LOAN AMENDMENT AND FORBEARANCE AGREEMENT
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THIS AMENDMENT AND FORBEARANCE AGREEMENT (the "FORBEARANCE AGREEMENT")
is dated as of November 3, 1999, by and among Consumer Portfolio Services, Inc.,
a California corporation (the "BORROWER"), and State Street Bank and Trust
Company as agent and lender ("STATE STREET"), The Structured Finance High Yield
Fund, LLC, as lender and The Prudential Insurance Company of America, as lender.
Said lenders are sometimes herein collectively referred to as the "LENDERS" and
each individually a "LENDER". State Street in its capacity as agent for the
Lenders hereunder and under each of the Loan Documents is sometimes herein
referred to as the "AGENT".
PRELIMINARY STATEMENT
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This Forbearance Agreement (i) amends certain provisions of that
certain Residual Interest in Securitizations Revolving Credit and Term Loan
Agreement dated as of April 30, 1998 by and among the Borrower, State Street,
for itself and as Agent, and the Lenders (as amended by a certain letter
agreement dated November 2, 1998 by and between the Borrower, the Agent and the
Lenders, as further amended by the Second Amendment Agreement dated November 17,
1998 by and between the Borrower, the Agent and the Lenders, as further amended
by the Third Amendment Agreement and Confirmation of Security Documents dated
April 15, 1999 by and between the Borrower, the Agent and the Lenders, as
further amended by a certain letter agreement dated May 28, 1999 by and between
the Borrower, the Agent and the Lenders, as further amended by a certain letter
agreement dated August 25, 1999 by and between the Borrower, the Agent and the
Lenders, as further amended by a letter agreement dated September 3, 1999 by and
between the Borrower, the Agent and the Lenders, all as further amended by this
Forbearance Agreement, the "LOAN AGREEMENT") and (ii) amends certain provisions
of that certain Pledge and Security Agreement dated as of April 30, 1998 by and
among the Borrower, State Street, for itself and as Agent, and the Lenders (as
amended by and through to the date hereof, the "PLEDGE AND SECURITY AGREEMENT",
together with all other Loan Documents heretofore executed in connection with
the Loan Agreement. Certain capitalized terms relating to the transactions
contemplated by this Forbearance Agreement are defined in Section 4.16 below.
Other capitalized terms used herein and not otherwise defined shall have the
same meanings herein as in the Loan Agreement.
The Borrower is in default of its obligations to the Lenders by reason
of the occurrence of the Events of Default listed on EXHIBIT A hereto
(collectively, the "EXISTING EVENTS OF DEFAULT"). Notwithstanding the occurrence
of the Existing Events of Default, the Borrower has requested that the Lenders
forbear from exercising their rights and remedies with respect to the Existing
Events of Default and amend the Loan Documents on the terms set forth herein.
The Lenders are willing, subject to the terms and conditions set forth herein
(including without limitation the grant of various waivers set forth below), to
forbear from exercising their rights in respect of the Existing Events of
Default and to amend the Loan Agreement and the Pledge and Security Agreement as
and to the extent herein provided.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions of this Forbearance Agreement, the parties agree as follows:
SS.1. CONFIRMATION OF INDEBTEDNESS. The Borrower owes the Lenders
$28,875,000 in respect of the outstanding principal balance of the Loans as of
the date of this Forbearance Agreement, and as of November 1, 1999, accrued and
unpaid interest thereon in the amount of $141,578.04, with a PER DIEM interest
charge as of November 1, 1999 of $8,221.36 and $7,792.36 of unpaid fees and
unreimbursed expenses. The total amount of the Borrower's indebtedness and
obligations to the Lenders evidenced by and/or related to the Loan Agreement,
the Notes, the Security Documents and each agreement and instrument executed in
connection therewith (collectively with this Agreement and any agreement or
instrument executed in connection herewith, and as the same have been or may
hereafter be amended and/or restated from time to time, the "LOAN DOCUMENTS"),
including without limitation principal, interest and reasonable fees and
reasonable expenses of counsel is, by the execution hereof by the Borrower,
ratified, confirmed and approved by the Borrower in all respects (the
indebtedness and obligations referred to in this sentence and all obligations of
the Borrower to the Lenders under this Agreement, in each case whether now
existing or hereafter arising and whether incurred before or after the filing of
any reorganization petition, are hereinafter referred to collectively as the
"OBLIGATIONS"). The Borrower acknowledges and agrees that (i) the Obligations
are valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their terms, and (ii) the Obligations are due and
payable in full and the Borrower is presently obligated to pay the amounts
referred to in the first sentence of this SS.1 and all of its other existing
Obligations in accordance with the terms of the Loan Documents, all without any
further demand, notice or claim by the Lenders. Without limiting the foregoing,
the Borrower acknowledges and agrees that the Lenders have no forbearance
obligation whatsoever except as expressly provided in this Forbearance
Agreement. The Borrower further acknowledges and agrees that the value of the
Collateral (as defined below) securing the Obligations is substantially in
excess of the amount of the Obligations.
SS.2. RATIFICATION AND CONFIRMATION OF SECURITY. The Borrower
acknowledges, confirms and agrees that all of the Obligations are and shall be
secured by and entitled to the benefits of each of the Security Documents and
that the liens granted to the Agent on behalf of the Lenders thereunder remain
valid, perfected liens, enforceable against the Borrower and shall extend to all
Collateral acquired or arising and Obligations incurred following the filing of
any reorganization petition. To the extent any Security Document does not
currently provide that the Obligations constitute "Obligations" and/or "Secured
Obligations" for purposes thereof, such Security Document is hereby amended to
provide for the same. The Borrower acknowledges, confirms and agrees that,
except for certain specific equipment on which vendors have existing purchase
money liens, the Lenders have and shall retain a first priority perfected
security interest in and lien on all of the Borrower's tangible and intangible
personal properties and assets, whether now existing or hereafter acquired or
arising (collectively, the "COLLATERAL"). The Borrower agrees to take, or cause
to be taken, all actions requested by the Lenders in order to create, maintain,
renew and/or perfect the Lenders' security interest in the Collateral.
SS.3. DELIBERATELY OMITTED.
SS.4. AMENDMENTS TO LOAN AGREEMENT. The Borrower wishes to amend and
supplement the Loan Agreement to (i) amend the Maturity Date and amortization
schedule for the Loans; (ii) decrease the Total Commitment from $33,333,333 to
$29,562,500; (iii) change the interest rate on the Notes; and (iv) make certain
other changes in the Loan Agreement. The Lenders are willing, subject to the
terms and conditions set forth herein, to agree to amend the Loan Agreement as
aforesaid on the terms herein provided.
4.1 AMENDMENT TO SECTION 1. Subsections 1.1 through 1.8 of the Loan
Agreement are hereby amended by deleting them in their entireties and replacing
them with the following new subsections:
"1.1 RECITALS; COMMITMENTS. The Company wishes to establish a
term loan with the Lenders in an aggregate principal amount at any one
time outstanding not in excess of Twenty-Nine Million Five Hundred
Sixty-Two Thousand Five Hundred Dollars ($29,562,500) (the "AMENDED
TERM LOAN FACILITY"), to expire September 15, 2000 or on such earlier
date as may be determined in accordance with SECTION 8.3.
Each Lender is severally willing to make such loans to the
Company, subject to the terms and conditions hereafter set forth, in
the following maximum amounts at any one time outstanding set forth
opposite each Lender's name (each of such amounts being hereinafter
called each Lender's "COMMITMENT", and collectively for all of the
Lenders, the "TOTAL COMMITMENT") and in the respective percentages set
forth opposite each Lender's name which shall be applicable to such
loans hereunder (hereinafter such Lender's "PERCENTAGE"):
LENDER COMMITMENT PERCENTAGE
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State Street Bank $14,781,250 50.0%
and Trust Company
The Structured Finance $ 4,434,375 15.0%
High Yield Fund, LLC
The Prudential Insurance $10,346,875 35.0%
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Company of America
TOTAL $29,562,500 100.0%
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1.2 AVAILABLE TERM LOAN COMMITMENT; BORROWING BASE; MECHANICS OF
BLOCKED ACCOUNT; BORROWING BASE Reports.
(a) The Lenders hereby establish the Amended Term Loan Facility in an
aggregate principal amount not to exceed the Total Commitment. Under the Amended
Term Loan Facility, subject to the terms and conditions hereof, the Company may
have outstanding, from time to time, an aggregate principal amount at any one
time not in excess of the Available Term Loan Commitment in effect on such date.
As used herein, the term "AVAILABLE TERM LOAN COMMITMENT" shall mean, as of any
date of determination prior to the Maturity Date, the lesser of (i) the Total
Commitment or (ii) the Borrowing Base. As used herein, the term "BORROWING BASE"
shall mean, as of any date of determination, an amount equal to the LEAST of:
(A) 80% of the Company's (and/or CPSRC's) interest in Investments in
Credit Enhancements relating to Eligible Securitization Transactions
(without duplication); or
(B) 65% of the Lenders' Value Model; or
(C) 8% of the aggregate outstanding Certificate Balance relating to
Eligible Securitization Transactions;
in each instance as reported on the most recently submitted Borrowing Base
Report. Each such loan pursuant to the Amended Term Loan Facility is herein
called an "AMENDED TERM LOAN" and such borrowings are collectively called the
"AMENDED TERM LOANS". The Company agrees that regardless of the amount of
availability hereunder, the Lenders shall not under any circumstances be
obligated to make any additional Loans hereunder.
(b) DELIBERATELY OMITTED.
(c) MECHANICS OF BLOCKED ACCOUNT. Pursuant to the Eligible
Securitization Transaction Documents (including, but not limited to, the
Irrevocable Payment Directives), and the documents governing any additional
Eligible Securitization Transaction(s) and any other notices, agreements or
documents necessary, the Company shall cause (i) the trustee, depository or
paying agent maintaining any Spread Account or other account from which Base
Servicing Fees relating to any transaction in the Company's aggregate servicing
portfolio are to be released or paid to the Company (or any Subsidiary), to
release such proceeds directly to the Blocked Account, (ii) CPSRC to make any
and all distributions and to pay any dividends or other amounts of any kind or
nature from time to time made or paid from CPSRC to the Company to be paid
directly to the Blocked Account and (iii) the Company to provide (by, among
other things, notifying each of its account debtors to remit payment of all
invoices directly to the Blocked Account) that all of its receipts, including
but not limited to, Base Servicing Fees, origination fees, proceeds from the
sale of loans or any other assets of the Company, and the release of any amount
relating to any transaction including but not limited to "holdback" purchase
price, are sent directly to the Blocked Account, PROVIDED that the Company shall
NOT be obligated to send to the Blocked Account (i) any origination fees arising
from the Pass Through Sale to Fairlane, (ii) loan payments received by the
Company in the ordinary course of business relating to Automobile Contracts that
are owned by the Company, and (iii) loan payments received by the Company in the
ordinary course of business relating to Automobile Contracts that are serviced
but not owned by the Company (collectively, (i), (ii) and (iii) shall be
referred to herein as the "EXCLUDED ITEMS" and (III) shall be referred to as the
"NON-OWNED EXCLUDED ITEM"). On the 15th day of each month, prior to the
occurrence of a Forbearance Event of Default, the Agent shall apply the funds on
deposit in the Blocked Account to pay the amounts due under this Agreement in
accordance with subsections 1.3, 1.5 and 1.8 below. After the occurrence of a
Forbearance Event of Default, the Agent shall apply the funds on deposit in the
Blocked Account in accordance with subsection 1.7.
(d) DELIBERATELY OMITTED.
(e) BORROWING BASE REPORTS. On the later of (i) the 12th business day
of each month and (ii) one business day prior to the 15th day of the month, or
the next succeeding Banking Day if the 12th business day of any month is not a
Banking Day (or after and during the continuance of a Default, on such more
frequent basis as the Majority Lenders may from time to time specify by notice
to the Company), the Company shall deliver to the Lenders a Borrowing Base
Report, substantially in the form of EXHIBIT A hereto (the "BORROWING BASE
REPORT"), each such Borrowing Base Report to set forth in reasonable detail the
information specified therein as of the close of business on the immediately
preceding month-end, and shall be signed by the Chief Executive Officer,
President, any Vice-President and/or Chief Financial Officer of the Company.
Such Borrowing Base Reports may be delivered by overnight mail, courier, telex,
telecopy or other facsimile transmission. Each Borrowing Base Report will set
forth, in such detail as the Lenders may from time to time reasonably require,
the Borrowing Base calculated in accordance with SUBSECTION 1.2(a) above.
1.3 AMENDED TERM NOTES; INTEREST.
(a) FORM OF AMENDED TERM NOTE. The Amended Term Loans made by each
Lender pursuant to SECTION 1 shall not exceed such Lender's Commitment and shall
be evidenced by an amended term note of the Company in a principal amount equal
to such Lender's Commitment and in the form attached hereto as EXHIBIT B-1.
There shall be one (1) note payable to the order of each Lender (each such note
being herein called an "AMENDED TERM NOTE" and all such notes being herein
collectively called the "AMENDED TERM NOTES").
(b) INTEREST RATE. Each Amended Term Note shall bear interest (computed
on the basis of the actual number of days elapsed over a 360-day year) on the
unpaid balance thereof at a rate per annum determined as follows:
(i) the per annum rate for any portion of the
outstanding principal balance of the Amended Term
Notes which is not the subject of a LIBOR Option
shall be equal to the Prime Rate plus one and three
quarters percent (1 3/4%) (the "APPLICABLE PRIME
RATE"); and
(ii) the per annum rate for any LIBOR Portion shall be
equal to the LIBOR Rate plus five percent (5%) (the
"APPLICABLE LIBOR RATE"). It is agreed that all
Loans shall be subject to the LIBOR Option unless
the Lenders agree otherwise.
(c) INTEREST PAYMENT DATE. Interest on the Amended Term Notes shall be
payable monthly in arrears on the fifteenth day of each month (or the next
succeeding Banking Day, if such day of any month is not a Banking Day),
commencing on the first such date next succeeding the date of issuance, and at
maturity (whether by acceleration or otherwise) and subject to the additional
default rate provided for in subsection 1.10. Notwithstanding anything contained
herein or any other Loan Document to the contrary, in no event shall the amount
paid or agreed to be paid by the Company as interest on the Amended Term Notes
exceed the highest lawful rate permissible under any law applicable thereto.
1.4 DELIBERATELY OMITTED.
1.5 AMORTIZATION OF AMENDED TERM LOANS; MATURITY DATE.
(a) In addition to the Company's ongoing obligation to pay accrued
interest on the Amended Term Loans pursuant to subsection 1.3, the Company shall
repay the outstanding principal balance of the Amended Term Notes in consecutive
monthly installments, due and payable on the fifteenth day of each month (or the
next succeeding Banking Day, if such day of any month is not a Banking Day) as
set forth in the table below. The Agent is hereby authorized to apply amounts in
the Blocked Account against principal and interest due on the Notes on the
fifteenth day of each month. Such monthly payments from the Blocked Account
shall commence on November 15, 1999.
AMENDED TERM LOAN PRINCIPAL PAYMENT DATES PRINCIPAL PAYMENT DUE
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October 21, 1999 $ 687,500
November 15, 1999 2,000,000
December 15, 1999 2,000,000
January 15, 2000 3,000,000
February 15, 2000 3,000,000
March 15, 2000 3,000,000
April 15, 2000 3,000,000
May 15, 2000 3,000,000
June 15, 2000 3,000,000
July 15, 2000 3,000,000
August 15, 2000 3,000,000
September 15, 2000 875,000
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TOTAL: $29,562,500
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(b) Subject to acceleration pursuant to SECTION 8, the full outstanding
balance of principal and accrued but unpaid interest on the Amended Term Loans
shall be due on September 15, 2000 (the "MATURITY DATE").
1.6 DELIBERATELY OMITTED.
1.7 APPLICATION OF FUNDS DEPOSITED INTO BLOCKED ACCOUNT AFTER EVENT OF
DEFAULT. From and after the occurrence of a Default or Forbearance Event of
Default, such Default or Forbearance Event of Default not having previously been
remedied or cured in accordance with SECTION 12 below, and without prejudice to
any other rights or remedies of the Agent or the Lenders, all amounts paid into
the Blocked Account from whatever source shall be applied by the Agent as
follows:
FIRST, to the payment of the reasonable costs and expenses incurred by
the Agent and the Lenders in connection with such Default or
Forbearance Event of Default;
SECOND, to the payment in full of all accrued and unpaid interest due
and owing on the Notes;
THIRD, to the payment in full of all unpaid principal of the Notes; and
FOURTH, to the payment in full of all other amounts owed by the
Borrower to the Agent or any Lender pursuant to any Loan Document.
The Agent's application of amounts paid into the Blocked Account in accordance
with this SUBSECTION 1.7 shall not affect, limit or impair in any manner the
rights and remedies of the Agent or the Lenders set forth in SUBSECTION 8.2
below.
1.8 PREPAYMENTS; REPAYMENT OF OUTSTANDING LOANS IN EXCESS OF AVAILABLE
COMMITMENT.
(a) VOLUNTARY PREPAYMENT. On at least three (3) Banking Days' prior
written notice to each Lender, the Company may, at its option, prepay the
Amended Term Notes in whole at any time or in part from time to time, without a
premium or penalty of any kind attributable to such prepayment. Any optional
prepayment of the Notes in part shall be in an aggregate principal amount of not
less than $300,000 to all of the Lenders. Any prepayment in full of the Amended
Term Notes shall be made together with accrued interest on the amount prepaid to
the date of such prepayment and all other fees and expenses due the Lenders,
including, but not limited to, the LIBOR Premium, if applicable.
(b) MANDATORY PREPAYMENTS.
(i) If at any time the aggregate outstanding principal amount
of the Amended Term Loans exceeds the Available Term Loan Commitment,
the Company will immediately repay the Amended Term Notes, without
penalty or premium, except the LIBOR Premium, if applicable, in an
amount necessary to cause the outstanding principal amount of the
Amended Term Loans not to exceed the Available Term Commitment.
Prepayments of the Amended Term Notes will be applied in inverse order
of maturity.
(ii) On or prior to the date seven (7) days after the
execution of the Forbearance Agreement and thereafter on the 15th of
each calendar month (the "ACTUAL MONTH") the Company shall make a
mandatory prepayment on the Amended Term Notes in the amount of fifty
percent (50%) of the Company's Net Free Cash Flow for that month (the
"CASH FLOW PAYMENT"). The "NET FREE CASH FLOW" for each month shall
equal (A) the sum of the Company's actual cash receipts from the
sixteenth day of the previous month through the fifteenth day of the
Actual Month, such cash receipts to include but not be limited to (1)
Base Servicing Fees; (2) origination fees paid to the Company; (3) cash
released from any Spread Account whether released to the Company or any
Subsidiary; (4) proceeds from the Company's sale of any loans or any
other sale of assets; and (5) the release of any "holdback" purchase
price or any other amounts to the Company relating to any transaction,
LESS (B) the Company's projected cash uses for the Actual Month in
accordance with the schedule set forth below.
MONTH BORROWER'S PROJECTED CASH USES
October 1999 $6,588,026
November 1999 $8,692,904
December 1999 $9,502,440
January 2000 $9,000,674
February 2000 $8,964,151
March 2000 $8,459,381
April 2000 $8,416,607
May 2000 $8,374,398
June 2000 $8,332,898
July 2000 $8,306,898
August 2000 $8,270,743
September 2000 $6,210,517
It is expressly agreed that the term "Net Free Cash Flow" SHALL include
the Excluded Items other than the Non-Owned Excluded Item, PROVIDED that the
calculation of Net Free Cash Flow as of any month will include the Excluded
Items (other than the Non-Owned Excluded Item) received by the Company from the
first day of the previous month through the last day of the previous month.
(c) DELIVERY OF EXCESS CASH FLOW CERTIFICATE. On the execution date of
the Forbearance Agreement and thereafter on the 15th day of each calendar month,
the Company shall submit to the Agent an Excess Cash Flow Certificate, certified
by an appropriate officer of the Company, in the form of EXHIBIT B-2. No funds
will be released to the Company from the Blocked Account until the Agent has
received an executed Excess Cash Flow Certificate for the month."
4.2 AMENDMENT TO SUBSECTION 1.9. Subsection 1.9 of the Loan Agreement
(Security) is hereby amended by deleting the figure "$1,000,000" where it
appears in subsection (f) thereof and replacing it with the figure "$1,660,000".
4.3 AMENDMENT TO SECTION 3.19. Section 3.19 of the Loan Agreement
(Chief Executive Offices, Principal Place of Business, Real Property Owned or
Leased) is hereby amended by changing the address that appears therein to "16355
Xxxxxx Xxxxxx Xxxx, Xxxxxx, Xxxxxxxxxx 00000".
4.4 AMENDMENT TO SUBSECTION 5.1. (i) Subsection 5.1 of the Loan
Agreement (Financial Statements) is hereby amended by deleting clause (a)
thereof in its entirety and replacing it with the following new clause (a):
"(a) Within 90 days after the end of each fiscal year of the
Company, (i) the audited consolidated and consolidating balance sheets
of the Company and its Subsidiaries as at the end of such year; (ii)
the related audited consolidated and consolidating statements of income
and surplus and cash flows for such year, setting forth in comparative
form with respect to such consolidated financial statements figures for
the previous fiscal year, all in reasonable detail, together with (A)
the opinion thereon of independent public accountants selected by the
Company and satisfactory to the Lenders, which opinion shall be in a
form generally recognized as unqualified and shall state that such
financial statements have been prepared in accordance with GAAP applied
on a basis consistent with that of the preceding fiscal year (except
for changes, if any, which shall be specified and approved in such
opinion) and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards related to reporting; and (B) a management
letter from such independent public accountants indicating that the
Company has the appropriate accounting systems and personnel in place,
and that such accounting systems are performing adequately; and (iii) a
Compliance Certificate substantially in the form of EXHIBIT D attached
hereto (the "COMPLIANCE CERTIFICATE") signed by a principal officer of
the Borrower and certifying that no event or condition which
constitutes a Default or Forbearance Event of Default or Credit Trigger
exists, and demonstrating the calculations used to determine compliance
with the financial covenants listed in such Compliance Certificate;"
(ii) Subsection 5.1 of the Loan Agreement is further amended by
deleting clause (b) thereof and replacing it with the following new clauses (b),
(bb), (bbb) and (bbbb):
"(b) within 45 days after the end of each of the first three
quarterly accounting periods in each fiscal year of the Company, (i)
the unaudited consolidated balance sheets of the Company and its
Subsidiaries as at the end of such period, and (ii) the related
unaudited consolidated and consolidating statements of income and
surplus and cash flows for such period and for the period from the
beginning of the current fiscal year to the end of such period, all in
reasonable detail and signed by a principal officer of the Company;
(bb) no later than the seventh (7th) business day of every
month, a Pool Summary report substantially in the form attached hereto
as EXHIBIT F (the "POOL SUMMARY REPORT");
(bbb) no later than the twentieth business day of every month
(1) unaudited consolidated balance sheets of the Company and its
Subsidiaries as at the end of the prior month and related unaudited
consolidated and consolidating statements of income and surplus and
cash flows for such period, prepared by the Company or its independent
public accountants, but in any event, certified by an authorized
officer of the Company, (2) a Compliance Certificate signed by a
principal officer of the Company and (3) the Company and the
Subsidiaries' accounts payable listing as of the previous month-end;
(bbbb) within 30 days after the end of each month, a copy of
the Company's monthly financial statement package for the immediately
preceding month, such monthly financial statement package to contain
statistical information on the financial performance of all
securitization transactions including, but not limited to, the Eligible
Securitization Transactions, and to be substantially in the form
currently produced by the Company, with such changes as are reasonably
satisfactory to the Lenders;"
(iii) Subsection 5.1 of the Loan Agreement is further amended by adding
a new clause (k) to the end thereof as follows:
"(k) Each Wednesday the Company shall submit to the Agent (i)
a report of the Company's actual cash receipts and disbursements as
compared to the Company's projections, for the previous week and (ii) a
weekly forecast of the Company's cash disbursements and receipts for
the next twelve weeks."
4.5 AMENDMENT TO SUBSECTION 5.7. Subsection 5.7 of the Loan Agreement
(Maintenance of Blocked Account; Eligible Securitization Transaction Documents;
Agreements to Hold in Trust) is hereby amended by deleting it in its entirety
and replacing it with the following:
"5.7 MAINTENANCE OF BLOCKED ACCOUNT; ELIGIBLE SECURITIZATION
TRANSACTION DOCUMENTS; AGREEMENT TO HOLD IN TRUST.
(i) As of the Closing Date, the Company will (a) establish a
blocked account arrangement (the "BLOCKED ACCOUNT") with the Agent and
(b) execute and cause to be executed by all necessary parties all such
agreements, instruments or notices as may be deemed necessary (1) by
the Lenders or the trustee or paying agent under each Eligible
Securitization Transaction so as to ensure that such trustee or paying
agent is directed to make payments due the Company directly to the
Blocked Account and (2) by the Lenders and any other necessary third
parties, included but not limited to account debtors, so as to ensure
that all of the Borrower's receipts, including but not limited to, Base
Servicing Fees, origination fees paid to the Company, cash released
from any Spread Account, whether released to the Company or any
Subsidiary, proceeds from the Company's sale of any loans or any other
assets and the release of "holdback" purchase price or any other amount
relating to any transaction, are sent directly by the applicable payor
to the Blocked Account, PROVIDED that the Company is not obligated to
forward the Excluded Items to the Blocked Account. The Company agrees
to contact each of its account debtors (other than account debtors
related to the Excluded Items unless such account debtors owe amounts
to the Company unrelated to the Excluded Items) in writing within
twenty (20) days of the execution of the Forbearance Agreement and
notify the account debtors to remit all payments to the Blocked
Account. All agreements, documents or instruments now or hereafter
necessary to ensure that the Collateral and all proceeds thereof will
be deposited directly into the Blocked Account, and to otherwise give
effect to the transactions contemplated by this Agreement, including
but not limited to, the Irrevocable Payment Directives, are referred to
herein collectively as the "ELIGIBLE SECURITIZATION TRANSACTION
DOCUMENTS".
(b) To the extent that notwithstanding the foregoing, the
Company or CPSRC receives any amounts directly (relating to an Eligible
Securitization Transaction or otherwise), which should have been
deposited in the Blocked Account, the Company will, and will cause
CPSRC to, hold the same in trust for the Lenders immediately upon
receipt thereof, and deliver the same to the Agent in the form
received, together with the Company's or CPSRC's (as the case may be)
endorsement thereon where necessary to permit collection thereof for
deposit into the Blocked Account."
4.6 AMENDMENT TO SUBSECTION 6.1. (i) Subsection 6.1 of the Loan
Agreement (Indebtedness) is hereby amended by deleting the existing subsection
(e) thereof and replacing it with the following:
"(e) Unsecured Subordinated Debt consented to in writing by the
Lenders, PROVIDED that at the time of delivery of any such written
consent, the Lenders will decide, in their sole discretion, whether the
proceeds of such Subordinated Debt must be delivered to the Blocked
Account pursuant to subsection 1.2(c) hereof;"
(ii) Subsection 6.1 of the Loan Agreement is further amended by adding the
following subsections (n) and (o) thereto:
"(n) Contingent Indebtedness relating to the Company's obligation,
under certain limited circumstances, to repurchase certain retail
installment contracts sold by Fundco and Wareco to each of the
following entities: (i) Customized Auto Credit Services, Inc. pursuant
to an Asset Purchase Agreement dated on or about May 28, 1999 (the "GE
SALE"); (ii) NuVell Credit Corporation pursuant to a Sale and Purchase
Agreement dated on or about August 25, 1999 (the "NUVELL SALE"); (iii)
Crescent Bank and Trust pursuant to a Purchase and Sale Agreements
dated on or about August 25, 1999 and August 30, 1999 (collectively,
the "CRESCENT SALE"); and (iv) Fairlane Credit LLC pursuant to an
Agreement to Purchase Retail Installment Contracts dated on or about
September 3, 1999 (the "FAIRLANE SALE"); and
(o) Contingent Indebtedness relating to the Company's obligation, under
certain limited circumstances, to repurchase retail installment
contracts sold to Fairlane Credit LLC ("FAIRLANE") pursuant to the
Contract Sale Agreement dated May 1999 by and between the Company and
Fairlane (the "PASS THROUGH Sale")."
4.6A AMENDMENT TO SUBSECTION 6.1. Subsection 6.1(f) of the Loan
Agreement (Indebtedness) is hereby amended by deleting the figure "$5,000,000"
where it appears therein and replacing it with the figure "$5,500,000".
4.7 AMENDMENT TO SUBSECTION 6.2. Subsection 6.2 of the Loan Agreement
(Liens; etc.) is hereby amended by adding the following clause (iii) to the end
thereof:
"(iii) , PROVIDED further that the aggregate principal amount of
indebtedness secured by all such liens incurred after September 30,
1999 shall at no time exceed $500,000."
4.8 AMENDMENT TO SUBSECTION 6.5. Subsection 6.3 of the Loan Agreement
(Loans, Guarantees and Investments) is hereby amended by adding the subsection
(g) thereto:
"(g) Investments consisting of the Company's purchase of up to
$1,000,000 (face value) of RISRS for retirement on or before January 1,
2000, subject to the limitations in subsection 6.5."
4.9 AMENDMENT TO SUBSECTION 6.5. Subsection 6.5 of the Loan Agreement
(Restricted Payments) is hereby amended by deleting it in its entirely and
replacing it with the following:
"6.5 RESTRICTED PAYMENTS. The Company will not, and will not
permit any Subsidiary to, directly or indirectly declare, order, pay or
make any Restricted Payment or set aside any sum or property therefor
if at the time of such proposed action or immediately after giving
effect thereto, any Default or Event of Default exists, AND unless
expressly permitted by this subsection 6.5.
As used herein, the term "RESTRICTED PAYMENTS" means (i) any
dividend or other distribution, direct or indirect, on or on account of
any shares of any class of stock of the Company now or hereafter
outstanding (including dividends payable exclusively in shares of the
Company's common or preferred stock); (ii) any redemption, purchase or
other acquisition, direct or indirect, of any shares of any class of
stock of the Company now or hereafter outstanding or of any warrants or
rights to purchase any such stock (including, without limitation, the
repurchase price thereof in connection with the exercise by the holder
thereof of any right of rescission or similar remedies with respect
thereto); (iii) any direct salary, non-salary managerial fees, fee
(consulting, management or others), fringe benefit, allowance or other
expense directly or indirectly paid or payable by the Borrower or any
Subsidiary (as compensation or otherwise) to any shareholder or
Affiliate of the Borrower (other than to an employee, to the extent of
such employee's normal compensation) and (iv) any payment in respect of
Subordinated Debt (including, without limitation, the 10.5%
Subordinated Participating Equity Notes due 2004 in the amount of
$20,000,000 (the "PENS"), the Rising Interest Subordinated Redeemable
Securities due 2006 in the amount of $20,000,000 (the "RISRS") and the
9% Subordinated Partially Convertible Note to Stanwich Financial
Services Corp. due 2004 in the amount of $15,000,000 and $5,500,000 of
other subordinated debt owed to Stanwich Financial Services Corp. and
$1,000,000 of other subordinated debt owed to Xxxx X. Xxxxx
(collectively, the $20,500,000 of subordinated debt owed to Stanwich
Financial Services Corp. and the $1,000,000 owed to Xx. Xxxxx, is
referred to herein as the "STANWICH SUBORDINATED DEBT"), the Xxxxxx
Subordinated Debt and the Xxxxx Xxxxxx Subordinated Debt).
Subject to the foregoing, the Company may make scheduled (but
NOT accelerated) monthly payments of interest ONLY on the PENS, RISRS,
Stanwich Subordinated Debt, Xxxxxx Subordinated Debt and Xxxxx Xxxxxx
Subordinated Debt and, in the Company may (i) retire up to an aggregate
of $1,000,000 in face amount of the RISRS by repurchasing such
securities at price(s) not in excess of the face amount of such
securities and/or (ii) make the minimum sinking fund payment of the
redemption price required for such securities, PROVIDED that in any
event the Company's cash outlay for the foregoing (i) and (ii) in the
aggregate shall not exceed $800,000. Notwithstanding anything to the
contrary in the documents relating to the PENS, RISRS, Stanwich
Subordinated Debt, Xxxxxx Subordinated Debt or Xxxxx Xxxxxx
Subordinated Debt, the Company agrees that, except as expressly set
forth above, it will not at any time make any payment of any kind or
nature (or set aside any sums therefor), in respect any Subordinated
Debt. For the avoidance of doubt, the Company shall not make any
voluntary or involuntary principal payments at all under the
Subordinated Debt while the Amended Term Loans are outstanding other
than as expressly permitted by this paragraph.
The provisions of this subsection 6.5 are solely for the
purpose of defining the relative rights of the Agent and the Lenders on
the one hand, and the holders of Subordinated Debt on the other hand,
and none of such provisions shall impair, as between the Company and
any holder of the Subordinated Debt, the obligations of the Company,
which are unconditional and absolute, to pay to such holder all of the
Subordinated Debt in accordance with the terms thereof, subject in each
instance to the rights of the Agent and the Lenders under the
provisions of this Agreement and under the subordination provisions of
such Subordinated Debt."
4.10 AMENDMENT TO SUBSECTION 6.6. Subsection 6.6 of the Loan Agreement
(Capital Expenditures) is hereby amended by deleting it in its entirety and
replacing it with the following:
"6.6 CAPITAL EXPENDITURES. The Company will not make, or permit any
Subsidiary to make, Capital Expenditures during the period beginning
October 1, 1999 through the Maturity Date in excess of $500,000."
4.11 AMENDMENT TO SUBSECTION 6.8. Subsection 6.8 of the Loan Agreement
(Sale of Assets) is hereby amended by deleting it in its entirety and replacing
it with the following paragraph:
"The Company will not, and will not permit any Subsidiary to, sell,
lease or otherwise dispose of any of its properties or assets, EXCEPT
for: (i) BONA FIDE sales of repossessed automobiles; (ii) sales or
other dispositions in the ordinary course of business of obsolete or
unusable property or assets (it being understood that Automobile
Contracts and related receivables are excluded from this clause (ii))
in each instance, with the prior written consent of the Majority
Lenders, such consent not to be unreasonably withheld, PROVIDED that
notwithstanding any of the foregoing, the GE Sale, the NuVell Sale, the
Crescent Sale, the Fairlane Sale and the Pass Through Sale, each in
accordance with the terms set out in the forms of agreement provided to
the Lenders for each such sale, are permitted sales of assets
hereunder; and (iii) any other sale of assets by the Company, consented
to in writing by the Lenders. The proceeds of any permitted sale of
assets shall be deposited into the Blocked Account unless they are
Excluded Items."
4.12 AMENDMENT TO SUBSECTION 7.2. Subsection 7.2 of the Loan Agreement
(Minimum Cash Balance) is hereby amended by deleting the figure "$500,000"
appearing therein and replacing it with the figure "$250,000."
4.13 AMENDMENT TO SUBSECTION 7.3. Subsection 7.3 of the Loan Agreement
(Minimum Net Worth) is hereby amended by deleting it in its entirety.
4.14 AMENDMENT TO SUBSECTION 7.5. Subsection 7.5 of the Loan Agreement
(Limitation on Quarterly Losses) is hereby deleted in its entirety.
4.15 AMENDMENT TO SUBSECTION 7.6. Subsection 7.6 of the Loan Agreement
(Minimum Servicing Balance) is hereby amended by deleting it in its entirety.
4.16 AMENDMENT TO SECTION 9. Section 9 of the Loan Agreement
(Definition) is hereby amended by including the following definitions in
alphabetical order:
"ACTUAL MONTH: shall have the meaning set forth in Section 1.8(b)
hereof."
"AMENDED TERM LOAN(S): shall have the meaning set forth in Section
1.2(a) hereof."
"AMENDED TERM LOAN FACILITY: shall have the meaning set forth in
Section 1.1 hereof."
"AMENDED TERM NOTE(S): shall have the meaning set forth in Section 1.3
hereof."
"AVAILABLE TERM LOAN COMMITMENT: shall have the meaning set forth in
Section 1.2(a) hereof."
"CASH FLOW PAYMENT": shall have the meaning set forth in Section 1.8
hereof."
"CRESCENT SALE: shall have the meaning set forth in Section 7.1(n)
hereof."
"EXCLUDED ITEMS: shall have the meaning set forth in Section 1.2(c)."
"GE SALE: shall have the meaning set forth in Section 6.1 hereof."
"FAIRLANE: shall have the meaning set forth in Section 6.1(o) hereof."
"FAIRLANE SALE: shall have the meaning set forth in Section 6.1(n)
hereof."
"MATURITY DATE: shall have the meaning set forth in subsection 1.5(b)
hereof."
"NET FREE CASH FLOW: shall have the meaning set forth in Section 1.8(b)
hereof."
"NON-OWNED EXCLUDED ITEM shall have the meaning set forth in subsection
1.2 hereof."
"NUVELL SALE: shall have the meaning set forth in Section 6.1(n)
hereof."
"PASS THROUGH SALE: shall have the meaning set forth in Section 6.1(o)
hereof."
"PENS: shall have the meaning set forth in Section 6.5 hereof."
"RISRS: shall have the meaning set forth in Section 6.5 hereof."
"STANWICH SUBORDINATED DEBT: shall have the meaning set forth in
Section 6.5 hereof."
SS.5. RATIFICATION AND CONFIRMATION OF LOAN AGREEMENT AND SECURITY
DOCUMENTS; UPDATED SCHEDULES AND EXHIBITS.
(a) The Borrower acknowledges and agrees with the Lenders that for all
purposes of this Forbearance Agreement, the Loan Agreement, the Notes and the
respective Security Documents, as the context permits or requires:
(i) The terms "Loan Agreement" and "Agreement" shall mean the
Loan Agreement, as amended through the date of the Forbearance
Agreement, and as the same may be further amended, restated and/or
extended from time to time;
(ii) The term "Notes" shall mean the Amended Term Notes, as
amended and extended through the date of the Forbearance Agreement, and
as the same may be further amended, restated and/or extended from time
to time;
(iii) The terms "Security Documents" and "Security Document"
shall mean the several Security Documents, as amended through the date
of this Forbearance Agreement, and as each such Security Document may
hereafter be amended, restated and/or extended from time to time;
(iv) The terms "Secured Obligations" and/or "Obligations" shall
include the Amended Term Loans heretofore or hereafter made by the
Lenders pursuant to the Loan Agreement, together with interest thereon
and all fees and expenses owing under the Agreement, the Amended Term
Notes and/or under the Security Documents, together with all other
obligations of any nature of the Company to the Lenders; and
(v) All Indebtedness of the Borrower to the Lenders in respect
of the Loan Agreement and the Amended Term Notes, whether now existing
or hereafter arising, shall be secured by and entitled to the benefits
of each of the Security Documents.
(b) Except to the extent specifically amended hereby, and, with respect
to the Security Documents, as such are simultaneously being amended and
confirmed, the Loan Agreement, the Amended Term Notes and each of the Security
Documents shall be unaffected hereby and shall continue in full force and
effect. As so amended, the Loan Agreement, the Amended Term Notes, each of the
Security Documents and the rights of the Agent and the Lenders and the
obligations of the Borrower thereunder, are hereby ratified, affirmed and
approved in all respects by the Borrower.
(c) The Loan Agreement is amended by adding to the respective Schedules
attached thereto the additional information or modifications set forth on the
corresponding Schedules submitted herewith. The Borrower represents and warrants
to the Lenders that the information set forth on the respective Schedules
attached to the Loan Agreement or hereto, as the case may be, is true and
complete in all material respects.
(d) The Exhibits to the Loan Agreement are hereby amended by inserting
a new EXHIBIT B-1 (Form of Amended Term Note), attached hereto.
SS.6. FORBEARANCE; ACKNOWLEDGMENT OF EXISTING EVENTS OF DEFAULT.
(a) Subject to the Borrower's compliance with the terms and conditions
of this Forbearance Agreement, and PROVIDED that no Forbearance Event of Default
shall have occurred, the Lenders shall forbear from enforcing their rights under
the Loan Documents until September 15, 2000. The Borrower acknowledges and
agrees that the provisions of this SS.6 relate solely to the Lenders' agreement
(subject to the terms and conditions hereof) to forbear from exercising their
existing rights and remedies in respect of Existing Events of Defaults under the
Loan Documents and are not, and shall in no way be deemed or construed as, a
waiver by the Lenders of such Existing Events of Default or any other Event of
Default now existing or occurring subsequent to the date hereof.
(b) The Borrower acknowledges and confirms to the Lenders that the
Borrower is in default of its obligations under the Loan Agreement by reason of
the occurrence of the Existing Events of Default listed on EXHIBIT A hereto. The
Borrower acknowledges and agrees with the Lenders that the Lenders' forbearance
agreement hereunder relates solely to the Existing Events of Default and to NO
OTHER defaults or Events of Default, now existing or hereafter arising and now
known or unknown to the Lenders. The Borrower acknowledges and agrees with the
Lenders that by reason of the occurrence of the Existing Events of Default, the
Lenders are currently entitled to exercise the full range of their rights and
remedies against the Borrower under the Loan Documents, without defense or
counterclaim of any kind on the part of the Borrower.
SS.7. FORBEARANCE FEE. The Borrower shall pay the Agent (for the
ratable benefit of the Lenders) a forbearance fee (the "FORBEARANCE FEE") of
$300,000 which Forbearance Fee shall be earned in full as of the execution of
this Forbearance Agreement. One-half of the Forbearance Fee shall be paid to the
Agent on the date the Cash Flow Payment is made for the month of October 1999
and the balance shall be paid to the Agent in three equal monthly installments
of $50,000 on the 15th of each month beginning on April 15, 2000. If the Amended
Term Loans and all other Obligations have been repaid in full prior to the due
date for any deferred portion of the Forbearance Fee, such deferred portion
shall be waived by the Lenders.
SS.8. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to
induce the Lenders to enter into this Agreement, the Borrower represents,
covenants and warrants to the Lenders as follows:
(a) AUTHORITY, ETC. The execution and delivery by the Borrower of this
Forbearance Agreement and the performance of its obligations hereunder have been
duly authorized by all necessary action and do not and will not (i) violate any
provision of any law, rule, regulation, order, judgment, injunction, decree or
determination applicable to the Borrower or of the Borrower's charter or (ii)
result in a breach of or constitute a default under any agreement, lease or
instrument to which the Borrower is a party or by which it may be bound or
affected.
(b) BINDING OBLIGATION. This Agreement, the Amended Term Notes, the
Loan Documents and each other agreement executed by the Borrower in connection
herewith or therewith constitute legal, valid and binding obligations of the
Borrower.
(c) LOAN DOCUMENTS. Except as indicated in EXHIBIT A hereto, the
Borrower is in compliance in all material respects with the covenants contained
in the Loan Documents and the representations and warranties in each of the Loan
Documents (except those that expressly relate to an earlier date) are true and
correct in all material respects on the date hereof. The Borrower's principal
place of business is as set forth in subsection 4.3 hereof and, except as
disclosed on EXHIBIT C hereto, there are no other locations at which any
Collateral is located.
(d) NO APPROVAL. No authorization, consent, approval, license,
exemption or filing or registration with, any court or governmental authorize,
agency or instrumentality is or will be necessary to the valid execution,
delivery or performance by the Borrower of this Forbearance Agreement or any
documents executed pursuant hereto.
(e) SECURITY DOCUMENTS. Each Security Document is effective to grant to
the Lenders a legal, valid, enforceable and first priority perfected security
interest in all right, title and interest of the Borrower in the Collateral
described therein; no further action or filing is required in order to perfect
the Lenders' security interest.
(f) OTHER DEBT. (i) The Borrower hereby warrants and represents that
the outstanding balance of the following debt (including principal, accrued but
unpaid interest and any fees) as of the date hereof is as follows:
RISRS $20,000,000
PENS $20,000,000
Stanwich Subordinated Debt $21,500,000
Xxxxxx Subordinated Debt plus
Xxxxx Xxxxxx Subordinated Debt $30,000,000
Other Debt $ -0-
(other than debt arising in
the ordinary course of the
Borrower's business)
Accrued interest on the above-
described debt $ 427,000
(ii) The Borrower hereby warrants and represents to the Lenders that the
Borrower is not in default of any of the debt referred to in paragraph (i)
above.
(g) PRELIMINARY STATEMENT. The statements contained in the Preliminary
Statement of this Forbearance Agreement are true and correct.
SS.9. COVENANTS. Until such time as the Borrower shall have paid its
Obligations to the Lenders in full, the Borrower covenants and agrees with the
Lenders that the Borrower shall comply with all of the terms and conditions
contained in the Loan Documents, as amended hereby, including but not limited to
the following covenants:
(a) RESTRICTED PAYMENTS. The Borrower shall not make any Restricted
Payment other than (i) payments of scheduled interest ONLY on the PENS, RISRS,
Stanwich Subordinated Debt, Xxxxxx Subordinated Debt and the Xxxxx Xxxxxx
Subordinated Debt; and (ii) payments with respect to the repurchase or
redemption of the RISRS, subject to the limitations set forth in subsection 6.5,
as amended hereby, PROVIDED that none of the foregoing payments shall be
permitted after the occurrence of a Forbearance Event of Default;
(b) MONTHLY REPORTS. The Borrower shall provide the Agent, within
twenty (20) days of each month-end, with (i) unaudited consolidated balance
sheets of the Borrower and its Subsidiaries and related unaudited consolidated
and consolidating statements of income and surplus and cash flows, (ii) a
Compliance Certificate and (iii) an accounts payable report for the Borrower and
its Subsidiaries;
(c) WEEKLY REPORTS. The Borrower shall provide the Agent on each
Wednesday, with a report of the Borrower's cash disbursements and cash receipts
versus projections along with a forecast of the Borrower's next twelve weeks of
cash disbursements;
(d) NOTIFICATION OF ACCOUNT DEBTORS. Within twenty (20) days of the
date hereof the Borrower shall notify each of its account debtors (other than
account debtor in so far as they relate to Excluded Items) to remit all future
payment of invoices directly to the Blocked Account;
(e) OTHER LIENS. The Borrower shall not create or suffer to exist any
new lien, security interest, or other charge or encumbrance, or any type of
preferential arrangement, or grant a negative pledge to any other party, upon or
with respect to any of its real or personal property or stock, whether now owned
or hereafter acquired, PROVIDED that the Borrower shall be permitted to grant
purchase money mortgages, liens and other security interests, including Capital
Leases, created in respect of property acquired by the Company after the date
hereof or existing in respect of property so acquired prior to the date hereof,
PROVIDED that (i) each such lien shall at all times be confined solely to the
item of property so acquired, and (ii) the aggregate principal amount of
indebtedness secured by all such liens incurred after the date hereof shall at
no time exceed $500,000;
(f) EXAMINATION OF BORROWER'S BOOKS. The Borrower shall permit the
Lenders to examine the Borrower's books on demand, at the Lenders' discretion.
Any such examination shall be at the Borrower's expense;
(g) FINANCIAL CRISIS MANAGEMENT. In the event of a Forbearance Event of
Default, the Borrower hereby agrees to employ a financial crisis manager chosen
by the Borrower, subject to the Lenders' approval, which approval shall not be
unreasonably withheld;
(h) FSA AGREEMENT. The Borrower shall notify the Agent in writing
immediately upon the occurrence of a default or Insurance Trigger (as defined
therein) under the FSA Agreement, as amended;
(i) REPURCHASE OBLIGATIONS. The Borrower shall notify the Agent in
writing if it incurs any liquidated repurchase obligations under the GE Sale,
Nuvell Sale, Crescent Sale, Fairlane Sale or Pass Through Sale;
(j) INDEBTEDNESS. The Borrower shall notify the Agent, in writing, of
the terms of any new Indebtedness to be incurred by the Borrower five days prior
to the Borrower's incurrence of such Indebtedness; and
(k) FORBEARANCE FEE. The Borrower shall pay the Forbearance Fee on the
schedule set forth in SS.7.
SS.10. CONDITIONS PRECEDENT. The obligations of the Lenders hereunder
are subject to the satisfaction (or written waiver) on or prior to execution
hereof by the Lenders, of the following conditions precedent, time being of the
essence hereof:
(a) The Borrower shall be in compliance with all the terms, covenants
and provisions contained herein, and all representations and warranties
contained herein shall be true in all material respects, and the Lenders shall
have received a certificate signed by an officer of the Borrower to the
foregoing effect;
(b) All corporate and legal proceedings and all instruments in
connection herewith and therewith shall be satisfactory in form and substance to
the Lenders and their counsel and the Lenders shall have received all
information and all documents and certificates (corporate and other) which the
Lenders may reasonably have requested in connection herewith, such documents
properly certified by proper corporate or governmental authorities;
(c) The Borrower shall deliver to the Agent a duly executed Landlord
Waiver relating to its principal place of business in a form acceptable to the
Lenders;
(d) The Borrower shall have entered into an amendment with its
agreement with Financial Security Assurance ("FSA") (the "FSA AGREEMENT"),
satisfactory in form to the Lenders, whereby FSA agrees to cap the amount of
cash retained in each of the Spread Accounts at no more than twenty-one percent
(21%);
(e) The Borrower shall have executed and delivered to the Lenders
Amended Term Notes in the form attached hereto as EXHIBIT B-1;
(f) The Borrower shall have delivered to the Lenders written
acknowledgment of the terms of this Forbearance Agreement by the holders of (i)
the Stanwich Subordinated Debt and (ii) the Xxxxxx Subordinated Debt and the
April Subordinated Debt;
(g) The Borrower shall have delivered to the Lenders an executed copy
of unanimous written consent of the Borrower's Board of Directors authorizing
the Borrower's execution of (A) the Forbearance Agreement, including but not
limited to the consent to the appointment of a receiver included in SS.15 hereof
and (B) the Amended Term Notes in the aggregate principal amount of $29,562,500;
(h) The Borrower shall have delivered to the Agent an executed Excess
Cash Flow Certificate for the month of October 1999, PROVIDED that for purposes
of the Borrower's Excess Cash Flow calculation for the month of October, 1999
the $1,500,000 of additional Stanwich Subordinated Debt received by the Borrower
in October 1999 shall not be included in the Borrower's cash receipts;
(i) No event or circumstance shall have occurred which could have a
Material Adverse Effect; and
(j) The Lenders shall have received all such other agreements,
information and certificates as the Lenders shall have reasonably requested,
including but not limited to, the side letter executed by the Company in favor
of the Lenders.
SS.11. CASH COLLATERAL ACCOUNT. In the event the aggregate balance of
the Amended Term Loans together with all unpaid interest, fees and unreimbursed
expenses owed by the Borrower to the Lenders is less than the balance of funds
in the Cash Collateral Account, the Agent is hereby authorized to liquidate the
Cash Collateral Account and use the proceeds thereof to repay the Obligations.
The foregoing right shall not affect, limit or impair in any manner the other
rights and remedies of the Agent or the Lenders set forth in this Forbearance
Agreement.
SS.12. FURTHER ASSURANCES, ETC. The Borrower agrees to take any action
and to execute and deliver any additional documents which the Lenders may
reasonably request in order to obtain and enjoy the full rights and benefits
granted to the Lenders by the Loan Documents or this Forbearance Agreement.
SS.13. FORBEARANCE EVENTS OF DEFAULT. Each of the following events
(each a "FORBEARANCE EVENT OF DEFAULT" and collectively the "FORBEARANCE EVENTS
OF DEFAULT") shall constitute an Event of Default under this Agreement and each
of the Loan Documents (whether or not such is an event of default therein):
(a) PAYMENT. The Borrower fails to make any payment required to be made
to the Lenders or the Agent under this Forbearance Agreement or the Loan
Agreement including but not limited to the Cash Flow Payments required by
subsection 1.8(b)(ii) of the Loan Agreement; or
(b) REPRESENTATIONS. Any representation or warranty made by, or on
behalf of, the Borrower in this Forbearance Agreement or in any certificate or
other document delivered in connection herewith shall prove to have been untrue
or incorrect in any material respect; or
(c) COVENANTS. The Borrower shall fail to fully perform or comply with
any term, covenant or provisions of this Forbearance Agreement (including
without limitation those under SS.7 or SS.9 hereof); or
(d) BANKRUPTCY, ETC. The Borrower shall become insolvent or fail to pay
its debts as they mature, or the Borrower shall be adjudicated as bankrupt or
insolvent, or any case or proceeding shall be commenced by or against the
Borrower in bankruptcy or liquidation or for its reorganization or readjustment
of the indebtedness of the Borrower under any applicable bankruptcy or
insolvency laws, or any receiver, administrator, liquidator or trustee or
similar official shall be appointed for the Borrower or any of its property, or
the Borrower shall make an assignment for the benefit of creditors, or any
similar event shall take place with respect to the Borrower or the Borrower
shall sell all or a substantial part of its assets, whether in a single
transaction or a series of transactions; or
(e) MATERIAL ADVERSE EFFECT. There shall have occurred any event,
circumstance or condition that the Lenders, in their sole discretion, believe
could have a Material Adverse Effect; or
(f) DEFAULT UNDER FSA AGREEMENT. There shall have occurred a default or
Insurance Agreement Event of Default under the FSA Agreement (as defined
therein); or
(g) LOAN DOCUMENTS. There shall have occurred any Event of Default
under or as defined in any of the Loan Documents (OTHER THAN the Existing Events
of Default in the amounts listed on EXHIBIT A), subject to any notice and cure
periods set forth in such Loan Documents; or
(h) SUBORDINATED DEBT. (i) The Borrower shall make any Restricted
Payment not expressly authorized in this Forbearance Agreement, including
without limitation, any principal payment in respect of Subordinated Debt other
than the payments with respect to the repurchase or redemption of the RISRS,
subject to the limitations set forth in subsection 6.5, as amended hereby; and
(ii) the Borrower shall default under any of the Subordinated Debt; or
(i) EXCESS CASH FLOW CERTIFICATE. The Borrower fails to (A) deliver an
executed Excess Cash Flow Certificate on the 15th day of each month or (B) make
any required Cash Flow Payment.
SS.14. REMEDIES. Immediately, on and after the occurrence of any
Forbearance Event of Default and in each case without any demand, presentment,
notice and/or other action of any nature by the Lenders (all of which are hereby
expressly waived by the Borrower), (a) all Obligations shall be immediately due
and payable and the Lenders shall be immediately and permanently relieved of
their forbearance obligations set forth herein; (b) all funds in the Cash
Collateral Account shall be applied against the outstanding balance of the
Obligations; (c) the Lenders may proceed to enforce their rights under and in
respect of this Forbearance Agreement and the Loan Documents including but not
limited to the rights set forth in SS.15 hereof; and (d) the Lenders shall be
free to avail themselves of all other rights and remedies available under
applicable law. The failure of the Lenders to insist upon the strict performance
of any term, condition or other provision hereof or to exercise any right or
remedy hereunder shall not constitute a waiver by the Lenders of any such term,
condition or other provision or Event of Default (including but not limited to
the Existing Events of Default) or Forbearance Event of Default in connection
therewith; and any waiver of any such term, condition or other provision of any
such Event of Default or Forbearance Event of Default shall not affect or alter
this Agreement or the other Loan Documents, and each and every term, condition
and other provision of this Forbearance Agreement and the other Loan Documents
shall, in such event, continue in full force and effect and shall be operative
with respect to any other then existing or subsequent Event of Default or
Forbearance Event of Default in connection therewith.
SS.15. CONSENT TO APPOINTMENT OF RECEIVER. WITHOUT DEROGATING FROM ANY
RIGHT, REMEDY OR OTHER PROVISION CONTAINED IN THE LOAN AGREEMENT, THE
FORBEARANCE AGREEMENT OR ANY OTHER SECURITY DOCUMENT, UPON TEN DAYS' NOTICE
AFTER THE OCCURRENCE OF A FORBEARANCE EVENT OF DEFAULT, THE LENDERS SHALL HAVE
THE RIGHT TO APPLY FOR AND HAVE A RECEIVER APPOINTED BY A COURT OF COMPETENT
JURISDICTION IN ANY ACTION TAKEN BY THE LENDERS TO ENFORCE THEIR RIGHTS AND
REMEDIES HEREUNDER IN ORDER TO MANAGE, PROTECT AND PRESERVE THE COLLATERAL AND
CONTINUE THE OPERATION OF THE BUSINESSES OF THE BORROWER, OR TO SELL OR DISPOSE
OF THE COLLATERAL, AND TO COLLECT ALL REVENUES AND PROFITS THEREOF AND APPLY THE
SAME TO THE PAYMENT OF ALL EXPENSES AND OTHER CHARGES OF SUCH RECEIVERSHIP,
INCLUDING THE COMPENSATION OF THE RECEIVER, SAID EXPENSES TO CONSTITUTE PART OF
THE SECURED OBLIGATIONS, AND TO THE PAYMENT OF THE SECURED OBLIGATIONS AS
AFORESAID. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, THE BORROWER HEREBY
IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE CONTEST
THE APPOINTMENT OF RECEIVER AS PROVIDED ABOVE. THE BORROWER (I) GRANTS SUCH
WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF
WITH COUNSEL, (II) ACKNOWLEDGES THAT (A) THE UNCONTESTED RIGHT TO HAVE A
RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE
LENDERS IN CONNECTION WITH THE ENFORCEMENT OF THEIR RIGHTS AND REMEDIES
HEREUNDER AND UNDER THE LOAN DOCUMENTS, AND (B) THE AVAILABILITY OF SUCH
APPOINTMENT AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR
IN INDUCING THE LENDERS TO FORBEAR HEREUNDER; AND (III) TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW, AGREES TO ENTER INTO ANY AND ALL STIPULATIONS IN
ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN CONNECTION WITH THE
FOREGOING AND TO COOPERATE FULLY WITH THE LENDERS IN CONNECTION WITH THE
ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL OR ANY PORTION OF
THE COLLATERAL.
SS.16. WAIVERS BY BORROWER; BANKRUPTCY MATTERS.
(a) WAIVER OF JURY TRIAL, ETC. THE BORROWER HEREBY WAIVES ANY RIGHTS
THAT IT MAY HAVE TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIMS ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. Except as prohibited by law which cannot be
waived, the Borrower hereby waives any right that it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages.
(b) BANKRUPTCY MATTERS; HEARING. IN THE CASE OF ANY FORBEARANCE EVENT
OF DEFAULT ARISING BY VIRTUE OF ANY BANKRUPTCY PROCEEDING INVOLVING THE
BORROWER, THE BORROWER COVENANTS AND AGREES THAT, UPON THE OCCURRENCE OF SUCH
FORBEARANCE EVENT OF DEFAULT, ANY OBLIGATION OF THE LENDERS TO CONTINUE TO
FORBEAR SHALL TERMINATE AS PROVIDED HEREIN, AND THE LENDERS SHALL BE ENTITLED TO
AN EMERGENCY HEARING (ON TWO (2) BUSINESS DAYS' NOTICE) ON ANY MOTION WHICH THEY
MAY FILE SEEKING A GENERAL LIFTING OF THE STAY TO ENFORCE THEIR RIGHTS AND TO
FORECLOSE ON ALL OF THEIR SECURITY INTERESTS. NOTHING HEREIN SHALL CONSTITUTE A
WAIVER BY THE BORROWER OF ANY DEFENSE TO THAT MOTION WHICH IT IS ENTITLED TO
ASSERT IN ANY BANKRUPTCY PROCEEDING.
(c) ACKNOWLEDGMENTS. The Borrower hereby (i) certifies that no
representative, agent or attorney of the Lenders has represented, expressly or
otherwise, that the Lenders would not, in the event of litigation, seek to
enforce the foregoing waivers (or any other waivers or other provisions
contained in this Agreement or in any of the Loan Documents) and (ii)
acknowledges that the Lenders have been induced to enter into this Forbearance
Agreement by, among other things, the waivers, agreements and certifications set
forth herein.
SS.17. FEES, ETC. The Borrower agrees to pay all reasonable expenses,
fees and disbursements of counsel for the Lenders which the Lenders have
incurred or may hereafter incur in connection with the Borrower's defaults under
the Loan Agreement, the preparation of this Agreement, the Loan Documents and
all other documents related hereto and thereto (including any amendment, consent
or waiver hereunder or thereunder) and the transactions contemplated hereby or
thereby or the enforcement of the rights of the Lenders hereunder or under the
Loan Documents in the event of a default hereunder or thereunder or any
"workout" of their obligations to the Lenders. All such expenses, fees and
disbursements shall constitute "Obligations" and shall be secured by the
Collateral. The Borrower shall pay all then current expenses, fees and
disbursements of the Lender's counsel upon the execution of this Forbearance
Agreement.
SS.18. SETOFFS, ETC. Without limiting, affecting or impairing in any
manner the Lenders' and the Agent's rights and remedies set forth herein in any
way, if any Forbearance Event of Default occurs, any Indebtedness from the
Lenders' to the Borrower, including but not limited to amounts on deposit in the
Cash Collateral Account, may, without regard to the value or adequacy of the
Collateral, be offset and applied toward the payment of any Indebtedness from
the Borrower to the Lenders, whether or not such Indebtedness, or any part
thereof, shall then be due.
SS.19. NOTICES. All notices, consents, requests, approvals,
instructions and other communications provided for herein and/or the Loan
Documents shall be in writing and validly given or made when delivered
personally, or mailed by registered or certified mail, or sent by overnight
courier, or by facsimile transmission (when confirmation of receipt thereof is
received) to the party entitled or required to receive the same at the addresses
set forth in the Loan Agreement (PROVIDED THAT any notice to the Agent shall be
delivered to the attention of Xxxx Xxxxxx AND Xxxxxxx X. Xxxxx, XX at the
address for the Agent set forth on the signature page), or at such other address
as any party hereto may subsequently furnish in writing to the other party.
SS.20. NO WAIVERS, ETC. Except to the extent the Lenders have agreed to
forbear pursuant to this Forbearance Agreement, the Lenders may enforce their
rights to the fullest extent permitted under this Agreement, the other Loan
Documents and/or applicable law. Neither this Forbearance Agreement nor the
compliance of the Lenders herewith shall be deemed or construed to be a waiver
of any right or remedy to which the Lenders may now or hereafter be entitled
against the Borrower, except to the extent herein otherwise explicitly provided.
Except to the extent herein otherwise explicitly provided, the provisions of the
Loan Documents and all related agreements shall continue in full force and
effect. The failure of the Lenders to insist upon the strict performance of any
term, condition or other provision hereof or to exercise any right or remedy
hereunder shall not constitute a waiver by the Lenders of any such term,
condition or other provision or Event of Default (including but not limited to
the Existing Events of Default) or Forbearance Event of Default in connection
therewith; and any waiver of any such term, condition or other provision of any
such Event of Default or Forbearance Event of Default shall not affect or alter
this Agreement or the other Loan Documents, and each and every term, condition
and other provision of this Agreement and the other Loan Documents shall, in
such event, continue in full force and effect and shall be operative with
respect to any other then existing or subsequent Event of Default or Forbearance
Event of Default in connection therewith.
SS.21. MISCELLANEOUS. (a) COUNTERPARTS, SUCCESSORS, GOVERNING LAW, ETC.
This Forbearance Agreement may be executed in multiple counterparts, each of
which shall be considered an original but all of which shall constitute one and
the same agreement. One or more counterparts may be delivered via telecopier;
any such telecopied counterpart shall have the same force and effect as an
original counterpart hereof. The Forbearance Agreement shall be binding and
inure to the benefit of each of the parties hereto, and their respective
successors, heirs, legal representatives and assigns, PROVIDED THAT the Borrower
may not assign its rights and obligations without the Lenders' prior written
consent. This Forbearance Agreement is solely for the purpose, and shall have
the sole effect, of defining the relative rights and obligations of the parties
hereto and may not be relied upon or enforced by any person not a party hereto;
no Person shall have third-party beneficiary rights hereunder.
This Forbearance Agreement shall be construed in accordance with and
governed by the internal laws of Massachusetts (without giving effect to
conflicts of laws principles) and is being executed as a sealed instrument under
Massachusetts law. In addition to the extent that it may lawfully do so, the
Borrower hereby consents to service of process, and to be sued, in Massachusetts
and consents to the jurisdiction of the courts of Massachusetts and the U.S.
District Court for the District of Massachusetts, as well as to the jurisdiction
of all courts to which an appeal may be taken from such courts, for the purpose
of any suit, action or other proceeding arising out of any of its obligations
hereunder or under the Loan Documents or with respect to the transactions
contemplated hereby or thereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Borrower further agrees that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address provided on the signature
page or as otherwise provided under the laws of Massachusetts or the
jurisdiction in which suit is brought.
(b) AMENDMENTS AND WAIVERS. Any term of this Forbearance Agreement or
of the Loan Documents may be amended and the observance of any term of this
Forbearance Agreement may be waived only with the written consent of each party
hereto.
(c) CONSTRUCTION. The parties acknowledge and agree that this
Forbearance Agreement shall not be construed in favor of one party more than the
other(s) based upon which party drafted (or caused to be drafted) the same.
Headings contained herein are included for convenience of reference only and
shall not constitute a part or to affect the meaning or interpretation of this
Forbearance Agreement. This Forbearance Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all other negotiations, understandings and representations made by and among
such parties. No course of dealing, course of performance, trade usage or parole
evidence of any nature shall be used to supplement or modify any terms of this
Forbearance Agreement.
(d) SURVIVAL OF REPRESENTATIONS. All representations and warranties
made herein and/or in certificates delivered pursuant hereto by the Borrower
shall survive the execution and delivery hereof, and shall continue in full
force and effect with respect to the date as of which made so long as any
Obligation is outstanding.
(e) STATUTE OF LIMITATIONS; TIME OF ESSENCE. Any statute of limitations
applicable to any remedy of the Lenders under the Loan Documents or any
applicable law shall be suspended and tolled until such time as the Lenders'
forbearance obligation terminates. Time shall be of the essence with respect to
each and every undertaking and obligation of the Borrower set forth herein.
(f) SPECIFIC PERFORMANCE, ETC. The Borrower stipulates that the
Lenders' remedies at law, in the event of any default or threatened default by
the Borrower in the performance of or compliance with any of the terms and
provisions of this Forbearance Agreement on its part to be observed or
performed, are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or therein or by an injunction against a violation of any of
the terms or provisions hereof, thereof or otherwise.
(g) SEVERABILITY. The unenforceability of any provision of this
Forbearance Agreement shall not affect the validity, binding effect and
enforceability of any other provision or provisions of this Forbearance
Agreement; PROVIDED, HOWEVER, that if any provision of this Forbearance
Agreement is declared unenforceable against the Borrower for any reason by any
court or governmental body having jurisdiction, all agreements, consents and
waivers of the Lenders set forth herein shall, at the option of the Lenders, be
deemed null and void AB INITIO, and the Lenders shall, at their election, be
restored to the position they would have occupied, with all rights available to
them as though such agreements, consents and waivers had never been made.
(h) INDEMNIFICATION. In addition to any indemnification obligations
contained in any of the Loan Documents, the Borrower agrees to indemnify the
Lenders and hold the Lenders and each of the Released Parties harmless from and
against any and all claims, damages, losses, liabilities, judgments and expenses
(including without limitation all reasonable counsel fees and expenses and
litigation expenses) which the Lenders may incur or which may be asserted
against it in connection with or arising out of any investigation, litigation or
proceeding which arises out of the transactions contemplated hereby or by the
Loan Documents (or any action or inaction by the Lenders hereunder or
thereunder) or which otherwise involves the Borrower or any shareholder or any
affiliate of the Borrower, whether or not the Lenders are party thereto, other
than claims, damages, losses, liabilities or judgments with respect to any
matter as to which the Lenders shall have been finally adjudicated (a) not to
have acted in good faith or (b) to have acted in a grossly negligent manner. The
provisions of this paragraph shall survive payment of all Obligations to the
Lenders. Promptly upon receipt by any party hereunder of notice of the
commencement against such party of any action, such indemnified party shall, if
a claim in respect thereof is to be made against the Borrower hereunder, notify
the Borrower in writing of the commencement thereof, PROVIDED THAT the failure
to provide such notice shall not limit any party's right to indemnification
unless and to the extent such failure shall have adversely affected the
Borrower.
(i) ARMS'-LENGTH TRANSACTION. The Borrower recognizes, stipulates and
agrees that Lenders' actions and relationships with the parties hereto
including, but not limited to, those relationships created or referenced by or
in this Forbearance Agreement, have been and constitute arms-length commercial
transactions, that such actions and relationships shall at all times in the
future continue to constitute arms'-length commercial transactions and that the
Lenders shall not at any time act, be obligated to act, or otherwise be
construed or interpreted as acting as or being the agent, employee or fiduciary
of the Borrower.
(j) NEGOTIATIONS/COUNSEL. The Borrower stipulates and agrees that this
Forbearance Agreement is the product of and results from lengthy arms-length
negotiations among the parties and that neither the Lenders nor any other party
have exerted or attempted to exert improper or unlawful pressure or has in any
way attempted to induce, through threats or otherwise, the execution or delivery
of this Forbearance Agreement. Without in any way limiting the foregoing, each
of the parties hereto stipulates and agrees that at all times during the course
of the negotiations surrounding the execution and delivery of this Forbearance
Agreement, they have, to the extent deemed necessary or advisable in their sole
discretion, been advised and assisted by competent counsel of their own
choosing, that such counsel has been present and participated in the
negotiations surrounding this Agreement and that they have been fully advised by
such counsel of the effect of each term, condition, provision and stipulation
contained herein.
(k) PARTIAL INVALIDITY. The invalidity or unenforceability of any one
or more phrases, clauses or sections of this Forbearance Agreement shall not
affect the validity or enforceability of the remaining portions of it.
(l) ENTIRE AGREEMENT. This Forbearance Agreement, the Amended Term
Notes, the other Loan Documents, the other Security Documents and the other
documents and agreements executed in connection herewith constitute the final
agreement of the parties hereto and supersede any prior agreement or
understanding, written or oral, with respect to the matters contained herein and
therein.
This Forbearance Agreement is a "LOAN DOCUMENT" as such term is defined
in the Loan Agreement.
EXECUTED as a sealed instrument as of the date first above written.
CONSUMER PORTFOLIO SERVICES, INC.
By:_______________________________
(Title)
Address:___________________
___________________
___________________
STATE STREET BANK AND TRUST COMPANY, INDIVIDUALLY AND AS AGENT
By: ________________________________________
(Title)
Address: 000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
THE STRUCTURED FINANCE HIGH YIELD FUND, LLC
By: ________________________________________
(Title)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ________________________________________
(Title)
ACKNOWLEDGED
------------
STANWICH FINANCIAL SERVICES CORP.
By: ________________________________________
(Title)
XXXXXX XXXXXXXXX CAPITAL PARTNERS
II, L.P.
By: ________________________________________
(Title)
