Exhibit 4
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is entered into as of
the 15th day of March 2000 (this "Agreement"), by and among CONSUMER PORTFOLIO
SERVICES, INC., a California corporation (the "Company"), XXXXXXX X. XXXXXXX,
XX., an individual ("X. X. Xxxxxxx, Xx."), XXXXXXX X. XXXXXXX, XX., an
individual ("X.X. Xxxxxxx, Xx." and, together with X.X. Xxxxxxx, Xx., the
"Bradleys"), and XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a California
limited partnership ("LLCP").
RECITALS
A. The parties and XXXXXXX X. XXXXX, an individual ("Xxxxx"), entered into
that certain Investor Rights Agreement dated as of November 17, 1998, as amended
by a First Amendment to Investor Rights Agreement dated as of April 15, 1999 (as
so amended, the "Original Investor Rights Agreement"), pursuant to which, among
other things, the Company and the Senior Officers (as such term is defined
therein) granted to LLCP certain investment monitoring, management, tag-along
and other rights and benefits, respectively, all as more fully described
therein.
B. The Company and LLCP are entering into that certain Amended and
Restated Securities Purchase Agreement dated of even date herewith (the
"Securities Purchase Agreement") pursuant to which, among other things, on the
date hereof, the Company is issuing and selling to LLCP, and LLCP is purchasing
from the Company, a Secured Senior Note Due 2001 in the principal amount of
$16,000,000, and the Company and LLCP are amending and restating the Amended
November 1998 Primary Note and the April 1999 Note into one Amended and Restated
Secured Senior Note Due 2003 in the principal amount of $30,000,000, all on the
terms and subject to the conditions set forth therein and in the Related
Agreements. Unless otherwise indicated, capitalized terms used herein shall have
the meanings set forth in the Securities Purchase Agreement.
C. In connection with the transactions contemplated by the Securities
Purchase Agreement, the parties wish to amend and restate the Original Investor
Rights Agreement on the terms and subject to the conditions set forth herein.
The execution and delivery of this Agreement is a condition precedent to the
consummation of the transactions contemplated by the Securities Purchase
Agreement.
D. In addition, Xxxxx, who was formerly a Senior Vice President and the
Chief Financial Officer of the Company, is currently a party to the Original
Investor Rights Agreement. Effective May 31, 1999, Xxxxx resigned from the
Company. Accordingly, the parties and Xxxxx have agreed to remove Xxxxx as a
party to the Original Investor Rights Agreement, to release him from any and all
of his liabilities or obligations thereunder and not to include him as a party
to this Agreement.
AGREEMENT
In consideration of the mutual covenants and agreements set forth herein,
and for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby amend and restate the Original Investor
Rights Agreement as follows:
1. INVESTMENT MONITORING/MANAGEMENT RIGHTS.
1.1 Election of LLCP Representative to Board.
(a) At the written request of LLCP from time to time, the Company
shall take all such steps (whether corporate or otherwise) as may be required or
appropriate to cause any individual designated by LLCP to be its representative
(the "LLCP Representative") on the Board of Directors of the Company (the "Board
of Directors") to be duly appointed or elected to the Board of Directors,
effective as of the close of business on the fifth day following receipt by the
Company of such written request. In addition, at any future election of
directors, the Company agrees to nominate the then current LLCP Representative
(or any other individual designated by LLCP) for election as a director and
shall otherwise use its best efforts to cause the LLCP Representative to be
elected to and remain as a member of the Board of Directors unless and until the
LLCP Representative resigns from the Board of Directors.
(b) In furtherance of the foregoing, each of X.X. Xxxxxxx, Xx. and
X.X. Xxxxxxx, Xx. agree to vote any and all shares of Common Stock as to which
he has the right to vote and shall, to the extent he has the power to do so,
cause each of his respective Affiliates to vote, all of his, its or their shares
of Common Stock as to which such Affiliate has the right to vote, for the
election of the LLCP Representative at each election of directors; provided,
however, that it shall not constitute a violation of this covenant to the extent
that a pledgee of any such shares of Common Stock acquires the right to vote
such shares pursuant to the terms of any pledge agreement under which such
shares have been pledged by X.X. Xxxxxxx, Xx., X.X. Xxxxxxx, Xx. or any of their
respective Affiliates, as the case may be (including, without limitation, the
BofA Pledge Agreements (as such term is defined in Section 5.1(d)). In the event
of the death or resignation of the LLCP Representative at any time, or in the
event the LLCP Representative shall not be elected to the Board of Directors at
any election of directors for any reason, the Company shall, upon request of
LLCP, promptly (and in any event within five (5)
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days of such request), take such steps as may be necessary, including, without
limitation, increasing the size of the Board of Directors and filling the
resulting vacancy with an LLCP Representative, as may be necessary to cause the
LLCP Representative to become a member of the Board of Directors. To the extent
that the Board of Directors delegates any of its duties to an executive
committee or other similar committee, the LLCP Representative shall, upon
request, be elected to such committee.
(c) The agreement to vote provided in this Section 1.1 is intended
to constitute an enforceable voting agreement within the scope of Section 706 of
the General Corporation Law of the State of California and is coupled with an
interest.
1.2 Observation Rights. If, at any time, no LLCP Representative is serving
on the Board of Directors for any reason, LLCP shall receive notice of and be
entitled to have one (1) representative and one advisor to such representative
(or, at LLCP's election, two (2) representatives) attend as observers at all
meetings of the Board of Directors and of all committees thereof and at all
meetings of the shareholders of the Company. Notice of such meetings shall be
given to LLCP in the same manner and at the same time as that given to the
members of the Board of Directors or such committees (which shall not be less
than 48 hours prior to such meeting unless otherwise agreed to by LLCP) and at
the same time as to the shareholders of the Company, as the case may be. LLCP
shall be provided with copies of (i) a meeting agenda, if any is prepared, (ii)
all information which is provided to the members of the Board of Directors or
such committees or to the shareholders of the Company (whether prior to, at, or
subsequent to any such meetings), as the case may be, at the same time as such
materials are provided to the members of the Board of Directors or such
committee or to the shareholders of the Company, as the case may be, and (iii)
copies of the minutes of all meetings of the Board of Directors and such
committees and of all meetings of shareholders concurrently with the
distribution of such minutes to one or more members of the Board of Directors or
such committees or shareholders, as the case may be, but in no event later than
forty-five (45) days after each such meeting.
1.3 Operating Committee.
(a) The Company shall establish an operating committee (the
"Operating Committee") to, among other things, (i) review the monthly operating
and capital plan of the Company and its subsidiaries for the next fiscal year,
(ii) compare budgeted versus actual performance, and (iii) analyze the Company's
capital needs over the 12 months following each meeting. The Operating Committee
shall also consider such additional financial matters as the Operating Committee
shall deem advisable. The Operating Committee shall not constitute a committee
designated by the Board of Directors pursuant to the Company's Bylaws or Section
311 of the California Corporations Code, and shall not have any authority to act
in the
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name of or on behalf of the Company or any Subsidiary, but the Operating
Committee shall have the right to make suggestions and to recommend actions to
the Board of Directors or to the Board of Directors of any Subsidiary of the
Company or to any committee of any such Board of Directors, either in writing or
by attending, through a representative, a meeting of such Board of Directors or
such committee.
(b) The Operating Committee shall at all times be comprised of two
(2) members of senior management of the Company, who shall be the President and
Chief Executive Officer of the Company and the Chief Financial Officer (or
principal accounting officer) of the Company, and two (2) members designated by
LLCP. The President and Chief Executive Officer of the Company and the Chief
Financial Officer (or principal accounting officer) of the Company currently are
X.X. Xxxxxxx, Xx. and Xxxxx X. Stock, respectively. The Company shall cause
other members of its senior management to be available at each meeting of the
Operating Committee to review financial information and discuss other matters.
(c) Regular meetings of the Operating Committee shall take place on
or about the fourth Wednesday of each month (or the next succeeding Business
Day, if the fourth Wednesday is not a Business Day).
(d) The financial statements and other materials to be discussed at
each monthly meeting described in Section 1.3(c) will consist of the materials
included in the monthly information package delivered by the Company to the
members of its Board of Directors and to LLCP as provided in Section 8.2(j) of
the Securities Purchase Agreement.
1.4 Intentionally Omitted.
1.5 Termination of Rights Under Section 1.1, 1.2 and 1.3. LLCP's rights
under Sections 1.1, 1.2 and 1.3 shall continue so long as (a) any Indebtedness
or other amounts remain outstanding under the Notes or (b) LLCP continues to
hold, directly or indirectly, five percent (5.0%) or more of the number of
shares of Common Stock outstanding; provided, however, that LLCP's rights under
Sections 1.1, 1.2 and 1.3 shall nevertheless continue for a period of two (2)
years after the date upon which all Indebtedness and other amounts under the
Notes are paid in full and LLCP holds less than five percent (5.0%) of the
outstanding shares of Common Stock if LLCP informs the Company in writing that
it believes in good faith that it is required to retain such rights to qualify
as a "venture capital operating company" for purposes of complying with the
requirements of ERISA.
1.6 Indemnification and Insurance. The Company shall, to the maximum
extent permitted by Applicable Laws, indemnify and hold harmless the LLCP
Representative, each LLCP representative on the Operating Committee, LLCP and
LLCP's employees, general and
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limited partners, principals, agents, attorneys, accountants, representatives
and Affiliates (collectively, the "LLCP Parties") from all costs, expenses,
liabilities, claims, damages and losses, including without limitation,
attorneys' fees and the cost of any investigation and preparation incurred in
connection therewith (collectively, "Liabilities and Costs"), arising out of or
in any way related to the fact that any LLCP Party is or was a director or other
agent of the Company or any Subsidiary of the Company, served on the Operating
Committee or, while a director or other agent, is or was serving at the request
of the Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise. Upon request by any LLCP Party, the Company shall advance
(within ten (10) Business Days of such request) any and all expenses, including,
without limitation, any and all attorneys' fees and the cost of any
investigation and preparation incurred in connection with any matter for which
such LLCP Party is or may be entitled to indemnification hereunder; provided,
that, if and to the extent that a court of competent jurisdiction finally
determines that such LLCP Party is not permitted to be indemnified with respect
to such matter under Applicable Laws, the Company shall be entitled to
reimbursement of any expenses so advanced. The Company shall also indemnify each
LLCP Party from and against any and all Liabilities and Costs incurred in
connection with any claim or action brought to enforce such LLCP Party's rights
under this Section 1.6, or under Applicable Laws or the Company's Articles of
Incorporation or Bylaws now or hereafter in effect relating to indemnification,
or for recovery under directors' and officers' liability insurance policies
maintained by the Company, regardless of whether such LLCP Party is ultimately
determined to be entitled to such indemnification or insurance recovery, as the
case may be. If for any reason the foregoing indemnification is not available
for any reason or is not sufficient to indemnify and hold the LLCP Parties
harmless from all such Liabilities and Costs, then the Company shall contribute
to the amount of all such Liabilities and Costs paid or payable by any LLCP
Party in such proportion as is appropriate to reflect not only the relative
benefits received by the Company, on the one hand, and LLCP, on the other hand,
but also the relative fault of each, as well as any other equitable
considerations. The Company's reimbursement, indemnity and contribution
obligations shall be in addition to any liability the Company may otherwise have
at law or under any other agreement, including without limitation, the
Securities Purchase Agreement, and such obligations shall extend, upon the same
terms, to all LLCP Parties. This Section 1.6 shall survive indefinitely the
termination of this Agreement. At any time that an LLCP Representative is
serving on the Board of Directors, the Company shall maintain in force and
effect one or more insurance policies providing at least $10,000,000 in
insurance coverage for director liability, including coverage for claims under
federal and state securities laws. The Company represents and warrants to LLCP
that it currently maintains in effect one or more insurance policies providing
at least $10,000,000 in insurance coverage for director liability, including,
without limitation, coverage for claims arising under federal and state
securities laws.
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2. TAG ALONG RIGHTS.
2.1 Tag Along Right. Subject to the provisions of Section 2.8, in the
event that X.X. Xxxxxxx, Xx. or any entity "controlled" by him (within the
meaning of the definition of Affiliate in the Securities Purchase Agreement)
(each a "Selling Holder") receives a bona fide offer from any Person (the
"Buyer") to purchase any shares of Common Stock from such Selling Holder and
such Selling Holder desires to sell or otherwise transfer any such shares of
Common Stock pursuant to such bona fide offer, then LLCP shall be given an
opportunity to sell or otherwise transfer to the Buyer LLCP's Pro Rata Share
(determined in accordance with Section 2.2 and Section 3.3) of any shares of
Common Stock which the Buyer agrees to purchase held or beneficially owned by
LLCP as provided in this Agreement (the "Tag Along Rights").
2.2 TAR Offer. At least fifteen (15) days prior to the consummation of any
sale or other transfer by a Selling Holder of any shares of Common Stock, the
Selling Holder shall cause the bona fide offer from the Buyer to purchase or
otherwise acquire such Selling Holder's shares to be reduced to a writing (the
"TAR Offer") and shall deliver to LLCP written notice of the TAR Offer, together
with a true copy of the TAR Offer (the "TAR Notice"). Each TAR Offer shall
require the Buyer to offer to purchase or otherwise acquire from LLCP, at the
same time, at the same price and on the same terms as apply to the sale or other
disposition by the Selling Holder to the Buyer and according to the terms and
subject to the conditions of this Agreement, not less than the number of LLCP
Shares held by LLCP as shall be equal to the product of (i) the total number of
shares of Common Stock which the Buyer desires to purchase or otherwise acquire,
multiplied by (ii) a fraction, the numerator of which is the total number of
LLCP Shares on the date of the TAR Notice and the denominator of which is the
total number of shares of Common Stock held on such date by the Selling Holder
plus the total number of LLCP Shares. Pursuant to Section 2.4, the Selling
Holder may then sell to the Buyer the number of shares of Common Stock remaining
after the shares of Common Stock to be sold by LLCP are subtracted from the
total number of shares of Common Stock which the Buyer desires to purchase or
otherwise acquire. For example, if a Buyer offers to purchase 100,000 shares of
Common Stock from X. X. Xxxxxxx, Xx., and he desires to accept such offer, then
the aggregate number of Shares which LLCP shall be entitled to sell to the Buyer
upon the exercise of the Tag Along Rights shall be equal to 100,000, multiplied
by the total number of LLCP Shares, divided by the sum of the total number of
LLCP Shares plus the total number of shares of Common Stock held by X.X.
Xxxxxxx, Xx. In no event shall LLCP be required to make any representation or
warranty in connection with the sale to any Buyer other than as to organization
and authority of LLCP, title to the shares of Common Stock to be sold by LLCP,
and the absence of conflict with laws or material agreements of LLCP.
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2.3 Acceptance Notice. If LLCP desires to accept the TAR Offer with
respect to any LLCP Shares, LLCP shall deliver to the Selling Holder within
fifteen (15) days after receipt of the TAR Notice by LLCP, a written notice
stating such acceptance of the TAR Offer and setting forth the number of shares
of LLCP Shares that LLCP desires to sell to the Buyer (the "Acceptance Notice").
If LLCP does not deliver an Acceptance Notice to the Selling Holder in
accordance with the provisions of this Section 2.3, LLCP shall be deemed to have
rejected the TAR Offer. The timely delivery of the Acceptance Notice shall
constitute LLCP's agreement to sell to the Buyer the lesser of (a) the number of
LLCP Shares which LLCP is entitled to sell to the Buyer pursuant to this Section
2 and (b) the number of LLCP Shares which LLCP desires to sell to the Buyer as
set forth in the Acceptance Notice. The Acceptance Notice shall also include (i)
a written undertaking of LLCP to deliver, at least two (2) Business Days prior
to the expected date of the consummation of such sale or other disposition to
the Buyer as indicated in the TAR Notice, such documents (including stock
assignments and stock certificates, if any) as shall be reasonably required to
transfer the LLCP Shares to be sold by LLCP to the Buyer pursuant to the TAR
Offer and (ii) a limited power-of-attorney authorizing the Selling Holder to
transfer such shares to the Buyer pursuant to the terms of the TAR Offer.
2.4 Consummation. If there is a decrease in the price to be paid by the
Buyer for the shares to be purchased from the price set forth in the TAR Offer,
which decrease is acceptable to the Selling Holder, or any other material change
in terms which are less favorable to the Selling Holder but which are acceptable
to the Selling Holder, the Selling Holder shall immediately, but in any event
within two (2) Business Days, notify LLCP of such decrease or other change, and
LLCP shall have five (5) Business Days from the date of receipt of the notice of
such decrease to modify the number of shares of Common Stock it will sell to the
Buyer, as previously indicated in the applicable Acceptance Notice, or decline
the TAR Offer. If the Selling Holder does not complete any proposed sale or
other transfer for any reason, the Selling Holder shall immediately return to
LLCP all documents (including stock assignments and stock certificates, if any)
and powers-of-attorney which LLCP delivered to the Selling Holder pursuant to
this Section 2 or otherwise in connection with such sale or other transfer.
2.5 Closing. The delivery of the stock certificate by the Selling Holder
and LLCP to the Buyer in consummation of the sale of shares of Common Stock
pursuant to the terms and conditions specified in the TAR Offer, and the payment
by the Buyer to the Selling Holder and LLCP in immediately available funds of
that portion of the sale proceeds to which the Selling Holder and LLCP are
respectively entitled by reason of their participation in such sale shall occur
simultaneously at a closing at the principal office of the Company, or such
place as the Buyer and the selling parties may agree, at a time and at a date
mutually agreeable to the Buyer and the selling parties.
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2.6 Subsequent Offering. The exercise or non-exercise of the Tag Along
Rights by LLCP with respect to any sale or transfer shall not affect adversely
the right of LLCP to exercise the Tag Along Rights with respect to any
subsequent sale or transfer.
2.7 Prohibited Sale. In the event of any purported sale of shares of
Common Stock by X.X. Xxxxxxx, Xx. or any of his Affiliates in contravention of
this Section 2 (a "Prohibited Transfer"), LLCP shall have the right to (i)
require that the Company, or the Company's transfer agent, not enter such
transfer on the books and records of the Company or (ii) sell to the Selling
Holder the number of shares of Common Stock equal to the number of LLCP Shares
that LLCP could have otherwise sold in connection with the sale by the Selling
Holder on the following terms and conditions:
(a) The price per share which such shares are to be sold to such
Selling Holder shall be equal to the price per share paid to such Selling
Holder by the Buyer of such Selling Holder's shares of Common Stock;
(b) LLCP shall deliver to such Selling Holder within not more than
ten (10) business days after receiving notice from such Selling Holder of
the Prohibited Transfer, the certificate or certificates representing the
shares of Common Stock to be sold, each certificate being properly
endorsed for transfer; and
(c) Such Selling Holder, upon receipt of the share certificates
delivered pursuant to Section 2.7(b) above, shall within one (1) business
day pay in cash (regardless of the form of consideration paid to such
Selling Holder by the Buyer) the purchase price therefor, by wire transfer
to such account as directed by LLCP or such other means of payment as is
directed by LLCP, and shall reimburse LLCP for any additional expenses,
including legal fees and expenses, incurred in effecting such purchase and
resale.
2.8 Permitted Transfers. Notwithstanding the foregoing, the following
transactions shall not be subject to the provisions of this Section 2: (i) sales
in a public offering registered under the Securities Act of 1933, as amended
(the "Act"); (ii) sales pursuant to Rule 144 or any similar successor rule
promulgated under the Act; (iii) sales of shares of Common Stock which do not
constitute "restricted securities" as such term is defined in Rule 144(a)(3) to
the extent X.X. Xxxxxxx, Xx. is not an affiliate of the Company at the time of
such sale; (iv) sales effected pursuant to a margin call by a broker holding
shares of Common Stock as collateral for a margin account; (v) the pledge of
shares pursuant to the terms of a bona fide pledge agreement to secure
obligations of X.X. Xxxxxxx, Xx., provided that no more than 600,000 shares are
subject to pledge at any time (which number shall be reduced by the number of
shares sold as permitted by the
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following clause (vi)); (vi) sales effected by a bona fide pledgee pursuant to
the terms of a pledge agreement permitted under the foregoing clause (v); (vii)
sales by the estate of the holder to a spouse or other family member ("Family
Member") within one year of the holder's death; (viii) transfers to a trust for
the benefit of a Family Member of the transferor, or to an executor,
administrator or other personal representative pending distribution to such
Family Member or trust; or (ix) by inter vivos transfer to a Family Member of
the transferor or to a trust primarily for the transferor's benefit or the
benefit of a Family Member of a transferor; provided, however, that the
transferee in each of the foregoing clauses (vii), (viii) and (ix) shall be
bound by the provisions of this Agreement with respect to such transferred
shares and shall, upon request, execute and deliver to LLCP and the Company an
instrument, in form and substance reasonably acceptable to LLCP, agreeing to be
bound by the provisions of this Agreement with respect to any future transfer.
Notwithstanding the foregoing, if X.X. Xxxxxxx Xx. sells any shares of Common
Stock as contemplated by clauses (i) through (vi) above, the purchaser or
transferee of such shares shall not be bound by any obligations under this
Agreement.
2.9 Termination of Tag-Along-Rights. The Tag-Along-Rights provided for in
this Section 2 shall terminate in their entirety at such time as the number of
LLCP Shares owned or held, directly or indirectly, by LLCP is less than three
percent (3%) of the total number of shares of Common Stock then outstanding.
2.10 Representation, Warranty and Covenant of X.X. Xxxxxxx, Xx. X.X.
Xxxxxxx, Xx. shall give LLCP written notice within two (2) days in the event
that he purchases or otherwise acquires, directly or indirectly, any shares of
Common Stock (excluding shares purchased or otherwise acquired by X.X. Xxxxxxx,
Xx. in the open market) after the date hereof, which shares shall, upon such
purchase or other acquisition, be legended as required by Section 5.1 (to the
extent required to be so legended pursuant to Section 5.1) and shall immediately
become subject to the terms and provisions of this Section 2. X.X. Xxxxxxx, Xx.
represents and warrants to LLCP that he has not purchased or otherwise acquired,
directly or indirectly, any such shares since November 17, 1998.
3. RIGHTS UPON ISSUANCE OF ADDITIONAL SECURITIES.
3.1 Right to Purchase. The Company shall not issue any Common Stock or
Equity Rights without first offering in writing to LLCP the right to purchase at
the same price applicable to such issuance (which offer must remain open for a
period of at least thirty (30) days) an amount of such newly-issued equity
securities equal to LLCP's pro rata share of the newly-issued equity securities
such that, if LLCP exercised its right to first refusal in full, its pro rata
share would not have changed from its Pro Rata Share (as defined below) prior to
such issuance.
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3.2 Exceptions. Section 3.1 shall not apply to: (i) the issuance of any
equity security by the Company pursuant to a public offering registered under
the Act, provided such security is listed at the time of issuance on a
recognized national securities exchange or on the NASDAQ National Market, (ii)
the issuance of Common Stock upon the exercise or conversion of any Equity
Rights (A) which are outstanding as of the date of November 17, 1998 or (B)
which are issued after November 17, 1998 in compliance with the provisions of
this Section 3, (iii) the issuance of the Stanwich Replacement Note and the
Xxxxx Replacement Note, and, in each case, the issuance of any securities issued
upon the conversion thereof, (iv) the issuance of any Equity Rights granted
pursuant to the Option Pool (as such phrase is defined below) or the issuance of
Common Stock issued upon the exercise of any such Equity Rights or (v) the
issuance of the FSA Warrant, and any shares of Common Stock issued or issuable
upon the exercise of the FSA Warrant.
3.3 Definitions. As used in this Section, the following terms shall have
the meanings indicated:
(a) "Pro Rata Share" as of a specified date shall mean the percentage
equal to the fraction, the numerator of which is the number of shares of Common
Stock held by LLCP or issuable upon the exercise of Equity Rights held by LLCP
as of such date and the denominator of which is the sum of (i) the number of
shares of Common Stock outstanding as of such date, plus (ii) the number of
shares of Common Stock issuable upon the exercise of Equity Rights outstanding
as of such date (but only to the extent such Equity Rights are exercisable as of
such date).
(b) "Equity Rights granted pursuant to the Option Pool" shall mean any
Equity Rights to purchase shares of Common Stock granted by the Company, whether
before or after the date of this Agreement, to directors, officers and key
employees of the Company or of any affiliate of the Company under a plan adopted
or to be adopted by the Board of Directors or the shareholders of the Company,
including, without limitation, the Company's 1991 Stock Option Plan, as amended,
and the Company Stock Plans, at an exercise price per share that is not less
than the fair market value of the shares of Common Stock as of the date of
grant, as determined by the Board of Directors in good faith and approved (i) in
the case of a grant to any officer (other than a senior executive officer) or
employee of the Company who is not a member of the Board of Directors, by a
majority vote of the Board of Directors, and (ii) in the case of any grant to a
senior executive officer or member of the Board of Directors, by the unanimous
vote of the members of the Board of Directors who are not being granted or
receiving such Equity Rights, unless such grant (and the number of shares of
Common Stock issuable upon exercise thereof) is consistent with past grants by
the Company to such member, in which case by a majority vote of the Board of
Directors.
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3.4 Termination. This Section 3 shall terminate on the earlier to occur of
(i) the seventh anniversary date of this Agreement and (ii) the date upon which
the number of LLCP Shares directly or indirectly held by LLCP is less than five
percent (5.0%) of the number of shares of Common Stock then outstanding.
4. COVENANTS OF THE BRADLEYS.
4.1 Protection and Use of Confidential Information. Each Xxxxxxx severally
acknowledges and agrees that, in the course of the performance of his duties for
the Company, he has or will come into the possession of confidential information
which is valuable to the Company by virtue of the fact that such information is
not generally known to the public or to the Company's competitors ("Confidential
Information"). The Confidential Information includes, but is not limited to,
trade secrets, business records, vendor lists, dealer lists, information
concerning financing sources, information concerning employees, information
concerning the Company's products and services, technical data, know how,
specifications, processes, computations, development work, business plans,
financial projections and other internal financial information, pricing
information, information concerning the Company's sales and marketing programs,
training materials and computer programs and routines. Each Xxxxxxx severally
agrees that (i) he will not, at any time either during or after his employment
with the Company, in any manner, either directly or indirectly divulge, disclose
or communicate any Confidential Information to any Person, (ii) he will not use
any Confidential Information for his own benefit or for any other purpose other
than for the exclusive benefit of the Company and its Subsidiaries, (iii) all
Confidential Information is and shall remain the exclusive property of the
Company, (iv) upon the termination of his employment with the Company, he will
not, without the prior written approval of the Company, keep or remove any
books, drawings, documents, records or other written or printed, photographic,
encarded, taped, electrostatically or electromagnetically encoded data or
information of whatever nature of the Company, and shall immediately return all
such material and other Company property in his possession to the Company;
provided, however, that the foregoing shall not prohibit any Xxxxxxx from
disclosing Confidential Information (i) to the extent such Xxxxxxx reasonably
believes in good faith that the disclosure of such Confidential Information is
in the best interests of the Company or otherwise necessary or appropriate to
the effective and efficient discharge of such Xxxxxxx'x duties to the Company or
(ii) to the extent such disclosure is required under Applicable Laws or pursuant
to the order of a court or other governmental agency.
4.2 Non-Solicitation. Each Xxxxxxx severally agrees that during any period
during which he is employed by the Company and for a period of five (5) years
after termination of such employment, he shall not, directly or indirectly,
either for himself or for any other Person, (i) hire or offer employment to or
seek to hire or offer employment to, or otherwise engage as an employee or
independent contractor (collectively, an "Employment Offer"), any employee of
the
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Company or any Subsidiary of the Company, or any former employee having been
employed by the Company or any Subsidiary of the Company within one year prior
to such Employment Offer, or in any other way interfere with the relationship
between the Company or any Subsidiary of the Company and any employee of the
Company, or (ii) request, advise or encourage any customer, dealer, financing
source, client, vendor or other person with whom the Company or any Subsidiary
of the Company conducts business to withdraw, curtail, reduce or cancel its
business with the Company.
5. MISCELLANEOUS.
5.1 Legends; Definition.
(a) Each certificate representing the shares of Common Stock now or
hereafter owned by X.X. Xxxxxxx, Xx. shall be endorsed with the following legend
and the legend set forth in Section 5.1(b):
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT BY AND AMONG CONSUMER PORTFOLIO
SERVICES, INC., XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., AND THE
OTHER PARTIES NAMED THEREIN. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
(b) Each certificate representing shares of Common Stock now or
hereafter owned by X.X. Xxxxxxx, Xx. shall be endorsed with the following legend
(provided, however, that (i) after the date upon which all Indebtedness and
other amounts owing under the Notes shall have been indefeasibly paid in full,
(A) X.X. Xxxxxxx, Xx. shall not be obligated to endorse such legend on any such
certificate and (B) his voting obligations under Section 1.1 shall terminate and
(ii) X.X. Xxxxxxx, Xx. shall not be obligated to endorse, and may remove, such
legend on any certificates which represent in the aggregate no more than 400,000
shares of Common Stock which are sold by him in any calendar year pursuant to
any Rule 144 transactions, and the purchaser or transferee of such shares shall
not be bound by any obligations under this Agreement):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
VOTING AGREEMENT AS SET FORTH IN AN AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT BY AND AMONG CONSUMER PORTFOLIO SERVICES, INC.,
XXXXXX
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XXXXXXXXX CAPITAL PARTNERS II, L.P., AND THE OTHER PARTIES NAMED
THEREIN. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY.
(c) The foregoing notwithstanding, a certificate evidencing shares
of Common Stock which were pledged to a third party prior to November 17, 1998,
or pursuant to any BofA Pledge Agreement need not be legended as provided in
this Section 5.1.
(d) For purposes of this Agreement, the term "BofA Pledge
Agreements" shall mean the pledge agreements expected to be entered into by X.X.
Xxxxxxx, Xx., Stanwich Financial Services Corp ("Stanwich") and Stanwich
Partners, Inc. ("SPI"), as pledgors, pursuant to which such pledgors are
expected to pledge to Bank of America, National Association, for itself and as
agent ("BofA"), the following number of shares of Common Stock in connection
with the merger of Stanwich Acquisition Corp. with and into Reunion Industries,
Inc. and the relating financial accommodations to be provided by BofA: X.X.
Xxxxxxx, Xx: 17,000 shares; Stanwich: 553,459 shares; and SPI: 50,832 shares.
5.2 Stock Transfer Records. The Company shall make appropriate notations
in its stock transfer records of the restrictions on transfer provided for in
this Agreement and shall not record any transfers of capital stock not made in
strict compliance with the terms of this Agreement. The Company acknowledges
that any such transfer shall constitute an Event of Default under the Securities
Purchase Agreement.
5.3 Successors and Assigns. The rights and obligations of LLCP under this
Agreement shall be freely assignable in connection with any transfer of the
Warrant or any portion thereof or of any shares of Common Stock issued upon the
exercise thereof in whole or in part; provided, however, that the rights of LLCP
under Section 1 may not be assigned except in connection with any such transfer
to an affiliate of LLCP. Any assignee of such rights shall be entitled to all of
the benefits of this Agreement as if such assignee were an original party
hereto. The rights and obligations of the Bradleys hereunder may only be
assigned, and shall automatically be assigned, to any Person who takes and holds
such shares through a private transaction other than one in which a TAR Offer
was made or by will or by the laws of descent and distribution. Such persons
shall be conclusively deemed to have agreed to and be bound by all the terms and
provisions of this Agreement.
5.4 Entire Agreement. This Agreement and the other agreements referenced
herein or furnished pursuant hereto or thereto or in connection herewith or
therewith constitute the full and entire agreement and understanding between the
parties relating to the subject matter hereof.
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5.5 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to LLCP, to: Xxxxxx Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to any assignee of LLCP: At such assignee's address as shown on the
books of the Company
If to the Company, to: Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address or addresses as LLCP, such assignee or the Company, as
the case may be, may specify by written notice given in accordance with this
Section 5.5.
5.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.8 Descriptive Headings, Construction and Interpretation. The descriptive
headings of the several paragraphs of this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and are not to be
considered in construing or interpreting this Agreement. All section, preamble,
recital and party references are to this Agreement unless otherwise stated. No
party, nor its counsel, shall be deemed the drafter of this Agreement for
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purposes of construing the provisions of this Agreement, and all provisions of
this Agreement shall be construed in accordance with their fair meaning, and not
strictly for or against any party.
5.9 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
5.10 Remedies. In the event that the Company or any Xxxxxxx fails to
observe or perform any covenant or agreement to be observed or performed under
this Agreement, LLCP may proceed to protect and enforce its rights by suit in
equity or action at law, whether for specific performance of any term contained
in this Agreement or for an injunction against the breach of any such term or in
aid of the exercise of any power granted in this Agreement or to enforce any
other legal or equitable right of LLCP, or to take any one or more of such
actions. The Company agrees to pay all fees, costs, and expenses, including,
without limitation, fees and expenses of attorneys, accountants and other
experts retained by LLCP, and all fees, costs and expenses of appeals, incurred
or expended by LLCP in connection with the enforcement of this Agreement or the
collection of any sums due hereunder, whether or not suit is commenced. None of
the rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy whether conferred by this Agreement
or now or hereafter available at law, in equity, by statute or otherwise.
5.11 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
5.12 Removal of Xxxxx as Party. Effective on and as of the Closing Date,
Xxxxx shall no longer be a party to the Original Investor Rights Agreement, as
amended and restated by this Agreement, and shall be released from any and all
liabilities and obligations which are binding on or applicable to Xxxxx
thereunder. Without limiting the generality of the foregoing, the parties
acknowledge and agree that Xxxxx shall no longer be required to agree or consent
to any matters arising under, or with respect to, the Original Investor Rights
Agreement, as amended and restated by this Agreement and as further amended,
supplemented or otherwise modified from time to time, or be a party to this
Agreement.
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5.13 Amendment and Restatement; Full Force and Effect. This Agreement
amends and restates the Original Investor Rights Agreement on and as of the
Closing Date, and the Original Investor Rights Agreement shall remain in full
force and effect as amended and restated hereby. The Original Investor Rights
Agreement, as amended and restated hereby, is hereby ratified and affirmed by
the parties in all respects.
5.14 Waiver of Trial by Jury. EACH PARTY HEREBY WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF, CONNECTED
WITH OR RELATED TO THE SECURITIES PURCHASE AGREEMENT, THIS AGREEMENT OR ANY
OTHER RELATED AGREEMENT, OR ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH
PARTY INITIATES SUCH ACTION OR ACTIONS.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the date first
written above.
COMPANY: CONSUMER PORTFOLIO SERVICES,INC., a
California corporation
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
By: /s/ Xxxxx X. Stock
---------------------------------------------
Xxxxx X. Stock
Vice President and Chief Financial Officer
LLCP: XXXXXX XXXXXXXXX CAPITAL PARTNERS, INC.,
a California corporation
On behalf of XXXXXX XXXXXXXXX CAPITAL
PARTNERS II, L.P., a California limited
partnership
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx, President
X.X. XXXXXXX, XX.: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
X.X. XXXXXXX, XX.: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
ACKNOWLEDGED AND AGREED for purposes of Section 5.12 of this Agreement:
/s/ Xxxxxxx X. Xxxxx
---------------------------------
Xxxxxxx X. Xxxxx
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