PROMISSORY NOTE
1. DATE AND PARTIES. This Promissory Note ("Note") is dated as of January
23, 1998, and the parties and their mailing addresses and Borrower's tax
identification number are as follows:
BORROWER: Eckler Industries, Inc.
5200 S. Washington Avenue
Titusville, FL 32780
Tax ID Number: 59-3471762
HOLDER: Stephens Inc.
950 East Paces Ferry Road, Suite 310
Atlanta, GA 30326
Attn: David Linch
2. PROMISE TO PAY. For value received, Borrower promises to pay to the
order of Holder, in accordance with the provisions of this Note, at Holder's
office at the address above, or at such other place as Holder may designate, the
principal sum of
Three Million and No/100 Dollars ($3,000,000.00)
plus interest from the date of disbursement on the unpaid principal balance at
the rate of ten percent (10%) per annum.
After the Maturity Date (defined herein), whether by acceleration or
otherwise, the Note shall bear interest at the maximum rate allowed by law until
paid in full. The interest permitted by this Note is limited to the maximum
lawful amount of interest (Maximum Lawful Interest ) permitted under applicable
federal and state laws, whichever is greater. If the interest accrued and
collected exceeds the Maximum Lawful Interest as of the time of collection, such
excess shall be applied to reduce the principal amount outstanding. If or when
no principal amount is outstanding, any excess interest shall be refunded to
Borrower. All fees and charges accrued, assessed, or collected which constitute
interest shall be amortized and pro-rated over the full term of the Note for
purposes of determining the Maximum Lawful Interest.
3. ADVANCE AND FUNDING PROVISIONS.
This Note is a Term Note. No advances will be made after the initial
advance.
4. TERMS OF PAYMENT. All principal advanced under this Note and all
interest accrued under this Note are due and payable to Holder and shall be paid
to Holder as follows:
All unpaid interest then accrued is due and payable in
semi-annual installments on the 30th day of each June and
December prior to maturity, beginning on the 30th day of June,
1998. Principal on this Note is due and payable $1,000,000 on
June 30, 1998 and $2,000,000 on June 30, 1999; provided that
all the outstanding principal hereunder shall be due and
payable on the sale of all or substantially all of the
outstanding stock or assets of the Borrower or the completion
by Smart Choice Automotive Group, Inc., a Florida corporation
and the parent of the Borrower ("Smart Choice"), of an
underwritten public offering of equity securities in which
Smart Choice realizes at least $10 million in gross proceeds.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
COLLATERAL: The collateral (the "Collateral") securing this note
includes but is not limited to:
All accounts receivable now owing or in the future accruing to
Borrower, all inventory, equipment, instruments, documents,
chattel paper and general intangibles now owned by or
hereafter acquired by Borrower as more particularly described
in that certain Security Agreement dated October 3, 1997
between Holder and Borrower, as amended by that certain
Amendment to Security Agreement between the Borrower and the
Holder of even date herewith; and
All of the issued and outstanding capital stock of Eckler
Industries, Inc. on terms and conditions more particularly
described in that certain Pledge and Security Agreement
between Holder and Smart Choice dated September 30, 1997, as
amended by that certain Amendment to Pledge and Security
Agreement between Smart Choice and the Holder of even date
herewith.
This Note is also guaranteed under that certain Guaranty Agreement dated
September 30, 1997 between Smart Choice and Holder, as amended by that certain
Amendment to Guaranty Agreement between the Smart Choice and the Holder of even
date herewith.
5. RECEIPT OF COPY. By signing this Note, Borrower acknowledges that he has
read this entire Note and Exhibits, if any, prior to execution and that it
received a copy (copies) of this Note. Borrower agrees to all provisions of this
Note and undertakes to perform all obligations of Borrower hereunder.
6. EVENTS OF DEFAULT. Borrower shall be in default upon the occurrence of
any of the following events, circumstances or conditions ("Events of Default"):
(a) Failure by Borrower to make any payment to Holder when due;
(b) A default or breach under any of the terms of the Note, or any other
Loan Document (as hereinafter defined);
(c) A default or breach under any of the terms of any note, loan agreement,
security agreement, subordination agreement, mortgage, deed of trust, deed to
secure debt, assignment of beneficial interest, guaranty agreement, trust deed
or any other document or instrument evidencing, guaranteeing, or securing any
other obligations of Borrower;
(d) The making or furnishing of any verbal or written representation,
statement, or warranty to Holder which is false or incorrect in any material
respect or the failure to furnish facts necessary to prevent any statement made
by, or on behalf of Borrower or any guarantor of the Note or other obligations
of Borrower to Holder from being materially misleading;
(e) The death, dissolution, liquidation or insolvency of Borrower, the
appointment of a receiver by or on the behalf of Borrower, the voluntary or
involuntary termination of existence by Borrower or any guarantor or the
commencement under any present or future federal or state insolvency,
bankruptcy, reorganization, composition or debtor relief law by or against
Borrower or any guarantor of the Note or other obligation of Borrower to Holder;
(f) Entry of a judgment against Borrower or any guarantor;
(g) A material adverse change in the financial condition of Borrower or any
guarantor; or a good faith belief by Holder at any time that Holder is insecure,
that the prospect of any payment is impaired, or that any collateral securing
the Note is impaired;
(h) Failure of Borrower or of any guarantor to pay and provide proof of
payment of any tax, assessment, rent, insurance premium, or escrow payment on or
before its due date;
(i) Without the prior written consent of Holder: (i) creation of any lien
or encumbrance on, or any sale, lease or transfer of, or any contract to
transfer, sell or lease, any collateral securing the Note or other obligation of
Borrower to Holder; (ii) transfer of ownership or control of the business of
Borrower or Smart Choice or more than fifty percent (50%) of the ownership of
Borrower or Smart Choice, whether by transfer of shares, partnership interest,
joint venture, pledge or otherwise; or (iii) any action by Borrower or any
guarantor to become a party to any merger or consolidation;
(j) The termination of any guaranty of the Note by any guarantor, or a
default on any debt owed by Borrower or any guarantor to any other creditor;
(k) Use of any portion of the loan proceeds in any transaction which may
cause Holder to directly or indirectly incur any securities or environmental
liability; or
(l) Any charge or indictment against Borrower or any guarantor under a
federal or state law for which forfeiture of any portion of the Collateral is a
potential penalty.
7. REMEDIES ON DEFAULT.
If an Event of Default occurs, then Holder any exercise any one or more of
the following rights and remedies, and any other rights and remedies provided in
any of the Loan Documents as Holder, in its sole discretion, may deem necessary
or appropriate:
(a) declare the unpaid principal of, and all interest then accrued, on the
Loan and the Note, to be forthwith due and payable, whereupon the same shall
forthwith become due and payable without presentment, demand, protest, notice of
default, notice of acceleration or of intention to accelerate or other notice of
any kind, all of which Borrower hereby expressly waives, anything contained
herein or in the Note to the contrary notwithstanding,
(b) reduce any claim to judgment, and/or
(c) without notice of default or demand, pursue and enforce any of Holder's
rights and remedies under any of the Loan Documents, or otherwise provided under
or pursuant to any applicable law or agreement;
provided however, that if any Event of Default specified in Subsection (e) above
shall occur, the principal of, and all interest then accrued on, the Note and
other liability hereunder shall thereupon become due and payable automatically
and concurrently therewith, without any further action by Holder and without
presentment, demand, protest, notice of default, notice of acceleration or
intention to accelerate or other notice of any kind, all of which Borrower
hereby expressly waives.
8. SET-OFF. Borrower acknowledges and agrees that upon the occurrence of an
Event of Default, Holder may exercise its right to set-off, without demand or
notice to Borrower or any other person or entity, to pay all or any part of the
outstanding principal and accrued interest owed on this Note against any
obligation Holder or any participant in the Note may have, now or hereafter, to
pay money to Borrower, including but not limited to any balances in any account
of Borrower. Where Borrower may obtain payment only with the endorsement or
consent of someone who has not agreed to pay this Note, Holders' right of
set-off will extend to Borrower's interest in the obligation. Holder's right to
set-off will not apply to accounts or obligations in which Borrower's rights are
solely as a fiduciary for another or to accounts exempt by law from the claims
of creditors. Holder's right of set-off may be exercised without regard to the
existence or value of any Collateral securing this Note, and without regard to
the number or creditworthiness of any other persons or entities who have agreed
to pay this Note. Borrower agrees to indemnify and hold Holder harmless from any
person's or entity's claims arising as a result of Holder's exercise of Holders'
right of set-off and the costs and expenses arising from any such claim,
including without limitation, attorney's fees. In addition to the right of
set-off, to further secure payment of the Note, Borrower hereby grants, conveys
and transfers to Holder a continuing security interest in all of Borrower's
accounts with Holder or with any participant in the Note.
9. COLLECTION EXPENSES. Upon a default on this Note, Holder may recover
from Borrower and all guarantors or any of them, all costs and expenses incurred
by Holder in collecting and enforcing this Note and reasonable costs and
expenses in preserving, selling or disposing of collateral and realizing on any
security. Such costs and expenses shall include, but are not limited to,
reasonable filing fees, costs of publication, deposition fees, stenographer
fees, witness fees, attorneys fees, paralegal fees, and any other court costs,
plus costs of collecting and enforcing the Note. Any such reasonable collection
costs and expenses shall be added to the principal amount of the Note and shall
accrue interest at the same rate as the Note.
10. ATTORNEYS' FEES. Borrower indemnifies Holder and holds Holder harmless
for all reasonable attorneys fees incurred by Holder, without limitation, for
the enforcement and collection of the obligations under this Note, if it is
placed in the hands of an attorney for collection, or for the protection of any
collateral or lien which secures this Note.
11. WAIVER AND CONSENT BY BORROWER AND OTHER SIGNERS. In regard to this
Note, Borrower and each guarantor:
(a) Waive protest, presentment for payment, notice of dishonor, notice of
intent to accelerate, and notice of acceleration;
(b) Consent to any one or multiple renewals or extensions of time for
payment on this Note;
(c) Consent to Holder's release of any guarantor, surety, endorser, or
co-signer;
(d) Consent to the release or substitution of any collateral or any failure
by Holder to perfect or continue a security interest in any collateral or any
impairment of any collateral;
(e) Consent to any modification of the terms of this Note or any instrument
securing, guaranteeing, or relating to this Note;
(f) Consent to any and all sales, repurchases, and participations of this
Note to any person or entity in any amount and waive notice of such sales,
repurchases, or participations of this Note; and
(g) Consent to Holder's right of set-off as well as any participating
Holder's right to set-off.
12. ADDITIONAL COLLATERAL. If Holder at any time deems any portion of the
collateral securing this Note to be unsatisfactory because of a decrease or
potential decrease in its value, upon demand, Borrower shall furnish such
additional collateral or make such payment upon the accrued interest and
principal balance of this Note as Holder may request.
13. NO DUTY BY HOLDER. Holder is under no duty to preserve or protect any
collateral until Holder is in actual possession of the collateral. Holder shall
only be deemed to be in "actual" possession of the collateral when Holder has
physical, immediate, and exclusive control over the collateral and has
affirmatively accepted such control.
14. APPLICATION OF PAYMENTS. All payments on this Note, including, but not
limited to, regular payments or prepayments, received by Holder shall be applied
first to costs and expenses, then to accrued interest, and the balance, if any,
to principal. No repayment shall excuse or defer Borrower's subsequent payment
obligations.
15. JOINT AND SEVERAL. Borrower and any other signers shall be jointly and
severally liable under this Note.
16. FINANCIAL STATEMENTS. Until this Note is paid in full, Borrower shall
furnish Holder upon any material change in financial or business condition, upon
Holder's written request, and in the event of no request, at least annually,
current financial statements of the Borrower, which is certified by Borrower and
Borrower's accountant to be true and accurate. The requirements of this
paragraph shall be in addition to any imposed by any security agreement or other
loan documents executed in connection with the Note.
17. NO OBLIGATION TO RENEW. Borrower may repay the entire principal balance
of the Note and unpaid interest when due. The Holder is under no obligation to
renew or extend the Note or to refinance the Loan at any time.
18. NO DEFENSES. Borrower represents and warrants to Holder that as of the
date of this Note, Borrower has no claims or causes of action against the
Holder, nor any defenses, set-offs, or counterclaims to this Note or the
repayment in full according to the terms hereof, and in consideration of the
making hereof or the renewal or extension hereof, Borrower releases all rights
or claims whatsoever of Borrower against Holder.
19. RELEASE OF INFORMATION. Borrower authorizes Holder to disclose, without
any additional consent, information concerning this Note for any one or more of
the following purposes: to complete the transaction contemplated hereby, to
verify and disclose the existence and condition of the account for credit
reporting purposes, to perfect any security interest, or to collect any money
the Holder in good faith believes Borrower owes, to disclose to Holder's
attorneys or collection agents, to disclose to Holder's accountants or auditors
as part of the review of the Holder's business affairs, to verify the accuracy
of any statement made to Holder, as part of the Holder's report to officials of
any governmental authority or self-regulatory organization that regulates the
business or Holder of its affiliates, for the sale or transfer of the Note or an
interest therein, or for any other legitimate business purpose of Holder.
20 GENERAL PROVISIONS.
(a) TIME OF THE ESSENCE. Time is of the essence in Borrower's performance
of all duties and obligations imposed by this Note.
(b) NO WAIVER BY HOLDER. Holder's course of dealing or Holder's forbearance
from, or delay in, the exercise of any of Holder's rights, remedies, privileges,
or right to insist upon Borrower's strict performance of any provisions
contained in this Note or other Loan Documents shall not be construed as a
waiver by Holder, unless any such waiver is in writing and signed by Holder.
(c) AMENDMENT. The provisions contained in this Note may not be amended
except through written amendment signed by Borrower and Holder.
(d) GOVERNING LAW. This Note shall be governed by the laws of the State of
Arkansas, to the extent that such laws are not preempted by federal laws and
regulations.
(e) FORUM AND VENUE, In the event of litigation pertaining to this Note,
the exclusive forum, venue, and place of jurisdiction shall be in the State of
Arkansas, unless otherwise designated in writing by Holder.
(f) SUCCESSORS. This Note shall inure to the benefit of and bind the heirs,
personal representatives, successors, and assigns of the parties.
(g) NUMBER AND GENDER. Whenever used, the singular shall include the
plural, the plural the singular, and the use of any gender shall be applicable
to all genders.
(h) PARAGRAPH HEADINGS. The headings at the beginning of each paragraph and
each sub-paragraph in this Note are for convenience only and shall not be
dispositive in the interpreting or construing this Note or any part thereof.
(i) SEVERABILITY. If any provisions of this Note shall be unenforceable or
void, then such provision shall be deemed severable from the remaining
provisions and shall in no way affect the enforceability of the remaining
provisions nor the validity of this Note.
(j) BORROWER DEFINED. The term "Borrower" includes each and every person
and entity signing this Note as a Borrower, and any co-signers.
(k) HOLDER. The term "Holder" shall include any transferee or assignee of
Holder or any other holder of this Note.
(l) ENTIRE AGREEMENT. This Note, any guaranty agreement, any security
agreement, any pledge agreement, any financing statements and any other
documents or instruments executed in connection with this Note by Borrower and
Smart Choice, or either of them (collectively, the "Loan Documents"), contain
all the terms of the agreement among the parties, and no earlier oral statement
or agreement has any force or effect. If any of the terms or provisions relating
to the indebtedness or the repayment of the indebtedness contained in a security
agreement, mortgage or any of the Loan Documents are inconsistent with the terms
of the Note, the terms of the Note shall be controlling. If any terms or
provisions relating to the collateral contained in any security agreement,
mortgage, or other collateral agreement are inconsistent with the terms of the
Note, the terms of the security agreement, mortgage or other collateral
agreement, shall be controlling. Borrower agrees that Borrower is not relying on
any representation or agreement except those contained in the Loan Documents.
BORROWER:
Eckler Industries, Inc.
By: /s/ James Neal Hutchinson, Jr.
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Title: Vice President