Exhibit 20.1.5
STANDSTILL, FORBEARANCE
AND AMENDMENT AGREEMENT
-----------------------
THIS STANDSTILL, FORBEARANCE AND AMENDMENT AGREEMENT (this
"Agreement"), dated as of the 19th day of February, 2002, is entered into by and
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among IMPERIAL CREDIT INDUSTRIES, INC., a California corporation ("ICII"), and
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the holders of the Senior Secured Notes (as defined herein) listed on Exhibit A
hereto (collectively, the "Senior Noteholders"), which holders constitute the
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holders of all of the issued and outstanding Senior Secured Notes, with
reference to the following facts:
R E C I T A L S
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A. ICII entered into a Master Recapitalization Agreement, dated as of
March 29, 2001, with certain investors named therein (as amended, the
"Recapitalization Agreement"), pursuant to which ICII sold $16,200,000 in
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aggregate principal amount of 12% Senior Secured Notes due April 30, 2002 (the
"Senior Secured Notes") to the Senior Noteholders in a private placement on or
--------------------
about March 30, 2001;
B. As contemplated by the Recapitalization Agreement, on June 28, 2001,
ICII issued $10,000,000 aggregate principal amount of Secured Convertible
Subordinated Debt (the "Convertible Debt") to The Xxxxxxx Xxxxx Living Trust
----------------
(the "Xxxxx Trust") and ICII shortly thereafter consummated a debt exchange
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offer under which ICII exchanged certain of its existing debt for $127,479,000
aggregate principal amount of 12% Senior Secured Notes due 2005 (the "Exchange
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Notes") and shares of its common stock and warrants to purchase additional
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shares of its common stock;
C. ICII's obligations under the Senior Secured Notes, the Convertible
Debt and the Exchange Notes are secured by that certain Amended and Restated
Collateral Agency and Security Agreement, dated as of March 29, 2001 and amended
June 28, 2001 (the "Security Agreement"), in favor of and for the benefit of
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Wilmington Trust Company ("Wilmington"), as collateral agent (the "Collateral
---------- ----------
Agent") for the benefit of the holders of the Senior Secured Notes, the
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Convertible Debt and the Exchange Notes;
D. The Senior Secured Notes have a maturity date of April 30, 2002, and
all unpaid principal, accrued and unpaid interest, and any other amounts payable
thereunder, are due and payable on that date;
E. Affinity Bank Holdings, Inc. ("Affinity") sent to ICII (x) a letter
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dated December 13, 2001 (the "December 13 Letter") on behalf of certain of the
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Senior Noteholders listed therein in which it asserted, among other things, (i)
that starting on November 1, 2001 interest on the Senior Secured Notes should
have accrued at the rate of 20% per annum due to the failure of the Senior
Secured Debt Exchange (as defined in the Recapitalization Agreement) to have
occurred by November 1, 2001, (ii) that the failure of ICII to have paid
interest on the Senior Secured Debt at such 20% per annum interest rate
constitutes an Event of Default (the "Alleged December Existing Default") under
---------------------------------
the Senior Secured Notes, and (iii) that, pursuant to Section 11 of the Security
Agreement, after the occurrence of an Event of Default (and notwithstanding a
cure of the Event of the Default after the date of the December 13 Letter) the
holders of the
Exchange Notes are not entitled to receive, and such holders have agreed not to
accept, any payment of principal or interest on the Exchange Notes until all
amounts owing in respect of the Senior Secured Notes shall have been paid in
full (the "Payment Blockage") and (y) a letter dated February 1, 2002 (the
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"February 1 Letter") on behalf of certain of the Senior Noteholders listed
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therein in which it asserted, among other things, (i) that payment of interest
on the Exchange Notes had been made not withstanding the Payment Blockage and
(ii) that the making of such payment notwithstanding the Payment Blockage
constitutes an Event of Default (the "Alleged February Existing Default", the
---------------------------------
Alleged December Existing Default and the Alleged February Existing Default
being jointly referred to herein as the "Alleged Existing Defaults").;
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F. By the terms of the Security Agreement, the holders of the Exchange
Notes are required to hold amounts received by them in trust in the event of a
Payment Blockage. The holders of the Exchange Notes were paid approximately
$8,575,000 on or about January 30, 2002. ICII is desirous of having any
requirement to hold such payment in trust waived;
G. In the December 13 Letter and the February 1 Letter, Affinity
offered to further discuss possible methods of resolving the Alleged Existing
Defaults and to refrain from giving a notice to the Collateral Agent of the
Alleged Existing Defaults. In the interest of obtaining further time to enable
the parties to attempt to resolve their disputes, ICII has paid to the Senior
Noteholders interest on the Senior Secured Notes at the 20% Accrual Rate
pursuant to the terms of the Senior Secured Notes, subject to an express
reservation of its rights, claims and remedies;
H. Southern Pacific Bank, ICII's wholly-owned subsidiary ("SPB"),
continues to require significant additional capital to satisfy regulatory
requirements. SPB and ICII continue to explore and evaluate possible
recapitalizations or other capital raising transactions intended, in part, to
provide such additional capital to SPB and decrease indebtedness of ICII (any
such recapitalizations or other transactions, being referred to herein as a
"Recapitalization Transaction");
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I. ICII, Affinity and the other Senior Noteholders have agreed to take
or forebear from taking certain actions over a specified time as provided
herein. In addition, SPB and the Xxxxx Trust have agreed to enter into a
separate Restructuring Agreement of even date herewith (the "Restructuring
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Agreement") in order to review and consider certain restructuring transactions;
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and
J. Pursuant to the Restructuring Agreement, an additional series of the
Senior Secured Notes is to be issued in an aggregate principal amount of
$6,382,877 having terms, rights and privileges set forth in the Restructuring
Agreement (the "Series B Senior Secured Notes"). The Senior Noteholders have
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agreed to consent to the issuance of the Series B Senior Secured Notes.
NOW, THEREFORE, in consideration of the foregoing agreed Recitals and
the other mutual agreements herein contained, the parties hereto agree as
follows:
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A G R E E M E N T
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1. Defined Terms. Capitalized terms used herein and not otherwise
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defined herein shall have the meanings assigned to them in the Senior Secured
Notes. The expression "Series A Senior Secured Notes" means the Senior Secured
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Notes as currently issued and outstanding. The term "Senior Secured Notes" as
--------------------
used herein means, prior to the issuance of the Series B Senior Secured Notes,
the Series A Senior Secured Notes and, after the issuance of the Series B Senior
Secured Notes, means both the Series A Senior Secured Notes and the Series B
Senior Secured Notes.
2. Acknowledgment of Indebtedness. ICII hereby acknowledges, confirms
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and agrees (i) that it has no right or claim to a return, repayment or refund of
any amount paid by ICII to the Senior Noteholders, including but not limited to
the accrual and payment of interest at the rate of 20% per annum from and after
November 1, 2001 through the beginning of the Standstill Period, from which time
interest shall accrue and be paid as set forth in Section 5 hereof, (ii) that it
presently owes to the Senior Noteholders the aggregate principal amount of
$16,200,000, together with interest as set forth in the Senior Notes as modified
by this Agreement and fees and expenses as set forth in this Agreement (such
amounts, collectively, the "Senior Note Amount"), and (iii) that the Senior
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Noteholders have a valid claim against ICII for the Senior Note Amount, not
subject to any defenses, offsets, disputes, objections, challenges,
contingencies, counterclaims or other deductions of any kind or nature
whatsoever (but subject to forbearance from enforcement by the Senior
Noteholders in accordance with Section 7 of this Agreement).
3. Amendment to Senior Secured Notes. The Senior Secured Notes are
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hereby amended by (i) extending the maturity thereof (the "Maturity Date") from
April 30, 2002 to June 28, 2002 (July 15, 2002 if, prior to June 15, 2002, (x)
ICII certifies in writing to the Senior Noteholders that payment of principal
and interest on all other indebtedness of ICII which is payable on or between
July 15, 2002 and August 14, 2002 may be deferred from the date due until at
least August 14, 2002 without giving rise to an event of default thereunder
(which certificate shall be supported by an opinion of counsel in form
reasonably satisfactory to the Senior Noteholders) and (y) ICII delivers to the
Senior Noteholders a contractually binding undertaking (together with an opinion
of counsel in form reasonably satisfactory to the Senior Noteholders to the
effect that such undertaking is duly authorized and enforceable against ICII in
accordance with its terms) to defer payment of such principal and interest to a
date no earlier than August 14, 2002) and (ii) adding the following conditions
and events at the end of the definition of "Event of Default" as set forth in
Section 5 of the Senior Secured Notes:
(l) ICII shall assert or contest in writing or in any court or with or
before any governmental agency or authority that any provision or all
of the Senior Secured Notes, this Agreement or any other Operative
Agreement is invalid or void; or ICII denies that it has the full
obligation to pay the Senior Note Amount, denies that the Senior Note
Amount is secured or denies that the security interest in favor of the
Senior Noteholders is a first, prior, perfected security interest.
If an Event of Default described in clause (f) or (g) of the definition of
"Event of Default" set forth in Section 5 of the Senior Secured Notes occurs or
exists, the Senior Secured Noteholders
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and the Collateral Agent shall thereupon be entitled to relief from (and ICII
hereby renounces all rights in respect of) any automatic stay imposed by
applicable bankruptcy law, or otherwise, on or against the exercise of the
rights and remedies otherwise available to the Senior Secured Noteholders or the
Collateral Agent. If any Event of Default (including, without limitation, those
described in clause (f) or (g) of the definition of "Event of Default" set forth
in Section 5 of the Senior Secured Notes but not including the Alleged Existing
Defaults) occurs or exists, the Standstill Period and the Senior Secured
Noteholders' forbearance provided in Section 7 of this Agreement shall terminate
automatically and without need for any action on the part of any party hereto.
4. Standstill Period. As used herein the term "Standstill Period" shall
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mean the period commencing as of the date of issuance of the Series B Senior
Secured Notes and ending on the earlier to occur of (a) the Maturity Date, (b)
the date on which the Senior Secured Notes, including Senior Secured Notes
issued pursuant to the Restructuring Agreement, shall have been repaid or sold
by the Senior Noteholders to ICII, and (c) the date of occurrence of an Event of
Default other than the Alleged Existing Defaults.
5. Performance and Other Agreements During Standstill Period. Except as
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expressly provided in this Agreement, all terms and provisions of the Senior
Secured Notes and the Security Agreement (the "Operative Agreements") shall
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remain in full force and effect during the Standstill Period. Without limiting
the generality of the foregoing, all payments scheduled to be made to or for the
benefit of the Senior Noteholders in respect of the Senior Secured Notes during
the Standstill Period shall be made when due (and, if not so paid, the Senior
Secured Notes shall bear interest at 25% per annum as provided in the Senior
Secured Notes and the Senior Noteholders shall be entitled, after notice of not
less than five calendar days to ICII, to exercise such rights and remedies as
are permitted by the Operative Agreements or otherwise). Assuming no Event of
Default (not including the Alleged Existing Defaults) has occurred, each of the
Senior Noteholders and ICII hereby agrees that during the Standstill Period all
monthly payments of interest payable under the Senior Secured Notes shall be
calculated and paid at the rate of 12% per annum through and including April 30,
2002, 16% per annum for the month of May 2002 and 20% per annum for the month of
June 2002 and thereafter. Therefore, the interest payment to be made on March 1,
2002 shall be at the rate of 20% per annum and the interest to be paid on April
1, 2002 for the month of March, 2002 shall include interest at the rate of 20%
per annum through the beginning of the Standstill Period and at the rate of 12%
per annum from the beginning of the Standstill Period for the remainder of the
month of March, 2002.
6. Senior Secured Debt Exchange/Amendments to Recapitalization
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Agreement. ICII hereby acknowledges that the conditions to the Senior Secured
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Debt Exchange have not been satisfied and, prior to the maturity of the Senior
Secured Notes, cannot be satisfied, and that the holders of the Senior Secured
Notes do not now and at no time in the future shall have any obligation to
exchange the Senior Secured Notes as contemplated in Section 2.4 of the
Recapitalization Agreement. The parties hereto agree (i) that the
Recapitalization Agreement is hereby amended by deleting Section 2.4 of the
Recapitalization Agreement in its entirety, (ii) that the holders of the Senior
Secured Notes have no obligation to exchange the Senior Secured Notes for
Exchange Notes, and (iii) that the Senior Secured Debt Exchange shall never take
place. In addition, the Recapitalization Agreement and the Security Agreement
are each hereby
4
amended to specifically permit the issuance of the Series B Secured Notes and to
acknowledge that the Series B Secured Notes are included in the obligations
secured thereby, including as follows:
(a) The definition of "Senior Secured Debt" is amended by adding the
phrase ", and the Senior Secured Notes - Series B, that are to be
issued to the holder of the Convertible Subordinated Debt pursuant to
the terms of the Restructuring Agreement" at the end of the definition;
and
(b) Section 4(f)(iii) of the Senior Secured Notes is amended by adding
the phrase ", as amended" following the reference to the Master
Recapitalization Agreement at the end of the Section.
7. Standstill. Each of the Senior Noteholders agrees to forbear during
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the Standstill Period from exercising any rights and remedies under any of the
Operative Agreements or under applicable law as a result of the Alleged Existing
Defaults, including, without limitation, (a) the sending of any notice to the
Collateral Agent claiming any Event of Default under the Senior Secured Notes as
a result of the Alleged Existing Defaults, (b) any attempted acceleration as a
result of the Alleged Existing Defaults of payment or other obligations of ICII
under the Senior Secured Notes or any other indebtedness owed by ICII to the
Senior Noteholders, (c) the institution of any judicial or nonjudicial
proceedings as a result of the Alleged Existing Defaults, (d) the exercise as a
result of the Alleged Existing Defaults of any right to foreclose on any
collateral pledged by ICII pursuant to the Security Agreement to secure its
obligations under the Senior Secured Notes, and (e) the taking of any action as
a result of the Alleged Existing Defaults to obtain a receiver of all or any
portion of the assets of, or to initiate bankruptcy or other insolvency
proceedings with respect to ICII or Southern Pacific Bank. The Senior
Noteholders agree to waive the Payment Blockage in respect of payment of
interest to the holders of the Exchange Notes on January 31, 2002. Further, the
Senior Noteholders agree that the Alleged Existing Defaults shall not be
asserted as the basis for preventing ICII from making the payments due under
ICII's 10.25% Remarketed Redeemable Par Securities, Series B, in accordance with
their terms. If an Event of Default (not including the Alleged Existing
Defaults) shall have occurred or exist, upon five calendar days notice thereof
to ICII, the Senior Noteholders shall be entitled to immediately obtain judgment
against ICII for the Senior Note Amount and to seek to collect the Senior Note
Amount by all available remedies or other means, whether under the Operative
Documents or otherwise.
8. No Other Waiver. Except as expressly modified by the terms of this
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Agreement, nothing contained herein shall be deemed a waiver or abandonment of
any rights or remedies available to the Senior Noteholders under any of the
Operative Agreements, each of which rights and remedies is specifically
reserved, including without limitation, the right to seek judgment against ICII.
9. Conditions to Effectiveness. The effectiveness of this Agreement is
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conditioned upon the execution and delivery of the Restructuring Agreement by
ICII and the Xxxxx Trust and the performance by ICII of its obligations
thereunder. Further, the obligations of each of the Senior Noteholders and ICII
to fulfill their respective obligations hereunder shall be subject to
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the satisfaction or waiver of the following conditions, except as to conditions
(e), (f) and (h) below, which shall be solely for the benefit of the Senior
Noteholders:
(a) All requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied.
(b) No party hereto shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of any of the transactions contemplated by this Agreement.
(c) No statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of any of the
transactions contemplated by this Agreement.
(d) Each of the parties hereto shall have received (i) a counterpart to
this Agreement, duly executed and delivered by the other parties hereto, and
(ii) a counterpart of an amendment to the Security Agreement, duly executed and
delivered by the other parties thereto, reflecting that the Senior Secured Debt
to be issued pursuant to the terms of the Restructuring Agreement are included
in the obligations secured thereby.
(e) ICII shall have performed, in all material respects, each of its
covenants and agreements contained in this Agreement to be performed by it; and
each of the Senior Noteholders shall have received a certificate signed by the
Chief Executive Officer and the Chief Financial Officer of the Company to the
foregoing effect.
(f) Each of the Senior Noteholders shall have received such other
certificates, opinions, documents and instruments relating to the transactions
contemplated hereby as may have been reasonably required by it and are customary
for transactions of this type, and all corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, shall be reasonably satisfactory in
form and substance to it.
(g) All necessary consents shall have been obtained for amendment of
any applicable agreements, documents, instruments and indentures as are
necessary to permit the issuance of the Senior Secured Debt and Exchange Notes
pursuant to the terms of the Restructuring Agreement, the payments required to
be made thereunder and the granting of the Liens securing such Senior Secured
Debt and Exchange Notes, and such consents shall be irrevocable.
(h) ICII shall have reimbursed the Senior Noteholders and the Xxxxx
Trust for their costs and expenses as set forth in Section 12 of this Agreement.
(i) ICII shall have granted to the Senior Noteholders a valid perfected
security interest in additional collateral satisfactory to the Senior
Noteholders in their sole discretion and having an immediately realizable cash
value of not less than $5 million and shall have entered into a new Collateral
Agency and Security Agreement in form reasonably acceptable to the Senior
Noteholders and such collateral shall have been delivered to the Collateral
Agent as contemplated thereby (it being understood that, until the occurrence of
an Event of Default, ICII shall have the right to use of such collateral and to
the proceeds thereof provided that, prior to
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any sale or other disposition, ICII delivers evidence reasonably satisfactory to
the Senior Noteholders to the effect that the immediately realizable cash value
of the remaining collateral is not less than $5 million or makes appropriate
arrangements consented to in advance in writing by the Senior Noteholders in
their sole reasonable discretion to deposit $5 million of cash sale proceeds or
$5 million of other cash collateral with the Collateral Agent as Collateral
pursuant to the Security Agreement).
10. Binding Effect. This Agreement shall be binding upon and inure to
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the benefit of the parties hereto and their respective successors and assigns.
11. Governing Law. This Agreement shall be deemed to be a contract
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formed under the internal laws of the State of California and for all purposes
shall be governed by and construed in accordance with the laws of said State.
12. Costs, Expenses and Taxes. Whether or not the transactions
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contemplated hereby are consummated, ICII agrees to pay all costs and expenses
incurred by it in connection with the negotiation, preparation, reproduction,
execution, delivery and performance of this Agreement and the agreements
referred to herein and any amendment or supplement or modification hereof,
including without limitation, attorneys fees and expenses and all reasonable
costs and expenses incurred by it in connection with the ICII's administration
of this Agreement and any agreement referred to herein. Without duplication of
fees and expenses payable pursuant to the terms of the Recapitalization
Agreement, ICII also agrees to pay the costs and expenses of the Senior
Noteholders and the Xxxxx Trust for up to $295,000, in the aggregate, of the
costs and expenses of their legal and financial advisors incurred in connection
with the negotiation of this Agreement, the Alleged Existing Defaults and the
Restructuring Agreement.
13. Headings. Section headings used in this Agreement are for
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convenience only and shall not affect the construction of this Agreement.
14. Execution in Counterparts. This Agreement may be executed by the
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parties hereto individually or in any combination of counterparts, each of which
shall be an original and all of which taken together shall constitute one and
the same agreement.
15. Consent by Majority. Any consent or approval to be made by the
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Senior Noteholders under this Agreement shall be deemed given, and shall be
binding on all Senior Noteholders, if such consent or approval has been given in
writing by Senior Noteholders that hold a majority in aggregate principal amount
of the Senior Secured Notes.
16. Collateral Agent. The Senior Noteholders acknowledge and agree to
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the terms, conditions and execution of the amendment to the Security Agreement
and the new Collateral Agency and Security Agreement contemplated by this
Agreement, and agree that the Collateral Agent shall be entitled to rely on the
provisions of this Section 16.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
IMPERIAL CREDIT INDUSTRIES, INC.
By:_______________________________________
Name:__________________________________
Title:_________________________________
XXXXXX XXXXX LIVING TRUST
By:_______________________________________
Name:
Title:
AFFINITY BANK HOLDINGS, INC.
By:_______________________________________
Name:
Title:
XXXXX IMPERIAL LIMITED PARTNERSHIP I
By:_______________________________________
Name:
Title:
XXXXX IMPERIAL LIMITED PARTNERSHIP II
By:_______________________________________
Name:
Title:
__________________________________________
Xxxx X. Xxxxx
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___________________________________________
Xxxxxx X. Xxxxxxx
___________________________________________
Xxxx X. Xxxxx
___________________________________________
Xxxxx X. Xxxxx
KMBY, INC. (dba ADCOMM IV, INC.)
By:________________________________________
Name:
Title:
___________________________________________
Xxxxx X. Xxxxxx
___________________________________________
Xxxxx X. Xxxxxx
K & B ASSOCIATES, INC.
By:________________________________________
Name:
Title:
___________________________________________
Xxxx X. Xxxxxx
0
XXXXXX, X.X.
By:_____________________________________
Name:
Title:
________________________________________
Xxxxx Xxxxx-Xxxxx
XXXXXXX, L.P.
By:_____________________________________
Name:
Title:
JJZ LIMITED PARTNERSHIP
By:_____________________________________
Name:
Title:
AGI HOLDING CORP. KEYSOP
By:_____________________________________
Name:
Title:
________________________________________
Xxxxxx Xxxxxx
________________________________________
Xxxxxx X. Xxxxxxx
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XXXXX, HELPUM & XXXX, INC. DEFINED
BENEFIT PLAN
By:_____________________________________
Name:
Title:
________________________________________
Xxxxxx X. Xxxx
IMPERIAL CREDIT CHARITABLE FOUNDATION
By:_____________________________________
Name:
Title:
HARVEST OPPORTUNITY PARTNERS, L.P.
By:_____________________________________
Name:
Title:
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EXHIBIT A: LIST OF SENIOR NOTEHOLDERS
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Name Amount
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XXXXXX XXXXX LIVING $ 200,000
TRUST
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AFFINITY BANK $8,000,000
HOLDINGS, INC.
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XXXXX IMPERIAL $ 400,000
LIMITED PARTNERSHIP I
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XXXXX IMPERIAL $ 400,000
LIMITED PARTNERSHIP II
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XXXX XXXXX $ 50,000
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XXXXXX XXXXXXX $ 700,000
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XXXX XXXXX $ 100,000
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XXXXX XXXXX $ 100,000
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KMBY, INC. DBA $ 100,000
ADCOMM IV, INC.
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XXXXX XXXXXX $ 200,000
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XXXXX X. XXXXXX $ 100,000
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K & B ASSOCIATES, INC. $ 100,000
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XXXX XXXXXX $ 250,000
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QUARTA, L.P. $ 250,000
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XXXXX XXXXX-XXXXX $ 150,000
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XXXXXXX, X.X. $1,250,000
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JJZ LIMITED $ 625,000
PARTNERSHIP
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AGI HOLDING CORP. $ 500,000
KEYSOP
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XXXXXX XXXXXX $ 200,000
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XX. XXXXXX XXXXXXX $ 100,000
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XXXXX, HELPUM & $ 200,000
XXXX, INC. DEFINED
BENEFIT PLAN
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XXXXXX X. XXXX $ 100,000
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IMPERIAL CREDIT $ 500,000
III
FOUNDATION
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HARVEST OPPORTUNITY $1,625,000
PARTNERS, L.P.
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