Subordination and Intercreditor Agreement
This
Subordination and Intercreditor Agreement (this “Agreement”) is made as of
September 17, 2010, by and among Xxxxx
Fargo Preferred Capital, Inc. (together with its successors and permitted
assigns, “WFPCI”),
individually as a Subordinated Creditor and as Subordinated Creditor
Representative (as hereinafter defined), and Bank
of Montreal, a Canadian chartered bank acting through its Chicago branch
(“BMO”), individually
as a Senior Creditor and as Senior Creditor Representative and as Bank Agent (as
hereinafter defined), Xxxxxx X.X.,
a national banking association (“Xxxxxx”), as Senior Creditor
Collateral Agent (as hereinafter defined) for the Senior Creditors, and World
Acceptance Corporation, a South Carolina corporation (together with its
successors and permitted assigns, the “Borrower”).
Recitals
A. The
Borrower and BMO, as agent for the Senior Lenders hereinafter identified and
defined (BMO in such capacity as agent for the Senior Lenders, and its
successors and assigns in such capacity, being hereinafter referred to as the
“Bank Agent”), have
entered into an Amended and Restated Credit Agreement dated as of
September 17, 2010 (such Amended and Restated Credit Agreement, as the same
may be amended or modified from time to time, including amendments and
restatements thereof in its entirety, being hereinafter referred to as the “Bank Credit Agreement”),
pursuant to which certain banks and financial institutions from time to time
party to the Bank Credit Agreement (such banks and financial institutions being
hereinafter referred to collectively as the “Senior Lenders” and
individually as a “Senior
Lender”) have agreed, subject to certain terms and conditions, to extend
credit and make certain other financial accommodations available to the
Borrower, which obligations are to be guaranteed by the Guarantors (as
hereinafter defined).
B. The
Borrower may from time to time incur Hedging Liability (as such term is defined
in the Bank Credit Agreement) to one or more of the Senior Lenders and their
Affiliates.
C. The
Borrower and WFPCI, as administrative agent for the Subordinated Creditors
hereinafter referred to, and the Subordinated Creditors, are parties to a
Subordinated Credit Agreement dated as of September 17, 2010 (such
Subordinated Credit Agreement, as the same may be amended or modified from time
to time, including amendments and restatements thereof in its entirety, being
hereinafter referred to as the “Subordinated Credit
Agreement”), pursuant to which the Subordinated Creditors have agreed,
subject to certain terms and conditions, to extend credit to the Borrower from
time to time in the aggregate principal amount not to exceed $75,000,000, with
the obligations of the Borrower in respect thereof to be guaranteed by the
Guarantors and evidenced by notes issued by the Borrower (such note(s), and all
notes issued, in whole or in part, in substitution or replacement therefor or in
extension or renewal thereof, as any of the foregoing may from time to time be
modified or amended, being hereinafter referred to as the “Subordinated Promissory
Notes”).
D. As
an inducement to and as one of the conditions precedent to the agreement of the
Senior Lenders under the Bank Credit Agreement, the Senior Lenders have required
the execution and delivery of this Agreement by the Subordinated Creditors (as
hereinafter defined) pursuant to which the Subordinated Creditors agree to
subordinate, in right of payment and claim, on the terms set forth herein, the
Subordinated Debt (as hereinafter defined) and all liens and security therefor
to the Senior Debt (as hereinafter defined) and all liens and security
therefor.
Now,
Therefore, for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions.
The
defined terms in the Recitals set forth above are hereby incorporated into this
Agreement by reference. Capitalized terms used but not otherwise
defined in this Agreement shall have the following meanings:
“Affiliate”, as applied to
any Person, means any other Person directly or indirectly controlling,
controlled by, or under common control with, that Person. For the purposes of
this definition, “control” (including, with correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
“Bankruptcy Code” means Title
11 of the United States Code entitled “Bankruptcy”, as now and hereafter in
effect, or any successor statute.
“Collateral” means all assets
and property of each of the Loan Parties, whether now owned or existing or
hereafter created, acquired, or arising and wherever located, of every kind and
description, tangible or intangible, real or personal property, or mixed,
including but not limited to all accounts, chattel paper, contracts,
instruments, documents, general intangibles, investment property, deposit
accounts, commercial tort claims, inventory, farm products, equipment, fixtures,
and other goods of whatever kind, and real estate, and all rents, issues, and
profits thereof, and all proceeds and products of the foregoing and all
additions and accessions thereto (including, without limitation, proceeds of any
insurance policies maintained on or with respect to any of the foregoing),
including without limitation all collateral pledged or secured by the Senior
Debt Documents or the Subordinated Debt Documents.
“Collateral Records” means
books, records, ledger cards, files, correspondence, customer lists, blueprints,
technical specifications, manuals, computer software, computer printouts, tapes,
disks and related data processing software and similar items that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon.
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“Collection Action” means any
of the following: (a) to xxx for, take, or receive from or on behalf of any
Loan Party, by set-off or in any other manner, the whole or any part of any
moneys which may now or hereafter be owing by any Loan Party with respect to any
Subordinated Debt (excluding receipt of regularly scheduled payments of
principal, interest, commitment fees and such other amounts to the extent not
prohibited to be paid or received hereunder), (b) to initiate or
participate with others in any suit, action, or proceeding against any Loan
Party to (i) enforce payment of or to collect the whole or any part of any
Subordinated Debt or (ii) commence judicial enforcement of any of the
rights and remedies under the Subordinated Debt Documents or applicable law with
respect to any Subordinated Debt or the Collateral, (c) to demand payment
of or accelerate any Subordinated Debt, (d) to exercise any put option or
to cause any Loan Party to honor any redemption or mandatory prepayment
obligation with respect to any Subordinated Debt, or (e) to exercise any
rights or remedies with respect to the Collateral or any part thereof,
including, without limitation, repossessing, selling, leasing or otherwise
disposing all or any part of such Collateral, or exercising notification or
collection rights with respect to all or any portion thereof, or attempting or
agreeing to do so, commencing or prosecuting the enforcement with respect to
such Collateral of any of the rights and remedies under any of the applicable
agreements or documents to which any Subordinated Creditor is a party or
applicable laws, offering or proposing to apply any Subordinated Debt as a
credit on account of the purchase price for any Collateral payable by the
holders of any Subordinated Debt at any public or private sale of the
Collateral, appropriating, setting off, recouping or applying any part or all of
such Collateral in the possession of, or coming into the possession of, any
Subordinated Creditor or its agent or bailee, to such Person’s Subordinated
Debt, or exercising any other rights or remedies of a secured creditor under
applicable law.
“Default” means any
Subordinated Default or Senior Default.
“DIP Financing” has the meaning assigned
to that term in Section 3.10 hereof.
“Guarantors” means and
includes all direct and indirect Subsidiaries of the Borrower, whether now
existing or hereafter formed or acquired, and all other Persons now or from time
to time guaranteeing all or any part of the Senior Debt or the Subordinated
Debt.
“Indebtedness” means the
Subordinated Debt and the Senior Debt, whether or not allowed as a claim in any
Proceeding.
“Lien” means any lien,
mortgage, pledge, assignment, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
“Loan Parties” means the
Borrower and the Guarantors; provided, however, that if
any Guarantor is released from its obligations or is voluntarily dissolved or
liquidated, in each case as permitted by the Senior Debt Documents and, except
as otherwise provided in Section 3.19 below, the Subordinated Debt
Documents, such Guarantor shall no longer constitute a Loan Party
hereunder. All references in this Agreement to any Loan Party shall
include such Loan Party as a debtor-in-possession and any receiver or trustee
for such Loan Party in any Proceeding.
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“Paid in Full” or “Payment in Full” means the
irrevocable termination of all commitments to extend credit that would
constitute Senior Debt, the payment in full in cash of all Senior Debt (except
Unasserted Obligations) up to, in the case of principal, the Senior Debt Limit,
including (without limitation) principal (up to the Senior Debt Limit), premium
(if any), interest, fees, costs, and expenses (including but not limited to
post-petition interest, fees, costs, and expenses even if such interest, fees,
costs, and expenses are not an allowed claim enforceable against any Loan Party
in a bankruptcy case under applicable law).
“Permitted Expense Payments”
means the payment of reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees), in each case as and when due and payable on a
non-accelerated basis in accordance with the terms of the Subordinated Debt
Documents.
“Person” means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, or any other entity or organization, including a
government or agency or political subdivision thereof.
“Proceeding” means any
voluntary or involuntary insolvency, bankruptcy, receivership, custodianship,
liquidation, dissolution, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee, or other officer with
similar powers or any other proceeding for the liquidation, dissolution, or
other winding up of a Person.
“Reorganization Subordinated
Securities” means (a) any equity securities issued in substitution
of all or any portion of the Subordinated Debt that are subordinated in right of
payment to the Senior Debt (or any notes or other securities issued in
substitution of all or any portion of the Senior Debt), and (b) any notes
or other debt securities issued in substitution of all or any portion of the
Subordinated Debt that are subordinated to the Senior Debt (or any notes or
other securities issued in substitution of all or any portion of the Senior
Debt), in each case to the same extent that the Subordinated Debt is
subordinated to the Senior Debt pursuant to the terms of this
Agreement.
“Senior Covenant Default”
means a default in the performance of any term, covenant or condition contained
in any Senior Debt Document or the existence of any condition or the occurrence
of any event, in each case permitting any Senior Creditor to accelerate the
payment of all or any portion of the Senior Debt (whether or not any such
Indebtedness is accelerated).
“Senior Covenant Default
Notice” means a written notice sent by the Senior Creditor Representative
to the Subordinated Creditor Representative pursuant to which the Subordinated
Creditors are notified of the existence of a Senior Covenant
Default.
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“Senior Creditor Collateral
Agent” means Xxxxxx in its capacity as collateral agent for the Senior
Creditors, and its successors and assigns in such capacity.
“Senior Creditor
Representative” means the Bank Agent or such other agent for the Senior
Creditors appointed by the holders of at least 66 2/3% of the Senior Debt then
outstanding. With respect to any Collateral or any guarantees for the
Senior Debt, the parties hereto acknowledge and agree that the Senior Creditor
Collateral Agent is the designated agent of the Senior Creditors and the Secured
Creditor Representative for such purposes.
“Senior Creditors” means and
includes the Senior Lenders, the Bank Agent, Affiliates of the Senior Lenders to
which any Hedging Liability is owed, the Senior Creditor Representative, the
Senior Creditor Collateral Agent, and each and all of the holders at any time
and from time to time of the Senior Debt, in each case together with their
successors and assigns, and including any lender or other financial institution
extending credit to refinance, in whole or in part (but, if in part, with the
prior written consent of the Senior Creditor Representative), the Senior Debt
then outstanding.
“Senior Debt” means
(i) all “Obligations” and all “Hedging Liability,” as such terms are
defined in the Bank Credit Agreement as in effect on the date hereof, including
(x) all principal of and interest on all borrowings and all other credit or
financial accommodations extended under the Bank Credit Agreement, (y) all
fees, charges, costs, expenses (including, without limitation, court costs and
attorneys’ fees), and other amounts payable under, and all other claims
(including, without limitation, claims arising out of breaches of
representations, warranties, or covenants) arising out of and in connection
with, the Bank Credit Agreement and any other indenture, agreement, or other
instrument governing the “Obligations” and “Hedging Liability,” and (z) all
indebtedness, obligations, and liabilities from time to time arising in
connection with any Collateral for or guaranties of the “Obligations” and
“Hedging Liability” (and including in each case post-petition interest, fees,
costs, and expenses even if such interest, fees, costs, and expenses are not an
allowed claim enforceable against any Loan Party in a bankruptcy case under
applicable law), and (ii) any and all deferrals, renewals, extensions, and
refinancings of the foregoing (whether or not with the same Senior Creditors,
provided that in order for any refinancing debt to be entitled to the benefits
of this Agreement, the terms and conditions thereof shall not conflict with
Section 2.11 or any other applicable provision of this Agreement); provided, that, without the
written consent of the holders of 66 2/3% or more of the Subordinated Debt then
outstanding, in no event shall the aggregate principal amount of Senior Debt
(determined exclusive of the aggregate amount of any Hedging Liability) at any
one time outstanding entitled to the benefits of this Agreement exceed the
Senior Debt Limit.
“Senior Debt Documents” means
the Bank Credit Agreement, all promissory notes (if any) issued to the Senior
Lenders pursuant to the Bank Credit Agreement, all agreements creating or
evidencing or otherwise setting forth the terms and conditions applicable to any
Hedging Liability, all guaranties with respect to any Senior Debt, and all other
documents, agreements, and instruments evidencing, securing, guaranteeing, or
otherwise pertaining to all or any portion of the Senior Debt.
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“Senior Debt Limit” means
$350,000,000 less the
amount of any permanent commitment reductions under the Bank Credit
Agreement.
“Senior Default” means any
Senior Payment Default or Senior Covenant Default.
“Senior Payment Default”
means a default in the payment when due (whether by lapse of time, acceleration,
or otherwise) of all or any portion of the Senior Debt.
“Senior Payment Default
Notice” means a written notice sent by the Senior Credit Representative
to the Subordinated Creditor Representative pursuant to which the Subordinated
Creditors are notified of the existence of a Senior Payment
Default.
“Subordinated Creditor
Representative” means WFPCI or such other agent for the Subordinated Creditors appointed by
the holders of 66 2/3% or more of the Subordinated Debt then
outstanding.
“Subordinated Creditors”
means WFPCI and all of the holders at any time and from time to time of the
Subordinated Promissory Notes and the other Subordinated Debt, including any
Subordinated Creditor Representative for such holders, in each case together
with their successors and assigns.
“Subordinated Debt” means all
obligations of the Borrower to the Subordinated Creditors evidenced by the
Subordinated Promissory Notes, all obligations of the Borrower to the
Subordinated Creditors arising under or in connection with the Subordinated
Credit Agreement, and all other indebtedness, obligations, and liabilities now
or hereafter owing by any Loan Party to the Subordinated Creditors under any of
the Subordinated Debt Documents.
“Subordinated Debt Documents”
means the Subordinated Promissory Notes, Subordinated Credit Agreement, all
guaranties with respect to the Subordinated Debt, and all other documents,
agreements, and instruments securing, guaranteeing, or otherwise creating or
evidencing or otherwise setting forth the terms and conditions of all or any
portion of the Subordinated Debt.
“Subordinated Default” means
a default in the payment of all or any portion of the Subordinated Debt or in
the performance of any term, covenant, or condition contained in any
Subordinated Debt Document, in each case permitting any Subordinated Creditor to
accelerate the payment of all or any portion of the Subordinated Debt (whether
or not any such Indebtedness is accelerated).
“Subordinated Default Notice”
means any written notice from the Subordinated Creditor Representative to the
Senior Creditors or the Senior Creditor Representative pursuant to which the
Senior Creditors are notified of the occurrence of a Subordinated
Default.
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“Subsidiary” means any
corporation or other Person more than 50% of the outstanding ordinary voting
shares or other equity interests of which is at the time directly or indirectly
owned by a Borrower, by one or more of its Subsidiaries, or by a Borrower and/or
one or more of its Subsidiaries.
“UCC” means the Uniform
Commercial Code (or any similar or equivalent legislation) as in effect in any
applicable jurisdiction.
“Unasserted Obligations”
means, at any time, obligations for taxes, costs, indemnifications,
reimbursements, damages and other liabilities (except for the principal of and
interest on, and fees relating to, any indebtedness) in respect of which no
claim or demand for payment has been made (or, in the case of obligations for
indemnification, no notice for indemnification has been issued by the
indemnitee) at such time.
Section 2.
Debt Subordination.
2.1.
Subordination of Subordinated
Debt to Senior Debt. The Loan Parties hereby covenant and agree, and the
Subordinated Creditors by their acceptance of this Agreement (or by their
acceptance of any of the Subordinated Debt, whether upon original issue, upon
transfer or assignment, or otherwise) likewise covenant and agree, that the
payment of any and all of the Subordinated Debt shall be subordinate and subject
in right of payment, to the extent and in the manner hereinafter set forth, to
the prior Payment in Full of the Senior Debt. Each holder of Senior
Debt, whether now outstanding or hereafter created, incurred, assumed, or
guaranteed, shall be deemed to have acquired the Senior Debt in reliance upon
the provisions contained in this Agreement.
2.2.
Proceedings.
(a)
Payments. In
the event of any Proceeding involving any Loan Party, (i) all Senior Debt
shall be Paid in Full before any payment of or with respect to the Subordinated
Debt shall be made (other than a distribution of Reorganization Subordinated
Securities which the Subordinated Creditors are hereby specifically authorized
to receive and retain); and (ii) any payment or distribution, whether in
cash, property, or securities which, but for the terms hereof, otherwise would
be payable or deliverable in respect of the Subordinated Debt (other than a
distribution of Reorganization Subordinated Securities which the Subordinated
Creditors are hereby specifically authorized to receive and retain), shall be
paid or delivered directly to the Senior Creditor Representative (to be applied
or otherwise held as collateral security for the Senior Debt in accordance with
the terms of the Senior Debt Documents) until all Senior Debt is Paid in Full,
and the Subordinated Creditors irrevocably authorize, empower, and direct all
receivers, trustees, liquidators, custodians, conservators, and other Persons
having authority in the premises to effect all such payments and
distributions.
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(b)
Voting and Other
Matters. At any meeting of creditors or in the event of any
Proceeding involving any Loan Party, the Subordinated Creditors shall retain the
right to vote, file a proof of claim, and otherwise act with respect to the
Subordinated Debt (including the right to vote to accept or reject any plan of
partial or complete liquidation, reorganization, arrangement, composition, or
extension), provided
that the Subordinated Creditors shall not take any such action which is
inconsistent with the provisions of this Agreement (including, without
limitation, Section 3 hereof) and shall not initiate or prosecute any claim
or action in such Proceeding challenging the enforceability of the Senior Debt,
this Agreement, or any Liens securing the Senior Debt. In the event
any Subordinated Creditor fails to execute, verify, deliver, and/or file any
proofs of claim in respect of its Subordinated Debt in connection with any such
Proceeding prior to 10 business days before the expiration of the time to
file any such proof of claim, each such Subordinated Creditor hereby irrevocably
authorizes, empowers, and appoints the Senior Creditor Representative as such
Subordinated Creditor’s agent and attorney-in-fact to execute, verify, deliver,
and file such proofs of claim and vote such claim in any Proceeding to the
extent permitted by applicable law; provided the Senior Creditor
Representative shall have no obligation to exercise such right or to exercise
any such authority with respect to the claims of any Subordinated Creditor and,
if the Senior Creditor Representative elects to exercise such authority, the
Senior Creditor Representative shall give the Subordinated Creditor
Representative at least one business day’s notice of its intention to do
so. The Senior Creditor Representative may exercise any such right or
exercise any such authority in a manner consistent with the sole interest of the
Senior Creditors and shall have no duty to take any action to maximize any
Subordinated Creditor’s recovery with respect to its claims on the Subordinated
Debt owing to it.
(c)
Reinstatement. The
Senior Debt shall continue to be treated as Senior Debt and the provisions of
this Agreement shall continue to govern the relative rights and priorities of
the Senior Creditors and the Subordinated Creditors even if all or part of the
Senior Debt or the Liens securing the Senior Debt are subordinated, set aside,
avoided, or disallowed in connection with any such Proceeding. This
Agreement shall be reinstated if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by any holder of Senior Debt or
any representative of such holder.
2.3. Restrictions on Payment of
Subordinated Debt.
(a)
Restricted Payments upon
Senior Default. The Subordinated Creditors shall neither be
entitled to nor shall they receive or accept, and no Loan Party shall make, any
payment or distribution with respect to the Subordinated Debt (whether for
principal, interest, premium, or otherwise) (notwithstanding the expressed
maturity or any other time for the payment of any Subordinated Debt) other than
Permitted Expense Payments if, at the time of such payment or immediately after
giving effect thereto:
(i) the Subordinated
Creditor Representative shall have received a Senior Payment Default Notice from
the Senior Creditor Representative stating that a Senior Payment Default exists;
or
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(ii) subject to the last
sentence of this Section 2.3(a), the Subordinated Creditor Representative
shall have received a Senior Covenant Default Notice from the Senior Creditor
Representative stating that a Senior Covenant Default exists or would be created
by the making of such payment and a blockage period is being
invoked.
The
Borrower may resume payments (and may make any payments missed due to the
application of clauses (i) or (ii) above of this Section 2.3) in respect of
the Subordinated Debt:
(1) in the case of a
Senior Payment Default referred to in clause (i) of this
Section 2.3(a), upon a cure or waiver thereof in accordance with the terms
of the Senior Debt Documents or, if the Senior Payment Default resulted in or
from the acceleration of the Senior Debt, upon such acceleration being annulled
or rescinded in accordance with the terms of the Senior Debt Documents;
or
(2) in the case of a
Senior Covenant Default referred to in clause (ii) of this
Section 2.3(a), upon the earlier to occur of (y) the cure or waiver of
all such Senior Covenant Defaults identified in the Senior Covenant Default
Notice in accordance with the terms of the Senior Debt Documents, and
(z) the expiration of 180 days from the date on which
the respective Senior Covenant Default Notice was received by the Subordinated
Creditor Representative in accordance with Section 9 hereof.
Notwithstanding
any provision of this Section 2.3 to the contrary: (x) the
Borrower shall not be prohibited from making, and Subordinated Creditors shall
not be prohibited from receiving, payments under clause (ii) of this Section
2.3(a) for more than an aggregate of 180 days within any period of 360
consecutive days; and (y) no Senior Covenant Default existing on the date
any Senior Covenant Default Notice is given pursuant to clause (ii) of this
Section 2.3(a) (and with respect to which the Senior Creditor
Representative had at that time actual knowledge) shall be used, unless the same
shall have ceased to exist (whether by the waiver or cure thereof) for a period
of at least 60 consecutive days, as a basis for any subsequent Senior
Covenant Default Notice, provided that if, on the date
that any Senior Covenant Default Notice is issued, the Borrower is in default of
one or more of the financial covenants set forth in the Senior Debt Documents,
the Senior Creditor Representative shall be permitted, subject to the other
terms and conditions hereof, to use a subsequent default of the same financial
covenant(s) (i.e., a
default occurring during a subsequent measurement period) as the basis for the
issuance of a subsequent Senior Covenant Default Notice.
(b) Non-Applicability to
Proceeding. The provisions of this Section 2.3 shall not
apply to any payment with respect to which Section 2.2 would be
applicable.
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2.4. Payments Otherwise Permitted.
The failure of any Loan Party to make any payment with respect to the
Subordinated Debt by reason of the operation of Section 2.3 shall not be
construed as preventing the occurrence of a Subordinated Default under the
applicable Subordinated Debt Documents. Nothing contained in this
Section 2 or elsewhere in this Agreement or in the Subordinated Debt
Documents shall prevent any Loan Party at any time, except during the pendency
of any Proceeding referred to in Section 2.2 or under the conditions
referred to in Section 2.3, from making payments, or prevent the
Subordinated Creditors from receiving payments, at any time on account of
Subordinated Debt accrued to and payable on the date of such payment; provided that such payment
constitutes any of the following:
(a) upfront commitment fee
not to exceed $487,500 due under Section 3.3 of the Subordinated Credit
Agreement as in effect on the date hereof;
(b) unused fees accrued to
and payable on the date of any such payment at the rate due under
Section 3.1 of the Subordinated Credit Agreement as in effect on the date
hereof;
(c) interest (including
default interest) on the Subordinated Promissory Notes accrued to and payable on
the date of any such payment at the rate of interest thereon as provided in the
relevant Subordinated Debt Documents;
(d) mandatory principal
prepayments to the extent permitted by, and subject to the terms and conditions
of, Section 2.6 below;
(e) voluntary principal
prepayments to the extent permitted by, and subject to the terms and conditions
of, Section 2.6 below; or
(f) the payment of Permitted
Expense Payments; or
(g) the reimbursement of an
indemnity obligation of the Loan Parties to one or more of the Subordinated
Creditors pursuant to an indemnification provision of the Subordinated Debt
Documents, in each case so long as no Senior Default then exists or would arise
after giving effect to the payment thereof;
in each
case, without giving effect to any provisions of the Subordinated Debt
Documents, including any provisions permitting voluntary prepayment or requiring
mandatory prepayment or redemption, which would have the effect of increasing
the amount, or frequency, of any such payment.
2.5.
Restriction on Action by
Subordinated Creditors. Until the Senior Debt is Paid in Full,
the Subordinated Creditors shall not, without the prior written consent of the
Senior Creditor Representative, take any Collection Action with respect to the
Subordinated Debt, except as expressly permitted in the following sentence or
Section 2.2 or Section 3.2 hereof. Upon the earliest to
occur of:
(a) the passage of
180 days from the date the Senior
Creditor Representative shall have received in accordance with Section 9
hereof a Subordinated Default Notice from the Subordinated Creditor
Representative and of its or any Subordinated Creditor’s intention to take any
Collection Action with respect to any Subordinated Default described therein if
such Subordinated Default shall not have been cured or waived within such period
(herein, the “Standstill
Period”);
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(b) acceleration of the
Senior Debt;
(c) the occurrence of any
Proceeding with respect to any Loan Party or its assets; or
(d) September 17, 2015
(or such later date to which the Maturity Date (as such term is defined in the
Subordinated Credit Agreement) is extended in writing by the Borrower and the
Subordinated Creditors with written notice thereof to the Senior Creditor
Representative);
the
Subordinated Creditors may, upon not less than 5 business days prior
written notice to the Senior Creditor Representative, accelerate the
Subordinated Debt or require the mandatory prepayment thereof or take any other
Collection Action (other than exercising any rights or remedies with respect to
any Collateral, which shall be subject to the terms and conditions of
Section 3 hereof and the other terms of this Agreement, including, without
limitation, Section 3.2 hereof); provided, however, that if
following the acceleration of the Senior Debt as described in clause (b)
above such acceleration is rescinded, then all Collection Actions taken by the
Subordinated Creditors shall likewise be rescinded if such Collection Action is
based solely on clause (b) above. Such 5 business day
notice may be given during the Standstill Period described in clause (a)
above, provided that the Subordinated Creditors shall not be entitled to take
any such actions until the expiration of such Standstill Period with respect to
actions initiated pursuant to clause (a) above. All Collection Actions
taken by the Subordinated Creditors shall at all times be and remain subject to
the terms of this Agreement and any and all payments and collections received by
the Subordinated Creditors in respect of the Subordinated Debt pursuant to any
Collection Action shall be paid over to the Senior Creditor Representative for
application to the Payment in Full of the Senior Debt (whether or not then due)
in such order and manner as set forth in the Bank Credit Agreement or as the
Senior Creditors shall otherwise determine until all Senior Debt is Paid in
Full. Notwithstanding the foregoing, but subject to the terms and
conditions of this Agreement (including, without limitation, Section 3
hereof), the Subordinated Creditors may vote, file proofs of claim, and
otherwise act with respect to the Subordinated Debt in any Proceeding involving
any Loan Party or its assets to the extent permitted by Section 2.2
hereof.
2.6.
Restrictions on Prepayments.
Except as expressly permitted below, under no circumstances shall any
Loan Party be entitled to make, or the Subordinated Creditors be entitled to
demand, take, receive, or retain, any voluntary or mandatory prepayments or
distributions or any voluntary or mandatory repurchase or redemption of any
Subordinated Debt prior to the Payment in Full of the Senior Debt. The Borrower
is permitted to pay, and the Subordinated Creditors are entitled to receive and
retain, voluntarily and mandatory prepayments of Subordinated Debt made under
Section 2.6 of the Subordinated Credit Agreement so long as no Senior
Default then exists under the Senior Debt Documents or would arise after giving
effect to such prepayment (including, without limitation, compliance with all
covenants set forth in Sections 8.7, 8.8, 8.10 of the Bank Credit
Agreement on a pro forma basis after giving effect to such payment) and, in the
case of any mandatory prepayment required under Section 2.6(b) of the
Subordinated Credit Agreement, after first giving effect to any mandatory
prepayment then required under the Bank Credit Agreement. Payments
received by the Subordinated Creditors after acceleration of the Subordinated
Debt or the commencement of a Collection Action otherwise permitted by this
Agreement shall not constitute a prohibited prepayment under this
Section 2.6, provided that any and all
such payments and collections received shall be subject to being paid over to
the Senior Creditor Representative for application to the payment of all Senior
Debt in such order and manner as set forth in the Bank Credit Agreement or as
the Senior Creditors shall otherwise determine until Paid in Full.
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2.7.
Amendment of Subordinated Debt
Documents. Until the Senior Debt is Paid in Full, and notwithstanding
anything contained in the Subordinated Debt Documents to the contrary, the
Subordinated Creditors shall not, without the prior written consent of the
Senior Creditor Representative and the Senior Lenders constituting the Required
Lenders under the Bank Credit Agreement, agree to any amendment, modification or
supplement to the Subordinated Debt Documents the effect of which is
to (i) increase the maximum principal amount of the Subordinated
Debt in excess of $75,000,000 or increase the rate of interest (other than
increases as a result of changes to index rates of interest) on, or any fees or
premium payable on, any of the Subordinated Debt (except nothing herein shall
prevent the Subordinated Creditors from accruing interest at a default rate of
interest to the extent contained in and permitted by the Subordinated Debt
Documents as in effect on the date hereof), (ii) change any date upon which
any payments of principal or interest or fees on the Subordinated Debt are due
to an earlier date, (iii) add or make more restrictive any event of default
or any covenant with respect to any Subordinated Debt, (iv) change any
redemption or prepayment provisions of any Subordinated Debt to an earlier date
or add any additional events requiring such redemption or prepayment,
(v) alter the subordination provisions with respect to any Subordinated
Debt, including, without limitation, subordinating the Subordinated Debt to any
other debt, (vi) take or obtain
any Liens securing the Subordinated Debt or any part thereof or obtain any
guaranties for the Subordinated Debt or any part thereof, other than Liens on
the Collateral granted by the Loan Parties in favor of the Subordinated Creditor
Representative on behalf of the Subordinated Creditors under the Subordinated
Debt Documents so long as the Collateral subject to such Liens also secures the
Senior Debt in accordance with Section 3.5 below and any Subordinated
Creditor’s Lien thereon is junior and subordinated to Liens in favor of the
Senior Creditors and guarantees issued by such Guarantors so long as such
Guarantors also guarantee the payment of the Senior Debt and the rights and
claims of the Subordinated Creditors against such Guarantors are junior and
subordinate to the rights and claims of the Senior Creditors against such
Guarantors as Loan Parties hereunder, in each case subject to the terms and
conditions of this Agreement; or (vii) change or amend any other term of
the Subordinated Debt Documents if such change or amendment would result in a
Senior Default.
2.8.
Incorrect Payments. If
any payment or distribution on account of the Subordinated Debt not permitted to
be made by any Loan Party or received by Subordinated Creditors under this
Agreement is received by Subordinated Creditors before all Senior Debt is Paid
in Full, such payment or distribution shall not be commingled with any asset of
the Subordinated Creditors, shall be held in trust by the Subordinated Creditors
for the benefit of the holders of the Senior Debt, and shall be promptly paid
over to the Senior Creditor Representative for application (in accordance with
the Senior Debt Documents) to the payment of the Senior Debt then remaining
unpaid in such order and manner as set forth in the Bank Credit Agreement or as
the Senior Creditors shall otherwise determine until all of the Senior Debt is
Paid in Full.
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2.9.
Sale Transfer,
etc. The Subordinated Creditors shall not sell, assign,
pledge, dispose of, or otherwise transfer all or any portion of the Subordinated
Debt or any Subordinated Debt Document (a) without giving prior written
notice of such action to the Senior Creditor Representative, and
(b) unless, prior to the consummation of any such action, the transferee
thereof shall execute and deliver to the Senior Creditor Representative an
agreement providing for the continued subordination of the Subordinated Debt to
the Senior Debt as provided herein, for the continued subordination of any Liens
on the Collateral (or any interest therein) securing the Subordinated Debt to
the Liens on the Collateral securing the Senior Debt, and for the continued
effectiveness of all of the rights of the Senior Creditors and holders of the
Senior Debt arising under this Agreement. Notwithstanding the failure
to execute or deliver any such agreement, the subordination effected hereby
shall survive any sale, assignment, pledge, disposition, or other transfer of
all or any portion of the Subordinated Debt, and the terms of this Agreement
shall be binding upon the successors and assigns of the Subordinated
Creditors.
2.10.
Legends. Until the
Senior Debt is Paid in Full, the Subordinated Promissory Notes and any other
Subordinated Debt Document at all times shall contain in a conspicuous manner
the following legend:
This
instrument and the rights and obligations evidenced hereby are subordinate in
the manner and to the extent set forth in that certain Subordination and
Intercreditor Agreement (the “Subordination Agreement”)
dated as of September 17, 2010, among Xxxxx Fargo Preferred
Capital, Inc., as agent for the Subordinated Creditors referred to therein, Bank
of Montreal, as agent for the Senior Creditors referred to therein, and World
Acceptance Corporation, to the Senior Debt described in the Subordination
Agreement, and each holder of this instrument, by its acceptance hereof, shall
be bound by the provisions of the Subordination Agreement.
2.11.
Modifications to Senior Debt.
The Senior Creditors may at any time and from time to time without the
consent of or notice to the Subordinated Creditors, without incurring liability
to the Subordinated Creditors and without impairing or releasing the obligations
of the Subordinated Creditors under this Agreement, change the manner or place
of payment or extend the time of payment of or renew or alter any of the terms
of the Senior Debt, or amend in any manner any agreement, note, guaranty or
other instrument evidencing, securing, guaranteeing, or otherwise relating to
the Senior Debt (provided it being understood that nothing herein shall be
deemed a waiver or consent by the Subordinated Creditors to any Loan Party under
any Subordinated Debt Document with respect to any of the foregoing); provided that, without the
written consent of the holders of 66 2/3% or more of the Subordinated Debt then
outstanding, the Senior Creditors will not (a) increase the pre-default
interest rates applied to the unpaid principal balance of Senior Debt from time
to time outstanding by more than 2.0% per annum above the interest rate formulas
currently provided for in the Bank Credit Agreement (except to the extent the
Subordinated Creditors are permitted to increase their pre-default interest
rates by a like amount), and the post-default interest rates applied to the
unpaid principal balance of Senior Debt from time to time outstanding shall not
be increased above the interest rate formulas currently provided for in the Bank
Credit Agreement, (b) increase the maximum principal amount that can be
borrowed under the Senior Debt Documents above the Senior Debt Limit, or
(c) amend or modify the Senior Debt Documents so as to expressly restrict
the payment of Subordinated Debt otherwise permitted to be paid hereunder in a
manner that is more restrictive than the restrictions currently provided for
herein or in the Bank Credit Agreement as in effect on the date
hereof.
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2.12.
Default
Notices. The Borrower shall provide the Senior Creditor
Representative and the Senior Creditors with written notice promptly after the
occurrence of any Subordinated Default, and shall notify the Senior Creditor
Representative and the Senior Creditors in the event such Subordinated Default
is cured or waived. The Borrower shall provide the Subordinated
Creditor Representative and the Subordinated Creditors with written notice
promptly after the occurrence of any Senior Default, and shall notify the
Subordinated Creditor Representative and the Subordinated Creditors in the event
such Senior Default is cured or waived.
2.13. Defined Rights of Creditors;
Borrower Obligations Unconditional. The provisions of this
Section 2 are solely for the purpose of defining the relative rights of
Subordinated Creditors and the holders of the Subordinated Debt, and the rights
of the Senior Creditors and holders of Senior Debt, and shall not be deemed to
create any rights or priorities in favor of any other Person, including, without
limitation, the Loan Parties. As between the Loan Parties and the
Subordinated Creditors, nothing contained herein shall impair the unconditional
and absolute obligation of the Loan Parties to the Subordinated Creditors to pay
the Subordinated Debt as such Subordinated Debt shall become due and payable in
accordance with the Subordinated Debt Documents. The failure of any
Loan Party to make any payment due to a Subordinated Creditor as a result of the
operation of this Agreement shall not prevent the occurrence of a Subordinated
Default as a result of such failure.
2.14.
Subrogation. After the
Payment in Full of the Senior Debt, and prior to repayment in full of the
Subordinated Debt, the Subordinated Creditors shall be subrogated to the rights
of the Senior Creditors to the extent that distributions otherwise payable to
the Subordinated Creditors have been applied to the Senior Debt in accordance
with the provisions of Section 2 of this Agreement. For purposes
of each subrogation, no payments or distributions to the holders of the Senior
Debt of any cash, property, or securities to which the Subordinated Creditors
would be entitled except for the provisions of this Agreement, and no payments
pursuant to the provisions of this Agreement to the holders of the Senior Debt
by the Subordinated Creditors, shall, as among any Loan Party, its creditors
(other than the Senior Creditors), any guarantors of the Senior Debt or the
Subordinated Debt, and the Subordinated Creditors be deemed to be a payment or
distribution by such Loan Party or such guarantor to or on account of the Senior
Debt. The Senior Creditors shall have no obligation or duty to
protect the Subordinated Creditors’ rights of subrogation arising pursuant to
this Agreement or under any applicable law, nor shall the Senior Creditors be
liable for any loss to, or impairment of, any subrogation rights held by the
Subordinated Creditors.
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Section
3. Lien
Subordination.
3.1.
Lien
Subordination. All Liens with respect to any Collateral in
favor of the Subordinated Creditors or otherwise in favor of the holders of the
Subordinated Debt and securing any Subordinated Debt, whether now or hereafter
existing, including without limitation judgment Liens, shall be subject,
subordinate and junior in all respects and at all times to the Liens with
respect to such Collateral in favor of the Senior Creditors or otherwise in
favor of the holders of the Senior Debt and securing the Senior Debt, whether
now or hereafter existing. The foregoing allocation of priorities
shall govern the relationship of the parties with respect to the Collateral
irrespective of the time or order of attachment or perfection of any of such
Liens, the time or order of filing of financing statements, the acquisition of
purchase money or other Liens, the time of giving or failure to give notice of
the acquisition or expected acquisition of purchase money or other Liens, the
rules for determining priority under the UCC or any other law or rule governing
relative priorities of secured creditors, the fact that any such Liens in favor
of the Senior Creditors or otherwise in favor of the holders of the Senior Debt
with respect to any Collateral are (i) subordinated to any Lien securing any
obligation of any Loan Party or (ii) otherwise subordinated, voided, avoided,
invalidated or lapsed, or any other circumstances whatsoever. For the
purposes of the foregoing allocation of priorities, any claim of a right of
set-off shall be treated in all respects as a security interest, and no claimed
right of set-off shall be asserted by the Subordinated Creditors or any holder
of Subordinated Debt to defeat or diminish the rights or priorities of the Lien
of the Senior Creditors or of any holder of the Senior Debt provided for
herein.
3.2.
No Adverse Actions by
Subordinated Creditors; Acknowledgment of Senior Debt
Actions. The Subordinated Creditors, on behalf of the holders
of the Subordinated Debt, agree that until the Senior Debt is Paid in
Full:
(a) they will not take or
cause to be taken any action, the purpose or effect of which is to make any Lien
in respect of any Collateral securing the Subordinated Debt pari passu with or senior to,
or to give the Subordinated Creditors or any holder of Subordinated Debt any
preference or priority relative to, the Liens securing Senior Debt in favor of
the Senior Creditors and the holders of the Senior Debt with respect to such
Collateral;
(b) they will not oppose,
object to, interfere with, hinder or delay, in any manner, whether by judicial
proceedings (including without limitation the filing of a Proceeding) or
otherwise, any foreclosure, sale, lease, exchange, transfer or other disposition
of any Collateral by the Senior Creditors or any holder of Senior Debt or any
other enforcement action taken by or on behalf of the Senior Creditors or any
holder of Senior Debt with respect to such Collateral so long as in each
instance the Senior Creditors and any holder of Senior Debt comply with
applicable law;
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(c) they have no right to (i)
direct the Senior Creditors or any holder of Senior Debt to exercise any right,
remedy or power with respect to any Collateral or pursuant to the Senior Debt
Documents or (ii) consent or object to the exercise by the Senior Creditors or
any holder of Senior Debt of any right, remedy or power with respect to any
Collateral (pursuant to the Senior Debt Documents or otherwise) or to the timing
or manner in which any such right is exercised or not exercised (or, to the
extent it may have any such right described in this clause (c), whether as a
junior lien creditor or otherwise, they hereby irrevocably waive such right) so
long as in each instance the Senior Creditors and any holder of Senior Debt
comply with applicable law;
(d) they will not institute
any suit or other proceeding or assert in any suit, Proceeding or other
proceeding any claim against the Senior Creditors or any holder of Senior Debt
seeking damages from or other relief by way of specific performance,
instructions or otherwise, with respect to, and neither the Senior Creditors nor
any holder of Senior Debt shall be liable for, any action taken or omitted to be
taken by the Senior Creditors or any such holder of Senior Debt with respect to
the Collateral;
(e) in the course of
administering extensions of credit to the Borrower, or in exercising their
rights or remedies with respect to any Senior Debt, the Senior Creditors may
from time to time in their respective discretion release proceeds of receivables
or other Collateral to the Loan Parties, or otherwise deal with the Collateral
and any other property or assets of the Loan Parties, without in any event any
notice or accounting to the Subordinated Creditors whatsoever; and
(f) the Senior Creditors have
complete discretion in, and shall not be liable in any manner to the
Subordinated Creditors for, determining how, when, and in what manner the Senior
Creditors administer extensions of credit to the Borrower or any other Loan
Party or exercise any rights or remedies with respect to, or foreclose or
otherwise realize upon, any Collateral for any Senior Debt or any other property
or assets.
Without
in any way limiting the foregoing, the Subordinated Creditors specifically
acknowledge and agree that, until the Senior Debt is Paid in Full, subject to
the terms and conditions of this Agreement, the Senior Creditors may take such
action(s) as they deem appropriate to enforce the Senior Debt or any Collateral
or guaranties therefor, whether or not such action is beneficial to the interest
of the Subordinated Creditors. The Subordinated Creditors, and all who may claim
through or under them, hereby expressly waive and release any and all rights to
have the Collateral or any part thereof marshaled upon any foreclosure, sale, or
other realization thereon by the Senior Creditors. In order for the
Senior Creditors to enforce their rights in the Collateral or any guaranty for
the Senior Debt, there shall be no obligation on the part of the Senior
Creditors at any time to resort for payment of the Senior Debt to any obligor
thereon or guarantor thereof, or to any other Person, their properties or
estates, or to resort to any other rights or remedies whatsoever; and the Senior
Creditors shall have the right to foreclose or otherwise realize upon any
Collateral or to enforce any guaranty irrespective of whether or not other
proceedings or steps are pending seeking resort to or realization upon or from
any of the foregoing.
3.3. Collection Actions with respect to
Collateral by Subordinated Creditors. The Subordinated
Creditors, on behalf of the holders of the Subordinated Debt, agree that until
all Senior Debt has been Paid in Full, they will not take any Collection Action
with respect to any Collateral, except as expressly permitted
herein. The Subordinated Creditors, on behalf of the holders of the
Subordinated Debt, agree that until the Senior Debt is Paid in
Full:
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(a) they will not commence
judicial or nonjudicial foreclosure proceedings with respect to, seek to have a
trustee, receiver, liquidator or similar official appointed for or over, attempt
any action to take possession of any Collateral, exercise any right, remedy or
power with respect to, or otherwise take any action to enforce its interest in
or realize upon, the Collateral; and
(b) they will not exercise
any other rights (other than the right to perfect the Liens in favor of the
Subordinated Creditors as contemplated under the Subordinated Debt Documents) or
remedies under the Subordinated Debt Documents with respect to any
Collateral;
until
after the passage of the Standstill Period (as such term is defined in
Section 2.5(a) hereof); provided, however, that, notwithstanding
anything herein to the contrary, in no event shall the Subordinated Creditors
exercise any rights or remedies with respect to the Collateral if,
notwithstanding the expiration of the Standstill Period, the Senior Creditor
Representative or the Senior Creditors shall have commenced and be diligently
pursuing the exercise of their rights or remedies with respect to all or any
material portion of the Collateral (prompt notice of such exercise to be given
by the Senior Creditor Representative (or the Senior Creditor Collateral Agent)
to the Subordinated Creditor Representative). As provided for in
Sections 2.5 and 3.17 hereof, all payments and collections received by the
Subordinated Creditors in respect of the Subordinated Debt or the Collateral
pursuant to any Collection Action shall be paid over to the Senior Creditor
Representative for application to the Senior Debt (whether or not then due) in
such order and manner as set forth in the Bank Credit Agreement or as the Senior
Creditors shall otherwise determine (including cash collateralization of Hedging
Liability) until all Senior Debt is Paid in Full.
Notwithstanding
the foregoing, nothing in this Agreement (including Sections 2.5, 3.2 and
3.8 hereof) shall prevent or impair the rights of the Subordinated Creditors to:
(i) enforce this Agreement, including the provisions of this Agreement
relating to priority, (ii) file a claim or statement of interest with
respect to the Subordinated Debt in any Proceeding that has been commenced by or
against any Loan Party or otherwise defend against any action in a Proceeding to
avoid its Lien on the Collateral, (iii) file any necessary responsive or
defensive pleadings in opposition to any motion, claim, adversary proceeding or
other pleading made by any Person objecting to or otherwise seeking the
disallowance of the claims of the Subordinated Creditors or of the holders of
the Subordinated Debt, including without limitation any claims secured by the
Collateral, if any, in each case in accordance with the terms of this Agreement,
(iv) file any proof of claim and other filings and make any arguments and
motions that are, in each case, in accordance with the terms of this Agreement,
with respect to the Subordinated Debt and the Collateral, (v) to the extent
not inconsistent with this Agreement, exercise any rights or remedies available
to unsecured creditors or file any pleadings, objections, motions or agreements
which assert rights or interests available to unsecured creditors of the Loan
Parties arising under the Subordinated Debt Documents, (vi) take any action
(not adverse to the priority status of the Liens on the Collateral securing the
Senior Debt, or the rights of any Senior Creditor to exercise any of its rights
or remedies in respect thereof) in order to create, perfect, and preserve their
Lien on the Collateral subject to the other terms of this Agreement, and
(vii) inspect or appraise the Collateral or receive information or reports
from any Loan Party concerning the Collateral, in each case pursuant to the
terms of the Subordinated Debt Documents and applicable law.
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3.4. No Contesting Debt or
Liens. The Subordinated Creditors, on behalf of the holders of
the Subordinated Debt, agree that they shall not directly or indirectly take any
action to contest or challenge the validity, legality, enforceability,
perfection or priority of any of the Senior Debt, any of the Senior Debt
Documents, or any of the Liens of the Senior Creditors or of any holder of
Senior Debt on any of the Collateral securing the Senior Debt. The Senior
Creditors, on behalf of the holders of the Senior Debt, agree that they shall
not directly or indirectly take any action to contest or challenge the validity,
legality, enforceability, perfection or priority of any of the Subordinated
Debt, any of the Subordinated Debt Documents, or any of the Liens of the
Subordinated Creditors or of any holder of Subordinated Debt on any of the
Collateral securing the Subordinated Debt.
3.5. Legend. The
Subordinated Creditors, on behalf of the holders of the Subordinated Debt, agree
that if the Subordinated Creditor Representative is not then also a Senior
Creditor, upon the written request of the Senior Creditor Representative, all
Subordinated Debt Documents filed against the Collateral or any part thereof,
including any UCC financing statements, shall contain the following
notation: “The
security interest and lien on the property referred to herein is junior and
subordinate to the security interest and lien on such property in favor of
Xxxxxx X.X., as Senior Creditor Collateral Agent, and/or Bank of Montreal, as
the Senior Creditor Representative, and their successors and assigns, pursuant
to the Subordination and Intercreditor Agreement dated as of September 17,
2010, among, Xxxxx Fargo Preferred Capital, Inc., as agent for the Subordinated
Creditors referred to therein, Xxxxxx X.X., as Senior Creditor Collateral Agent,
and Bank of Montreal, as Senior Creditor Representative, World Acceptance
Corporation and certain other related parties.”
3.6. No Liens for Subordinated Debt until
Grant Date; No other Liens for Subordinated Debt. The
Subordinated Creditors, on behalf of the holders of the Subordinated Debt,
acknowledge and agree that they shall not take or accept any Lien on the
Collateral or any part thereof until the Grant Date (as such term is defined in
the Subordinated Credit Agreement as in effect on the date
hereof). The parties hereto agree that until all Senior Debt has been
Paid in Full, the Subordinated Creditors, on behalf of the holders of the
Subordinated Debt, shall not, without the consent of the Senior Creditor
Representative, acquire or hold any Lien on any assets or property of any Loan
Party securing any Subordinated Debt which assets or property are not also
subject to the first priority Lien in favor of the Senior Creditors under the
Senior Debt Documents. If the Subordinated Creditors or any holder of
Subordinated Debt shall (nonetheless and in breach hereof) acquire or hold any
Lien on any assets or property of any Loan Party securing any Subordinated Debt
which assets or property are not also subject to the first priority Lien in
favor of Senior Creditors under the Senior Debt Documents, then the Subordinated
Creditors shall, notwithstanding anything to the contrary in any Subordinated
Debt Document, if so requested by the Senior Creditor Representative, release
such Lien.
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3.7. Insurance. Until
the Senior Debt is Paid in Full, the Senior Creditors have the sole and
exclusive right to prosecute and settle any insurance claim pertaining to the
Collateral in their sole discretion notwithstanding the fact that the
Subordinated Creditors or any holder of the Subordinated Debt may be named as
loss payee or additional insured on any insurance policies pertaining to such
Collateral. In the event that any insurance company requires the
release or written confirmation as to the status of a Person’s rights to make,
prosecute, adjust, or settle any insurance claim and/or to receive any insurance
proceeds, the Subordinated Creditors, on behalf of the holders of the
Subordinated Debt, agree to promptly provide the Senior Creditor Representative
with the appropriate documents reasonably requested by the relevant insurance
company.
3.8. Actions upon
Breach. If the Subordinated Creditors or any holder of
Subordinated Debt, contrary to this Agreement, commences or participates in any
Collection Action against any Loan Party or the Collateral, any Borrower, with
the prior written consent of the Senior Creditor Representative, may interpose
as a defense or dilatory plea the making of this Agreement, and the Senior
Creditor Representative may intervene and interpose such defense or plea in its
name or in the name of such Borrower or any other Loan Party. Should
the Subordinated Creditors or any holder of Subordinated Debt, contrary to this
Agreement, in any way take, or attempt to or threaten to take any action with
respect to the Collateral (including, without limitation, any attempt to realize
upon or enforce any remedy with respect to the Collateral), or fail to take any
action required by this Agreement, the Senior Creditor Representative (in its
own name or in the name of any Borrower or any other Loan Party) or either
Borrower may obtain relief against the Subordinated Creditors or any holder of
Subordinated Debt by injunction, specific performance and/or other appropriate
equitable relief, it being understood and agreed by the Subordinated Creditors,
on behalf of each holder of the Subordinated Debt, that (A) the damages to
the Senior Creditors, and the holders of the Senior Debt, from their actions may
at that time be difficult to ascertain and may be irreparable, and (B) the
Subordinated Creditors, on behalf of each holder of the Subordinated Debt,
waives any defense that any Loan Party and/or the Senior Creditors or any holder
of any Senior Debt cannot demonstrate damage and/or be made whole by the
awarding of damages. Except as provided herein, if the Senior
Creditors or any holder of any Senior Debt or the Subordinated Creditors or any
holder of Subordinated Debt shall enforce their rights or remedies in violation
of the terms of this Agreement, the Borrower shall not be entitled to use such
violation as a defense to any action by the Senior Creditors or any holder of
any Senior Debt or the Subordinated Creditors or any holder of Subordinated
Debt, as the case may be, nor to assert such violation as a counterclaim or
basis for set-off or recoupment against the Senior Creditors or any holder of
any Senior Debt or the Subordinated Creditors or any holder of Subordinated
Debt.
3.9. Proceedings; Filing of
Motions. Until the Senior Debt is Paid in Full, the
Subordinated Creditors, on behalf of the holders of the Subordinated Debt, agree
that they shall not, in or in connection with any Proceeding, file any pleadings
or motions, take any position at any hearing or proceeding of any nature, or
otherwise take any action whatsoever, in each case in respect of any of the
Collateral, including, without limitation, with respect to the determination of
any Liens or claims held by the Senior Creditors (including the validity and
enforceability thereof) or any holder of any Senior Debt or the value of any
claims of such parties under Section 506(a) of the Bankruptcy Code or otherwise;
provided that the
Subordinated Creditors may include in their claim filed in any such Proceeding a
claim for post-petition interest (as provided for the Subordinated Debt
Documents and permitted by applicable law) as part of the Subordinated Debt
(provided the Subordinated Creditors shall not seek the payment thereof, as
adequate protection or otherwise, until the Senior Debt is Paid in Full) or take
such actions set forth in Section 2.2(b), the last paragraph of
Section 3.2, seek adequate protection in accordance with Section 3.12,
or object to any sale or disposition of Collateral not in compliance with
Section 3.13.
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3.10. Proceedings; Financing
Matters. Until the Senior Debt is Paid in Full, if any Loan
Party becomes subject to any Proceeding, and if the Senior Creditors or any
holder of Senior Debt desires to consent (or not object) to the use of cash
collateral on which the Senior Creditors or any other creditor has a Lien or to
provide financing to any Loan Party under the Bankruptcy Code or to consent (or
not object) to the provision of such financing under the Bankruptcy Code to any
Loan Party by any third party (“DIP Financing”), then the
Subordinated Creditors, on behalf of the holders of the Subordinated Debt, agree
that they (a) will be deemed to have consented to, and will raise no
objection to, the use of such cash collateral or to such DIP Financing, (b) will
not request or accept any form of adequate protection or any other relief in
connection with the use of such cash collateral or such DIP Financing except as
set forth in Section 3.12 below, and (c) to the extent the Liens in favor
of the Senior Creditors are subordinated or pari passu with such DIP Financing,
will subordinate (and will be deemed hereunder to have subordinated) the Liens
in favor of the Subordinated Creditors or any holder of the Subordinated Debt
(i) to such DIP Financing with the same terms and conditions as the Liens in
favor of the Senior Creditors are subordinated thereto (and such subordination
will not alter in any manner the terms of this Agreement), (ii) to any adequate
protection provided to the Senior Creditors and the holders of Senior Debt, and
(iii) to any “carve-out” for administrative, professional, and United States
Trustee fees agreed to by the Senior Creditors or the holders of the Senior
Debt. The Subordinated Creditors, on behalf of the holders of the
Subordinated Debt, waive any claim they may now or hereafter have arising out of
any Senior Creditor’s election, in any Proceeding, of the application of
Section 1111(b)(2) of the Bankruptcy Code or any similar provision of any
other applicable debtor relief law.
3.11. Proceedings; Relief From the
Automatic Stay. The Subordinated Creditors, on behalf of the
holders of the Subordinated Debt, agree that until the Senior Debt is Paid in
Full, they will not seek relief from the automatic stay or from any other stay
in any Proceeding or take any action in derogation thereof, in each case in
respect of any Collateral, without the prior written consent of the Senior
Creditor Representative.
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3.12. Proceedings; Adequate
Protection. The Subordinated Creditors, on behalf of the
holders of the Subordinated Debt, agree that until the Senior Debt is Paid in
Full, they shall not object to, contest, or support any other Person objecting
to or contesting, (i) any request by the Senior Creditors or any holder of
Senior Debt for adequate protection, (ii) any objection by the Senior Creditors
or any holder of Senior Debt to any motion, relief, action or proceeding based
on a claim of a lack of adequate protection, or (iii) the payment of interest,
fees, expenses or other amounts to the Senior Creditors or any holder of Senior
Debt under Section 506(b) or 506(c) of the Bankruptcy Code or
otherwise. Notwithstanding anything contained in this Section and in
Section 3.10 hereof, in any Proceeding, (x) the Subordinated Creditors may
seek, support, accept or retain adequate protection (A) only if the Senior
Creditors and the holders of Senior Debt are granted adequate protection that
includes replacement Liens on additional collateral and superpriority claims and
(B) solely in the form of (1) a replacement Lien on such additional collateral,
subordinated to the Liens in favor of the Senior Creditors and such DIP
Financing on the same basis as the other Liens in favor of the Subordinated
Creditors are so subordinated to the Senior Debt under this Agreement subject to
the “carve-out” in Section 3.9(c)(iii) above and (2) solely to the extent
that the Collateral pledged or secured by the Subordinated Debt Documents has
been diminished in connection with such Proceeding, superpriority claims junior
in all respects to the superpriority claims granted to the Senior Creditors and
the holders of the Senior Debt, and (y) in the event the Subordinated Creditors
receive adequate protection, including in the form of additional collateral,
then the Subordinated Creditors, on behalf of the holders of the Subordinated
Debt, agree that the Senior Creditors shall have a senior Lien and claim on such
adequate protection as security for the Senior Debt and that any Lien on any
additional collateral securing the Subordinated Debt shall be subordinated to
the Liens on such collateral securing the Senior Debt and any DIP Financing (and
all indebtedness, obligations, and liabilities relating thereto) and any other
Liens granted to the Senior Creditors or any holder of the Senior Debt as
adequate protection, with such subordination to be on the same terms that the
other Liens securing the Subordinated Debt are subordinated to such Senior Debt
under this Agreement.
3.13. Asset Dispositions in a
Proceeding. Neither the Subordinated Creditors nor any holder
of Subordinated Debt shall, in a Proceeding or otherwise, oppose any sale or
disposition of any assets of any Loan Party that is supported by the Senior
Creditors, and the Subordinated Creditors and each holder of the Subordinated
Debt will be deemed to have consented under Section 363 of the Bankruptcy Code
(and otherwise) to any sale supported by the Senior Creditors and to have
released their Liens in such assets upon the consummation of such
sale.
3.14. Separate Grants of Security and
Separate Classification. The Subordinated Creditors, on behalf
of the holders of the Subordinated Debt, acknowledge and agree that (i) the
grants of Liens pursuant to the Senior Debt Documents and the Subordinated Debt
Documents constitute two separate and distinct grants of Liens and (ii) because
of, among other things, their differing rights in the Collateral, the
Subordinated Debt is fundamentally different from the Senior Debt and must be
separately classified in any plan of reorganization proposed or adopted in a
Proceeding. To further effectuate the intent of the parties as
provided in the immediately preceding sentence, if it is held that the Senior
Debt and the Subordinated Debt in respect of the Collateral constitute only one
secured claim (rather than separate classes of senior and junior secured
claims), then the Subordinated Creditors, on behalf of the holders of the
Subordinated Debt, acknowledge and agree that all distributions shall be made as
if there were separate classes of senior and junior secured claims against the
Loan Parties in respect of the Collateral with the effect being that, to the
extent that the aggregate value of the Collateral is sufficient (for this
purpose ignoring all Subordinated Debt), the Senior Creditors and the holders of
the Senior Debt shall be entitled to receive, in addition to amounts distributed
to them in respect of principal, pre-petition interest and other claims, all
amounts owing in respect of post-petition interest, fees, costs, and expenses in
respect of the Senior Debt before any distribution is made in respect of the
claims held by the Subordinated Creditors or any holder of Subordinated Debt,
with the Subordinated Creditors, on behalf of the holders of the Subordinated
Debt, hereby acknowledging and agreeing to turn over to the Senior Creditors
amounts otherwise received or receivable by them until the Senior Debt is Paid
in Full.
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3.15. No Waivers of Rights of Senior
Creditors. Nothing contained herein shall prohibit or in any
way limit the Senior Creditors or any holder of Senior Debt from objecting in
any Proceeding or otherwise to any action taken by the Subordinated Creditors or
any holder of any Subordinated Debt, including the seeking by the Subordinated
Creditors or any holder of any Subordinated Debt of adequate protection or the
asserting by the Subordinated Creditors or any holder of any Subordinated Debt
of any of its rights and remedies under the Subordinated Debt Documents or
otherwise; provided no
Senior Creditor or holder of Senior Debt shall oppose or object to any claim by
a Subordinated Creditor or holder of Subordinated Debt for the inclusion of
post-petition interest (as provided for the Subordinated Debt Documents) as part
of its Subordinated Debt claim (provided the Subordinated Creditors shall not
seek the payment thereof, as adequate protection or otherwise, until the Senior
Debt is Paid in Full) or for the allowance in any Proceeding for adequate
protection permitted by Section 3.12.
3.16. Other Matters. To
the extent that the Subordinated Creditors or any holder of any Subordinated
Debt has or acquires rights under Section 363 or Section 364 of the Bankruptcy
Code with respect to any of the Collateral, the Subordinated Creditors, on
behalf of the holders of the Subordinated Debt, agree not to assert any of such
rights without the prior written consent of the Senior Creditor Representative;
provided that if
requested by the Senior Creditor Representative, the Subordinated Creditor, on
behalf of the holders of the Subordinated Debt, shall timely exercise such
rights in the manner requested by the Senior Creditor Representative, including
any rights to payments in respect of such rights.
3.17. Distributions of Proceeds of
Collateral. All realizations upon the Collateral or any part
thereof (whether occurring before or after the commencement of a case under the
Bankruptcy Code and including realizations resulting from sales by a Loan Party
under Section 363 of the Bankruptcy Code), including, without limitation,
any realizations by way of a Collection Action, shall be applied first to Senior
Debt (in such order and manner as set forth in the Bank Credit Agreement or as
the Senior Creditors shall otherwise determine) until Paid in Full before any
application to the Subordinated Debt. If Proceeds of Collateral
pursuant to a realization of Collateral described above shall be received by the
Subordinated Creditors or any holder of any Subordinated Debt before all Senior
Debt has been Paid in Full, such Proceeds shall be segregated and held in trust
and forthwith paid or delivered by the Subordinated Creditors or such holder of
Subordinated Debt to the Senior Creditor Representative for application to the
Senior Debt in such order and manner as set forth in the Bank Credit Agreement
or as the Senior Creditors shall otherwise determine).
3.18. Perfection of Possessory Security
Interests. For the limited purpose of perfecting the security
interests in those types or items of Collateral in which a security interest may
be perfected by possession or control, the Subordinated Creditors and the Senior
Creditors hereby appoint one another as its agent for the limited purpose of
possessing or controlling on its behalf any such Collateral that may come into
the possession or control of such other party from time to time, and the
Subordinated Creditors and the Senior Creditors each agree to act as the other
party’s agent for such limited purpose of perfecting such other party’s security
interest by possession or control through an agent; provided that neither shall
incur any liability to the other by virtue of acting as such other party’s agent
hereunder, and either may relinquish possession or control of Collateral in
accordance with the terms of the applicable Senior Debt Documents or
Subordinated Debt Documents without the consent of the other, and without
incurring liability to the other, except as otherwise provided herein or unless
there is an express written agreement to the contrary in effect between the
Senior Creditors and the Subordinated Creditors.
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3.19. Release of Liens; Release of
Guarantors. In the event that the Senior Creditors or any
holders of Senior Debt are required pursuant to the terms of any Senior Debt
Document to release their Liens in any of the Collateral securing the Senior
Debt (other than a release required as a result of the Payment in Full of all
Senior Debt) or any guaranty from any Person guaranteeing the Senior Debt, or in
the event that the Senior Creditors voluntarily elect to release their Liens in
any of the Collateral or any guaranty from any Person securing or guaranteeing
the Senior Debt (other than in connection with the termination of any such Lien
or guaranty in accordance with the terms of the relevant agreement as a result
of the retirement of all Senior Debt secured or guaranteed thereby) in
connection with any sale (whether consensual or forced), foreclosure, or
realization upon, or release of, any such Collateral or such guarantor by the
Senior Creditor Representative or the Senior Creditors during the existence of
any Default, the Subordinated Creditors and the holders of the Subordinated Debt
shall release, on a prompt basis (but in any event within 5 business days
of receipt of a written request therefor), any Liens which they may have, if
any, in such Collateral or any such guaranty which they may have from any such
Person (whether or not any Subordinated Default exists or would arise as a
result thereof). In order to effectuate the foregoing, the
Subordinated Creditors and the holders of the Subordinated Debt hereby agree to
execute and deliver to the Senior Creditor Representative releases and
terminations of the Liens in the Collateral held by (or for the benefit of) the
Subordinated Creditors or any of the holders of the Subordinated Debt if and
when requested by the Senior Creditor Representative. Until the
Senior Debt is Paid in Full, the Subordinated Creditors, on behalf of the
holders of the Subordinated Debt, hereby irrevocably constitute and appoint the
Senior Creditor Representative and any officer or agent of the Senior Creditor
Representative, with full power of substitution, as their true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Subordinated Creditors or such holder of any Subordinated Debt or
in the Senior Creditor Representative’s own name, from time to time in the
Senior Creditor Representative’s discretion, for the purpose of carrying out the
terms of this Section, to take any and all action and to execute any and all
documents and instruments which may be necessary or appropriate to accomplish
the purposes of this Section, including any endorsements or other instruments of
transfer or release. The Subordinated Creditors, on behalf of the
holders of the Subordinated Debt, hereby irrevocably authorize the Senior
Creditor Representative to prepare and record or otherwise execute and deliver
any releases and terminations of the Liens in the relevant Collateral held by
(or for the benefit of) the Subordinated Creditors or any holder of Subordinated
Debt at any time, and to the extent, that this Agreement requires such Liens be
released or terminated. The Subordinated Creditors, on behalf of the
holders of the Subordinated Debt, agree that the Senior Creditors may permit the
use or consumption of Collateral by a Loan Parties free of the Lien of the
Subordinated Creditors and the holders of the Subordinated Debt, in each case to
the same extent that the Senior Creditors release, refrain from enforcing or
permit the use or consumption of such Collateral by a Loan Party free of their
own Liens, without incurring any liability to the Subordinated Creditors or any
holder of Subordinated Debt.
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3.20. Collateral
Records. If any Subordinated Creditor shall receive possession
or control of any Collateral Records which contain information relating to any
property of any Loan Party, such Subordinated Creditor shall notify the Senior
Creditor Representative that it has received such Collateral Records and shall,
as promptly as practicable thereafter, make available to the Senior Creditor
Representative such Collateral Records.
3.21. UCC Notices. In
the event that any Senior Creditor shall be required by the UCC or any other
applicable law to give any notice to any Subordinated Creditor or holder of
Subordinated Debt, such notice shall be given in accordance with Section 9
hereof and, as between the Senior Creditors and the holders of the Senior Debt
on the one hand and the Subordinated Creditors and the holders of the
Subordinated Debt on the other hand, ten (10) days’ notice shall be conclusively
deemed to be commercially reasonable.
Section 4. Continued
Effectiveness of this Agreement.
The terms
of this Agreement, the subordinations effected hereby, and the rights and the
obligations of any Loan Party, the Senior Creditor Representative, the Senior
Creditors, the Subordinated Creditor Representative, and the Subordinated
Creditors arising hereunder shall not be affected, modified, or impaired in any
manner or to any extent by the validity or enforceability of any of the Senior
Debt Documents or the Subordinated Debt Documents, or any exercise or
non-exercise of any right, power, or remedy under or in respect of the Senior
Debt or the Senior Debt Documents or the Subordinated Debt or the Subordinated
Debt Documents. The Subordinated Creditors and each other holder of
Subordinated Debt hereby acknowledges that the provisions of this Agreement are
intended to be enforceable at all times, whether before the commencement of,
after the commencement of, in connection with or premised on the occurrence of a
Proceeding. This Agreement, which the parties hereto expressly
acknowledge is a “subordination agreement” under Section 510(a) of the
Bankruptcy Code, shall be effective before and after the commencement of a
Proceeding.
Section
5. Representations and
Warranties.
5.1. Subordinated Creditor
Representations and Warranties. Each Subordinated Creditor hereby
represents and warrants to the Senior Creditors as follows:
(a) Existence and Power. Such
Subordinated Creditor is duly organized, validly existing, and in good standing
under the laws of the state of its incorporation or organization.
(b) Authority. Such Subordinated
Creditor has the power and authority to enter into, execute, delivery, and
perform the terms of this Agreement, all of which have been duly authorized by
all proper and necessary action and are not prohibited by its organizational
documents.
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(c) Binding
Agreements. This Agreement, when executed and delivered, will
constitute the valid and legally binding obligation of such Subordinated
Creditor enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles.
(d) Conflicting Agreements;
Litigation. No provisions of any mortgage, indenture,
contract, agreement, statute, rule, regulation, judgment, decree, or order
binding on such Subordinated Creditor conflicts with, or requires any consent
which has not already been obtained under, or would in any way prevent the
execution, delivery, or performance of the terms of this Agreement by such
Subordinated Creditor. The execution, delivery, and performance of
the terms of this Agreement will not constitute a default under, or result in
the creation or imposition of, or obligation to create, any lien or security
interest in the property of such Subordinated Creditor pursuant to the terms of
any such mortgage, indenture, contract, or agreement. No pending or,
to the best of such Subordinated Creditor’s knowledge, threatened, litigation,
arbitration, or other proceeding if adversely determined would in any way
prevent the performance of the terms of this Agreement by such Subordinated
Creditor.
(e) No Divestiture. Such
Subordinated Creditor is the sole owner, beneficially and of record, of the
Subordinated Debt held by it.
5.2.
Senior Creditor Representative
Representations and Warranties. The Senior Creditor Representative hereby
represents and warrants to the Subordinated Creditors as follows:
(a)
Existence and
Power. The Senior Creditor Representative is duly organized,
validly existing, and in good standing under the laws of the state of its
incorporation or organization.
(b) Authority. The
Senior Creditor Representative has the power and authority to enter into,
execute, delivery, and perform the terms of this Agreement, all of which have
been duly authorized by all proper and necessary action and are not prohibited
by its organizational documents.
(c)
Binding
Agreements. This Agreement, when executed and delivered, will
constitute the valid and legally binding obligation of the Senior Creditor
Representative enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles.
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(d) Conflicting Agreements;
Litigation. No provisions of any mortgage, indenture,
contract, agreement, statute, rule, regulation, judgment, decree, or order
binding on the Senior Creditor Representative conflicts with, or requires any
consent which has not already been obtained under, or would in any way prevent
the execution, delivery or performance of the terms of this Agreement by the
Senior Creditor Representative. The execution, delivery, and
performance of the terms of this Agreement will not constitute a default under,
or result in the creation or imposition of, or obligation to create, any lien or
security interest in the property of the Senior Creditor Representative pursuant
to the terms of any such mortgage, indenture, contract, or
agreement. No pending or, to the best of the Senior Creditor
Representative’s knowledge, threatened, litigation, arbitration, or other
proceeding if adversely determined would in any way prevent the performance of
the terms of this Agreement by the Senior Creditor
Representative.
Section 6. Cumulative
Rights, No Waivers.
Each and
any every right, remedy, and power granted to the Senior Creditors hereunder
shall be cumulative and in addition to any other rights, remedy, or power
granted herein or in the Senior Debt Documents or now or hereafter existing in
equity, at law, by virtue of statute or otherwise, and may be exercised by the
Senior Creditors, from time to time, concurrently or independently and as often
and in such order as the Senior Creditors may deem expedient. Any
failure or delay on the part of the Senior Creditors in exercising any such
right, remedy, or power, or abandonment or discontinuance of steps to enforce
the same, shall not operate as a waiver thereof or affect the rights of the
Senior Creditors thereafter to exercise the same, and any single or partial
exercise of any such right, remedy, or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy, or power,
and no such failure, delay, abandonment, or single or partial exercise of the
rights of the Senior Creditors or such holder hereunder shall be deemed to
establish a custom or course of dealing or performance among the parties
hereto.
Section 7. Amendments
and Waivers.
Except as
otherwise specifically provided for in this Agreement, any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the holders of 66 2/3% or more of the Senior Debt
then outstanding (and, if the obligations of the Senior Creditor Representative
or Senior Creditor Collateral Agent are affected thereby, with the written
consent of the Senior Creditor Representative and Senior Creditor Collateral
Agent, as applicable) and the holders of 66 2/3% or more of the Subordinated
Debt then outstanding (and, if the obligations of the Subordinated Creditor
Representative are affected thereby, with the written consent of the
Subordinated Creditor Representative); and then such amendment or waiver shall
be effective only in the specific instance and for the specific purpose
given. Any notice or demand given to the Subordinated Creditors by
the Senior Creditor Representative, the Senior Creditors, or any holder of
Senior Debt in any circumstances not specifically required hereby shall not
entitle the Subordinated Creditors to any other or further notice or demand in
the same, similar or other circumstances unless specifically required
hereunder.
Section
8. Additional Documents
and Actions.
The
Subordinated Creditors at any time, and from time to time, after the execution
and delivery of this Agreement, promptly will execute and deliver such further
documents and do such further acts and things as the Senior Creditor
Representative may reasonably request that may be necessary in order to effect
fully the purposes of this Agreement.
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Section 9. Notices.
Unless
otherwise specifically provided herein, any notice or other communication
required or permitted to be given shall be in writing addressed to the
respective party as set forth below and may be personally served, telecopied, or
sent by recognized overnight courier service or certified or registered United
States mail and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a business day before 4:00 p.m. (Central
time) or, if not, on the next succeeding business day; or (c) if delivered
by overnight courier, the business day after delivery to such courier properly
addressed; or (d) if by United States mail or any other means, when
received by the relevant party.
Notices
shall be addressed as follows:
(a) If to the
Subordinated Creditor Representative (or to the Subordinated
Creditors):
Xxxxx
Fargo Preferred Capital, Inc.
000 Xxxxx
Xxxxx Street, 7th Floor
MAC
Y1379-075
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Senior Vice President
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
(b) If to any
Loan Party:
c/o World
Acceptance Corporation
000
Xxxxxxxxx Xxxxxx
Xxxxxxxxxx,
Xxxxx Xxxxxxxx 00000-0000
Attention:
Chief Financial Officer
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
(c) If to the
Senior Creditor Representative:
Bank of
Montreal
000 Xxxx
Xxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
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or in any
case, to such other address as the party addressed shall have previously
designated by written notice to the serving party given in accordance with this
Section 9. A notice not given as provided above shall, if it is
in writing, be deemed given if and when actually received by the party to whom
given (provided notice transmitted by e-mail shall not constitute proper notice
under this Section).
Section 10. Severability.
In the
event that any provision of this Agreement is deemed to be invalid, illegal, or
unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, the
validity, legality, and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby, and the affected
provision shall be modified to the minimum extent permitted by law so as most
fully to achieve the intention of this Agreement.
Section 11. Successors
and Assigns.
This
Agreement shall be binding upon, and inure to the benefit of, the successors and
assigns of the Senior Creditors and holders of the Senior Debt, the Subordinated
Creditors and the holders of the Subordinated Debt, and the Loan Parties party
hereto.
Section 12. Execution;
Counterparts; Several Obligations.
This
Agreement shall become effective on the execution hereof by WFPCI, the Borrower,
and the acceptance by BMO as the Senior Creditor Representative; and it shall
not be necessary for the other Senior Creditors or any other Subordinated
Creditor to evidence their acceptance hereof. This Agreement may be
executed in one or more counterpart originals, which, taken together, shall
constitute one fully-executed instrument. Delivery of a counterpart
hereof by facsimile transmission or by e-mail transmission of an Adobe portable
document format file (also known as a “PDF” file) shall be effective as delivery
of a manually executed counterpart hereof. The obligations of the Senior
Creditors and the Subordinated Creditors are several, not joint and
several.
Section 13. Conflict.
In the
event of any conflict between any term, covenant or condition of this Agreement
and any term, covenant, or condition of any of the Subordinated Debt Documents,
the provisions of this Agreement shall control and govern.
Section 14. Headings.
The
paragraph headings used in this Agreement are for convenience only and shall not
affect the interpretation of any of the provisions hereof.
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Section 15. Termination.
This
Agreement shall terminate upon the Payment in Full of the Senior Debt in
accordance with the terms of the Senior Debt Documents. Upon
termination of this Agreement, the Senior Creditor Representative shall take
such action as is reasonably requested by the Subordinated Creditors to deliver
to the Subordinated Creditor Representative any Collateral in the Senior
Creditor Representative’s (or its collateral agent’s or security trustee’s)
possession.
Section 16. Applicable
Law.
This
Agreement shall be governed by and shall be construed and enforced in accordance
with the internal laws of the State of Illinois, without regard to conflicts of
law principles.
Section 17. No
Refinancing of Subordinated Debt without consent of the Senior
Debt.
The
Subordinated Debt may not be refinanced prior to the Senior Debt being Paid in
Full unless consented to by the requisite holders of the Senior
Debt.
Section
18. Purchase
Option.
18.1. Purchase
Notice. In the event that (a) a Proceeding has commenced
with respect to any Loan Party which is either a voluntary Proceeding by such
Loan Party or an involuntary proceeding pursuant to which the relevant cure
period in the Bank Credit Agreement has expired or for which an order for relief
has been entered, (b) all or a material part of the Senior Debt is
accelerated, or (c) the Senior Creditor Representative has delivered a
Senior Payment Default Notice or a Senior Covenant Default Notice to the
Subordinated Creditor Representative and (in the case of this clause (c))
the Purchase Notice (as defined below) is given while either (i) such
Senior Payment Default Notice or Senior Covenant Default Notice still has the
effect of blocking payment under Section 2.3(a) or (ii) any payment
blocked under Section 2.3(a) still has not been made by the Borrower, the
Subordinated Creditors shall have the option upon prior written notice by the
Subordinated Creditor Representative to the Senior Creditor Representative (the
“Purchase Notice”), to
purchase from the Senior Creditors all of the Senior Debt (including, for
purposes of this Section, all “Obligations” and all “Hedging Liability,” as such
terms are defined in the Bank Credit Agreement, including amounts, if any, in
excess of the Senior Debt Limit). The Purchase Notice from the
Subordinated Creditor Representative to the Senior Creditor Representative shall
be irrevocable.
18.2. Purchase Option
Closing. On the date specified by the Subordinated Creditor
Representative in the Purchase Notice (which shall not be less than
three (3) business days nor more than thirty (30) days after the
receipt by the Senior Creditor Representative of the Purchase Notice), the
Senior Creditors shall sell to the Subordinated Creditors, and the Subordinated
Creditors shall purchase from the Senior Creditors, all of the Senior
Debt.
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18.3. Purchase
Price. Such purchase and sale shall be made by execution and
delivery by the Senior Creditors and the Subordinated Creditors of an Assignment
and Assumption in the form attached to the Bank Credit
Agreement. Upon the date of such purchase and sale, the Subordinated
Creditors shall (i) pay to the Senior Creditor Representative for the
benefit of the holders of the Senior Debt as the purchase price therefore the
full amount of all the Senior Debt then outstanding and unpaid (including
principal, interest, fees, Eurodollar breakage or similar breakage amounts, and
expenses, including reasonable attorneys’ fees and expenses), (ii) cash
collateralize any interest rate, foreign currency, or commodity hedge agreements
that have not been terminated in a manner satisfactory to the Senior Creditor
Representative, (iii) agree to reimburse the Senior Creditors for any loss,
cost, damage or expense (including reasonable attorneys’ fees and legal
expenses) in connection with any commissions, fees, costs or expenses related to
any issued and outstanding hedge agreements as described above and any checks or
other payments provisionally credited to the Senior Debt, and/or as to which the
Senior Creditors have not yet received final payment, and (iv) agree to
reimburse (or back by stand-by letters of credit or cash collateral in a manner
satisfactory to the Senior Creditor Representative) the Senior Creditors in
respect of indemnification obligations of the Loan Parties under the Senior Debt
Documents as to matters or circumstances known to or determinable by Senior
Creditor Representative which could reasonably be expected to result in any
loss, cost, damage or expense (including reasonable attorneys’ fees and legal
expenses) to the Senior Creditors. Such purchase price and cash
collateral shall be remitted by wire transfer of immediately available funds to
such bank account of the Senior Creditors as the Senior Creditor Representative
may designate in writing to the Subordinated Creditor Representative for such
purpose. Interest shall be calculated to, but shall exclude, the
business day on which such purchase and sale shall occur if the amounts so paid
by the Subordinated Creditors to the bank account designated by the Senior
Creditor Representative are received in such bank account prior to
2:00 p.m., Chicago time, and interest shall be calculated to, and shall
include, such business day if the amounts so paid by the Subordinated Creditors
to the bank account designated by the Senior Creditor Representative are
received in such bank account later than 2:00 p.m., Chicago time on such
day.
18.4. Nature of
Sale. Such purchase and sale shall be expressly made without
representation or warranty of any kind by the Senior Creditors as to the Senior
Debt or otherwise and without recourse to the Senior Creditors, except for
representations and warranties as to the following (which shall be the several,
not joint, representation by the relevant Senior Creditor selling the relevant
portion of the Senior Debt): (i) the notional amount of the
Senior Debt being purchased (including as to the principal of and accrued and
unpaid interest on such Senior Debt, fees and expenses thereof), (ii) that
such Senior Creditor owns the relevant Senior Debt free and clear of any Liens
created by such Senior Creditor, and (iii) such Senior Creditor has the
full right and power to assign its Senior Debt and such assignment has been duly
authorized by all necessary corporate action by such Senior
Creditor.
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Section 19. Consent to
Jurisdiction.
Each
of the Subordinated Creditors, the Senior Creditors, and the Loan Parties hereto
hereby consents to the non-exclusive jurisdiction of any state or federal court
located within the State of Illinois or Iowa. Each of Subordinated
Creditors, the Senior Creditors, and the Loan Parties hereto expressly submits
and consents to the non-exclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens. Each of Subordinated
Creditors and each Loan Party hereto hereby waives personal service of any and
all process and agrees that all such service of process may be made upon it by
certified or registered mail, return receipt requested, addressed to Senior
Creditors, Subordinated Creditors or such Loan Party at its address set forth in
this Agreement and service so made shall be complete 10 days after the same has
been posted.
Section 20. Waiver of
Jury Trial.
Each
of the Subordinated Creditors, the Senior Creditors, and the Loan Parties hereto
hereby waives their respective rights to a jury trial of any claim or cause of
action based upon or arising out of this Agreement. Each of
Subordinated Creditors, the Senior Creditors, and the Loan Parties hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has relied on the waiver in entering into this Agreement
and that each will continue to rely on the waiver in their related future
dealings. Each of Subordinated Creditors, the Senior Creditors, and
the Loan Parties hereto warrants and represents that each has had the
opportunity of reviewing this jury waiver with legal counsel, and that each
knowingly and voluntarily waives its jury trial rights.
[Signature
Pages to Follow]
-31-
In
Witness Whereof, the Subordinated Creditors identified below, the
Borrower, and the Senior Creditor Representative have caused this Agreement to
be executed as of the date first above written.
|
Subordinated
Creditor Representative
and
the initial Subordinated Creditor
|
||
|
Xxxxx
Fargo Preferred Capital, Inc.
|
||
|
By
|
||
|
Name
|
||
|
Title
|
||
|
Senior
Creditor Representative
|
||
|
Bank
of Montreal, Chicago Branch
|
||
|
By
|
||
|
Xxxxxxx
X. Xxxxxx, Director
|
||
|
Senior
Creditor Collateral Agent for the
Senior
Creditors
|
||
|
Xxxxxx
X.X.
|
||
|
By
|
||
|
Xxxxxxx
X. Xxxxxx, Vice
President
|
||
S-1
|
Borrower
|
||
|
World
Acceptance Corporation
|
||
|
By
|
||
|
Name:
|
||
|
Title:
|
||
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Other
Loan Parties
|
|
World
Acceptance Corporation of Alabama
|
|
World
Acceptance Corporation of Missouri
|
|
World
Finance Corporation of Georgia
|
|
World
Finance Corporation of Louisiana
|
|
World
Acceptance Corporation of Oklahoma, Inc.
|
|
World
Finance Corporation of South Carolina
|
|
World
Finance Corporation of Tennessee
|
|
WFC
of South Carolina, Inc.
|
|
World
Finance Corporation of Illinois
|
|
World
Finance Corporation of New Mexico
|
|
World
Finance Corporation of Kentucky
|
|
WFC
Services, Inc., a South Carolina
corporation
|
|
World
Finance Corporation of Colorado
|
|
World
Finance Corporation of Wisconsin
|
|
World
Finance Corporation of
Texas
|
|
By
|
|
|
A.
Xxxxxxxxx XxXxxx, III
|
|
|
Its
Chief Executive
Officer
|
S-2
|
WFC
Limited Partnership
|
||
|
By
|
WFC
of South Carolina, Inc., as sole
general
partner
|
|
|
By
|
||
|
A.
Xxxxxxxxx XxXxxx, III
|
||
|
Its
Chief Executive
Officer
|
||
S-3
