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EXHIBIT 10.29
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as of
this 17th day of November, 1998, by and between Stanwich Financial Services
Corp., a Rhode Island corporation ("Stanwich"), Xxxx X. Xxxxx, an individual
("Xxxxx"), Xxxxxx Xxxxxxxxx Capital Partners II, L.P., a California limited
partnership ("LLCP"), and Consumer Portfolio Services, Inc., a California
corporation ("CPS").
RECITALS
A. Pursuant to the terms of that certain Debt Restructure
Agreement of even date herewith by and among CPS, Stanwich and Xxxxx (the "Debt
Restructure Agreement"), CPS is issuing (i) a Convertible Subordinated 12.5%
Note in the principal amount of $4,000,000 to Stanwich (the "$4 Million Stanwich
Note") and (ii) a Convertible Subordinated 12.5% Note in the principal amount of
$1,000,000 to Xxxxx (the "Xxxxx Note").
X. Xxxxxxxx is the holder of (i) two Partially Convertible
Subordinated 9% Notes dated June 12, 1997, each in the principal amount of
$5,000,000 (the "$5 Million Stanwich Notes"), and (ii) five Partially
Convertible Subordinated 9% Notes dated June 12, 1997, each in the principal
amount of $1,000,000 (the "$1 Million Stanwich Notes" and, together with the $4
Million Stanwich Note and the $5 Million Stanwich Notes, the "Stanwich Notes").
X. Xxxxxxxx has pledged both of the $5 Million Stanwich Notes
and one of the $1 Million Stanwich Notes (collectively, the "Pledged Notes") to
certain financial institutions pursuant to the terms of various agreements (as
such agreements as in effect on the date hereof, the "Note Pledge Agreements").
D. LLCP and CPS are parties to that certain Securities Purchase
Agreement of even date herewith (the "LLCP Purchase Agreement") pursuant to
which CPS has agreed to issue to LLCP, and LLCP has agreed to purchase from CPS
as of the date hereof a Senior Subordinated Primary Note in the principal amount
of $25,000,000.
E. The execution of this Agreement by Stanwich, Xxxxx and CPS is
a condition precedent to the obligation of LLCP to consummate the transactions
contemplated by the LLCP Purchase Agreement.
F. In consideration of the substantial direct and indirect
benefits which Stanwich, Xxxxx and CPS will realize from the consummation of the
transactions contemplated by the LCCP Purchase Agreement, Stanwich, Xxxxx and
CPS desire to enter into this Agreement and to be bound by the terms and
conditions hereof.
AGREEMENT
In consideration of the mutual covenants and agreements set
forth herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of the Stanwich Notes and the Xxxxx Note.
1.1 Amendment of Section 2. Subject to Section 1.4, from and after the
date hereof and until the termination of this Agreement as provided below,
Section 2 (SUBORDINATION) of the Stanwich Notes and the Xxxxx Note shall be
amended and restated to read in its entirety as follows:
2. SUBORDINATION.
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(a) IN GENERAL. THIS NOTE IS ISSUED SUBJECT TO, AND EACH PERSON
HOLDING THIS NOTE OR ANY INTEREST THEREIN, WHETHER UPON ORIGINAL ISSUE OR
UPON TRANSFER OR ASSIGNMENT HEREOF, SHALL BY ACCEPTANCE HEREOF BE DEEMED
TO HAVE ACCEPTED AND AGREED TO BE BOUND BY THE PROVISIONS THAT THE
INDEBTEDNESS EVIDENCED BY THIS NOTE IS AND SHALL BE SUBORDINATED AND
SUBJECT IN RIGHT OF PAYMENT, TO THE EXTENT AND IN THE MANNER PROVIDED IN
THIS SECTION 2, TO THE PRIOR PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS
AND OF ALL SENIOR SUBORDINATED INDEBTEDNESS.
(b) PERMITTED PAYMENTS. THE MAKER MAY NOT MAKE ANY PAYMENT OF
PRINCIPAL OR PREMIUM ON THIS NOTE, AND THE HOLDER OF THIS NOTE SHALL NOT
BE PERMITTED TO RETAIN ANY PAYMENT OF PRINCIPAL OR PREMIUM, PRIOR TO THE
PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS AND ALL SENIOR SUBORDINATED
INDEBTEDNESS. UNTIL ALL SENIOR INDEBTEDNESS AND ALL SENIOR SUBORDINATED
INDEBTEDNESS HAVE BEEN PAID IN FULL, THE MAKER SHALL BE PERMITTED TO MAKE
AND THE HOLDER SHALL BE PERMITTED TO RETAIN, SUBJECT TO THE PROVISIONS OF
SECTION 2(c), ONLY PAYMENTS OF INTEREST ON THIS NOTE ("PERMITTED
PAYMENTS"), AND ANY PAYMENTS MADE BY THE MAKER THAT ARE NOT PERMITTED
PAYMENTS WILL BE TURNED OVER BY THE HOLDER OF THIS NOTE (i) FIRST, TO THE
HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS OR ANY AGENT THEREFOR (A "SENIOR
AGENT") FOR THE BENEFIT OF THE HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS
AND (ii) TO THE EXTENT THE SENIOR INDEBTEDNESS HAS BEEN PAID IN FULL, TO
THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS OR ANY AGENT
THEREFOR (A "SENIOR SUBORDINATED AGENT") FOR THE BENEFIT OF THE HOLDER OR
HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS. UPON PAYMENT IN FULL OF THE
SENIOR INDEBTEDNESS AND THE SENIOR SUBORDINATED INDEBTEDNESS, PAYMENT OF
PRINCIPAL AND INTEREST MAY BE MADE TO THE HOLDER OF THIS NOTE WITHOUT
RESTRICTION HEREUNDER.
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(c) SUSPENSION OF PAYMENTS; LIMITATION ON REMEDIES.
(i) FROM AND AFTER RECEIPT BY THE MAKER OF A WRITTEN
NOTICE FROM THE HOLDER OR HOLDERS OF NOT LESS THAN FIFTY-ONE
PERCENT (51.0%) IN PRINCIPAL AMOUNT OF THE OUTSTANDING SENIOR
INDEBTEDNESS OR ANY SENIOR AGENT (A "DEFAULT NOTICE") STATING
THAT A DEFAULT HAS OCCURRED IN THE PAYMENT OF ANY OBLIGATION ON
ANY SENIOR INDEBTEDNESS WHEN DUE, WHETHER AT THE STATED MATURITY
OF ANY SUCH PAYMENT OR BY DECLARATION OF ACCELERATION, CALL FOR
REDEMPTION, MANDATORY REPURCHASE, PAYMENT OR PREPAYMENT OR
OTHERWISE (A "PAYMENT DEFAULT"), AND UNTIL THE DATE ON WHICH SUCH
PAYMENT DEFAULT IS CURED OR WAIVED IN WRITING BY THE HOLDERS OF
THE SENIOR INDEBTEDNESS WHO DELIVERED THE DEFAULT NOTICE, THE
MAKER SHALL NOT MAKE, AND THE HOLDER SHALL NOT BE PERMITTED TO
RECEIVE OR RETAIN, ANY PAYMENT OF INTEREST ON THIS NOTE.
(ii) FROM AND AFTER RECEIPT BY THE MAKER OF WRITTEN NOTICE
FROM LLCP STATING THAT A DEFAULT OR EVENT OF DEFAULT HAS OCCURRED
UNDER THE LLCP PURCHASE AGREEMENT AND STATING THAT LLCP IS
ELECTING TO INVOKE THE PROVISIONS OF THIS SECTION 2(c)(ii), AND
UNTIL THE DATE ON WHICH SUCH DEFAULT OR EVENT OF DEFAULT IS CURED
OR WAIVED IN WRITING BY LLCP, THE MAKER MAY NOT MAKE, AND THE
HOLDER SHALL NOT BE PERMITTED TO RECEIVE OR RETAIN, ANY PAYMENT
OF INTEREST ON THIS NOTE.
(iii) THE HOLDER OF THIS NOTE MAY NOT ACCELERATE THE
MATURITY OF THIS NOTE, OR PURSUE ANY OTHER REMEDY PROVIDED IN
SECTION 11 PRIOR TO THE PAYMENT IN FULL OF ALL SENIOR
INDEBTEDNESS AND ALL SENIOR SUBORDINATED INDEBTEDNESS; PROVIDED,
HOWEVER, THAT THIS CLAUSE (iii) SHALL NOT LIMIT THE AUTOMATIC
ACCELERATION OF THIS NOTE UPON THE OCCURRENCE OF ANY EVENT OF
DEFAULT SPECIFIED IN SECTIONS 10(f) OR 10(g) OF THIS NOTE .
(iv) IN THE EVENT THE MAKER IS PROHIBITED FROM MAKING ANY
PAYMENT OF INTEREST UNDER THIS SECTION 2(c), THE AMOUNT OF SUCH
PAYMENT SHALL BE ADDED TO THE PRINCIPAL AMOUNT OF THIS NOTE AS OF
THE DATE ON WHICH SUCH PAYMENT WOULD OTHERWISE HAVE BEEN DUE AND
SUCH ADDITIONAL PRINCIPAL AMOUNT SHALL BE DUE AND PAYABLE AT
MATURITY, EXCEPT TO THE EXTENT LLCP MAY OTHERWISE AGREE IN
WRITING.
(d) DISTRIBUTIONS IN BANKRUPTCY. UPON A PAYMENT OR DISTRIBUTION
TO CREDITORS OF THE MAKER IN A LIQUIDATION, DISSOLUTION, OR WINDING UP OF
THE MAKER OR IN A BANKRUPTCY, REORGANIZATION, INSOLVENCY, RECEIVERSHIP OR
SIMILAR PROCEEDING RELATING TO THE MAKER OR ITS PROPERTIES OR AN
ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR ANY MARSHALING OF THE MAKER'S
ASSETS AND LIABILITIES:
(i) THE HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS SHALL BE
ENTITLED TO RECEIVE PAYMENT OF THE FULL AMOUNT OF THE SENIOR
INDEBTEDNESS AND, AFTER SUCH PAYMENT IN FULL OF THE SENIOR
INDEBTEDNESS, THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED
INDEBTEDNESS SHALL BE ENTITLED TO RECEIVE PAYMENT OF THE FULL
AMOUNT OF THE SENIOR SUBORDINATED INDEBTEDNESS BEFORE THE HOLDER
IS ENTITLED TO RECEIVE ANY PAYMENT ON ACCOUNT OF THE PRINCIPAL
OF, PREMIUM, IF ANY, OR INTEREST ON THIS NOTE; AND
(ii) ANY PAYMENT BY, OR DISTRIBUTION OF ASSETS OF, THE
MAKER OF ANY KIND OR CHARACTER, WHETHER IN CASH, PROPERTY OR
SECURITIES (OTHER THAN SECURITIES OF THE MAKER AS REORGANIZED OR
READJUSTED OR SECURITIES OF THE MAKER OR ANY OTHER CORPORATION
PROVIDED FOR BY A PLAN OF REORGANIZATION OR READJUSTMENT THE
PAYMENT OF WHICH IS SUBORDINATE, AT LEAST TO THE EXTENT PROVIDED
IN THIS SECTION 2 WITH RESPECT TO THIS NOTE, TO THE PAYMENT OF
ALL SENIOR INDEBTEDNESS AND ALL SENIOR SUBORDINATED
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INDEBTEDNESS, PROVIDED THAT THE RIGHTS OF THE HOLDERS OF SENIOR
INDEBTEDNESS AND THE HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS
ARE NOT IMPAIRED BY SUCH REORGANIZATION OR READJUSTMENT) TO WHICH
THE HOLDER WOULD BE ENTITLED EXCEPT FOR THE PROVISIONS OF THIS
SECTION 2 SHALL BE PAID OR DELIVERED BY THE PERSON MAKING SUCH
PAYMENT OR DISTRIBUTION, WHETHER A TRUSTEE IN BANKRUPTCY, A
RECEIVER OR LIQUIDATING TRUSTEE OR OTHERWISE, (i) FIRST, DIRECTLY
TO THE HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS OR ANY SENIOR
AGENT, RATABLY ACCORDING TO THE AGGREGATE AMOUNTS REMAINING
UNPAID ON ACCOUNT OF THE SENIOR INDEBTEDNESS HELD OR REPRESENTED
BY EACH, TO THE EXTENT NECESSARY TO MAKE PAYMENT IN FULL OF ALL
SENIOR INDEBTEDNESS REMAINING UNPAID AFTER GIVING EFFECT TO ANY
CONCURRENT PAYMENT OR DISTRIBUTION TO THE HOLDER OR HOLDERS OF
SENIOR INDEBTEDNESS, BEFORE ANY PAYMENT OR DISTRIBUTION IS MADE
TO THE HOLDER OR HOLDERS OF ANY SENIOR SUBORDINATED INDEBTEDNESS
OR ANY SENIOR SUBORDINATED AGENT OR TO THE HOLDER, AND (II)
THEREAFTER DIRECTLY TO THE HOLDER OR HOLDERS OF SENIOR
SUBORDINATED INDEBTEDNESS OR ANY SENIOR SUBORDINATED AGENT,
RATABLY ACCORDING TO THE AGGREGATE AMOUNTS REMAINING UNPAID ON
ACCOUNT OF THE SENIOR SUBORDINATED INDEBTEDNESS HELD OR
REPRESENTED BY EACH, TO THE EXTENT NECESSARY TO MAKE PAYMENT IN
FULL OF ALL SENIOR SUBORDINATED INDEBTEDNESS REMAINING UNPAID
AFTER GIVING EFFECT TO ANY CONCURRENT PAYMENT OR DISTRIBUTION TO
THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS, BEFORE
ANY PAYMENT OR DISTRIBUTION IS MADE TO THE HOLDER; AND
(iii) IN THE EVENT, NOTWITHSTANDING THE FOREGOING, ANY
PAYMENT BY, OR DISTRIBUTION OF ASSETS OF, THE MAKER OF ANY KIND
OR CHARACTER, WHETHER IN CASH, PROPERTY OR SECURITIES (OTHER THAN
SECURITIES OF THE MAKER AS REORGANIZED OR READJUSTED OR
SECURITIES OF THE MAKER OR ANY OTHER CORPORATION PROVIDED FOR BY
A PLAN OF REORGANIZATION OR READJUSTMENT THE PAYMENT OF WHICH IS
SUBORDINATE, AT LEAST TO THE EXTENT PROVIDED IN THIS SECTION 2
WITH RESPECT TO THIS NOTE, TO THE PAYMENT OF ALL SENIOR
INDEBTEDNESS AND ALL SENIOR SUBORDINATED INDEBTEDNESS, PROVIDED
THAT THE RIGHTS OF THE HOLDERS OF SENIOR INDEBTEDNESS AND THE
HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS ARE NOT IMPAIRED BY
SUCH REORGANIZATION OR READJUSTMENT) SHALL BE RECEIVED BY THE
HOLDER OF THIS NOTE BEFORE ALL SENIOR INDEBTEDNESS AND ALL SENIOR
SUBORDINATED INDEBTEDNESS IS PAID IN FULL, SUCH PAYMENT OR
DISTRIBUTION SHALL BE PAID OVER (i) FIRST, TO THE HOLDER OR
HOLDERS OF SUCH SENIOR INDEBTEDNESS OR ANY SENIOR AGENT, AND (ii)
THEREAFTER TO THE HOLDERS OF SUCH SENIOR SUBORDINATED
INDEBTEDNESS OR ANY SENIOR SUBORDINATED AGENT RATABLY AS
AFORESAID, FOR APPLICATION TO THE PAYMENT OF ALL SENIOR
INDEBTEDNESS AND ALL SENIOR SUBORDINATED INDEBTEDNESS REMAINING
UNPAID, AS THE CASE MAY BE, UNTIL ALL SUCH SENIOR INDEBTEDNESS
AND ALL SUCH SENIOR SUBORDINATED INDEBTEDNESS SHALL HAVE BEEN
PAID IN FULL, AFTER GIVING EFFECT TO ANY CONCURRENT PAYMENT OR
DISTRIBUTION TO THE HOLDERS OF SUCH SENIOR INDEBTEDNESS AND THE
HOLDERS OF SUCH SENIOR SUBORDINATED INDEBTEDNESS.
(e) EXCLUSIVE POWERS. THE HOLDERS OF SENIOR INDEBTEDNESS AND THE
HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS, ON THE ONE HAND, AND THE
HOLDER, ON THE OTHER HAND, ARE ENTITLED TO EXERCISE CERTAIN RIGHTS AND
POWERS WITH RESPECT TO THE MAKER FROM TIME TO TIME, WHETHER BEFORE OR
AFTER AN OCCURRENCE OF AN EVENT OF DEFAULT, AND THE EXERCISE OF ANY SUCH
RIGHT OR POWER BY ONE CREDITOR MAY PRECLUDE THE EXERCISE OF A SIMILAR
RIGHT OR POWER BY ONE OR MORE OTHER CREDITORS (ANY SUCH RIGHT OR POWER
BEING HEREIN CALLED AN "EXCLUSIVE POWER"). TO THE EXTENT THAT ANY HOLDER
OR HOLDERS OF SENIOR INDEBTEDNESS OR ANY SENIOR AGENT OR ANY HOLDER OR
HOLDERS OF SENIOR SUBORDINATED INDEBTEDNESS OR ANY SENIOR SUBORDINATED
AGENT ACTUALLY EXERCISES ANY EXCLUSIVE POWER, THEN THE HOLDER OF THIS
NOTE AGREES TO REFRAIN FROM EXERCISING ANY SUBSTANTIALLY SIMILAR
EXCLUSIVE POWER TO THE EXTENT NECESSARY TO PERMIT THE HOLDER OR HOLDERS
OF SENIOR INDEBTEDNESS OR THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED
INDEBTEDNESS, OR ANY OF THEM, TO BENEFIT FROM THEIR ACTIONS.
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(f) MODIFICATION OF SENIOR DEBT OR SENIOR SUBORDINATED DEBT. NO
AMENDMENT, MODIFICATION, EXTENSION, REPLACEMENT, RESTATEMENT OR
SUBSTITUTION OF ANY SENIOR INDEBTEDNESS OR OF ANY SENIOR SUBORDINATED
INDEBTEDNESS, OR OF ANY AGREEMENT OR NOTE NOW OR HEREAFTER IN EFFECT
PERTAINING TO SUCH SENIOR INDEBTEDNESS OR SENIOR SUBORDINATED
INDEBTEDNESS, SHALL NULLIFY, IMPAIR, LIMIT, ALTER OR MODIFY THE
PROVISIONS OF THIS SECTION 2.
(g) EXPENSES INCLUDED IN SENIOR INDEBTEDNESS AND SENIOR
SUBORDINATED INDEBTEDNESS. FOR PURPOSES OF THIS SECTION 2, SENIOR
INDEBTEDNESS SHALL INCLUDE ALL FEES, EXPENSES AND COSTS INCURRED BY OR ON
BEHALF OF THE HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS OR THE SENIOR
AGENT IN CONNECTION WITH SUCH SENIOR INDEBTEDNESS, AND SENIOR
SUBORDINATED INDEBTEDNESS SHALL INCLUDE ALL FEES, EXPENSES AND COSTS
INCURRED BY OR ON BEHALF OF THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED
INDEBTEDNESS OR THE SENIOR SUBORDINATED AGENT IN CONNECTION WITH SUCH
SENIOR SUBORDINATED INDEBTEDNESS.
(h) NOTICE TO SENIOR DEBT AND TO SENIOR SUBORDINATED DEBT.
NOTICES TO HOLDERS OF SENIOR INDEBTEDNESS SHALL BE MADE TO EACH HOLDER OF
SENIOR INDEBTEDNESS OR, IF THE HOLDERS OF SENIOR INDEBTEDNESS HAVE
APPOINTED A SENIOR AGENT, THEN TO SUCH SENIOR AGENT, AND SHALL BE MADE IN
THE MANNER SPECIFIED IN THE DOCUMENT EVIDENCING SUCH HOLDER'S SENIOR
INDEBTEDNESS IF SUCH A MANNER IS SO SPECIFIED THEREIN. NOTICES TO HOLDERS
OF SENIOR SUBORDINATED INDEBTEDNESS SHALL BE MADE TO EACH HOLDER OF
SENIOR SUBORDINATED INDEBTEDNESS OR, IF THE HOLDERS OF SENIOR
SUBORDINATED INDEBTEDNESS HAVE APPOINTED A SENIOR SUBORDINATED AGENT,
THEN TO SUCH SENIOR SUBORDINATED AGENT, AND SHALL BE MADE IN THE MANNER
SPECIFIED IN THE DOCUMENT EVIDENCING SUCH HOLDER'S SENIOR SUBORDINATED
INDEBTEDNESS IF SUCH A MANNER IS SO SPECIFIED THEREIN.
(i) SUBROGATION. SUBJECT TO THE PAYMENT IN FULL OF ALL SENIOR
INDEBTEDNESS AND ALL SENIOR SUBORDINATED INDEBTEDNESS, THE HOLDER SHALL
BE SUBROGATED TO THE RIGHTS OF THE HOLDER OR HOLDERS OF SENIOR
INDEBTEDNESS AND THE HOLDER OR HOLDERS OF SENIOR SUBORDINATED
INDEBTEDNESS TO RECEIVE PAYMENTS OR DISTRIBUTIONS OF CASH, PROPERTY OR
SECURITIES OF THE MAKER APPLICABLE TO SUCH SENIOR INDEBTEDNESS OR SENIOR
SUBORDINATED INDEBTEDNESS, AS THE CASE MAY BE, UNTIL ALL AMOUNTS OWING ON
THIS NOTE SHALL BE PAID IN FULL, AND, AS BETWEEN THE MAKER, ITS CREDITORS
OTHER THAN HOLDERS OF SENIOR INDEBTEDNESS OR HOLDERS OF SENIOR
SUBORDINATED INDEBTEDNESS AND THE HOLDER, NO SUCH PAYMENT OR DISTRIBUTION
MADE TO THE HOLDER OR HOLDERS OF SENIOR INDEBTEDNESS OR THE HOLDERS OF
SENIOR SUBORDINATED INDEBTEDNESS BY VIRTUE OF THIS SECTION 2 WHICH
OTHERWISE WOULD HAVE BEEN MADE TO THE HOLDER SHALL BE DEEMED TO BE A
PAYMENT BY THE MAKER ON ACCOUNT OF ANY SENIOR INDEBTEDNESS OR ANY SENIOR
SUBORDINATED INDEBTEDNESS, IT BEING UNDERSTOOD THAT THE PROVISIONS OF
THIS SECTION 2 ARE AND ARE INTENDED SOLELY FOR THE PURPOSE OF DEFINING
THE RELATIVE RIGHTS OF THE HOLDER, ON THE ONE HAND, AND THE HOLDER OR
HOLDERS OF SENIOR INDEBTEDNESS AND THE HOLDER OR HOLDERS OF SENIOR
SUBORDINATED INDEBTEDNESS, ON THE OTHER HAND.
(j) OBLIGATIONS OF THE MAKER UNCONDITIONAL. NOTHING CONTAINED IN
THIS SECTION 2 OR ELSEWHERE IN THIS NOTE IS INTENDED TO OR SHALL IMPAIR,
AS BETWEEN THE MAKER, ITS CREDITORS OTHER THAN THE HOLDERS OF SENIOR
INDEBTEDNESS OR OF SENIOR SUBORDINATED INDEBTEDNESS AND THE HOLDER, THE
OBLIGATIONS OF THE MAKER, WHICH ARE ABSOLUTE AND UNCONDITIONAL, TO PAY TO
THE HOLDER THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THIS NOTE
AS AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN ACCORDANCE WITH ITS
TERMS HEREOF, OR IS INTENDED TO OR SHALL AFFECT THE RELATIVE RIGHTS OF
THE HOLDER, ON THE ONE HAND, AND CREDITORS OF THE MAKER OTHER THAN THE
HOLDERS OF SENIOR INDEBTEDNESS AND SENIOR SUBORDINATED INDEBTEDNESS, ON
THE OTHER HAND.
UPON ANY PAYMENT OR DISTRIBUTION OF ASSETS OF THE MAKER REFERRED
TO IN THIS SECTION 2, THE HOLDER OF THIS NOTE SHALL BE ENTITLED TO RELY
UPON ANY ORDER OR DECREE MADE BY ANY COURT OF COMPETENT JURISDICTION IN
WHICH ANY SUCH DISSOLUTION, WINDING UP, LIQUIDATION OR REORGANIZATION
PROCEEDING AFFECTING THE AFFAIRS OF THE MAKER IS PENDING OR UPON A
CERTIFICATE OF THE TRUSTEE IN
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BANKRUPTCY, RECEIVER, ASSIGNEE FOR THE BENEFIT OF CREDITORS,
LIQUIDATING TRUSTEE OR AGENT OR OTHER PERSON MAKING ANY PAYMENT OR
DISTRIBUTION, DELIVERED TO THE HOLDER OF THIS NOTE, FOR THE PURPOSE OF
ASCERTAINING THE PERSONS ENTITLED TO PARTICIPATE IN SUCH PAYMENT OR
DISTRIBUTION, THE HOLDERS OF THE SENIOR INDEBTEDNESS, SENIOR
SUBORDINATED INDEBTEDNESS AND OTHER INDEBTEDNESS OF THE MAKER, THE
AMOUNT THEREOF OR PAYABLE THEREON, THE AMOUNT PAID OR DISTRIBUTED
THEREON AND ALL OTHER FACTS PERTINENT THERETO OR TO THIS SECTION 2.
1.2 Amendment of Section 12. From and after the date hereof and until the
termination of this Agreement as provided below, the following definitions shall
be added to Section 12 of the Stanwich Notes and the Xxxxx Note:
"LLCP" MEANS XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., A CALIFORNIA
LIMITED PARTNERSHIP.
"LLCP PURCHASE AGREEMENT" MEANS THAT CERTAIN SECURITIES PURCHASE
AGREEMENT DATED NOVEMBER 16, 1998 BY AND AMONG THE MAKER AND LLCP.
"SENIOR SUBORDINATED INDEBTEDNESS" HAS THE MEANING GIVEN TO SUCH TERM IN
THE LLCP PURCHASE AGREEMENT.
1.3 Legends. Subject to Section 1.4, the following legend shall be placed
on the Stanwich Notes and the Xxxxx Note:
THE PROVISIONS OF THIS NOTE HAVE BEEN AMENDED AS PROVIDED IN A
SUBORDINATION AGREEMENT DATED NOVEMBER 16, 1998 AMONG THE MAKER, THE
ORIGINAL HOLDER OF THIS NOTE AND CERTAIN OTHER PARTIES. A COPY OF SUCH
SUBORDINATION AGREEMENT MAY BE OBTAINED FROM THE PRINCIPAL EXECUTIVE
OFFICE OF THE MAKER.
CPS shall not effect any transfer of the Stanwich Note or the Xxxxx Note or any
portion of either of them prior to the termination of this Agreement unless the
foregoing legend is imprinted thereon. Upon the termination of this Agreement,
CPS shall, upon request and against delivery of the legended note for
cancellation, issue a new note without the foregoing legend for any Stanwich
Note or for the Xxxxx Note.
1.4 The Pledged Notes. The foregoing provisions of this Section 1
notwithstanding, the Pledged Notes shall not be amended as provided herein so
long as they remain subject to the Note Pledge Agreements as in effect on the
date hereof. Neither Stanwich nor Xxxxx may amend any Note Pledge Agreement
without the prior written consent of LLCP. Upon the release of any Pledged Note
from the pledge created pursuant to any Pledge Agreement, such Pledged Note
shall thereupon immediately be deemed amended as provided in this Agreement
without any further action of any kind by any party. Without limiting the
foregoing, upon the release of any Pledged Note from pledge, such Pledged Note
shall be legended as required by Section 1.4 within two business days of such
release.
2. Termination. This Agreement shall terminate and be of no further force
or effect upon the first to occur of (i) the payment in full of all "Obligations
to Purchaser" as such term is defined in the LLCP Purchase Agreement or (ii) the
issuance to LLCP of the New Senior Credit Facility Note (as such term is defined
in the LLCP Purchase Agreement). Upon termination of this Agreement, the terms
and provisions of the Stanwich Notes and the Xxxxx Note shall no longer be
amended as provided herein and shall continue in effect without any modification
resulting from this Agreement.
3. Miscellaneous.
3.1 Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the respective successors, legal representatives and assigns
of the parties to this Agreement. No party to this Agreement may assign its
right or obligations hereunder without the prior written consent of the other
parties.
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3.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to LLCP: x/x Xxxxxx Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Stanwich: c/o Stanwich Partners, Inc.
One Stamford Landing
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Xxxxx: c/o Stanwich Partners, Inc.
One Stamford Landing
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to CPS: Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., President
and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address or addresses as LLCP, Stanwich, Poole, or CPS, as the
case may be, may specify by written notice given in accordance with this
Section.
3.3 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.5 Descriptive Headings, Construction and Interpretation. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Agreement for 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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3.6 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
3.7 Remedies. In the event that Stanwich, Poole, or CPS fails to observe
or perform any covenant or agreement to be observed or performed under this
Agreement, LLCP may proceed to protect and enforce its rights by suit in equity
or action at law, whether for specific performance of any term contained in this
Agreement or for an injunction against the breach of any such term or in aid of
the exercise of any power granted in this Agreement or to enforce any other
legal or equitable right, or to take any one or more of such actions. Stanwich,
Xxxxx and CPS severally agree to pay all fees, costs, and expenses, including
without limitation, fees and expenses of attorneys, accountants and other
experts, and all fees, costs and expenses of appeals, incurred by LLCP in
connection with the enforcement of this Agreement against it or him, as the case
may be or the collection or any sums due hereunder, whether or not suit is
commenced. None of the rights, powers or remedies conferred under this Agreement
shall be mutually exclusive, and each such right, power or remedy shall be
cumulative and in addition to any other right, power or remedy whether conferred
by this Agreement or now or hereafter available at law, in equity, by statute or
otherwise.
3.8 Governing Law. 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 thereof regarding
conflicts of laws.
4. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
COMMERCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT AND/OR ANY RELATED AGREEMENT OR THE TRANSACTIONS COMPLETED HEREBY OR
THEREBY.
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9
IN WITNESS WHEREOF, the parties have caused this Subordination Agreement
to be executed and delivered by their duly authorized representatives as of the
date first above written.
CONSUMER PORTFOLIO SERVICES, XXXXXX XXXXXXXXX CAPITAL
INC., a California corporation PARTNERS, INC., a California
corporation
By:_______________________________ on behalf of XXXXXX XXXXXXXXX
Xxxxxxx X. Xxxxxxx, Xx., CAPITAL PARTNERS II, L.P.,
President and Chief Executive Officer a California limited partnership
By:_______________________________ By:_________________________________
Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxxxxx,
Senior Vice President and Chief Chief Executive Officer
Financial Officer
STANWICH FINANCIAL SERVICES
CORP., a Rhode Island Corporation ____________________________________
XXXX X. XXXXX
By:______________________________
Xxxxxxx X. Xxxxxxx, Xx., President
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