Exhibit 2
WAIVER AGREEMENT
THIS WAIVER AGREEMENT is entered into as of the 15th day of March 2000
(this "Agreement"), by and between XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a
California limited partnership ("LLCP"), and CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation (the "Company").
R E C I T A L S
A. LLCP and the Company are entering to that certain Amended and Restated
Securities Purchase Agreement dated of even date herewith (the "Securities
Purchase Agreement") pursuant to which, among other things, the Company and LLCP
are amending and restating (i) the Amended November 1998 Securities Purchase
Agreement and the April 1999 Securities Purchase Agreement, as provided therein,
and (ii) the Amended November 1998 Primary Note and the April 1999 Note into one
Amended and Restated Secured Senior Note Due 2003 in the principal amount of
$30,000,000. Unless otherwise indicated, all capitalized terms used herein shall
have the respectively meanings given to them in the Securities Purchase
Agreement.
B. Certain Defaults and Events of Default under the Amended November 1998
Securities Purchase Agreement and the April 1999 Securities Purchase Agreement
have occurred since the date that the parties entered into the Original November
1998 Securities Purchase Agreement and the April 1999 Securities Purchase
Agreement, including, without limitation, the Existing Defaults (as such term is
defined in the First Amendment to the November 1998 Securities Purchase
Agreement).
C. The Company has requested that LLCP waive the Pre-Closing Date Defaults
(as such term is defined in Section 1) and amend and restate certain agreements,
instruments and other documents as more fully described in the Securities
Purchase Agreement, and LLCP is willing to do so only on the terms and subject
to the conditions set forth in this Agreement, the Securities Purchase Agreement
and the Related Agreements.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. WAIVER OF PRE-CLOSING DATE DEFAULTS BY LLCP.
Effective on and as of the Closing Date, and on the terms and subject to
the conditions set forth herein, LLCP waives all breaches, violations, Defaults
and Events of Default that have occurred under the Amended November 1998
Securities Purchase Agreement, the April 1999 Securities Purchase Agreement and
the Related Agreements (as such term is defined in the Amended November 1998
Securities Purchase Agreement or the April 1999 Securities Purchase Agreement,
as the case may be) at any time prior to the Closing Date; provided, however,
that the waiver provided for in this Section 1 shall not apply to any breach,
violation, Default or Event of Default that is based on (a) the failure of the
Company or any of its Subsidiaries to pay to the Purchaser or any of its
Affiliates any principal, interest, premium, fees, costs, expenses or other
amounts due or owing at any time prior to the Closing Date (provided, however,
that LLCP hereby acknowledges that the Company has agreed to pay, and LLCP has
agreed to accept, the Accrued Default Interest pursuant to the terms of Section
2.3 and that, if payment of the Accrued Default Interest is made pursuant to
Section 2.3, the non-payment of interest at the Default Rate accruing prior to
the Closing Date shall be deemed waived pursuant to this Section 1) or (b) fraud
(including, without limitation, intentional misrepresentation and
misappropriation of funds) occurring at any time prior to the Closing Date. All
such breaches, violations, Defaults and Events of Default (other than the
breaches, violations, Defaults or Events of Default described in clauses (a) and
(b) above) are collectively referred to herein as the "Pre-Closing Date
Defaults." In addition, the parties acknowledge and agree that the waiver
provided for in this Section 1 is not intended to, and shall not, apply to any
breaches, violations, Defaults or Events of Default that occur under the
Securities Purchase Agreement or any Related Agreement (as such term is defined
in the Securities Purchase Agreement) on or at any time after the Closing Date.
LLCP hereby expressly reserves all of its rights, powers and remedies with
respect to all such matters and the matters described in clauses (a) and (b)
above.
2. OTHER AGREEMENTS.
2.1 Issuance of March 2000 LLCP Shares. As a material inducement to LLCP
to waive the Pre-Closing Date Defaults, amend the Amended November 1998
Securities Purchase Agreement and the April 1999 Securities Purchase Agreement
and enter into the other transactions contemplated by this Agreement and the
Securities Purchase Agreement, and as additional consideration to LLCP to do so,
the Company shall issue to LLCP, on or prior to the Closing Date, 103,500 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(the "March 2000 LLCP Shares"), at no cost to LLCP. The parties acknowledge and
agree that the March 2000 LLCP Shares shall constitute "Registrable Securities"
within the meaning of the Amended and Restated Registration Rights Agreement
and, therefore, LLCP (or any subsequently holder thereof) shall be entitled to
the rights and benefits under the Amended and Restated Registration Rights
Agreement with respect thereto.
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2.2 Issuance of Shares to Stanwich. The parties hereby acknowledge and
confirm that the Company was and is not obligated to issue to Stanwich, and
Stanwich is not entitled to receive, any "Stanwich Commitment Warrants" pursuant
to Section 3.1(b)(3) of the Investment and Guaranty Agreement. Notwithstanding
the foregoing, as consideration for the purchase by Stanwich, on or about
September 30, 1999, of the Stanwich Commitment Note, LLCP hereby consents to the
issuance by the Company to Stanwich after the Closing Date, at the discretion of
the Company, of not more than 103,500 shares of Common Stock, on terms and
conditions that are no more favorable to Stanwich than those applicable to the
issuance of the March 2000 LLCP Shares to LLCP (the "March 2000 Stanwich
Shares"). Furthermore, LLCP hereby waives (a) its right of first refusal under
Section 3.1 of the Amended and Restated Investor Rights Agreement with respect
to the March 0000 Xxxxxxxx Shares and (b) its right under the Residual Warrant
to require an adjustment to the number of Residual Warrant Shares or the Warrant
Purchase Price (as such term is defined therein) as a result of the issuance of
the March 0000 Xxxxxxxx Shares.
2.3 Payment of Default Interest. The parties acknowledge and agree that
the aggregate amount of interest that has accrued under the Amended November
1998 Note and the April 1999 Note at the Default Rate (as such term is defined
in the Amended November 1998 Note and the April 1999 Note, respectively) with
respect to Defaults and Events of Default occurring through the Closing Date is
$300,000 (the "Accrued Default Interest"), and that such aggregate amount
remains unpaid as of the date hereof. Accordingly, the Company agrees to pay to
LLCP, at or prior to the Closing, all Accrued Default Interest.
2.4 Waiver of Rights Under Residual Warrant. At the request of the
Company, and in connection with the consummation of the transactions
contemplated by this Agreement, effective on and as of the Closing Date, LLCP
hereby (a) waives its right to receive additional shares of Common Stock under
Section 3.9 of the Residual Warrant as a result of the occurrence of a Dilutive
Issuance (as such term is defined in the Residual Warrant) at any time after the
date upon which the Company has fully and indefeasibly paid in full all
Indebtedness (including principal of, premium, if any, and interest), fees,
expenses and other amounts owing under the Term A Note and the Term B Note, (b)
agrees that, for purposes of Section 3.9 of the Residual Warrant, a Dilutive
Issuance shall not include (i) any anti-dilution adjustments that may be made
pursuant to the terms of the FSA Warrant as a result of each of the transactions
called for or contemplated by this Agreement (but only so long as no other
Person is entitled to any "anti-dilution" or similar adjustments under any
Equity Rights held by such Person as a result thereof) or (ii) the issuance of
Common Stock upon exercise of the FSA Warrant, and (c) agrees that the
obligation of a successor to the Company under Section 3.5 of the Residual
Warrant to explicitly assume the Company's obligations under the Residual
Warrant shall not apply in the context of a "Sale Event." The term "Sale Event"
means a sale, merger, consolidation or combination involving the Company
pursuant to the terms of which (i) cash (and no other type of consideration) is
to be received by or distributed to persons who are holders of Common Stock
immediately prior to the Sale Event or (ii) persons who are holders of Common
Stock
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immediately prior to the Sale Event are entitled to receive shares of common
stock of a corporation whose common stock is listed for trading on a national
securities exchange or the Nasdaq and which, immediately prior to the time that
the Sale Event is publicly announced, has a market capitalization in excess of
$500.0 million.
2.5 Indemnification of LLCP. Without limiting Section 9.2 of the
Securities Purchase Agreement, the Company agrees to indemnify and hold harmless
LLCP and any other Indemnified Parties from and against any and all Losses
arising from, or in connection with, any breach of the representations or
warranties made by the Company in this Agreement or in connection with any of
the transactions contemplated hereby or the performance of any covenants,
agreements or other obligations of the Company contained herein and therein, as
provided in Section 9 of the Securities Purchase Agreement.
3. CONDITIONS PRECEDENT.
The effectiveness of the waiver set forth in Section 1 and the other
transactions contemplated by this Agreement shall be subject to the condition
that each of the conditions precedent set forth in the Securities Purchase
Agreement shall be satisfied in the sole judgment of the Purchaser.
4. MISCELLANEOUS PROVISIONS.
4.1 Successors and Assigns; Assignments. This Agreement shall be binding
upon, and inure to the benefit of, the parties and their respective successors
and permitted assigns. The rights and obligations of the Company may not be
assigned or delegated, as the case may be, without the prior written consent of
LLCP.
4.2 Entire Agreement; Amendments. This Agreement, together with the
agreements, instruments and other documents contemplated hereby, constitute the
entire agreement and understanding among the parties with respect to the subject
matter hereof, and supersede all prior oral and written, and all contemporaneous
oral, agreements and understandings relating to the subject matter hereof. This
Agreement may not be amended, supplemented or otherwise modified except in a
writing signed by the parties.
4.3 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon
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the expiration of 72 hours after mailing, if mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(1) If to LLCP, to:
Xxxxxx Xxxxxxxxx Capital Partners II, L.P.
c/o Levine Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx & XxXxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
(2) If to the Company, to:
Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., President
Telecopier: (000) 000-0000
or at such other address or addresses as any party may specify after the date
hereof by written notice given in accordance with this Section 4.3.
4.4 Descriptive Headings, Construction and Interpretation. The descriptive
headings of the several paragraphs of this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and are not to be
considered in construing or interpreting this Agreement. All section, preamble,
recital, exhibit, schedule, clause and party references, if any, are to this
Agreement unless otherwise stated. No party, nor its counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions of this
Agreement, and all provisions of this Agreement shall be construed in accordance
with their fair meaning, and not strictly for or against any party.
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4.5 Governing Law; Failure or Delay. In all respects, including all
matters of construction, validity and performance, this Agreement and the rights
and obligations arising hereunder shall be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to
contracts made and performed in such state, without regard to principles
regarding choice of law or conflicts of laws. No failure or delay by LLCP in the
exercise of any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any power, right or
remedy preclude any other exercise thereof or of any other power, right or
remedy.
4.6 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be an original but all of
which taken together shall constitute one and the same instrument.
4.7 Advice of Counsel. Each party acknowledges and agrees that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Agreement, that it has had an opportunity to ask questions
of its legal counsel and that it is satisfied with its legal counsel and the
advice received from it.
4.8 Further Assurances. Each party agrees to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable to
effectuate the purposes of this Agreement and otherwise to consummate the
transactions contemplated hereby.
4.9 Waiver of Trial by Jury. EACH PARTY HEREBY WAIVES THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF, CONNECTED WITH
OR RELATED TO THIS AGREEMENT, THE SECURITIES PURCHASE AGREEMENT OR ANY OTHER
RELATED AGREEMENT, OR ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH
PARTY INITIATES SUCH ACTION OR ACTIONS.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives, as of the date first
written above.
LLCP
XXXXXX XXXXXXXXX CAPITAL PARTNERS, INC.,
a California corporation
On behalf of XXXXXX XXXXXXXXX CAPITAL
PARTNERS II, L.P., a California limited
partnership
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
President
COMPANY
CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
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Xxxxxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
By: /s/ Xxxxx X. Stock
--------------------------------------------------
Xxxxx X. Stock
Senior Vice President and Chief Financial Officer
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ADDENDUM REGARDING STANWICH
The undersigned has reviewed the Waiver Agreement and understands and
acknowledges its terms and conditions.
STANWICH FINANCIAL SERVICES CORP.,
a Rhode Island corporation
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
----------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
President
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