting party
a statement in writing certifying (a) that this Lease is unmodified and in full
force and effect (or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), (b) whether there
are then
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existing any offsets or defenses against the enforcement of any of the terms,
covenants or conditions hereof upon the part of Landlord or Tenant to be
performed (and if so, specifying the same), and (c) the dates to which the Rent
and other charges have been paid in advance, if any, it being intended that any
such statement delivered pursuant to this Section may be relied upon by any
prospective purchaser or mortgagee of the Premises.
ARTICLE XXIII - LEASE NOT SUBJECT TO TERMINATION
XXIII.1 LEASE WITH FIRST MORTGAGEE. In the event that, notwithstanding
the express provision of this Lease, this Lease shall be deemed terminated by
operation of law, or by action of court, or in the event any receiver, trustee
in bankruptcy, liquidator or assignee of Landlord shall initiate any action for
the taking of the Rent and the application thereof for the benefit of any
creditors of Tenant other than the holder of a first mortgage on Landlord's
interest in the Premises, then Tenant shall, upon ten days' written demand to
Tenant by the holder of said first mortgage, enter into a new lease with said
holder containing the same terms and provisions as this Lease. Forthwith upon
the execution and delivery of such new lease, this Lease and all obligations of
Tenant hereunder shall be deemed terminated without further action by either
party hereto.
ARTICLE XXIV - ENVIRONMENTAL MATTERS
XXIV.1 COMPLIANCE WITH LAWS. Tenant shall cause all activities
conducted at the Premises to be conducted in compliance in all material respects
with all statutes, ordinances, regulations, orders, and requirements of common
law concerning (i) those activities, (ii) repairs or construction of any
improvements, (iii) handling of any materials, (iv) discharges to the air, soil,
surface, or groundwater, and (v) storage, treatment or disposal of any material
or waste at or connected with any activity at the Property ("Environmental
Statutes").
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XXIV.2 PERMITS. Landlord represents and warrants that to the best of
Landlord's knowledge, without inquiry, Landlord has, and prior operators of the
Property had, all of the necessary permits, licenses, and similar approvals to
conduct activities at the Premises in compliance with Environmental Statutes.
Landlord shall, to the extent possessed by Landlord, provide Tenant with copies
of all such permits concerning activities on the Demised Premises.
XXIV.3 SITE CONTAMINATION.
(i0 Landlord represents and warrants that, to the best of its
knowledge, without inquiry and except as identified in the July 13, 1999 Phase
II Environmental Site Assessment Report by Handex Environmental (the "Phase
II"), there is no Contamination present at, on or under the Premises.
(ii0 As used in this Lease, the term "Contamination" means the
release and/or presence of Hazardous Substances at, on or under the Premises,
which requires remediation under any Environmental Statutes.
(iii0 As used in this Lease, the term "Hazardous Substances"
shall mean any chemical, material or substance defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "restricted hazardous waste", "solid waste" or
"toxic substances", or words of similar import under any applicable local, state
or federal law or under the regulations adopted or publications promulgated
pursuant thereto, including but not limited to the federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601-9675, as
amended; Subtitle I of the Resource Conservation and Recovery Act, 42 U.S.C.
6901-6991i, as amended; and the other Environmental Statutes.
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XXIV.4 INDEMNIFICATION; LIMITATION OF LIABILITY. Landlord shall be
responsible for performing any remediation of any Contamination at the Premises
arising out of or relating to events occurring before the Commencement Date
(except, to the extent relevant, for those raised in the Phase II) and Tenant
shall be responsible for performing any remediation of any Contamination at the
Premises arising out of or relating to events occurring during the Term, except
such Contamination caused by or arising solely from contamination (i.e., the
release and/or presence of Hazardous Substances which requires remediation under
any Environmental Statutes) having its origin on any property other than the
Premises or the Tenant Parking Areas, and the Tenant shall be relieved of such
responsibility only to the extent that the requirement to remediate is directly
attributed to such other property. Landlord shall each indemnify, defend and
hold the other harmless of, from and against any and all expenses, loss or
liability suffered by the other by reason of Landlord's or Tenant's breach of
any provision relevant to either of Landlord or Tenant of this Article 24
including but not limited to, (a) any and all expenses required so that the
Premises complies with Environmental Statutes; (b) any and all reasonable costs
or damages, including but not limited to costs or damages resulting from
litigation and Natural Resource Damages, that Landlord or Tenant may incur as a
result of the presence, study, removal or remediation of any Contamination on
the Premises or arising from the Premises; (c) any and all fines, penalties, or
other sanctions assessed or imposed due to Landlord's or Tenant's failure to
have complied with the Environmental Statutes and/or the presence of
Contamination on the Premises as herein set forth; and (d) any and all legal and
professional fees and costs incurred by Landlord or Tenant in connection with
the foregoing. This indemnification shall survive the expiration or termination
of this Lease.
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XXIV.5 TENANT'S COVENANTS. Tenant shall cause all permits, licenses or
approvals to be obtained, and shall cause all notifications and reports to be
made, as required by Environmental Statutes applicable to the Premises. Tenant
shall, at all times, cause compliance in all material respects with the terms
and conditions of any such approvals or notifications.
ARTICLE XXV - MISCELLANEOUS PROVISIONS
XXV.1 INTEGRATION. This Lease, the Transition Services Agreement
between Landlord and Tenant dated August _____, 1999 and Section 2(g) of the
Merger Agreement between Landlord and Tenant dated August _____, 1999 and the
documents referred to herein set forth all the promises, agreements, conditions
and understandings between Landlord and Tenant relative to the leasing of the
Premises, and there are no promises, agreements, conditions or understandings,
either oral or written, between them other than as are herein set forth. No
subsequent alteration, amendment, supplement, change or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
them.
XXV.2 NO RECORDING. This Lease shall not be recorded or otherwise filed
or made a matter of public record, and any attempt to record or file same by
Tenant shall be deemed a default by it hereunder.
XXV.3 TIME OF THE ESSENCE. Time wherever specified herein for
satisfaction of conditions or performance of obligations by Tenant is of the
essence of this Lease.
XXV.4 NO PARTNERSHIP. The parties do not intend to create hereby any
partnership or joint venture between themselves with respect to the Premises or
any other matter.
XXV.5 SEVERABILITY. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction or with respect to any person
shall, as to such jurisdiction or person, be ineffective only to the extent of
such prohibition or unenforceability, without
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invalidating the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction or, as the case may be, with respect to any other person.
To the extent permitted by applicable law, the parties hereto hereby waive any
law that renders any provision hereof prohibited or unenforceable in any
respect.
XXV.6 AUTHORITY. Each party warrants that it has full power, authority
and legal right to execute and deliver this Lease, and to keep and observe all
of the terms and provisions of this Lease on such party's part to be observed
and performed. Each party warrants that this Lease is its valid and enforceable
obligation.
XXV.7 GOVERNING LAW. This Lease and all issues arising hereunder shall
be governed by the laws of the State in which the Premises are located.
XXV.8 COUNTERPARTS. This Lease may be executed by the parties hereto in
separate counterparts, all of which, when delivered, shall together constitute
one and the same instrument.
XXV.9 HEADINGS; PRONOUNS. The headings of the sections of this Lease
are for convenience only and have no meaning with respect to this Lease or the
rights or obligations of the parties hereto. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein:
"person", as used herein, includes an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, or other
entity; "Premises" includes each portion of the Premises and each estate or
interest therein; "hereof", "herein", and "hereunder" and other words of similar
import refer to this Lease as a whole; "Lease" includes these presents as
supplemented or amended from time to time by written instrument(s) entered into
by Tenant or Landlord; `Landlord" includes Landlord's successors and assigns;
"Tenant" includes Tenant's permitted successors and assigns, if any, and
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"parties" means Landlord and Tenant. Whenever the context may require, any
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of pronouns or nouns shall include the
plural and vice versa.
XXV.10 LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord
under this Lease do not constitute personal obligations of the individual
partners, directors, officers, or shareholders of Landlord, and Tenant shall
look solely to the real estate that is the subject of this Lease and the
escrowed funds described in EXHIBIT "F" and to no other assets or property of
the Landlord for satisfaction of any liability in respect of this Lease and
shall not seek recourse against any other property of Landlord, or against the
individual partners, directors, officers or shareholders of Landlord or any of
their personal assets for such satisfaction.
XXV.11 SURVIVAL. All agreements and obligations of Tenant hereunder
which require observance or performance after the expiration or termination of
this Lease, or which can not reasonably be ascertained as having been observed
or performed at the time of such expiration or termination, shall survive, and
be enforceable against Tenant following, such expiration or termination.
XXV.12 WAIVER OF SUBROGATION. Notwithstanding any provision to the
contrary under this Lease, each party hereto hereby waives any and every claim
which arises or which may arise in its favor and against the other party and its
directors, officers, partners, employees and agents during the term and extended
term, if any, for any and all loss of, or damage to, any of its property located
within or upon or constituting a part of the Premises, to the extent that such
loss or damage is covered under an insurance policy or policies carried by
Landlord or Tenant or required to be carried under this Lease by Landlord or
Tenant and to the extent such policy or policies contain provisions permitting
such waivers of claims. Each party agrees to
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request its insurers to issue policies containing such provisions and if any
extra premium is payable therefor, the insured party shall so notify the party
which would benefit from the provision and such benefitted party shall have the
option to pay such additional premium in order to obtain such benefit, but if
the benefitted party declines to make such payment, the insured party will not
be required to obtain such a waiver provision. If the benefitted party pays the
additional premium required by the insurer in order to obtain such a benefit,
the insured party shall promptly thereafter provide the benefitted party with
certificates of such insurance evidencing such a waiver provision.
XXV.13 SIGNS. Tenant shall have the right, with the consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed, to erect and install signage on or about the Premises, including on
exterior walls in and around the Premises, so long as Tenant complies with
Governmental Regulation jurisdiction therefor and at the expiration of this
Lease, removes all signage and completes, at Tenant's sole expense, repairs to
all damage to the Premises caused by such removal, and Landlord hereby consents
to Tenant erecting and installing a sign located in the front of the Premises
consisting of the company's name and logo.
XXV.14 PARKING. The Premises shall include the parking areas indicated
on EXHIBIT "G" (the "Tenant Parking Areas") for parking for Tenant's employees,
customers and business invitees. The parties acknowledge that Landlord shall
have the right to relocate Tenant, in whole or in part, from the 15 parking
spaces located on Parcel 4, the area labeled "52 Spaces" and/or the portions of
the area labeled "48 Spaces" not located on Parcel 5 if Landlord sells or leases
Parcel 6 or Parcel 4 or uses Parcel 6 or Parcel 4 for its own business purpose
(including parking), upon 10 business days' notice to Tenant, provided Landlord
has provided, at Landlord's sole cost and expense, and has immediately made
available to Tenant on any parcel,
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including Parcel 7 and/or 8 the same number of fully constructed, graded, paved
and striped spaces that it takes from Tenant; except that Landlord shall only be
responsible for one-half of the cost to construct, grade, pave and stripe the
"50/50 Spaces". The "50/50 Spaces" shall be those Tenant parking spaces in
excess of the first 100 spaces available to Tenant for parking anywhere on the
Premises or the Tenant Parking Areas (including the 10 customer spaces on the
eastern portion of Parcel 1) up to and including the 125th such parking space.
Landlord agrees that at all times it shall provide and make available to Tenant
the exclusive use of 125 paved and striped parking spaces and the ability to
access such spaces in a reasonable manner. Upon Tenant's request, Landlord shall
within a reasonable time make such additional space available to Tenant to
provide Tenant a total of 200 parking spaces; provided, however, Tenant shall be
responsible to construct, grade, pave and stripe such parking spaces needed by
Tenant in excess of 125 spaces. All such parking spaces shall be used by Tenant
only for Tenant's employees, customers and business invitees. Notwithstanding
anything to the contrary contained in this Paragraph 25.14, if Tenant constructs
any parking spaces and Landlord thereafter relocates Tenant from such spaces,
which right of relocation Landlord shall have on 10 business days' notice from
time to time during the Term, Landlord shall pay all of the cost and expense
relating to the construction, grading, paving and striping of the number of
spaces needed as a result of such relocation(s).
During the once each year Eckler 3 Day Weekend Reunion, Tenant shall
have the right to park in available parking spaces consistent with past
practices on any of Landlord's parcels shown on EXHIBIT "D".
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XXV.15 BROKERS. Tenant represents and warrants that it has not employed
any broker or agent as its representative in the negotiation for or the
obtaining of this Lease, and agrees to defend, indemnify and hold Landlord
harmless from any and all cost or liability for compensation claimed by any such
broker or agent. Landlord represents and warrants that it has not employed any
broker or agent as its representative in the negotiation for or the obtaining of
this Lease, and agrees to defend, indemnify and hold Tenant harmless from any
and all cost or liability for compensation claimed by any such broker or agent.
XXV.16 PREVAILING PARTY. If either party shall bring an action against
the other to enforce or interpret the terms of this Lease or otherwise arising
out of this Lease, the prevailing party in such action shall be entitled to its
costs of suit and reasonable attorney's fees.
XXV.17 EFFECT OF CONVEYANCE OR ASSIGNMENT BY LANDLORD. If Landlord
shall convey, assign or transfer its interest in this Lease, which rights
Landlord shall have, Tenant shall look to the purchaser, assignee or transferee
of Landlord's interest in this Lease for the performance of Landlord's
obligations hereunder and so long as such transferee assumes all of Landlord's
obligations under this Lease and owns fee simple title to the Premises Landlord
shall from and after such conveyance, assignment or transfer be relieved and
discharged from any and all liabilities and obligations under this Lease. Tenant
agrees to attorn to any purchaser, assignee or transferee and to execute any
written attornment agreement reasonably requested by such purchaser, assignee or
transferee.
XXV.18 RADON DISCLOSURE. Tenant is hereby advised that 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
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regarding radon and radon testing may be obtained from your county public health
unit. The foregoing disclosure is provided to comply with state law and is for
informational purposes only.
XXV.19 LANDLORD'S DEFAULT. Except as otherwise provided in this Lease,
Landlord shall be in default under this Lease if Landlord fails to perform any
of its obligations hereunder and said failure continues for a period of thirty
(30) days after written notice thereof from Tenant to Landlord (unless such
failure cannot reasonably be cured within thirty (30) days and Landlord shall
have commenced to cure said failure within said thirty (30) days and continues
diligently to pursue the curing of the same to completion but not to exceed
ninety (90) days) and Tenant shall have any rights and remedies available to it
at law or in equity or under this Lease.
To the extent Landlord owes Tenant any money under Section 2(g) of the
Merger Agreement as determined under said Section 2(g), Tenant may, at its
option and upon written notice to Landlord, deduct such amounts due Tenant in
accordance with such Section 2(g) from the Rent due Landlord.
XXV.20 MEMORANDUM OF LEASE. This Lease shall not be recorded, but, upon
the request of either party, the parties shall execute a short form Memorandum
of Lease and/or easements granted under this Lease, which may be recorded by
either party at its expense and which shall include provisions satisfactory to
Landlord to enable Landlord to remove such Memorandum of record upon the
termination of this Lease. The Memorandum of Lease shall, without any document
or action by the parties, terminate and be of no force or effect upon the
termination (whether at the end of the Term or earlier because of default or
whatever cause), provided, notwithstanding the foregoing, Tenant will confirm in
recordable form, any such termination of this Lease (whether at the end of the
Term or earlier as above set forth) and of the Memorandum of Lease before ten
(10) business days after notice from Landlord, failing which
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Landlord is hereby granted an irrevocable power of attorney to execute such
termination documents for and in the name of Tenant.
XXV.21 LANDLORD'S LIEN WAIVER. Upon Tenant's written request, Landlord
shall agree to execute and deliver a Landlord's Lien Waiver for the benefit of
any lenders of Tenant in the form of EXHIBIT "H" attached hereto and made a part
hereof.
XXV.22 SURVEY. Landlord shall use all reasonable efforts to obtain a
survey of the Premises and legal descriptions of each parcel and the access
easement within thirty (30) days of the Commencement Date.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease
Agreement to be duly executed, all as of the day and year first above written.
Witnesses: SMART CHOICE AUTOMOTIVE GROUP, INC.
/s/ MARIA DIAZ By: /s/ ROBERT J DOWNING
- --------------------------- ----------------------------
Print Name: Maria Diaz Name: Robert J. Downing
Title: Vice President
/s/ DOUGLAS K. BISCHOFF
- ------------------------------- Attest:
Print Name: Douglas K. Bischoff --------------------------
Name:
Title:
(Corporate Seal)
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Witnesses: ECKLER INDUSTRIES, LLC
/s/ MICHAEL KALB By: /s/ RODGER R. KRAUSE
- -------------------------- --------------------------
Print Name: Name: Rodger R. Krause
Title: Vice President
/s/ MARC J. LEDER
- ---------------------------
Print Name: Attest:/s/ MICHAEL KALB
-------------------------
Name: Michael Kalb
Title:
(Corporate Seal)
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EXHIBIT "F"
TENANT'S WORK LETTER
1. PLANS AND SPECIFICATIONS.
a. Improvements to the Premises ("Tenant's Work") shall be completed in
accordance with detailed architectural and/or engineering working drawings and
material specifications (the "Plans and Specifications") which shall be prepared
by Tenant at Tenant's expense (and as an offset to the Tenant Improvement
Allowance defined in Section 2 hereof). The Plans and Specifications shall
include, without limitation, the following to the extent reasonably required:
i. fully dimensioned architectural plan;
ii. electric telephone outlet diagram;
iii. reflective ceiling plan with light switches;
iv. electric power circuitry diagram;
v. all color and finish selections; and
vi. all special equipment and fixture specifications.
b. Tenant shall use a licensed architect, engineer or space planner in
preparation of the Plans and Specifications.
c. Tenant shall cause the Plans and Specifications to be prepared, at
Tenant's expense, and submitted to Landlord not later than September 17, 1999.
Landlord shall then have a period of not more than ten (10) business days
following such submittal in which to review and approve the Plans and
Specifications or state any objections to same in writing. Once Plans and
Specifications have been accepted by Landlord, they may be modified only with
Landlord's written approval, which approval shall not be unreasonably withheld,
provided if such change is made by Tenant or required under applicable code,
ordinance or regulation, Tenant shall be liable for any additional costs in
excess of the Tenant Improvement Allowance incurred as a result of any such
change.
2. TENANT IMPROVEMENT ALLOWANCE.
a. Notwithstanding anything contained in this Work Letter to the
contrary, Landlord shall provide Tenant a sum not to exceed $275,000, as a
tenant work allowance for construction of Tenant's Work (the "Tenant Improvement
Allowance"), including the cost of architectural, engineering and working
drawings and all other costs associated with Tenant's Work. Tenant shall use
this Tenant Improvement Allowance to offset costs incurred for construction of
improvements to the Premises and any permit, architectural, engineering and all
other fees and expenses relating thereto. In the event the cost of the Tenant's
Work and related fees exceed the Tenant Improvement Allowance, Tenant shall pay
such excess ("Tenant's Costs"). It is expressly understood that Landlord shall
in no event be required to expend any monies in excess
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of the Tenant Improvement Allowance. Tenant shall in no event receive any cash
or credit to rent for any unused portion of the Tenant Improvement Allowance.
b. The Tenant Improvement Allowance shall be deposited, by Landlord,
into a title company (the "Title Company") escrow account (the "Escrow
Account"). The Title Company shall be approved (reasonably) by Landlord and
Tenant, each agreeing that First American Title Co. and Commonwealth Land Title
Insurance Company are pre-approved. The Tenant Improvement Allowance shall be
held and distributed by the Title Company in accordance with this Tenant's Work
Letter and any escrow agreement required by the Title Company each month
beginning after commencement of construction upon written request by Tenant,
such request, in each instance, being accompanied by (i) lien waivers and
releases of lien for the general contractor, subcontractors and materialmen with
respect to disbursements for the preceding months, (ii) a certificate to
Landlord from Tenant's architect or engineer (who shall be a Florida licensed
architect or engineer) stating that all of Tenant's Work to the date of each
such certificate has been completed in compliance with Governmental Regulation
and in compliance in all material respects with the Plans and Specifications,
and that a sufficient amount of money remains in the Escrow Account as of the
date of each such certificate to pay for the completion of Tenant's Work. In the
event any change order to the Plans and Specifications causes an increase in the
cost of Tenant's Work, causing the total cost of Tenant's Work to exceed the
Tenant Improvement Allowance, then Tenant shall, in each instance, deposit
within five (5) business days into the Escrow Account the amount of such
increased costs, provided such amount exceeds $25,000. In the event any such
increase is $25,000 or less, then Tenant shall not be required to deposit such
amount into the Escrow Account, but Tenant shall, nevertheless, be and remain
solely liable for and shall pay such amount(s) as a Tenant's Costs. Tenant shall
prepare, in accordance with Government Regulations for Landlord's review and
approval, such approval not to be unreasonably withheld, a Notice of
Commencement with respect to Tenant's Work and Tenant shall thereafter record
the Notice of Commencement. Disbursements of the Tenant Improvement Allowance
shall be made in compliance with the hold back requirements of Governmental
Regulation.
3. CONTRACTOR(S); PERMITS; PERFORMANCE BOND.
a. Tenant shall use licensed contractors, each of which shall maintain
sufficient insurance in customary amounts in accordance with industry standards,
and shall be responsible for obtaining all necessary permits and approvals at
Tenant's sole expense. Tenant shall advise its contractor(s), subcontractor(s)
and material supplier(s) that no interest of Landlord in the Premises, the
Building or the Property shall be subject to liens to secure payment of any
amount due for work performed or materials installed in the Premises and that
Landlord has recorded a notice to that effect in the public records of Brevard
County, Florida. Landlord shall permit Tenant and Tenant's contractor(s) to
enter the Premises prior to the Commencement Date to accomplish any work as
agreed, however, Landlord shall not be liable in any way for any injury, loss,
damage or delay which may be caused by or arise from such entry by Tenant, its
employees or contractor(s).
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b. Tenant covenants and agrees to pay the general contractor,
sub-contractors and materialmen as the work progresses, the entire cost of
supplying the materials and performing the work shown on Tenant's approved Plans
and Specifications, unless a dispute arises, in which case, such sums shall
remain in the Escrow. Tenant shall pay (or bond off in accordance with Florida
Statutes) within five (5) business days after notice thereof, any liens filed
with respect to the Premises and/or Landlord's other property in connection with
Tenant's Work.
c. Landlord shall have the right to disapprove any of Tenant's
contractors or subcontractors if Landlord has reason to believe that such
contractors or subcontractors are: (i) not licensed as required by any
governmental agency; (ii) not technically qualified or sufficiently staffed to
do the work; (iii) not financially capable of undertaking the work or (iv) do
not carry required insurance.
d. Landlord, in its sole and absolute discretion, may require
contractor(s) to provide a performance and payment bond(s) covering the cost of
Tenant's Work. The cost of such performance and payment bond shall be borne by
Tenant, provided, however, that such cost may be paid from the Tenant
Improvement Allowance.
e. All work shall be done in a good, workmanlike and expedient manner.
Tenant Work shall not impair or effect the structural components of the Building
or any of the Building's systems (other than those previously approved in
writing in connection with Landlord's approval of the Plans and Specifications)
without the prior written approval of Landlord in each instance.
4. INSPECTION OF TENANT'S WORK
During the progress of the Tenant's Work, Tenant's Work and the
Premises shall be subject to inspection by representatives of Landlord who shall
be permitted access and the opportunity to inspect, at all reasonable times, but
this provision shall not in anyway whatsoever create any obligation on Landlord
to conduct such inspections.
5. LEGAL REQUIREMENTS
All such Tenant's Work shall be performed in compliance with
Governmental Regulations.
6. EVIDENCE OF CERTIFICATES.
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Prior to commencement of any work, Tenant shall furnish to Landlord
certificates evidencing the existence of (a) workmen's compensation insurance
covering all persons employed for such work; (b) commercial general liability
and property damage insurance; and (c) Builder's Risk Insurance naming, in each
instance, Landlord and Tenant as insured, with liability coverage of at least $1
million. Such insurance shall be placed with insurance companies reasonably
satisfactory to Landlord and licensed to do business in the State of Florida,
and each policy shall provide that it may not be canceled without 30 days' prior
written notice to Landlord.
7. CAPITALIZED TERMS.
All undefined capitalized terms used herein shall have the same meaning
as in the Lease.
8. INCONSISTENT TERMS.
In the event that any term in this Work Letter shall be inconsistent
with any term of the Lease, the terms of this Work Letter shall prevail.
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For Immediate Release
SMART CHOICE AUTOMOTIVE GROUP ANNOUNCES
COMPLETION OF SALE OF ITS ECKLER INDUSTRIES SUBSIDIARY
Smart Choice Automotive Group, Inc. (NASDAQ: SMCH) ("Smart Choice"), a
leading retailer of "dealer-financed" used cars in the Southeastern United
States, announced today that it has completed the sale of its wholly owned
subsidiary, Eckler Industries, Inc. ("Eckler's"), to Sun Automotive Partners
L.P. Eckler's is a manufacturer and supplier of aftermarket Corvette parts
and accessories.
Gary R. Smith, President and CEO, stated that "proceeds from the sale
would be used primarily to reduce debt and the remainder would be used for
working capital purposes. It also allows our management team to focus on our
primary business of selling and financing used cars and trucks throughout
Florida to sub-prime borrowers."
THIS PRESS RELEASE INCLUDES STATEMENTS THAT MAY CONSTITUTE "FORWARD-LOOKING"
STATEMENTS, USUALLY CONTAINING THE WORDS "BELIEVE," "ESTIMATE," "PROJECT,"
"EXPECT," OR SIMILAR EXPRESSIONS. THESE STATEMENTS ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FORWARD-LOOKING STATEMENTS INHERENTLY INVOLVE RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT WOULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, CONTINUED ACCEPTANCE OF THE COMPANY'S PRODUCTS IN THE MARKETPLACE,
COMPETITIVE FACTORS, RECEIVABLES PORTFOLIO RISKS, DEPENDENCE UPON THIRD-PARTY
VENDORS, AND OTHER RISKS DETAILED IN THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-1 (FILE NO. 333-59375) AND PERIODIC REPORT FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION. BY MAKING THESE FORWARD-LOOKING STATEMENTS, THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE THESE STATEMENTS FOR REVISIONS OR CHANGES
AFTER THE DATE OF THIS RELEASE.
