MODIFICATION AGREEMENT
This Modification Agreement (the "Agreement") is made and entered into as
of the ___ day of April, 1999 by and among ▇▇▇▇▇▇▇▇ Holding Company ("Holder"),
▇▇▇▇▇▇▇▇ Inc. ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ Industries, Inc. ("Maker") and Smart Choice
Automotive Group, Inc. (the "Company").
This Agreement relates to (i) that certain promissory note dated as of
October 3, 1997 from ▇▇▇▇▇▇ Industries, Inc. to the order of ▇▇▇▇▇▇▇▇ in the
face principal amount of $1,500,000 ("Note 1"), which has subsequently been
assigned to Holder; (ii) that certain promissory note dated as of January 23,
1998 from ▇▇▇▇▇▇ Industries, Inc. to the order of ▇▇▇▇▇▇▇▇ in the face principal
amount of $3,000,000 ("Note 2"), which has subsequently been assigned to Holder;
(iii) that certain promissory note dated as of May 11, 1998 from ▇▇▇▇▇▇
Industries, Inc. to the order of ▇▇▇▇▇▇▇▇ in the face principal amount of
$4,000,000 ("Note 3"), which has subsequently been assigned to Holder (Note 1,
Note 2 and Note 3 are herein collectively called the "Notes"); (iv) the guaranty
agreement of each of the above-described Notes by the Company, as amended by
prior written instruments, if any, among the parties thereto (collectively
called the "Guaranty"); (v) any and all pledges, security agreements and other
instruments and documents that secure, effect or perfect any rights or interests
of Holder or its predecessor in interest relating to the above-described Notes;
(vi) the potential sale of Maker with the assistance of ▇▇▇▇▇▇▇▇ and
modification of certain terms and conditions previously agreed to and set forth
in that certain engagement letter dated December 23, 1997 from ▇▇▇▇▇▇▇▇ to the
Company ("Engagement Letter") and as extended by that certain Extension to
Engagement Letter dated March 1, 1999 ("Extension Letter"); and (vii) waiver of
certain fees, costs and expenses previously incurred in connection with the
Company's 1998 withdrawn secondary offering. The parties acknowledge that they
desire to extend the maturity dates of the Notes and to the extent that it may
be necessary, for Holder to waive any defaults which may now exist. For and in
consideration of the premises and of the mutual promises and covenants
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows: 1. The Company hereby
agrees that it will accept any cash offer to purchase the stock, assets or
business of Maker (excluding the land and buildings) recommended by ▇▇▇▇▇▇▇▇ on
or before December 31, 1999, provided that the amount of such cash proceeds
equals or exceeds $10.0 million (excluding any and all lease or other income or
proceeds therefrom), provided however, that ▇▇▇▇▇▇▇▇ or any of its affiliates,
agents or representatives, agrees to waive any and all fees and claims for
reimbursement for costs and expenses to which ▇▇▇▇▇▇▇▇, its affiliates, agents
or representatives, may be entitled to now or in the future, in connection with
the sale of the Maker, including without limitation, any and all such fees and
reimbursements as set forth in the Engagement Letter and Extension Letter. The
Company and the Maker hereby agree to fully cooperate and to exercise their
reasonable best efforts to promptly close any cash offer recommended by
▇▇▇▇▇▇▇▇. The Company hereby reaffirms and agrees that the Company shall repay
in full all of the indebtedness evidenced by the Notes at the closing of the
sale of such stock, assets or business of Maker. 2. ▇▇▇▇▇▇▇▇, on behalf of
▇▇▇▇▇▇▇▇ and its affiliates, agents and representatives, agrees to waive any and
all claims any and all of such parties has or may have to fees reimbursement or
for costs and expenses incurred in connection with, arising out of or related to
that certain secondary offer of the Company's Common Stock filed with the
Securities and Exchange Commission on July 17, 1998, and as amended by that
certain preliminary offering Prospectus of the Company dated August 21, 1998. 3.
Further provided, that the Company hereby agrees that if the Notes have not been
repaid in full on or before April 30, 2000, then, upon request by Holder, the
Company shall transfer ownership of the stock, assets and business of Maker to
Holder, or its designee, in full satisfaction of the indebtedness represented by
the then outstanding amount of the Notes and that, in conjunction with such
transfer, the Company shall permit Maker to continue to use and occupy the
offices, warehouse spaces and other business premises of Maker, as used and
occupied by Maker during the year preceding the date of this Agreement, subject
to payment of rent for a period of five (5) years at the then current rent paid
by ▇▇▇▇▇▇'▇ on the premises. 4. The Company hereby agrees that if the Company
issues debt or equity securities, including (but not limited to) securitization
or other sale or financing of chattel paper or receivables but excluding the
financing of this chattel paper through FINOVA in the ordinary course of
business consistent with its past practices and excluding floor plan financing,
prior to the repayment in full of the Notes, the net proceeds of which equal or
exceed $10.0 million, the Company shall repay the Notes in full out of such
proceeds. 5. The Company hereby re-affirms the rights granted to ▇▇▇▇▇▇▇▇ to
serve as the lead managing underwriter for the Company and any of its
subsidiaries or affiliates and to serve as financial advisor and/or investment
banker for the Company and any of its subsidiaries or affiliates on the terms
and conditions set forth in Section 4 of that certain Amendment to Guaranty
Agreement dated as of January 23, 1998 by and among the Company, the Maker and
▇▇▇▇▇▇▇▇, and the Company hereby confirms the date through which such rights
shall be applicable through January 31, 2001. 6. Promptly following execution of
this Agreement, the Company shall issue to ▇▇▇▇▇▇▇▇ warrants to purchase
_________ shares of the Common Stock of the Company at an exercise price of
$_____ per share. Such warrants shall be exercisable for a period of twelve (12)
months and shall also contain the other terms and conditions set forth in the
warrant agreement attached hereto as Exhibit "A". ▇▇▇▇▇▇▇▇ agrees that to the
extent the Company incurs an expense related to the value of any such warrants,
▇▇▇▇▇▇▇▇ agrees to reimburse the Company in the amount of such expense. 7. Upon
the closing of the sale of the stock, assets or business of Maker as described
above, the Company shall issue to ▇▇▇▇▇▇▇▇ warrants to purchase 300,000 shares
of the common stock of the Company, if such closing occurs on or before August
31, 1999 and warrants to purchase 250,000 shares of the common stock of the
Company, if such closing occurs after August 31, 1999 and on or before December
31, 1999 and warrants to purchase 200,000 shares of the common stock of the
Company, if such closing occurs after December 31, 1999 but prior to April 30,
2000, at an exercise price equal to the greater of (x) the product of ___ times
the average closing price of such common stock for the ten trading days
preceding the date of such closing and (y) the closing price of such common
stock on the date of such closing. All of the aforementioned warrants shall be
exercisable for a period of twelve (12) months and shall also contain the other
terms and conditions set forth in the warrant agreement attached hereto as
Exhibit "A". ▇▇▇▇▇▇▇▇ agrees that to the extent the Company incurs an expense
related to the value of any such warrants, ▇▇▇▇▇▇▇▇ agrees to reimburse the
Company in the amount of such expense. 8. Holder hereby agrees to extend the
maturity date of the Notes to April 30, 2000, on which date all unpaid principal
and all accrued and unpaid interest on the Notes shall be due and payable in
full. Maker shall continue to pay interest on the Notes at the same intervals
and at the same times provided for in each of the Notes, respectively, until the
maturity date thereof, as amended hereby. All other terms and provisions of the
Notes shall remain in full force and effect, except as explicitly amended hereby
or as explicitly amended by a prior written amendment thereto executed by the
parties thereto. 9. The Company hereby consents to the extension of the maturity
date of the Notes and to all other modifications of the Notes effected by this
Agreement or by any prior written modification or amendment of any of the Notes
executed by the parties thereto, and the Company hereby re-affirms its agreement
to guarantee the Notes on the terms and conditions set forth in the Guaranty
Agreement of the Company, as amended, under which the Company has agreed to
guarantee payment and performance of the Notes, except only to the extent
amended by this Agreement. 10. Each party hereto for itself, and its successors
and assigns, hereby waives, releases, and discharges the other parties hereto
and their respective successors, assigns, officers, directors, shareholders,
employees, agents and representatives, from any and all claims, actions,
obligations, damages, and liabilities (known or unknown and, past, present, or
future), which the releasing party or its successors and assigns, has (or may
have) by reason of any matter, cause, or transaction with respect to the Notes,
Engagement Letter, and the Extension Letter, and matters contemplated thereby,
and/or occurring before the effective date of this Agreement. In witness
whereof, the parties hereto have executed and delivered this Agreement as of the
15th day of April, 1999.
HOLDER: COMPANY:
▇▇▇▇▇▇▇▇ HOLDING COMPANY SMART CHOICE AUTOMOTIVE
GROUP, INC.
BY: ________________________ BY: ___________________________
NAME: ________________________ NAME: ___________________________
TITLE: ________________________ TITLE: ___________________________
MAKER:
▇▇▇▇▇▇▇▇ INC. ▇▇▇▇▇▇ INDUSTRIES, INC.
BY: ________________________ BY: ___________________________
NAME: ________________________ NAME: ___________________________
TITLE: ________________________ TITLE: ___________________________