EXHIBIT 10.1
EAGLE ACQUISITION SERVICES L.L.C.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
August 6, 1998
Board of Directors
Eagle Finance Corp.
0000 Xxx-Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Gentlemen:
This letter sets forth the principal terms on which Eagle Acquisition
Services L.L.C. ("EASC"), through a newly-formed subsidiary of EASC ("New
Eagle"), would acquire certain of the assets, and assume certain of the
liabilities, of Eagle Finance Corp. (the "Company").
1.FORM OF TRANSACTION, CONSIDERATION AND OTHER TERMS.
(a) FORMATION OF TRANSACTION. Subject to the terms and conditions set
forth herein, EASC proposes to effect a transaction pursuant to which New Eagle
would purchase, free and clear of all liens, claims and other encumbrances of
any kind, the following assets owned by the Company (collectively, the
"Assets"):
(i) all furniture, fixtures, equipment, supplies and other
tangible personal property owned by the Company and used in
the operation of the Company's automobile finance business
(the "Business") and the right to receive all utility and
rent deposits related to the Office Leases (as such term is
defined below);
(ii) all books, records, customer lists and similar data used in
the Business (which books and records shall not include the
corporate books and records of the Company);
(iii) all leases (the "WPT Leases") between the Company and
Wonderlic Personal Test, Inc. ("WPT");
(iv) the rights under the agreement between WPT and the Company
relating to the Eagle Credit Index;
(v) the leases of the Company's offices in Gurnee, Illinois and
Tampa, Florida (the "Office Leases"); and
(vi) all tradenames, copyrights and other intellectual property
rights of any kind owned by the Company and used in the
Business (some of which, at the option of New Eagle, may be
placed in a third party escrow).
In addition, the Company and EASC acknowledge the significant value of the
Company's rights under the servicing agreement (including the rights under
related asset purchase agreements) with General Electric Capital Corporation
(the "GECC Agreements"). The Company and EASC agree to take appropriate and
reasonable actions to preserve such value including either entering a
sub-servicing arrangement (as contemplated in the Servicing Agreement
referenced in subsection (e) below with, or assigning to, New Eagle the
Company's rights (subject to related obligations and together with the
off-balance sheet reserves associated therewith). Any such sub-servicing
arrangement or assignment shall provide that an agreed upon portion of any
amounts realized by New Eagle (as servicing fees or otherwise) on any such
reserves (referred to herein as the "GECC Reserve Participation") shall be
paid to the Company after receipt thereof by New Eagle during the 12 months
following the Closing and on an agreed upon accelerated basis for amounts due
after the June 30, 1999. In this regard, the parties anticipate that New
Eagle would provide to the Company a proposal relating to such accelerated
payment no later than March 31, 1999.
It is understood and agreed by the parties that the Assets shall not include
the Company's cash, marketable securities, tax credits, net operating loss
carryforward, Company-owned finance receivables, repossessed vehicles or
charged-off finance receivables.
(b) CONSIDERATION. In consideration for its acquisition of the
Assets, New Eagle agrees to assume certain specified liabilities as set forth
in more detail below at the Closing and to pay to the Company, if
appropriate, the GECC Reserve Participation.
(c) ASSUMPTION OF LIABILITIES. New Eagle would assume the following
disclosed ordinary course obligations or liabilities of the Business
including those due to be performed after the Closing under the Office
Leases, the WPT Leases, the employee stay bonus and, if appropriate, the GECC
Agreements (collectively, the "Assumed Liabilities"). No other obligations,
contingencies or liabilities of the Company or the Business would be assumed
by New Eagle or EASC.
(d) EMPLOYEES. At the Closing, New Eagle would be permitted, but
would not be obligated, to offer employment to current employees of the
Company on such terms as New Eagle, in its sole discretion, may determine.
Without limiting the foregoing, the Company has been advised that most of its
employees would be offered employment with New Eagle. Additionally, the
Company understands that the employment of certain senior executives would be
phased-in over a period of time determined by New Eagle and acceptable to the
respective senior executive.
(e) SERVICING AGREEMENT. At the Closing, the Company and New Eagle
would enter into a servicing agreement substantially in the form attached
hereto as Exhibit A (the "Servicing Agreement"). The Company would retain
the right to sell owned and charge-off receivables remaining after two
hundred and seventy (270) days. New Eagle would have the
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right of first refusal to purchase receivables at 95% of the highest cash
offering price. Closing of such sale would occur on or before June 30, 1999.
2. DUE DILIGENCE AND FINANCIAL REVIEW.
From and after the date hereof and until the termination of this
letter of intent, the Company shall grant EASC and New Eagle and their
counsel, accountants, advisors, representatives, agents and employees, full
and complete access to the Company's facilities, properties, information and
data, and to its accountants, personnel and other representatives, and shall
make available to EASC and New Eagle and their counsel, accountants,
advisors, representatives, agents and employees, all such other documents,
books, records and information relating to the business, affairs, financial
and other condition of the Company and its properties and its affiliates as
shall be requested by EASC or New Eagle. The parties agree that all
information furnished shall remain confidential. Without limiting the
foregoing, the Company has been advised that the due diligence review will be
completed within four weeks from the date of this letter.
3. CERTAIN COVENANTS.
The Company hereby agrees that prior to the Closing the Company will
operate its business in a manner consistent with prior practice and will use
its reasonable efforts to maintain the goodwill of its employees, customers,
suppliers and other persons with which it has commercial dealings.
4. DOCUMENTATION AND OTHER CONDITIONS.
(a) The transaction contemplated herein shall be conditional on the
completion of a due diligence review, satisfactory to EASC and New Eagle in
their sole discretion, of all relevant business, financial, legal and other
information regarding the Company and the Business.
(b) The transactions contemplated herein shall be subject to the
negotiation, execution and delivery of definitive documents, including the
Servicing Agreement and a definitive asset purchase agreement (the "Purchase
Agreement") between New Eagle and the Company, containing, among other
provisions, customary and appropriate representations and warranties, covenants
and conditions (including, without limitation, third party consents to the
assignment of the WPT Leases, the Eagle Credit Index rights and the Office
Leases and, if appropriate, the sub-servicing arrangement or assignment of the
GECC Agreements), indemnifications and other provisions.
(c) The proposal contained in this letter of intent is subject to the
ability of EASC and/or New Eagle to raise $2,000,000 of new equity capital.
(d) The parties intend to enter into the Purchase Agreement as soon as
practicable and to close (the "Closing") no later than ninety days subsequent to
the full execution of this letter of intent.
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5. PUBLICITY.
Except as required by law or as recommended by legal counsel, no party
shall make any announcement of the transactions contemplated herein to the
employees of the Company (other than key management and other persons whose
knowledge thereof is appropriate in connection herewith), news or wire
services or otherwise except with the consent and approval of the other party.
6. EXCLUSIVITY.
Except for continuing its discussions with X.X. Xxxxxxx & Sons, Inc.
or its affiliates which may continue through August 14, 1998, the Company
hereby agrees that until termination of this letter of intent, it shall not
without the prior consent of EASC, directly or indirectly, solicit any
proposal or offer concerning the sale, transfer or merger of the Company, the
sale or other transfer of the Business and/or the Assets or the sale or other
transfer of any of the capital stock of the Company (each, a "Sale").
Notwithstanding the foregoing, the Company may engage in discussions or
negotiations with, furnish nonpublic information concerning the Company, any
subsidiary of the Company, and their respective properties, assets and
business to, and grant access to the facilities of the Company or any
subsidiary of the Company to, any person that has made an unsolicited
competing proposal, but only to the extent the Company's board of directors
shall conclude in good faith on the basis of the advice of its outside
counsel that the failure to take such action would be inconsistent with its
fiduciary duties under applicable law. If the Company shall take any of the
actions referenced in the immediately preceding sentence, and shall within
one year from the date hereof sell or transfer a controlling interest in the
Company or all or substantially all of the assets of the Company to any
person other than EASC or New Eagle, the Company shall upon closing of such
transaction pay to EASC a fee of $100,000; provided, however, that such
payment shall not be required if:
(a) the Company undertakes an orderly liquidation of its assets for the
benefit of its stakeholders; or
(b) if (a) above shall not apply, unless EASC shall have taken each of
the following actions: (i) on or before September 28, 1998, EASC shall have
delivered to the Company a draft of the definitive Purchase Agreement
contemplated in paragraph 4(b) above; (ii) on or before October 13, 1998,
EASC shall have advised the Company that it has received binding
subscriptions for the new capital contemplated in paragraph 4(c) above; (iii)
neither EASC nor New Eagle shall have breached any of their obligations under
the definitive Purchase Agreement; and (iv) on or before October 28, 1998,
EASC shall have notified the Company that it is prepared to purchase the
Assets in accordance with the terms set forth in the definitive Purchase
Agreement.
7. GOVERNING LAW.
This letter of intent and the terms hereof shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to its conflicts of laws principles.
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8. EXPENSES.
Each of the parties hereto shall bear its own costs and expenses
incurred in connection with the proposed transactions contemplated herein
whether or not the Closing shall occur.
9. PRIOR AGREEMENT.
This letter of intent supersedes all prior agreements (except for the
Confidentiality Agreement executed by Xx. Xxxxxx) and understandings of the
parties hereto with respect to the subject matter hereof.
10. TERM.
(a) Subject to subsection (b) of this Section 10, this letter of
intent shall automatically terminate ninety days subsequent to the full
execution hereof unless extended by the written agreement of the parties
hereto.
(b) Unless this letter of intent is executed by the Company and
received by EASC at c/o X. X. Xxxxxx & Company, 44th Floor, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, by 5:00 p.m., New York time, on August 6,
1998, the proposals contained herein and this letter of intent shall
automatically terminate.
11. BINDING AGREEMENTS.
The parties hereto each understand and agree that the purpose of this
letter of intent is to set forth their mutual understandings regarding the
proposed transaction described herein. The parties understand and agree that
this letter of intent expresses their preliminary understandings and good
faith intentions only and does not create a binding obligation upon any party
hereto except that Sections 2, 5, 6, 7, 8 9, 10 and 11 hereof are intended to
be and are binding obligations of the parties hereto.
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If the foregoing accurately reflects your understanding, please indicate your
intent to proceed with the transaction contemplated herein by signing the
enclosed counterpart of this letter of intent in the space provided below for
such purpose, and return such signed counterpart to the undersigned.
Very truly yours,
EAGLE ACQUISITION SERVICES L.L.C.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
Chairman
Agreed and Accepted, as of this
13th day of August, 1998
EAGLE FINANCE CORP.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Its: President
-----------------------------------
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SCHEDULE "A"
Servicing Fees
GECC
4% annualized prior month account balance. (MINIMUM $20.00 PER
ACCOUNT)
Bonus Servicing: 25% first $ 500,000 earned
30% to $ 1,000,000
35% to $ 1,500,000
40% to $ 2,000,000
45% to $ 2,500,000
50% beyond $ 2,500,001
SECURITIZATION
4% annualized prior month account balance (MINIMUM $20.00 PER ACCOUNT)
Repo Expenses Reimbursed - Estimate $400.00 per account
Repo Fee (Labor and Overhead) $300.00 per account
EAGLE OWNED
4% annualized prior month account balance. (MINIMUM $20.000 PER ACCOUNT)
P&L Recoveries: 25% first $ 400,000 earned
30% to $ 800,000
35% to $ 1,200,000
40% to $ 1,600,000
45% to $ 2,000,000
50% beyond $ 2,000,001
Repo Expenses Reimbursed - Estimate $400.00 per account
Repo Fee (Labor and Overhead) $300.00 per account
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