EXHIBIT 4.1
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SECOND AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
AS PURCHASER,
AND
CONSUMER PORTFOLIO SERVICES, INC.,
A CALIFORNIA CORPORATION,
AS ISSUER
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Issuance and Sale of
$35,000,000 Principal Amount
Secured Senior Note Due February 28, 2003
(Bridge Note)
and
$11,241,931 Principal Face Amount
12.00% Secured Senior Note Due 2008
(Term C Note)
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Issuance of
$26,000,000 Principal Amount
Second Amended and Restated Secured Senior Note Due November 30, 2003
(Term B Note)
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Common Stock and Warrant
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Dated as of March 8, 2002
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TABLE OF CONTENTS
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1. DEFINITIONS; DETERMINATIONS.............................................................................2
1.1 Definitions....................................................................................2
1.2 Accounting Terms and Computations............................................................29
1.3 Independence of Covenants.....................................................................29
1.4 Headings; Construction and Interpretation....................................................30
1.5 Determinations................................................................................30
1.6 Knowledge of the Company......................................................................30
2. PURCHASE AND SALE OF NOTES; CLOSING; LIMITED WAIVER...................................................30
2.1 Authorization.................................................................................30
2.2 Purchase of Notes.............................................................................31
2.3 Closing.......................................................................................31
2.4 Use of Proceeds...............................................................................31
2.5 Limited Waiver of Specified Defaults.........................................................31
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................32
3.1 Organization and Good Standing...............................................................32
3.2 Subsidiaries..................................................................................32
3.3 Qualification.................................................................................33
3.4 Authorization; Binding Obligations...........................................................33
3.5 No Violation; Existing Defaults; Senior Indebtedness.........................................33
3.6 Governmental and Other Third Party Consents..................................................34
3.7 Capitalization................................................................................35
3.8 Validity and Issuance of Residual Warrant Shares.............................................36
3.9 Transactions with Affiliates..................................................................36
3.10 Financial Statements; Disclosure.............................................................37
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3.11 Indebtedness; Liens; Investments; Etc........................................................38
3.12 Certain Changes...............................................................................39
3.13 Material Contracts; Automobile Contracts.....................................................40
3.14 Trade Accounts Payable........................................................................41
3.15 Labor and Employees...........................................................................41
3.16 Employee Benefit Plans; ERISA................................................................42
3.17 Taxes.........................................................................................45
3.18 Actions and Legal Proceedings.................................................................47
3.19 Governmental Regulation; Margin Stock........................................................47
3.20 Compliance with Laws; Licenses and Permits...................................................47
3.21 Title to Properties and Assets; Liens........................................................48
3.22 Intellectual Property.........................................................................48
3.23 Brokers; Certain Expenses.....................................................................49
3.24 Real Property Leases..........................................................................49
3.25 Powers of Attorney............................................................................49
3.26 Insurance.....................................................................................50
3.27 Books and Records.............................................................................50
3.28 Dealers.......................................................................................50
3.29 Personal Property Leases......................................................................50
3.30 Employment and Agency Agreements.............................................................50
3.31 Solvency......................................................................................51
3.32 Environmental Matters.........................................................................51
3.33 Public Holding Company; Investment Company...................................................51
3.34 Depository and Other Accounts................................................................51
3.35 Tax Status of Securitization Transactions....................................................52
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3.36 Burdensome Obligations; Future Expenditures..................................................52
3.37 Credit Enhancer Indebtedness and Liabilities.................................................52
3.38 [Intentionally Omitted.]......................................................................52
3.39 Company SEC Documents.........................................................................52
3.40 Listing of Common Stock.......................................................................53
3.41 MFN-Related Matters...........................................................................53
3.42 Stanwich-Related Matters......................................................................53
3.43 Class B Certificate...........................................................................53
3.44 Disclosure....................................................................................53
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................................54
4.1 Organization and Good Standing...............................................................54
4.2 Authorization.................................................................................54
4.3 Due Execution and Delivery; Binding Obligations..............................................54
4.4 No Violation..................................................................................54
4.5 Investment Intent.............................................................................54
4.6 Accredited Investor Status...................................................................55
4.7 Purchaser Consents............................................................................55
4.8 Brokers.......................................................................................55
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER........................................................55
5.1 Representations and Warranties; No Default...................................................55
5.2 Fees..........................................................................................56
5.3 Default Interest; Deferred Fees. ............................................................56
5.4 Reimbursement of Fees and Expenses...........................................................56
5.5 Purchase Permitted By Applicable Laws........................................................56
5.6 No Material Adverse Changes..................................................................56
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5.7 No Injunction or Order........................................................................56
5.8 Legal Opinions................................................................................56
5.9 Delivery of Certain Closing Documents........................................................57
5.10 Collateral Documents..........................................................................57
5.11 MFN Merger-Related Matters....................................................................58
5.12 Stanwich-Related Matters......................................................................59
5.13 Delivery of Company Corporate Documents......................................................59
5.14 Delivery of Subsidiary Corporate Documents...................................................60
5.15 Repayment of Indebtedness.....................................................................60
5.16 New Securitization Transactions; New Receivables Facility....................................60
5.17 Insurance.....................................................................................61
5.18 Third Party Consents..........................................................................61
5.19 Compliance Certificate........................................................................61
5.20 Financial Projections.........................................................................61
5.21 Solvency Certificate..........................................................................61
5.22 Documents in Satisfactory Form...............................................................62
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY..........................................................62
6.1 Representations and Warranties...............................................................62
6.2 Purchase Permitted By Applicable Laws........................................................62
6.3 No Material Judgment or Order................................................................62
6.4 Payment for Notes.............................................................................63
7. AFFIRMATIVE COVENANTS..................................................................................63
7.1 Payments with Respect to Notes...............................................................63
7.2 Information Covenants.........................................................................63
7.3 Performance of Related Agreements............................................................66
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7.4 Legal Existence; Compliance with Laws........................................................66
7.5 Books, Records and Inspections................................................................66
7.6 Insurance.....................................................................................66
7.7 Taxes.........................................................................................67
7.8 ERISA Matters.................................................................................67
7.9 Performance of Servicing Duties; Clean-Up Calls..............................................68
7.10 Communication with Accountants................................................................68
7.11 Further Assurances............................................................................68
7.12 Future Information............................................................................68
7.13 Nasdaq Listing................................................................................69
7.14 CARSUSA Flooring Line.........................................................................69
7.15 Securities and Exchange Act Compliance.......................................................69
7.16 Additional Subsidiary Guarantors.............................................................70
7.17 CPSRC Shares..................................................................................70
7.18 Landlord Consents and Waivers................................................................70
7.19 [Intentionally Omitted.]......................................................................71
7.20 Payment of Certain Indebtedness...............................................................71
7.21 Corporate Separateness........................................................................71
7.22 Balance Sheet Items; Dissolution of Certain Subsidiaries.....................................71
7.23 Additional MFN Collateral Security for Obligations...........................................71
7.24 Post-Closing Deliveries.......................................................................72
8. NEGATIVE COVENANTS.....................................................................................73
8.1 Limitations on Indebtedness...................................................................73
8.2 Limitations on Liens..........................................................................74
8.3 Limitations on Investments....................................................................75
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8.4 Limitation on Restricted Payments............................................................75
8.5 Subsidiaries; Changes in Business............................................................75
8.6 Observance of Stanwich Subordination Provisions..............................................75
8.7 Environmental Liabilities.....................................................................75
8.8 Amendments to Securitization Transaction Documents...........................................76
8.9 Limitations on Transactions with Affiliates..................................................76
8.10 Restrictions on Fundamental Changes..........................................................76
8.11 Agreements Affecting Capital Stock and Indebtedness; Amendments to Material
Contracts.....................................................................................77
8.12 Indebtedness to Credit Enhancer..............................................................77
8.13 Payment Restrictions Affecting Certain Subsidiaries..........................................77
8.14 No New Loans and Advances.....................................................................78
8.15 Financial Covenants...........................................................................78
8.16 CPS Leasing...................................................................................78
8.17 LINC and Samco................................................................................78
9. INDEMNIFICATION........................................................................................78
9.1 Transfer Taxes................................................................................78
9.2 Losses........................................................................................79
9.3 Indemnification Procedures....................................................................80
9.4 Contribution..................................................................................80
9.5 Costs of Collection...........................................................................80
10. DEFAULTS AND REMEDIES..................................................................................81
10.1 Events of Default.............................................................................81
10.2 Acceleration..................................................................................86
10.3 Other Remedies................................................................................86
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10.4 Appointment of Receiver.......................................................................87
10.5 Waiver of Past Defaults.......................................................................87
11. MISCELLANEOUS..........................................................................................87
11.1 Consent to Amendments.........................................................................87
11.2 Survival of Representations and Warranties; Purchaser Investigation..........................87
11.3 Entire Agreement..............................................................................88
11.4 Successors and Assigns; Assignments..........................................................88
11.5 Severability..................................................................................88
11.6 Notices.......................................................................................88
11.7 Counterparts..................................................................................89
11.8 Fees and Expenses.............................................................................89
11.9 Governing Law.................................................................................90
11.10 Consent to Jurisdiction and Venue............................................................90
11.11 Publicity.....................................................................................91
11.12 Limitation on Liability.......................................................................91
11.13 Amendment and Restatement.....................................................................91
11.14 Waiver of Trial by Jury Trial................................................................91
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LIST OF EXHIBITS
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Exhibit A-1 - Form of Term B Note
Exhibit A-2 - Form of Bridge Note
Exhibit A-3 - Form of Term C Note
LIST OF DISCLOSURE SCHEDULES
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Schedule 2.5 Specified Defaults
Schedule 3.2 Subsidiaries
Schedule 3.5(b) No Defaults
Schedule 3.5(d) Trigger Events and Insurance Agreement Events of Default
Schedule 3.7(a) Company Capitalization
Schedule 3.7(b) Subsidiary Capitalization
Schedule 3.7(d) Repricing of Stock Options
Schedule 3.9 Transactions with Affiliates
Schedule 3.10(a) Material Adverse Change
Schedule 3.10(d) Pro Forma Consolidated Balance Sheet
Schedule 3.10(g) Warehouse Financing Transactions
Schedule 3.11(a) Existing Indebtedness; Existing Liens, Etc.
Schedule 3.11(c) Post-Closing Indebtedness
Schedule 3.12 Certain Changes
Schedule 3.13(a) Material Contracts
Schedule 3.13(d) Portfolio Performance Reports
Schedule 3.14 Trade Accounts Payable
Schedule 3.15 Officers, Employees and Consultants
Schedule 3.16 Benefit Plans
Schedule 3.17(c) Taxes
Schedule 3.18 Legal Proceedings
Schedule 3.20 Licenses and Permits
Schedule 3.22 Intellectual Property
Schedule 3.24 Real Property
Schedule 3.26 Insurance
Schedule 3.28 Dealers
Schedule 3.29 Personal Property Leases
Schedule 3.30 Employment Agreements
Schedule 3.34 Depository Accounts
Schedule 3.39 SEC Documents
Schedule 7.22 Balance Sheet Items
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CONSUMER PORTFOLIO SERVICES, INC.
SECOND AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
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THIS SECOND AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT is
entered into as of the 8th day of March, 2002 (as amended from time to time,
this "AGREEMENT"), by and between XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a
California limited partnership, as purchaser (the "PURCHASER"), and CONSUMER
PORTFOLIO SERVICES, INC., a California corporation, as issuer (the "COMPANY").
R E C I T A L S
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A. The Company and the Purchaser are parties to that certain Amended
and Restated Securities Purchase Agreement dated as of March 15, 2000, as
amended by that certain Consent to Warehouse Financing Transaction and Amendment
to Securities Purchase Agreement dated November 16, 2000 (as so amended, the
"FIRST AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT"), pursuant to which,
among other things, the Company issued and sold the Term A Note to the Purchaser
and the Company and the Purchaser amended, restated and combined the Amended
November 1998 Primary Note and the April 1999 Note into the First Amended Term B
Note. The Company has repaid the outstanding principal balance of, and accrued
interest on, the Term A Note, and the outstanding principal balance of the First
Amended Term B Note is currently $26,000,000.
B. The Company, CPS Mergersub, Inc., a Delaware corporation and a
wholly owned Subsidiary of the Company ("MERGERSUB"), and MFN Financial
Corporation, a Delaware corporation ("MFN"), have entered into that certain
Agreement and Plan of Merger dated as of November 18, 2001 (the "MFN MERGER
AGREEMENT"), pursuant to which, subject to the terms and conditions set forth
therein, Mergersub will be merged with and into MFN (the "MFN MERGER") at the
Effective Time and, as a result thereof, MFN will continue as the surviving
corporation of the MFN Merger and be a wholly owned Subsidiary of the Company.
The MFN Merger will be consummated substantially simultaneously with the
transactions contemplated hereunder.
C. The consummation of the MFN Merger and the transactions contemplated
thereby or related thereto would, among other things, violate certain provisions
of the First Amended and Restated Securities Purchase Agreement, including
SECTION 8.3 and SECTION 8.10(D), as well as cause an Event of Default to occur.
The Company has requested that the Purchaser consent to the consummation of the
MFN Merger.
D. In addition, the Company wishes to issue and sell to the Purchaser a
Senior Secured Note Due February 28, 2003, in the principal amount of
$35,000,000 (as amended from time to time, the "BRIDGE NOTE"). The Bridge Note
will be senior in right of payment and rights upon liquidation to all other
existing and future indebtedness of the Company and would rank PARI PASSU with
the Term B Note and the Term C Note. The proceeds from the sale of the Bridge
Note will be used solely to assist the Company to finance the MFN Merger.
E. In addition, the Company wishes to issue and sell to the Purchaser a
12.00% Senior Secured Note Due 2008 in the principal amount of $11,241,931 (as
amended from time to time, the "TERM C NOTE"). The Term C Note will be senior in
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right of payment and rights upon liquidation to all other existing and future
indebtedness of the Company and would rank PARI PASSU with the Term B Note and
the Bridge Note. The proceeds from the sale of the Term C Note will be used
solely to assist the Company to finance the MFN Merger and to repay the MFN
Senior Subordinated Notes.
F. The Purchaser is willing to consent to the MFN Merger and to
purchase the Bridge Note, all on the terms and subject to the conditions set
forth in this Agreement and the Related Agreements.
A G R E E M E N T
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In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, on the terms and subject to the
conditions set forth in this Agreement and the Related Agreements, the parties
hereby amend and restate the First Amended and Restated Securities Purchase
Agreement as follows:
1. DEFINITIONS; DETERMINATIONS.
1.1 DEFINITIONS. For the purpose of this Agreement, the following
capitalized terms shall have the meanings set forth below (unless otherwise
specified, the plural shall mean the singular and vice versa); PROVIDED,
HOWEVER, that certain capitalized terms used in this SECTION 1 and not defined
herein shall have the meanings set forth in the First Amended and Restated
Securities Purchase Agreement (and any other capitalized terms used in any such
capitalized terms shall also have the meanings set forth in the First Amended
and Restated Securities Purchase Agreement):
"AFFILIATE" shall mean, when used with reference to any
specified Person, (i) any other Person that, directly or indirectly,
owns or controls, or has the right to acquire, whether beneficially or
of record, or as a trustee, guardian or other fiduciary (other than a
commercial bank or trust company), five percent (5%) or more of the
Capital Stock of such specified Person having ordinary voting power in
the election of directors of such specified Person, (ii) any other
Person that, directly or indirectly, controls, is controlled by, is
under direct or indirect common control with or is included in the
Immediate Family of, such specified Person or any Affiliate of such
specified Person, (iii) any executive officer, director, joint
venturer, partner or member of such specified Person or any Person
included in the Immediate Family of any of the foregoing, (iv) any
Dealer, if such Dealer or any Affiliate of such Dealer is included in
the Immediate Family of Xxxxxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxxxxx,
Xx. or any other officer or director of the Company, or (v) any
Automobile Contract Debtor, independent contractor, vendor, client or
customer of the Company, if such Automobile Contract Debtor,
independent contractor, vendor, client or customer, or any Affiliate
thereof, is included in the Immediate Family of Xxxxxxx X. Xxxxxxx,
Xx., Xxxxxxx X. Xxxxxxx, Xx. or any other officer or director of the
Company. For the purposes of this definition, "control," when used with
respect to any specified Person, shall mean the power to direct or
cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
2
have meanings correlative of the foregoing. Notwithstanding the
foregoing, for the purposes of this Agreement and the Related
Agreements, neither the Purchaser nor any of its Affiliates, officers,
directors, partners or employees shall be deemed to be Affiliates of
the Company or of any Affiliate of the Company.
"AGREEMENT" shall have the meaning set forth in the preamble
and shall include the Exhibits and Schedules.
"AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT" shall mean a
Second Amended and Restated Investor Rights Agreement dated as of the
Closing Date, in form and substance satisfactory to the Purchaser, by
and among the Company, Xxxxxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxxxxx, Xx.
and the Purchaser, as amended from time to time.
"AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT" shall
mean a Second Amended and Restated Registration Rights Agreement dated
as of the Closing Date, in form and substance satisfactory to the
Purchaser, by and between the Company and the Purchaser, as amended
from time to time.
"AMENDED NOVEMBER 1998 PRIMARY NOTE" shall mean that certain
Amended and Restated Senior Subordinated Primary Note dated as of
November 17, 1998, as amended April 15, 1999, issued by the Company to
the Purchaser in the principal amount of $25,000,000. The Amended
November 1998 Primary Note amended and restated that certain Senior
Subordinated Primary Note dated November 17, 1998.
"AMOUNT FINANCED" shall mean, with respect to an Automobile
Contract, the aggregate amount advanced under such Automobile Contract
toward the purchase price of the Financed Vehicle and any related
costs, including amounts advanced in respect of accessories, insurance
premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or
promissory notes, and related costs.
"APPLICABLE LAWS" shall mean (i) the applicable provisions of
all constitutions, treaties, statutes, laws, rules, regulations and
ordinances of any Governmental Authority, including usury laws, the
Federal Truth-In-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Xxxxxxxx-Xxxx Warranty Act, Regulations B and Z of the Federal Reserve
Board, the Soldiers' and Sailors' Civil Relief Act of 1940, the Texas
Consumer Credit Code, the California Automobile Sales Finance Act and
state adaptations of the National Consumer Act and the Uniform Consumer
Credit Code, and other consumer credit, equal opportunity, disclosure
or repossession laws or regulations, laws relating to the discharge of
pollutants into the environment and the storage and handling of
Hazardous Materials and laws relating to franchise, building, zoning,
health, sanitation, safety or labor relations, (ii) any Consents of any
Governmental Authority and (iii) any orders, writs, decisions, rulings,
judgments or decrees of any Governmental Authority.
"APRIL 1999 NOTE" shall mean that certain Senior Subordinated
Note dated April 15, 1999, issued by the Company to the Purchaser in
the principal amount of $5,000,000.
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"APRIL 1999 NOTE DOCUMENTS" shall mean, collectively, the
April 1999 Securities Purchase Agreement, the April 1999 Note, the
April 1999 Warrant, the other Related Agreements (as such term is
defined in the April 1999 Securities Purchase Agreement) and any and
all other agreements, instruments and other documents contemplated by
or relating to the April 1999 Securities Purchase Agreement, as the
same may be amended from time to time.
"APRIL 1999 SECURITIES PURCHASE AGREEMENT" shall mean that
certain Securities Purchase Agreement dated as of April 15, 1999, by
and between the Company and the Purchaser.
"APRIL 0000 XXXXXXX" shall mean that certain Warrant (Warrant
No. LLB-4) dated April 15, 1999, to purchase 1,335,000 shares of Common
Stock.
"ARC" shall mean Xxxxx Receivables Corp., a California
corporation.
"ASSET SALE" shall mean any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers,
issuances or dispositions) by the Company or any of its Subsidiaries of
(i) any shares of Capital Stock of the Company's Subsidiaries, or (ii)
any other assets or properties of the Company or such Subsidiaries
outside of the ordinary course of business; PROVIDED, HOWEVER, that the
term "Asset Sale" shall not include (a) any sales made by the Company
in the ordinary course of business of Automobile Contracts under the
Company's "flow through" program whereby the Company sells Automobile
Contracts at a price in excess of the consideration paid by the Company
therefor, reduced by principal payments received thereon (it being
understood, however, that "whole loan" sales made by the Company, the
proceeds of which are used to repay indebtedness incurred in connection
with any Warehouse Financing Transaction, shall continue to be deemed
to be Asset Sales) or (b) sales of Automobile Contracts in connection
with any Securitization Transaction (other than "whole loan" sales as
provided in CLAUSE (A) above).
"ASSIGNEE" shall have the meaning set forth in SECTION 11.4.
"ASSIGNMENT" shall mean any assignment or other transfer to
one or more Persons of any Note (or any interest therein) pursuant to
the terms of such Note.
"AUTOMOBILE CONTRACT" shall mean any installment sale contract
for a Financed Vehicle, and all rights and obligations thereunder.
"AUTOMOBILE CONTRACT DEBTOR" shall mean, with respect to any
Automobile Contract, any purchaser or co-purchaser of any Financed
Vehicle purchased, or any other Person who owes payments under, such
Automobile Contract.
"AUTOMOBILE PRINCIPAL BALANCE" shall mean, with respect to any
Automobile Contract, as of the close of business on the last day of a
Collection Period, the Amount Financed MINUS the sum of the following
amounts without duplication: (i) in the case of any "Rule of 78's"
Automobile Contract, that portion of all Scheduled Payments actually
received on or prior to such day allocable to principal using the
actuarial or constant yield method; (ii) in the case of any "Simple
Interest Receivable" Automobile Contract, that portion of all Scheduled
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Payments actually received on or prior to such day allocable to
principal using the "Simple Interest Method"; (iii) any payment of the
Purchase Amount with respect to the Automobile Contract allocable to
principal; (iv) any Cram Down Losses in respect of such Automobile
Contract; and (v) any prepayment in full or any partial prepayment
applied to reduce the principal balance of the Automobile Contract.
"AUTOMOBILE SECURITY DOCUMENTS" shall mean all security
agreements, chattel mortgages, deeds of trust, mortgages or other
security instruments, guaranties, sureties, and all agreements of every
type and nature (including a certificate of title) securing the
obligations of an Automobile Contract Debtor.
"BANKRUPTCY LAW" shall mean Title 11 of the United States Code
(11 U.S.C. Section 101 ET SEQ.) or any similar federal or state law for
the relief of debtors, as amended from time to time.
"BENEFIT PLAN" shall have the meaning set forth in SECTION
3.16.
"BOARD OF DIRECTORS" shall mean, with respect to any Person,
the board of directors (or similar governing body) of such Person.
"BRIDGE NOTE" shall have the meaning set forth in SECTION 2.1.
"BRIDGE NOTE PURCHASE PRICE" shall have the meaning set forth
in SECTION 2.3.
"BUSINESS DAY" shall mean any day except Saturday, Sunday and
any day which either is a legal holiday under the laws of the State of
California or is a day on which banking institutions located in such
state are authorized or obligated to close.
"CAPITAL EXPENDITURES" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued) of
the Company and its Subsidiaries made during such period, including all
Capital Lease Obligations, for property, plant and equipment (other
than repairs), other fixed assets and improvements, or for
replacements, substitutions or additions thereto, that are required to
be capitalized on the consolidated balance sheet of the Company in
accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean any obligations of the
Company and its Subsidiaries under all leases of real or personal
property that are required to be recorded as a capitalized lease on the
consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP.
"CAPITAL STOCK" shall mean, with respect to any Person, (i) if
such Person is a corporation, any and all shares of capital stock,
participations in profits or other equivalents (however designated) or
other equity interests of such Person, (ii) if such Person is a limited
liability company, any and all membership units or other interests, or
(iii) if such Person is a partnership or other entity, any and all
partnership or entity units or other interests.
"CARSUSA" shall mean CARSUSA Inc., a California corporation.
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"CHANGE IN CONTROL" shall have the meaning set forth in
Section 6 of the Term B Note.
"CLASS B CERTIFICATE" shall mean that certain Class B
Asset-Backed Certificate, Number B-1, in the original certificate
balance of $14,036,989, issued by CPS Auto Receivables Trust 2001-A and
evidencing the beneficial interest of a Certificateholder (as defined
in the Amended and Restated Trust Agreement dated as of September 1,
2001 (the "CPS 2001-A TRUST Agreement"), between CPSR, as "Depositor,"
and Wilmington Trust Company, as "Owner Trustee") in the CPS Auto
Receivables Trust 2001-A.
"CLOSING" shall have the meaning specified in SECTION 2.3.
"CLOSING DATE" shall have the meaning specified in SECTION
2.3.
"CLOSING ESCROW AGENT" shall mean West LB, in its capacity as
"Escrow Agent" under West LB Escrow Agreement I and West LB Escrow
Agreement II.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B
of the Code and Part 6 of Title I of ERISA.
"COLLATERAL" shall mean the collateral under the Collateral
Documents, however defined.
"COLLATERAL DOCUMENTS" shall mean, collectively, the Security
Agreement, the Pledge Agreement, the Intellectual Property Security
Agreement, landlord waivers and consents, control agreements, UCC
financing and other statements and all other agreements, instruments
and documents executed or delivered from time to time in connection
herewith or therewith to secure the Obligations to Purchaser or any
other obligations of the Company, any Subsidiaries of the Company or
any other obligor under this Agreement, the Notes or any other Related
Agreement (including the MFN Collateral Documents), in each case as
amended from time to time.
"COLLECTION PERIOD" (or any term with a substantially similar
meaning) shall mean, with respect to any Securitization Transaction,
(i) (A) with respect to the first Payment Date, the period commencing
at the close of business on the Initial Cut-Off Date and ending at the
close business on the last day of the then current month, and (B) with
respect to each subsequent Payment Date, the preceding calendar month,
or (ii) such other period as may be provided for in the Securitization
Transaction Documents for such Securitization Transaction. Any amount
stated "as of the close of business of the last day of a Collection
Period" shall give effect to the following calculations as determined
as of the end of the day on such last day: (i) all applications of
collections and (ii) all distributions.
"COMMON STOCK" shall mean the common stock, no par value per
share, of the Company.
"COMPANY" shall have the meaning set forth in the preamble.
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"COMPANY SEC DOCUMENTS" shall mean all registration
statements, prospectuses, reports, schedules, forms, statements and
other documents (including all exhibits, schedules and other
information included or incorporated by reference therein) which are
filed or are required to be filed by the Company (or any of its
Subsidiaries) with the SEC under the Securities Act, the Exchange Act
or the rules and regulations promulgated thereunder, and all
applications, filings, reports and other documents which are filed or
are required to be filed by the Company with the Nasdaq or the NYSE.
"COMPANY STOCK PLANS" shall mean, collectively, the Company's
1991 Stock Option Plan, as amended, and the Company's 1997 Long-Term
Incentive Stock Plan.
"CONSENT" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, license, exemption or order of, any
registration, certificate, qualification, declaration or filing with,
or any notice to, any Person, including any Governmental Authority.
"CONTINGENT OBLIGATIONS" shall mean, with respect to any
Person, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) with respect to any indebtedness or other obligation of
another Person, including any direct or indirect guarantee of such
indebtedness (other than any endorsement for collection or deposit in
the ordinary course of business) or any other direct or indirect
obligation, by agreement or otherwise, to purchase or repurchase any
such indebtedness or obligation or any security therefor, or to provide
funds for the payment or discharge of any such Indebtedness or
obligation (whether in the form of loans, advances, stock purchases,
capital contributions, dividends or otherwise), letters of credit and
reimbursement obligations for letters of credit, (ii) to provide funds
to maintain the financial condition of any other Person, or (iii)
otherwise to indemnify or hold harmless the holders of indebtedness or
other obligations of another Person against loss in respect thereof.
The amount of any Contingent Obligation under clauses (i) and (ii)
above shall be the maximum amount guaranteed or otherwise supported by
the Contingent Obligation.
"CONVERTIBLE SECURITIES" shall mean any securities or other
obligations issued or issuable by the Company or any other Person that
are exercisable or exchangeable for, or convertible into, any Capital
Stock of the Company.
"CPS AVERAGE DELINQUENCY RATIO" shall mean the "Average
Delinquency Ratio" as defined in the CPS Master Spread Account
Agreement (and all capitalized terms used within such definition shall
have the meanings ascribed to them in the CPS Master Spread Account
Agreement).
"CPS CUMULATIVE DEFAULT RATE" shall mean the "Cumulative
Default Rate" as defined in the CPS Master Spread Account Agreement
(and all capitalized terms used within such definition shall have the
meanings ascribed to them in the CPS Master Spread Account Agreement).
"CPS CUMULATIVE NET LOSS RATE" shall mean the "Cumulative Net
Loss Rate" as defined in the CPS Master Spread Account Agreement (and
all capitalized terms used within such definition shall have the
meanings ascribed to them in the CPS Master Spread Account Agreement).
7
"CPS DETERMINATION DATE" shall mean the "Determination Date"
as defined in the applicable CPS Sale and Servicing Agreement (and all
capitalized terms used within such definition shall have the meanings
ascribed to them in the applicable CPS Sale and Servicing Agreement).
"CPS MASTER SPREAD ACCOUNT AGREEMENT" shall mean that certain
Master Spread Account Agreement, as amended and restated, dated as of
December 1, 1998, among CPSR, FSA, and Xxxxx Fargo Bank Minnesota,
National Association (f/k/a Norwest Bank Minnesota, National
Association), as "Trustee" and as "Collateral Agent," as amended by
Amendment No. 1 dated as of September 7, 2001, among CPSR, FSA, Bank
One Trust Company, N.A., in its capacity as "Trustee" and as
"Collateral Agent" with respect to the "Bank One Collateral," and Xxxxx
Fargo Bank Minnesota, National Association (f/k/a Norwest Bank
Minnesota, National Association), in its capacity as "Collateral Agent"
with respect to the "Xxxxx Fargo Collateral," as supplemented by a
Series 2001-A Supplement, dated as of September 7, 2001, among CPSR,
FSA and Bank One Trust Company, N.A., as "Trustee" and as "Collateral
Agent," as further amended from time to time as permitted herein.
"CPS SALE AND SERVICING AGREEMENT" shall mean, with respect to
a particular CPS Securitization Transaction, the sale and servicing
agreement or similar agreement applicable to, or entered into in
connection with, such CPS Securitization Transaction, including, with
respect to the CPS Auto Receivables Trust 2001-A Securitization
Transaction, that certain Sale and Servicing Agreement dated as of
September 1, 2001 (the "CPS 2001-A SALE AND SERVICING AGREEMENT"),
among CPS Auto Receivables Trust 2001-A, as "Issuer," CPSR, as
"Seller," the Company, as "Servicer," Systems & Services Technologies,
Inc., as "Back-up Servicer," and Bank One Trust, N.A., as "Standby
Servicer and Trustee," as amended from time to time as permitted
herein.
"CPSL" shall mean CPS Leasing, Inc., a Delaware corporation.
"CPS MARKETING" shall mean CPS Marketing, Inc., a California
corporation.
"CPS 123 CORP." shall mean CPS 123 Corp., a Delaware
corporation.
"CPSRC" shall mean CPS Receivables Corp., a California
corporation.
"CPSRC SHARES" shall mean 1,000 shares of common stock, no par
value per share, of CPSRC, represented by stock certificate no. 3 and
registered in the name of the Company, which shares represent all of
the issued and outstanding Capital Stock of CPSRC.
"CRAM DOWN LOSSES" shall mean, with respect to any Automobile
Contract, if a court of appropriate jurisdiction in an insolvency
proceeding shall have issued an order reducing the amount owed on an
Automobile Contract or otherwise modifying or restructuring Scheduled
Payments to be made on an Automobile Contract, an amount equal to such
reduction in the principal balance of such Automobile Contract or the
8
reduction in the net present value (using as the discount rate the
lower of the contract rate or the rate of interest specified by the
court in such order) of the Scheduled Payments as so modified or
restructured. A "Cram Down Loss" shall be deemed to have occurred on
the date such order is entered.
"CREDIT ENHANCER" shall mean FSA, XLCA and/or any other Person
which is not an Affiliate of the Company that issues any surety bond,
financial guaranty insurance policy, letter of credit or other credit
enhancement device in connection with any Securitization Transaction in
which the Company or any Subsidiary of the Company is the issuer or a
party.
"CUSTODIAN" shall mean any receiver, trustee, assignee,
liquidation, sequestrator or similar official under any Bankruptcy Law.
"CUT-OFF DATE" shall mean, with respect to any Securitization
Transaction, the date upon which (i) money received under Automobile
Contracts sold in connection with such Securitization Transaction
becomes payable to the trustee or similar Person under the relevant
Securitization Transaction Documents (including principal prepayments
relating to Scheduled Payments), and (ii) all Net Liquidation Proceeds
received with respect to such Automobile Contracts.
"DEALER" shall mean, with respect to an Automobile Contract,
any Person that has sold Goods to any Automobile Contract Debtor
pursuant to such Automobile Contract.
"DEFAULT" shall mean any event or condition which, with the
giving of notice or the lapse of time or both, would become an Event of
Default.
"DETERMINATION DATE" shall mean a CPS Determination Date or an
MFN Determination Date or both, as the case may be.
"DGCL" shall mean the Delaware General Corporation Law.
"DISCLOSURE SCHEDULES" shall have the meaning specified in the
introductory paragraph of SECTION 3.
"EFFECTIVE TIME" shall have the meaning set forth in the MFN
Merger Agreement.
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating
to Hazardous Materials or the protection of human health or the
environment, including all requirements pertaining to reporting,
permitting, investigating or remediating releases or threatened
releases of Hazardous Materials into the environment, or relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"EQUITY RIGHTS" shall mean any warrants, options or other
rights to subscribe for or purchase, or obligations to issue, any
Capital Stock of the Company, or any Convertible Securities, or any
stock appreciation rights, including any options or similar rights
9
issued or issuable under any employee stock option plan, pension plan
or other employee benefit plan of the Company.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute, including the rules and
regulations promulgated thereunder, in each case as amended from time
to time.
"ERISA AFFILIATE" shall mean, at any time, (i) MFN and its
Subsidiaries and (ii) any other Person that is or was a member of the
controlled group of corporations or trades or businesses (as defined in
Sections (b), (c), (m) or (o) of Section 414 of the IRC) of which the
Company or any of its Subsidiaries is or was a member within the six
(6) year period immediately prior to such time.
"ESCROW ACCOUNT I" shall mean the "Escrow Account" defined in
West LB Escrow Agreement I.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION
10.1.
"EXCESS CASH" shall mean, in any period, all cash released to
the Company or any of its Subsidiaries, by way of dividend, payment,
distribution or otherwise, during such period in connection with any
CPS Securitization Transaction.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, as
the same shall be in effect at the time.
"EXISTING INDEBTEDNESS" shall have the meaning set forth in
SECTION 3.11(c).
"EXISTING LIENS" shall have the meaning set forth in SCHEDULE
3.11(a).
"FINANCED VEHICLE" shall mean a new or used automobile, light
truck, van or minivan, together with all accessions thereto, securing
any Automobile Contract Debtor's indebtedness under an Automobile
Contract.
"FINANCIAL STATEMENTS" shall have the meaning specified in
SECTION 3.10(a).
"FIRST AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT"
shall have the meaning set forth in the recitals.
"FISCAL QUARTER" shall mean any quarter of a Fiscal Year.
"FISCAL YEAR" shall mean the fiscal year of the Company, which
shall be the twelve (12) month period ending on December 31 in each
calendar year, or such other period as the Company may designate in
writing and the Purchaser may approve in writing.
"FSA" shall mean Financial Security Assurance Inc., a New York
stock insurance company.
10
"FSA STOCK PLEDGE AGREEMENT" shall mean the Stock Pledge
Agreement dated as of June 10, 1994, among the Company, FSA and the
Trustee, as collateral agent on behalf of FSA.
"FSA WARRANT" shall mean the Warrant Agreement dated as of
November 30, 1998, between the Company and FSA Portfolio Management
Inc., as purchaser, together with Warrant Certificate No. 1 dated as of
December 4, 1998, which is part of a duly authorized issue of warrants
issued pursuant to such Warrant Agreement.
"FULLY DILUTED BASIS" shall mean, at any time, a basis that
includes all shares of Capital Stock of the Company issued and
outstanding at such time and all additional shares of Capital Stock of
the Company which would be issued upon the conversion or exercise of
all Equity Rights of the Company outstanding at such time.
"FUNDCO" shall mean CPS Funding Corp., a California
corporation.
"FUTURE SERVICING CASH FLOWS" shall mean, as of any date of
determination, the present value on such date of the difference between
(i) the cash collected from obligors on Automobile Contracts in each
Securitization Transaction and (ii) the sum of (A) principal and
interest passed-through on certificates, or paid on notes, issued to
investors in such Securitization Transaction, (B) Servicing Fees and
(C) other expenses, including trustee fees and expenses, collateral
agent fees, rating agency fees and expenses, standby servicing fees,
surety bond premiums and the underwriter's discount.
"GAAP" shall mean generally accepted accounting principles and
practices in the United States of America set forth in the opinions and
pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, all as in effect on
the Closing Date, applied on a basis consistent with prior periods.
"GCM" shall mean Greenwich Capital Markets, Inc.
"GOODS" shall mean any new or used automobile, light truck,
van or minivan, including equipment sold or financed in connection
therewith, or any other item of personal property, each being intended
principally for personal or family use by consumers, sold, leased or
otherwise encumbered under any Automobile Contract.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
and any state or political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory
organization.
"GUARANTEE" shall mean, with respect to any Person, (i) any
guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, of
any indebtedness or other obligation of any other Person and (ii) any
agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of non-performance) of any indebtedness
11
or other obligation of such other Person, including any indemnity
agreement, any warranty or any agreement to pay amounts drawn down by
letters of credit. The amount of a Guarantee shall be deemed to be the
maximum amount of the obligation guaranteed for which the guarantor
could be held liable under such Guarantee.
"HAZARDOUS MATERIALS" shall mean any substance (i) the
presence of which requires investigation or remediation under any
Applicable Laws; (ii) that is defined or becomes defined as a
"hazardous waste" or "hazardous substance" under any Applicable Laws,
including the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) or the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); (iii)
that is toxic, explosive, corrosive, inflammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any Governmental Authority; (iv) the presence of
which on any real property causes or threatens to cause a nuisance upon
the real property or to adjacent properties or poses or threatens to
pose a hazard to any real property or to the health or safety of
Persons on or about any real property; or (v) without limitation, that
contains gasoline or other petroleum hydrocarbons, polychlorinated
biphenyls or asbestos.
"HOLDER" shall mean any Person (including the Purchaser) in
whose name any Note is registered in the register maintained by the
Company pursuant to SECTION 11 of the Notes, respectively.
"IMMEDIATE FAMILY" of a Person includes such Person's spouse,
and the parents, children and siblings of such Person or his or her
spouse and their spouses and other Persons related to the foregoing by
blood, adoption or marriage within the second degree of kinship.
"INDEBTEDNESS" shall mean, with respect to the Company and its
Subsidiaries, without duplication, (i) any indebtedness or obligations,
contingent or otherwise, for borrowed money (including any Indebtedness
for Money Borrowed (as such term is defined in the RISRS Indenture or
the PENS Indenture)); (ii) all obligations evidenced by bonds, notes,
debentures or similar instruments; (iii) all obligations to pay the
deferred purchase price of property or services (excluding trade
payables incurred in the ordinary course of business that are not
overdue by more than sixty (60) days from its due date and that are not
being contested in good faith); (iv) all Capital Lease Obligations; (v)
all obligations secured by a Lien to which any property or assets owned
by the Company or any of its Subsidiaries is subject, whether or not
the obligations secured thereby have been assumed by the Company or any
such Subsidiaries; (vi) all Contingent Obligations of the Company and
its Subsidiaries, whether for letters of credit or bankers' acceptances
or otherwise; (vii) all obligations under facilities for the discount
or sale of receivables; (viii) the maximum fixed repurchase price of
any redeemable stock of the Company and its Subsidiaries; and (ix) all
Guarantees of items which would be included within this definition
(regardless of whether such items would appear upon such balance
sheet).
"INDEMNIFIED PARTIES" shall have the meaning specified in
SECTION 9.2.
12
"INDEMNITY SIDE LETTER" shall have the meaning specified in
SECTION 5.9(j).
"INITIAL CUT-OFF DATE" shall mean the first Cut-Off Date with
respect to any Securitization Transaction.
"INSURANCE AGREEMENT EVENT OF DEFAULT" shall mean an event of
default as defined in each of the Insurance and Indemnity Agreements to
which the Company or any of its Subsidiaries is a party entered into in
connection with a Securitization Transaction, or any other event or
condition, however defined, which has a substantially similar meaning
to such defined term.
"INTELLECTUAL PROPERTY" shall mean all intellectual property,
including (i) patents, patent registrations, patent applications,
patent disclosures and any related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model and certificate of
invention; (ii) trademarks, service marks, trade dress, logos, trade
names, domain names and corporate names, and any registrations and
applications for registration thereof; (iii) copyrights and
registrations and applications for copyrights, including the Company's
proprietary scoring and underwriting model; (iv) computer software,
data and documentation; (v) trade secrets, know-how, processes and
techniques, research and development, works, financial, marketing and
business data, pricing and cost information, business and marketing
plans, customer and supplier lists and any other confidential
information; (vi) all proprietary rights relating to any of the
foregoing; and (vii) copies and tangible embodiments thereof.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean an
Intellectual Property Security Agreement, in form and substance
satisfactory to the Purchaser, duly executed by the Company and the
Purchaser, as amended from time to time.
"INVESTMENT AND GUARANTY AGREEMENT" shall mean that certain
Investment Agreement and Continuing Guaranty dated as of April 15,
1999, by and among Stanwich, Xxxxxxx X. Xxxxxxx, Xx., Xxxxxxx X.
Xxxxxxx, Xx., the Company and the Purchaser, as amended from time to
time.
"INVESTMENTS" shall mean, as applied to any Person, (i) any
direct or indirect purchase or other acquisition by such Person of any
Capital Stock of any other Person, or all or any substantial part of
the business or assets of such other Person, and (ii) any direct or
indirect loan, advance or capital contribution by such Person to any
other Person (including any Affiliate, officer, director or employee of
the Company).
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute, and the treasury regulations
promulgated thereunder.
"LICENSES AND PERMITS" shall mean, with respect to any Person,
all licenses, franchises, permits, consents, approvals, registrations,
certificates and authorizations of all Governmental Authorities
necessary to the conduct of the businesses of such Person, including
all licenses issued or issuable under the finance laws in each state in
which the activities of such Person would require such licensing,
licenses required for the sale or brokerage of insurance products,
compliance with all bonding requirements of any Governmental Authority
and any licenses, franchises, permits, consents, approvals,
13
registrations, certificates and authorizations required to be held to
comply with or obtain exemptions from the usury laws of any state.
"LIEN" shall mean any lien, pledge, mortgage, security
interest, hypothecation, charge or encumbrance of any kind (including
the interest of a lessor under a Capital Lease having substantially the
same economic effect), any agreement to give or refrain from giving any
lien, pledge, mortgage, security interest, hypothecation, charge or
other encumbrance of any kind, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of
any financing statement or other similar form of notice under the laws
of any jurisdiction.
"LINC" shall mean LINC Acceptance Company, LLC, a Delaware
limited liability company, which is involved in the marketing and
originating of Automobile Contracts.
"LIQUIDATED CONTRACTS" shall mean any Automobile Contract (i)
which has been liquidated by the Servicer through the sale of the
Financed Vehicle or (ii) for which the related Financed Vehicle has
been repossessed and 90 days have elapsed since the date of such
repossession or (iii) as to which an Automobile Contract Debtor has
failed to make more than 90% of a Scheduled Payment of more than ten
dollars for 120 days or more as of the end of a Collection Period or
(iv) with respect to which proceeds have been received which, in the
Servicer's judgment, constitute the final amounts recoverable in
respect of such Automobile Contract.
"LLCP COMMITMENT LETTER" shall have the meaning set forth in
SECTION 11.3.
"LLCP COVERAGE RATIO" shall mean, as of any date, a fraction,
expressed as a percentage, the numerator of which shall be (A) the sum
of (i) all cash, (ii) all restricted cash, (iii) all servicing fees
receivable and (iv) all investment in credit enhancements, in each case
as shown on the consolidated balance sheet of the Company and its
Subsidiaries as of such date, MINUS (B) the sum of all contributions,
whether in the form of debt or equity, by the Company or any Subsidiary
in CPS Funding LLC, CPS 123 Corp. or any other Subsidiary used for the
purpose of effecting Warehouse Financing Transactions, and the
denominator of which shall be equal to all Indebtedness outstanding
under the Notes as of such date. For purposes of the LLCP Coverage
Ratio, the calculation shall cover the assets and liabilities of the
Company and its Subsidiaries other than MFN and its Subsidiaries except
for, in the case of clause (A)(i) above, cash held by MFN in an amount
not to exceed $2,000,000.
"LLCP REPRESENTATIVE" shall have the meaning set forth in the
Amended and Restated Investor Rights Agreement.
"LLCP SHARES" shall mean (i) an aggregate of 4,552,500 shares
of Common Stock held by the Purchaser as of the date hereof, (ii) the
March 2000 LLCP Shares, (iii) any and all shares of Common Stock issued
or issuable upon exercise of the Residual Warrant (including any
Warrant Shares or other shares issued as an "anti-dilution" or other
adjustment) and (iv) any other shares of Common Stock acquired by the
Purchaser from and after the date hereof.
14
"LLCP WARRANTS" shall mean, collectively, the following Equity
Rights: (i) the Bridge Warrant (Warrant No. LL-1) to Purchase 345,000
Shares of Common Stock of the Company, issued November 2, 1998; (ii)
the Primary Warrant (Warrant No. LL-2) to Purchase 3,450,000 Shares of
Common Stock, issued November 17, 1998; (iii) the Amended and Restated
Primary Warrant (Warrant No. LLA-1) to Purchase 3,115,000 Shares of
Common Stock, issued April 15, 1999; (iv) the Warrant (Warrant No. LLB
4) to Purchase 1,335,000 Shares of Common Stock, issued April 15, 1999;
and (v) the Residual Warrant.
"LOSSES" shall have the meaning specified in SECTION 9.2.
"MARCH 2000 LLCP SHARES" shall mean the 103,500 shares of
Common Stock issued to the Purchaser as provided in the Waiver
Agreement.
"MARGIN REGULATIONS" shall mean Regulations T, U and X of the
Board of Governors of the Federal Reserve System, or any successor
thereto (the "Federal Reserve Board"), as amended from time to time.
"MARGIN STOCK" shall mean "margin stock" as defined in the
Margin Regulations.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall
mean a material adverse effect on or adverse change in, as the case may
be, (i) the business, assets, condition (financial or otherwise),
properties, results of operations, projections or prospects of the
Company, individually, or the Company and its Subsidiaries (other than
LINC or Samco) taken as a whole, (ii) the business, assets, condition
(financial or otherwise), properties, results of operations,
projections or prospects of MFN, individually, or MFN and its
Subsidiaries taken as a whole, or (iii) the ability of the Company,
individually, or the Company and its Subsidiaries (other than LINC or
Samco) taken as a whole, to perform its or their obligations under this
Agreement or any Related Agreements.
"MATERIAL CONTRACTS" shall have the meaning set forth in
SECTION 3.13.
"MERGER CONSIDERATION" shall mean the "Merger Consideration"
as defined in the MFN Merger Agreement.
"MERCURY FINANCE COMPANY" shall mean Mercury Finance Company
LLC, a Delaware limited liability company.
"MERGERSUB" shall have the meaning set forth in the recitals.
"MERGERSUB CONSENT LETTER" shall mean that certain consent
letter dated November 16, 2001, under which the Purchaser consented to
the formation of Mergersub in connection with the execution and
delivery of the MFN Merger Agreement.
"MFN" shall have the meaning set forth in the recitals.
15
"MFN CERTIFICATE OF MERGER" shall mean a Certificate of
Merger, duly executed in accordance with the DGCL and to be filed with
the Secretary of State of the State of Delaware effectuating the MFN
Merger under the MFN Merger Agreement.
"MFN COLLATERAL DOCUMENTs" shall have the meaning set forth in
SECTION 7.23.
"MFN CUMULATIVE GROSS LOSS RATE" shall mean the "Cumulative
Gross Loss Rate" as defined in the applicable MFN Sale and Servicing
Agreement (and all capitalized terms used within such definition shall
have the meanings ascribed to them in the MFN Sales and Servicing
Agreement).
"MFN CUMULATIVE NET LOSS RATE" shall mean the "Cumulative Net
Loss Rate" as defined in the applicable MFN Sale and Servicing
Agreement (and all capitalized terms used within such definition shall
have the meanings ascribed to them in the applicable MFN Sales and
Servicing Agreement).
"MFN DELINQUENCY RATIO" shall mean the "Delinquency Ratio" as
defined in the applicable MFN Sale and Servicing Agreement (and all
capitalized terms used within such definition shall have the meanings
ascribed to them in the MFN Sales and Servicing Agreement).
"MFN DETERMINATION DATE" shall mean the "Determination Date"
as defined in the applicable MFN Sale and Servicing Agreement (and all
capitalized terms used within such definition shall have the meanings
ascribed to them in the MFN Sales and Servicing Agreement).
"MFN GUARANTY" shall have the meaning set forth in SECTION
7.23.
"MFN XXXXX 0 XXXXXXX XXXXX" shall mean the "Level 1 Trigger
Event" as defined in the applicable MFN Sale and Servicing Agreement
(and all capitalized terms used within such definition shall have the
meanings ascribed to them in the MFN Sales and Servicing Agreement).
"MFN MASTER SPREAD ACCOUNT AGREEMENT" shall mean that certain
Master Spread Account Agreement dated as of June 1, 2001, among MFN
Securitization LLC, as "Seller," XLCA, as "Insurer," MFN Auto
Receivables Trust 2001-A, as "Issuer," and Xxxxx Fargo Bank Minnesota,
National Association, as "Trust Collateral Agent" and "Collateral
Agent, as supplemented by a Series 2001-A Supplement dated as of June
1, 2001, as amended from time to time as permitted herein.
"MFN MERGER" shall have the meaning set forth in the recitals.
"MFN MERGER AGREEMENT" shall have the meaning set forth in the
recitals.
"MFN RECEIVABLES FINANCING DOCUMENTS" shall mean that certain
Receivables Financing Agreement dated as of March 1, 2001, among MFN
Funding LLC, Mercury Finance Company, MFN, Deutsche Bank AG, New York
Branch, Xxxxx Fargo Bank Minnesota, National Association, and the other
parties thereto, and the agreements, instruments and other documents
related thereto.
16
"MFN SALE AND SERVICING AGREEMENT" shall mean, with respect to
a particular MFN Securitization Transaction, the sale and servicing
agreement or similar agreement applicable to, or entered into in
connection with, such MFN Securitization Transaction, including, with
respect to the MFN Auto Receivables Trust 2001-A Securitization
Transaction, the Sale and Servicing Agreement dated as of June 1, 2001,
among MFN Auto Receivables Trust 2001-A, as "Issuer," Mercury Finance
Company, as "Servicer," MFN, as "Performance Guarantor," Xxxxx Fargo
Bank Minnesota, National Association, as "Back-up Servicer" and "Trust
Collateral Agent," and Systems & Services Technologies, Inc., as
"Designated Back-up Servicer," as amended from time to time as
permitted herein.
"MFN SIGNIFICANT SUBSIDIARIES" shall have the meaning set
forth in SECTION 7.23.
"MFN SENIOR SUBORDINATED NOTES" shall mean the $22,500,000
principal amount of 11.0% Senior Subordinated Notes Due 2002 issued by
MFN pursuant to the terms of that certain Indenture dated as of March
23, 1999, and related First Supplement to Trust Indenture dated as of
March 23, 1999.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"NAB" shall mean NAB Asset Corporation, a Texas corporation.
"NASDAQ" shall mean The Nasdaq National Market System or any
successor reporting system.
"NET AVAILABLE CASH" shall mean, with respect to any Asset
Sale, all cash payments received from such Asset Sale (including cash
payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the Company or any of its Subsidiaries of Indebtedness
relating to the property that is the subject of such Asset Sale or
received in any other non-cash form), in each case net of (i) all
legal, title and recording Tax expenses, commissions and other fees and
expenses incurred, and all federal, state and local Taxes required to
be accrued as a liability under GAAP, as a consequence of such Asset
Sale, and (ii) all payments made on any Indebtedness which is secured
by any property subject to such Asset Sale, in accordance with the
terms of any Lien upon such property, or which must by its terms or in
order to obtain a necessary Consent to such Asset Sale, or under
Applicable Laws, be repaid out of the proceeds from such Asset Sale.
"NET INTEREST RECEIVABLE" shall mean, at any date of
determination, the net present value as of such date of Future
Servicing Cash Flows available to be distributed to the Company by any
Subsidiary of the Company in connection with any Securitization
Transaction as determined in accordance with Statement of Financial
Accounting Standards No. 140. Future Servicing Cash Flows represents
the difference between the coupon rate on the Automobile Contracts and
the pass-through rate on the certificates or notes issued to the
investors in the securitized pool in excess of a base Servicing Fee of
two percent (2%) and any other continuing costs such as trustee or
17
surety bond premiums. To determine the Net Interest Receivable, the
Future Servicing Cash Flows are first estimated using an assumed rate
of prepayment that is intended to be conservative relative to
historical experience and then discounted as a market rate commensurate
with the risk associated with this type of investment. The Net Interest
Receivable is then reduced by a credit loss provision based upon
historical experience and deemed adequate to cover net losses over the
life of the trust. The Net Interest Receivable is subsequently
amortized against servicing income on a level-yield basis.
"NET LIQUIDATION PROCEEDS" shall mean, as to any Liquidated
Contract, all amounts realized with respect to such Automobile Contract
net of (i) reasonable expenses incurred by the Servicer in connection
with the collection of such Automobile Contract and the repossession
and disposition of the Financed Vehicle and (ii) amounts that are
required to be refunded to the Automobile Contract Debtor on such
Automobile Contract; PROVIDED, HOWEVER, that "Net Liquidation Proceeds"
with respect to any Automobile Contract shall in no event be less than
zero.
"NYSE" shall mean The New York Stock Exchange, Inc.
"NOTES" shall mean, collectively, the Term B Note, the Bridge
Note and the Term C Note, as amended from time to time, and shall also
include, where applicable, any additional note or notes issued by the
Company in connection with any Assignments thereof. The term "Note"
shall refer to the Term B Note, the Bridge Note or the Term C Note, as
applicable.
"OBLIGATIONS" or "OBLIGATIONS TO PURCHASER" shall mean any and
all Indebtedness, claims, liabilities or obligations of the Company and
any of its Subsidiaries owing from time to time to the Purchaser or any
Affiliate of the Purchaser (or any successor, assignee or transferee of
the Purchaser or such Affiliate) of whatever nature, type or
description, arising under or with respect to the Prior LLCP Documents,
this Agreement, the Notes (including the Term B Note, the Bridge Note
and the Term C Note), the Amended and Restated Registration Rights
Agreement, the Amended and Restated Investor Rights Agreement, the
Subsidiary Guaranty, the Collateral Documents, the Option Agreement,
the Indemnity Side Letter and the other Related Agreements, and any and
all agreements, instruments or other documents heretofore or hereafter
executed or delivered in connection with any of the foregoing, of
whatever nature, character or description, including any claims for
rescission or other damages under applicable federal and state
securities laws, in each case whether due or not due, direct or
indirect, joint and/or several, absolute or contingent, voluntary or
involuntary, liquidated or unliquidated, determined or undetermined,
now or hereafter existing, amended, renewed, extended, exchanged,
restated, refinanced, refunded or restructured, whether or not from
time to time decreased or extinguished and later increased, created or
incurred, whether for principal, interest, premiums, fees, costs,
expenses (including attorneys' fees) or other amounts incurred for
administration, collection, enforcement or otherwise, whether or not
arising after the commencement of any proceeding under the Bankruptcy
Laws (including post-petition interest) and whether or not allowed or
allowable as a claim in any such proceeding, and whether or not
recovery of any such obligation or liability may be barred by any
statute of limitations or such Indebtedness, claim, liability or
obligation may otherwise be unenforceable.
18
"OPTION AGREEMENT" shall mean an Option Agreement dated as of
the Closing Date, in form and substance satisfactory to the Purchaser,
duly executed by the Company and the Purchaser, as amended from time to
time.
"PAYMENT DATE" shall mean, with respect to each Collection
Period in any Securitization Transaction, the 15th day of the following
calendar month or, if such day is not a Business Day, the immediately
following Business Day, or such other day as provided for with respect
to such Securitization Transaction. A Payment Date may also be referred
to as a "Distribution Date," or an other term or definition which has a
substantially similar meaning, with respect to any Securitization
Transaction.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENS" shall mean the "10.50% Participating Equity Notes" due
April 15, 2004, issued by the Company in the original principal amount
of $20,000,000 pursuant to a First Supplemental Indenture dated as of
April 15, 1997, between the Company and Bankers Trust Company, as
trustee thereunder, as in effect on the date hereof or as amended
pursuant to SECTION 8.11(A). The PENS is the first series of unsecured
subordinated debentures, notes or other evidences of indebtedness to be
issued under the PENS Indenture.
"PENS INDENTURE" shall mean an Indenture, dated as of April
15, 1997, as supplemented by the First Supplemental Indenture, dated as
of April 15, 1997, between the Company and Bankers Trust Company, as
trustee thereunder, as in effect on the date hereof or as amended
pursuant to SECTION 8.11(A).
"PERMITTED INVESTMENTS" shall mean any one or more of the
following:
(i) any direct obligations of the United States of
America (including obligations issued or held in book-entry form on the
books of the Department of the Treasury of the United States of
America) or obligations the timely payment of the principal of and
interest on which are fully guaranteed by the United States of America,
all of which mature within three (3) months from the date of
acquisition thereof; or
(ii) any interest-bearing demand or time deposits or
certificates of deposit that mature no more than thirty (30) days from
the date of creation thereof and that are either (a) insured by the
Federal Deposit Insurance Corporation or (b) held in any United States
commercial bank having general obligations rated at least "AA" or
equivalent by Standard & Poor's Rating Group Corporation or Xxxxx'x
Investors Service, Inc. and having capital and surplus of at least
$500,000,000 or the equivalent.
"PERMITTED LIENS" shall mean:
19
(i) judgment and attachment Liens in connection with
(a) judgments that do not constitute an Event of Default so long as the
judgment creditor has not succeeded in the foreclosure thereof and
reserves have been established to the extent required by GAAP as in
effect at such time and (b) litigation and legal proceedings that are
being contested in good faith by appropriate proceedings (or as to
which the Company or any of its Subsidiaries, as the case may be, is
preparing to promptly initiate in appropriate proceedings) so long as
adequate reserves have been established in accordance with GAAP and so
long as such Liens do not encumber assets in an aggregate amount
(together with the amount of any unstayed judgments against the Company
or any of its Subsidiaries) in excess of $1,000,000;
(ii) Liens for Taxes, assessments or other
governmental charges or levies on property of the Company or any of its
Subsidiaries if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good
faith by appropriate proceedings, and Liens for personal property Taxes
so long as such Liens do not secure an amount in excess of $20,000;
(iii) pledges or deposits by the Company or any of
its Subsidiaries under worker's compensation laws, unemployment
insurance laws or similar legislation;
(iv) Liens on the property of the Company or any of
its Subsidiaries incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety or indemnity
bonds or other obligations of like nature and incurred in a manner
consistent with industry practice, in each case which are not incurred
in connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property
(provided that the Company may incur Liens to secure surety or
indemnity bonds or other obligations of like nature outside of the
ordinary course of business so long as such Liens do not encumber
assets in excess of $350,000 in the aggregate);
(v) Liens imposed by operation of law, such as
carriers', warehousemen's and mechanics' Liens, on property of the
Company or any of its Subsidiaries arising in the ordinary course of
business and securing payment of obligations which are not more than
sixty (60) days past due or are being contested in good faith by
appropriate proceedings and, if required by GAAP, are appropriately
reserved for on the books of the Company or such Subsidiary, as the
case may be; and
(vi) utility easements, building restrictions and
such other encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a similar
character;
PROVIDED, HOWEVER, that each of the Liens described in the foregoing
clauses (i) through (vi) inclusive shall only constitute a Permitted
Lien so long as such Liens do not materially interfere with the conduct
of the business of the Company and its Subsidiaries, individually or
taken as a whole, or result in a Material Adverse Change.
"PERSON" shall mean any individual, trustee, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company,
limited liability partnership, other business entity or Governmental
Authority.
"PLEDGE AGREEMENT" shall mean a Stock Pledge and Control
Agreement dated as of the Closing Date, in form and substance
satisfactory to the Purchaser, by and between the Company and the
Purchaser, as amended from time to time.
20
"PLEDGED STANWICH NOTES" shall have the meaning set forth in
the Stanwich Amended Subordination Agreement.
"XXXXX" shall mean Xxxx X. Xxxxx, an individual and a former
Affiliate of Stanwich.
"XXXXX REPLACEMENT NOTE" shall mean the Convertible
Subordinated 12.5% Note dated November 16, 1998, in the principal
amount of $1,000,000, made payable by the Company in favor of Xxxxx.
"PREVIOUSLY PLEDGED STANWICH NOTES" shall have the meaning set
forth in the Stanwich Amended Subordination Agreement.
"PRIOR LLCP DOCUMENTS" shall mean, collectively, any and all
agreements, instruments, amendments, certificates and other documents
entered into or delivered by the Purchaser, the Company or Stanwich or
any of the Company's other Affiliates from November 2, 1998, through
the date immediately preceding the Closing Date, related to, or in
connection with, the purchase by the Purchaser of any debt or equity
securities of the Company, including the Bridge Loan Documents, the
November 1998 Transaction Documents and the April 1999 Note Documents
and the Waiver Agreement.
"PRO FORMA CLOSING BALANCE SHEET" shall have the meaning set
forth in SECTION 3.10(e).
"PURCHASE PRICE" shall have the meaning specified in SECTION
2.2.
"PURCHASED CONTRACT" shall mean an Automobile Contract
purchased as of the close of business on the last day of a Collection
Period by the Servicer.
"PURCHASER" shall have the meaning set forth in the preamble.
"REAL PROPERTY" shall mean any real property or "facility" (as
defined in the Resource Conversation and Recovery Act (RCRA), 42 U.S.C.
Section 6901 ET SEQ.) currently or formerly owned, operated, leased or
occupied by the Company and its Subsidiaries.
"RELATED AGREEMENTS" shall mean, collectively, the Prior LLCP
Documents, the Notes, the Option Agreement, the Amended and Restated
Registration Rights Agreement, the Amended and Restated Investor Rights
Agreement, the Subsidiary Guaranty, the Collateral Documents, the
Stanwich-Related Agreements, the Indemnity Side Letter, the Mergersub
Consent Letter, the consent letter dated March 7, 2002, between the
Company and the Purchaser with respect to the CPS Auto Receivables
Trust 2002-A Securitization Transaction, the consent letter dated March
7, 2002, between the Company and the Purchaser with respect to the CPS
Warehouse Trust Securitization Transaction, the side letter dated as of
the date hereof with respect to the Xxxxxx Matter (as defined therein),
and any and all agreements, instruments, certificates, letters and
other documents executed or delivered in connection herewith or
therewith or contemplated hereby and thereby (including the MFN
Guaranty and the MFN Collateral Documents), as the same may be amended
from time to time.
21
"RESIDUAL INTEREST IN SECURITIZATIONS" shall mean, at any date
of determination, the present value as of such date of the aggregate
(without duplication) of the Company's or any Subsidiaries' interest in
(i) the Net Interest Receivable relating to all Securitization
Transactions, (ii) all spread accounts, collection accounts, reserve
accounts and all other deposit accounts and securities accounts
relating to all Securitization Transactions and (iii) any
over-collateralized accounts.
"RESIDUAL WARRANT" shall mean that certain Warrant (No. LLB 5)
issued April 15, 1999, and restated upon exercise in part as of May 26,
1999, to Purchase 1,000 Shares of Common Stock, as amended from time to
time.
"RESIDUAL WARRANT SHARES" shall mean any and all shares of
Common Stock issued or issuable upon exercise of the Residual Warrant.
"RESTRICTED PAYMENT" shall mean, with respect to any Person,
any one or more of the following:
(i) any dividend or other distribution, direct or
indirect, on account of any Capital Stock of such Person now or
hereafter outstanding;
(ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any Capital Stock of such Person now or
hereafter outstanding; and
(iii) any payment or prepayment of principal of,
premium, if any, or interest, fees or other charges on or with respect
to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment with respect to any Subordinated Indebtedness
(PROVIDED that any sinking fund payments required to be made by the
Company under the terms of any Existing Indebtedness shall not
constitute a Restricted Payment);
PROVIDED, HOWEVER, that the following shall not constitute a Restricted
Payment so long as the Company is Solvent and no Default or Event of
Default has occurred and is continuing or would occur as a result
thereof: (a) any dividend or other distribution, direct or indirect, on
account of any Capital Stock of such Person now or hereafter
outstanding which is payable solely in shares of Common Stock; (b) any
regularly scheduled payments of principal of and/or interest on any
Subordinated Indebtedness made in accordance with the terms and
provisions of the Subordinated Agreements; (c) any sales or transfers
of Automobile Contracts (or pools thereof) between or among the Company
and its Subsidiaries in connection with any Securitization Transaction
(including any Warehouse Financing Transaction); (d) any purchases by
the Company of its Capital Stock under the Company's Employee Savings
(401(k)) Plan; (e) any dividend or other distribution, direct or
indirect, on account of any Capital Stock (now or hereafter
outstanding) of any of the Company's Subsidiaries to the Company; or
(f) the cancellation or acquisition of any Capital Stock of the Company
as payment to the Company of the exercise price of any Equity Rights.
"RISRS" shall mean the "Rising Interest Subordinated
Redeemable Security Due 2006" issued by the Company in the original
principal amount of $20,000,000, pursuant to a First Supplemental
22
Indenture dated as of December 15, 1995, between the Company and Xxxxxx
Trust and Savings Bank, as trustee thereunder, as in effect on the date
hereof, or as amended pursuant to SECTION 8.11(A). The RISRS is the
first series of unsecured subordinated debentures, notes or other
evidences of indebtedness to be issued under the RISRS Indenture.
"RISRS INDENTURE" shall mean an Indenture dated as of December
15, 1995, between the Company and Xxxxxx Trust and Savings Bank, as
trustee, as supplemented by the First Supplemental Indenture, dated as
of December 15, 1995, between the Company and Bankers Trust Company, as
trustee thereunder, as in effect on the date hereof or as amended
pursuant to SECTION 8.11(A).
"SAMCO" shall mean Samco Acceptance Corp., a Delaware
corporation.
"SCHEDULED PAYMENT" shall mean, with respect to any Collection
Period for any Automobile Contract, the amount set forth in such
Automobile Contract as required to be paid by the Automobile Contract
Debtor in such Collection Period (without giving effect to deferments
of payments or any rescheduling of payments in any insolvency or
similar proceedings).
"SEC" shall mean the Securities and Exchange Commission, or
any successor agency.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, all as
the same shall be in effect at the time.
"SECURITIZATION TRANSACTION DOCUMENTS" shall mean any and all
agreements, instruments and other documents now existing or hereafter
related to, or entered into in connection with, any Securitization
Transaction, including any and all purchase agreements, assignment
agreements, sale and servicing agreements, pooling and servicing
agreements, servicing agreements, sub-servicing agreements, trust
agreements, indentures, note purchase agreements, master spread account
agreements, spread account supplements, collection account agreements,
lockbox agreements, blocked account agreements, other deposit account
control agreements, insurance and indemnity agreements, liquidity
facility agreements, financial guaranty insurance policies and other
credit enhancement agreements, in each case as amended from time to
time as permitted herein.
"SECURITIZATION TRANSACTION" shall mean any and all
transactions, whether now existing or hereafter arising or entered
into, by the Company or any of its Subsidiaries involving the pooling
and sale of Automobile Contracts to a Special Purpose Entity, including
the pooling and sale of Automobile Contracts to a Special Purpose
Entity in connection with any Warehouse Financing Transaction,
including (i) Xxxxx Grantor Trust 0000-0, Xxxxx Xxxxxxx Xxxxx 0000-0,
Xxxxx Grantor Trust 1993-3, Xxxxx Grantor Trust 1993-4, CPS Auto
Grantor Trust 1994-1, CPS Auto Grantor Trust 1994-2, CPS Auto Grantor
Trust 1994-3, CPS Auto Grantor Trust 1994-4, CPS Auto Grantor Trust
1995-1, CPS Auto Grantor Trust 1995-2, CPS Auto Grantor Trust 1995-3,
CPS Auto Grantor Trust 1995-4, CPS Auto Grantor Trust 1996-1, FASCO
Auto Grantor Trust 1996-2, CPS Auto Grantor Trust 1996-2A, CPS Auto
23
Grantor Trust 1996-3, CPS Auto Grantor Trust 1997-1, CPS Auto Grantor
Trust 1997-2, CPS Auto Receivables Trust 1997-3, CPS Auto Receivables
Trust 1997-4, CPS Auto Receivables Trust 1997-5, CPS Grantor Trust
1998-1, CPS Auto Receivables Trust 1998-2, CPS Auto Receivables Trust
1998-3, CPS Auto Receivables Trust 1998-4, CPS Auto Receivables Trust
2001-A (the "CPS 2001-A SECURITIZATION TRANSACTION") and CPS Auto
Receivables Trust 2002-A, and any such future securitization
transactions involving the Company or any of its Subsidiaries (other
than MFN and its Subsidiaries covered by clause (B) below)
(collectively, the "CPS SECURITIZATION Transactions"), or (B) MFN Auto
Receivables Trust 2001-A, MFN Auto Receivables Trust 2002-A and any
such future securitization transactions involving MFN or any of its
Subsidiaries (collectively, the "MFN SECURITIZATION TRANSACTIONS").
"SECURITY AGREEMENT" shall mean an Amended and Restated
Security Agreement dated as of the Closing Date, in form and substance
satisfactory to the Purchaser, by and between the Company and the
Purchaser, as amended from time to time.
"SENIOR INDEBTEDNESS" shall mean the principal amount of,
premium, if any, and interest on (i) any Indebtedness of the Company,
whether now outstanding or hereafter created, incurred, assumed or
guaranteed, unless in the instrument creating or evidencing such
Indebtedness or pursuant to which such Indebtedness is outstanding it
is provided that such Indebtedness is subordinate in right of payment
or rights upon liquidation to any other Indebtedness of the Company,
and (ii) refundings, renewals, extensions, modifications, restatements,
and increases of any such Indebtedness. The term "Senior Indebtedness"
shall include any and all Indebtedness and other amounts owing under
the Notes.
"SENIOR SUBORDINATED INDEBTEDNESS" shall mean, collectively,
the RISRS, the PENS, the Stanwich Indebtedness, the Xxxxx Replacement
Note and any other Indebtedness of the Company which ranks PARI PASSU
with the RISRS, the PENS and the Stanwich Indebtedness and the Xxxxx
Replacement Note; PROVIDED, HOWEVER, that such other Indebtedness is
evidenced or governed by provisions that are reasonably satisfactory to
the Purchaser, in each case as amended from time to time in accordance
with SECTION 8.11(A).
"SERVICER" shall mean the Company, as the servicer of
Automobile Contracts, and each successor servicer of the Company.
"SERVICING FEES" shall mean any and all servicing fees
(including, as applicable, reimbursements and returns) paid or payable
to the Company in connection with and under the terms of the applicable
indenture, pooling or sale and servicing agreements or other agreements
or documents executed in connection with any Warehouse Financing
Transaction or other Securitization Transaction.
"SOLVENT" shall mean, with respect to any Person on the date
of determination, that: (i) the present fair saleable value of the
assets of such Person is greater than the amount required to be paid
with respect to the probable liability on the existing debts and other
liabilities (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of such Person as they become absolute
and matured; (ii) the sum of the debts (whether matured or unmatured,
24
liquidated or unliquidated, absolute, fixed or contingent) of such
Person will not exceed all of the property of such Person at a fair
valuation (including the value of all intangible property); (iii) such
Person's assets do not constitute unreasonably small capital for such
Person to carry on its business as now conducted and as proposed to be
conducted; and (iv) such Person does not intend to, and does not
believe it will, incur debts or liabilities beyond such Person's
ability to pay such debts and liabilities as they mature (taking into
account the timing and amounts of cash to be received by such Person
and of amounts to be payable on or with respect to debt of such
Person). For purposes of this definition, the amount of Contingent
Obligations outstanding at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such
time, represents the amount that is reasonably expected to become an
actual or matured liability.
"SPECIAL PURPOSE ENTITY" shall mean any direct or indirect
wholly owned Subsidiary of the Company that is formed or created as a
"bankruptcy remote special purpose" entity solely for the purposes of
effectuating any Securitization Transaction.
"SPECIFIED DEFAULTS" shall have the meaning set forth in
SECTION 2.5.
"STANWICH" shall mean Stanwich Financial Services Corp., a
Rhode Island corporation or Stanwich Partners, Inc., a Delaware
corporation, as applicable.
"STANWICH AMENDED REGISTRATION RIGHTS AGREEMENT" or "AMENDED
STANWICH REGISTRATION RIGHTS AGREEMENT" shall mean the Consolidated
Registration Rights Agreement dated as of November 17, 1998 (the
"STANWICH REGISTRATION RIGHTS AGREEMENT"), between the Company,
Stanwich and Xxxxx, as amended by the First Amendment to Consolidated
Registration Rights Agreement dated as of March 15, 2000, as further
amended from time to time.
"STANWICH AMENDED SUBORDINATION AGREEMENT" or "AMENDED
STANWICH SUBORDINATION AGREEMENT" shall mean the Subordination
Agreement dated as of November 17, 1998 (the "ORIGINAL STANWICH
SUBORDINATION AGREEMENT"), among Stanwich, Poole, the Purchaser and the
Company, as amended by the Amendment to Subordination Agreement dated
as of April 15, 1999, among Stanwich, the Purchaser and the Company (it
being understood that such amendment was not intended in any way to
affect Xxxxx'x obligations under the Original Stanwich Subordination
Agreement insofar as they related to Xxxxx), and as further amended by
the Second Amendment to Subordination Agreement dated as of March 15,
2000, among Stanwich, Poole, the Purchaser and the Company, as further
amended from time to time.
"STANWICH CASE" shall mean IN RE STRUCTURED SETTLEMENT
LITIGATION, Nos. BC 244111, 244271 and 243787 (Cal. Super. Ct. filed
May 9, 2001), including any and all claims, counterclaims and
cross-claims related thereto.
"STANWICH COMMITMENT NOTE" shall mean the Subordinated
Promissory Note dated September 30, 1999, made by the Company to
Stanwich in the principal amount of $1,500,000.
25
"STANWICH DEBT DOCUMENTS" shall mean, collectively, all
agreements, instruments and other documents, whether now existing or
hereafter entered into, evidencing or governing any Stanwich
Indebtedness, including (i) the 0000 Xxxxxxxx Notes, (ii) the Xxxxx
Replacement Note, (iii) the Stanwich Debt Restructure Agreement, (iv)
the Stanwich Amended Subordination Agreement and (v) the Stanwich
Commitment Note, as the same may be amended from time to time in
accordance with SECTION 8.11(A).
"STANWICH DEBT RESTRUCTURE AGREEMENT" shall mean the Debt
Restructure Agreement dated as of November 17, 1998, among the Company,
Stanwich and Xxxxx.
"STANWICH INDEBTEDNESS" shall mean, collectively, any and all
outstanding Indebtedness of the Company or its Subsidiaries or both
owing to Stanwich or any of Stanwich's shareholders, officers,
directors, employees or Affiliates (including Xxxxx, but excluding the
Company and its Subsidiaries), including Indebtedness owing under the
following:
(i) the seven (7) "Partially Convertible Subordinated
9% Notes" dated June 12, 1997, including two (2) in the principal
amount of $5,000,000 and five (5) in the principal amount of $1,000,000
(collectively, the "1997 STANWICH NOTES"), issued by the Company to
Stanwich in the aggregate principal amount of $15,000,000;
(ii) the Xxxxx Replacement Note; and
(iii) the Stanwich Commitment Note;
in each of clauses (i) through (iii) above as amended from time to time
in accordance with SECTION 8.11(a).
"STANWICH-RELATED AGREEMENTS" shall mean the Stanwich Debt
Documents, the Stanwich Amended Registration Rights Agreement, the
Stanwich Amended Subordination Agreement, the Stanwich Termination and
Settlement Agreement and any and all agreements, instruments and
documents executed and delivered in connection therewith or from time
to time with respect to any Stanwich Indebtedness.
"STANWICH REPLACEMENT NOTE" shall mean the Convertible
Subordinated 12.5% Note dated November 16, 1998, in the principal
amount of $4,000,000, made payable by the Company in favor of Stanwich.
"STANWICH TERMINATION AND SETTLEMENT AGREEMENT" shall mean the
Termination and Settlement Agreement With Respect To Investment
Agreement and Continuing Guaranty dated as of March 15, 2000, by and
among the Purchaser, the Company, Stanwich, Xxxxxxx X. Xxxxxxx, Xx. and
Xxxxxxx X. Xxxxxxx, Xx.
"SUBORDINATED AGREEMENTS" shall mean, collectively, the RISRS
Indenture, the PENS Indenture, the Stanwich Debt Documents and all
other agreements, instruments and other documents evidencing or
governing any Indebtedness of the Company or any of its Subsidiaries,
whether now existing or hereafter entered into, that expressly provides
that such Indebtedness is subordinate in right of payment or rights
upon liquidation to any other Indebtedness of the Company, together
with any and all related agreements, instruments and other documents
26
between or among the Company, any of its Subsidiaries and/or the
Subordinated Lenders, in each case as amended, supplemented or
otherwise modified from time to time in accordance with SECTION
8.11(a).
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness that is
not Senior Indebtedness, as such Indebtedness may be refinanced,
renewed, replaced, restructured or exchanged from time to time in
accordance with SECTION 8.11(A).
"SUBORDINATED LENDERS" shall mean the lenders of Subordinated
Indebtedness (including Stanwich and Xxxxx).
"SUBSIDIARY" and "SUBSIDIARIES" shall mean, with respect to
any Person, any other Person of which more than fifty percent (50%) of
the total voting power of Capital Stock entitled to vote (without
regard to the occurrence of any contingency) in the election of
directors (or other Persons performing similar functions) are at the
time directly or indirectly owned by such first Person. Unless
otherwise indicated, the term "SUBSIDIARY" refers to a Subsidiary of
the Company and includes, at any time after the consummation of the MFN
Merger (and, without limiting the generality of this sentence for
purposes of ARTICLES 7 and 8), MFN and its direct and indirect
Subsidiaries; PROVIDED, HOWEVER, that, unless otherwise indicated, when
used in ARTICLE 3, the term "Subsidiary" means any Subsidiary of the
Company immediately prior to the MFN Merger.
"SUBSIDIARY GUARANTORS" shall mean CPSL, CPS Marketing and any
other direct or indirect Subsidiary that is or becomes a "Guarantor"
under the Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" shall mean an Amended and Restated Joint
and Several General and Continuing Guaranty dated as of the Closing
Date, in form and substance satisfactory to the Purchaser, duly
executed by the Subsidiary Guarantors in favor of the Purchaser, as
amended from time to time.
"TAX" or "TAXES" shall mean any present and future income,
excise, sales, use, stamp or franchise taxes and any other taxes, fees,
duties, levies, withholdings or other charges of any nature whatsoever
imposed by any taxing authority, whether federal, state, local or
foreign, together with any interest and penalties and additions to tax.
"TERM A NOTE" shall mean that certain Secured Senior Note Due
2001 dated March 15, 2000, issued by the Company in favor of the
Purchaser in the principal amount of $16,000,000.
"TERM B NOTE" shall mean a Second Amended and Restated Secured
Senior Note Due November 30, 2003, as amended and restated as of the
Closing Date, in the principal amount of $26,000,000, in substantially
the form of EXHIBIT A-1, which amends and restates that certain Amended
and Restated Secured Senior Note Due 2003 dated as of March 15, 2000
(the "FIRST AMENDED TERM B NOTE"), issued by the Company in favor of
the Purchaser in the original principal amount of $30,000,000, as
amended from time to time. (The Term B Note evidences the aggregate
Indebtedness and all other amounts owing under the Amended November
1998 Primary Note and the April 1999 Note.)
"TERM C NOTE" shall have the meaning set forth in SECTION 2.1.
27
"TERM C NOTE PURCHASE PRICE" shall have the meaning set forth
in SECTION 2.3.
"TERMINATION EVENT" shall mean (i) the Company, any ERISA
Affiliate, and Benefit Plan or any fiduciary (within the meaning of
Section 3(21) of ERISA) of a Benefit Plan being named as a defendant in
a lawsuit filed under ERISA; (ii) the Internal Revenue Service giving
notice that it intends to revoke the tax-qualified status of any
Benefit Plan; (iii) the occurrence of a "Reportable Event" described in
Section 4043 of ERISA with respect to a Benefit Plan, regardless of
whether the PBGC has waived the notice requirements with respect to
such event in its regulations; (iv) the imposition of liability
(whether absolute or contingent) as a result of a complete or partial
withdrawal from a Multiemployer Plan, if any; (v) the filing of a
notice to terminate a Benefit Plan in a distress termination under
Section 4041(c) of ERISA; (vi) the institution of proceedings by the
PBGC to terminate a Benefit Plan or to appoint a trustee pursuant to
Section 4042 of ERISA, or the occurrence of any event or set of
circumstances that might reasonably constitute grounds for the PBGC to
do either; (vii) the restoration of a plan by the PBGC pursuant to
Section 4047 of ERISA; or (viii) the Company's or any ERISA Affiliate's
withdrawal from a single-employer plan during the plan year in which it
is a substantial employer pursuant to Section 4063 of ERISA.
"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the
meaning specified in SECTION 3.22(A).
"TRIGGER EVENT" shall mean a "Trigger Event," a "Level 1
Trigger Event," a "Level 2 Trigger Event," a "Level 3 Trigger Event" or
any other term or definition having a substantially similar meaning, as
defined or used in any Securitization Transaction Document or other
agreement executed in connection with any Securitization Transaction,
including the CPS Master Spread Account Agreement and the MFN Master
Spread Account Agreement.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of California;
PROVIDED that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of the
Purchaser's Liens on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than
the State of California, the term "UCC" shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions hereof relating to such
attachment, perfection, or priority and for purposes of definitions
related to such provisions.
"USAP AUDIT" shall mean an audit conducted according to the
requirements and standards set forth in the Uniform Single Attestation
Program promulgated by the Mortgage Bankers Association of America.
"WAIVER AGREEMENT" shall mean that certain Waiver Agreement
dated as of March 15, 2000, by and between the Company and the
Purchaser, as amended from time to time.
"WARECO" shall mean CPS Warehouse Corp., a Delaware
corporation.
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"WAREHOUSE FINANCING TRANSACTION" shall mean any transaction
entered into in the ordinary course of the Company's business, in each
case consistent with the Company's past practices, pursuant to which
(i) the Company or one or more of its Subsidiaries sells Automobile
Contracts to any entity which is established by the Company for the
limited purpose of buying and reselling such Automobile Contracts, and
(ii) such entity purchases such Automobile Contracts from the Company
or such selling Subsidiary from time to time for cash or other
consideration equal to the fair market value of such Automobile
Contracts and finances the purchase of such Automobile Contracts
through borrowings under a "warehouse financing" facility established
with a third party financing party and under which such entity is the
sole borrower (with no recourse to either the Company or any other
Subsidiary other than for breaches of customary representations and
warranties in connection with sales of Automobile Contracts).
"WARRANT SHARES" shall mean any and all shares of Common Stock
issued or issuable upon exercise of, or otherwise under, any LLCP
Warrants.
"WEST LB" shall mean Westdeutsche Landesbank Girozentrale, New
York Branch.
"WEST LB COMMITMENT LETTER" shall mean that certain Project
Chicago-Commitment Letter dated November 16, 2001, between West LB and
the Company.
"WEST LB ESCROW AGREEMENT I" shall have the meaning set forth
in SECTION 5.9(h)(i).
"WEST LB ESCROW AGREEMENT II" shall have the meaning set forth
in SECTION 5.9(h)(ii).
"WEST LB ESCROW AGREEMENTS" shall mean, collectively, West LB
Escrow Agreement I and West LB Escrow Agreement II.
"XLCA" shall mean XL Capital Assurance Inc., a New York
monoline financial guaranty insurance company.
1.2 ACCOUNTING TERMS AND COMPUTATIONS. For purposes of this Agreement
and any Related Agreement, (a) all accounting terms used that are not expressly
defined herein or therein have the meanings given to them under GAAP, (b) all
computations made pursuant to this Agreement or any Related Agreement shall be
made in accordance with GAAP and (c) all financial statements and other
financial information required to be delivered by the Company or any Guarantor
under this Agreement or under any Related Agreement shall, except as otherwise
expressly provided in this Agreement, be prepared in accordance with GAAP in the
ordinary course of business consistent with past practices, except that any such
financial statements or other financial information which are unaudited may be
subject to year-end audit adjustments and may omit footnotes.
1.3 INDEPENDENCE OF COVENANTS. All covenants in this Agreement or any
Related Agreement shall each be given independent effect so that if a particular
action or condition is not permitted by any such covenant, the fact that it
would be permitted by another covenant, by an exception thereto, or be otherwise
29
within the limitations thereof, shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists.
1.4 HEADINGS; CONSTRUCTION AND INTERPRETATION. The headings in this
Agreement and any Related Agreement are for convenience of reference only, do
not constitute a part of this Agreement or such Related Agreement and are not to
be considered in construing or interpreting this Agreement or Related Agreement.
All section, preamble, recital, exhibit, schedule, disclosure schedule, annex,
clause and party references contained in this Agreement or any Related Agreement
are to this Agreement or such Related Agreement, as the case may be, unless
otherwise stated. Unless the context of this Agreement or any Related Agreement
clearly requires otherwise, the use of the word "including" is not limiting and
the use of the word "or" has the inclusive meaning represented by the phrase
"and/or." Reference in this Agreement or any Related Agreement to any agreement,
other document or law "as amended" or "as amended from time to time," or
amendments of any document or law, shall include any amendments, restatements,
supplements, replacements, renewals, refinancings, refunds, waivers or other
modifications. This Agreement and each Related Agreement has been negotiated by,
and entered into between or among, persons that are sophisticated and
knowledgeable in business matters. Accordingly, any rule of law or legal
decision that would require interpretation of this Agreement or any Related
Agreement against the party that drafted it shall not be applicable and is
irrevocably and unconditionally waived. All provisions of this Agreement and
each Related Agreement shall be construed in accordance with their fair meaning,
and not strictly for or against any party.
1.5 DETERMINATIONS. Any determination or calculation contemplated by
this Agreement or any Related Agreement that is made by the Purchaser shall be
final and conclusive and binding upon the Company in the absence of manifest
error.
1.6 KNOWLEDGE OF THE COMPANY. Whenever the term "KNOWLEDGE OF THE
COMPANY" or "BEST KNOWLEDGE OF THE COMPANY PARTIES" or words of similar import
are used in this Agreement or any other Investment Document with respect to the
existence or absence of any fact, it shall mean that any one or more of the
following Persons knows or should have known, based upon the reasonable inquiry
of such Person, of the existence or absence of such fact: Xxxxxxx X. Xxxxxxx,
Xx., Xxxxx Xxxxxxxxx and Xxxx X. Xxxxxxxx, Esq.
2. PURCHASE AND SALE OF NOTES; CLOSING; LIMITED WAIVER.
2.1 AUTHORIZATION. The Company has authorized, among other things, (a)
the amendment and restatement of the First Amended and Restated Securities
Purchase Agreement, on the terms and subject to the conditions set forth herein,
(b) the amendment and restatement of the First Amended Term B Note, on the terms
and subject to the conditions set forth in the Term B Note, (c) the issuance,
sale and delivery to the Purchaser of a Secured Senior Note Due February 28,
2003, in the principal amount of $35,000,000, in substantially the form of
EXHIBIT A-2 (as amended from time to time, the "BRIDGE NOTE") and (d) the
issuance, sale and delivery to the Purchaser of a 12.00% Secured Senior Note Due
2008 in the principal face amount of $11,241,931, in substantially the form of
EXHIBIT A-3 (as amended from time to time, the "TERM C NOTE"). The Indebtedness
evidenced by the Bridge Note and the Term C Note, including the payment of
30
principal thereof and premium, if any, and interest thereon, shall constitute
Senior Indebtedness and shall rank PARI PASSU in right of payment and rights
upon liquidation to all Indebtedness evidenced by the Term B Note.
2.2 PURCHASE OF NOTES. Subject to the terms and conditions contained
herein, and in reliance upon the representations, warranties, covenants and
agreements contained herein, at the Closing, the Company shall issue, sell and
deliver to the Purchaser, and the Purchaser shall purchase from the Company, the
Bridge Note and the Term C Note. The aggregate purchase price to be paid by the
Purchaser for the Bridge Note shall be $35,000,000 (the "BRIDGE NOTE PURCHASE
PRICE") and the aggregate purchase price to be paid by the Purchaser for the
Term C Note shall be $8,500,000 (the "TERM C NOTE PURCHASE PRICE"), in each case
which will be paid in accordance with SECTION 2.3.
2.3 CLOSING. The closing (the "CLOSING") of the issuance, sale and
delivery of the Bridge Note and the Term C Note and the other transactions
contemplated by this Agreement shall take place at the offices of Irell &
Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
on the date hereof or as soon as practicable thereafter immediately following
the satisfaction or waiver of the conditions precedent set forth in SECTION 5
and SECTION 6 (such date being the "CLOSING DATE"). At the Closing, the Company
shall deliver to the Purchaser the Term C Note, duly executed by the Company,
against delivery by the Purchaser of the Term C Note Purchase Price (net of
amounts permitted to be withheld pursuant to SECTION 11.8) by wire transfer in
immediately available funds to such bank as the Company may request in writing
(which request shall be made in writing at least one (1) Business Day prior to
the Closing Date) for credit to an account designated by the Company in such
request. Pursuant to the terms of West LB Escrow Agreement I and as expressly
instructed by the Company, immediately prior to the Closing, the Purchaser shall
deposit into Escrow Account I the Bridge Note Purchase Price (net of amounts
permitted to be withheld pursuant to SECTION 11.8) in accordance with the wire
transfer instructions contained in the West LB Escrow Agreement I. Concurrently
with the release by the Closing Escrow Agent of the funds deposited by the
Purchaser and others into Escrow Account I as provided in West LB Escrow
Agreement I, the Company shall be deemed to have received the Bridge Note
Purchase Price, and the Company shall deliver to the Purchaser the Bridge Note,
duly executed by the Company.
2.4 USE OF PROCEEDS. The proceeds to be received by the Company from
the issuance and sale of the Bridge Note hereunder shall be used solely to fund
a portion of the Merger Consideration under the MFN Merger Agreement and to pay
costs, fees and expenses associated with the MFN Merger and the transactions
contemplated by this Agreement and the Related Agreements. The proceeds to be
received by the Company from the issuance and sale of the Term C Note hereunder
shall be used solely to fund a portion of the Merger Consideration under the MFN
Merger Agreement, to repay the MFN Senior Subordinated Notes and to pay costs,
fees and expenses associated with the MFN Merger and the transactions
contemplated by this Agreement and the Related Agreements.
2.5 LIMITED WAIVER OF SPECIFIED DEFAULTS. The Company has advised the
Purchaser that the Events of Default under the First Amended and Restated
Securities Purchase Agreement listed on SCHEDULE 2.5 (the "SPECIFIED DEFAULTS")
have occurred and are continuing as of the date hereof. Effective at and as of
the Closing, pursuant to Section 10.4 of the First Amended and Restated
Securities Purchase Agreement and in consideration for the payment being made to
the Purchaser pursuant to SECTION 5.3, the Purchaser waives the Specified
31
Defaults. Except for the waiver of the Specified Defaults as expressly provided
for in this SECTION 2.5, nothing contained in this Agreement or any Related
Agreement is intended to or shall be construed as a waiver of any breaches,
violations, Defaults or Events of Default, whether past, present or future,
under the Securities Purchase Agreement or any Related Agreement, or a
forbearance by the Purchaser of any of its rights, remedies or powers against
the Company, any of its Subsidiaries or the Collateral, and the Purchaser hereby
expressly reserves all of its rights, powers and remedies under or in connection
with the Securities Purchase Agreement and the Related Agreements, whether at
law or in equity.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to the Purchaser that, except as set forth in the disclosure
schedules attached to this Agreement (the "DISCLOSURE SCHEDULES"), the following
statements are true and correct:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has all power and authority, including all Licenses and
Permits, necessary to own or lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be conducted.
The Company is duly qualified or licensed and in good standing as a "foreign
corporation" duly authorized to do business in each jurisdiction in which the
character of the properties owned or the nature of the activities conducted
makes such qualification or licensing necessary. The Company has the requisite
power and authority to enter into this Agreement and each Related Agreement to
which it is a party, to amend and restate the First Amended and Restated
Securities Purchase Agreement, to issue, sell and deliver the Bridge Note to be
issued by it hereunder and to consummate the other transactions contemplated
hereby and by the Related Agreements.
3.2 SUBSIDIARIES.
(a) SCHEDULE 3.2 sets forth a true, correct and complete list
of all direct and indirect Subsidiaries of the Company as of the date hereof and
a list of all direct and indirect Subsidiaries of the Company immediately
following the MFN Merger, in each case setting forth, as to each such
Subsidiary, its name, the jurisdiction of its organization, the address of its
principal executive offices, the number of outstanding shares of its Capital
Stock and the number of such outstanding shares or other interests owned,
directly or indirectly, by the Company. Each such Subsidiary is an entity duly
organized, validly existing and, if applicable, in good standing (other than
LINC) under the laws of the jurisdiction of its incorporation, and has all power
and authority, including all Licenses and Permits, necessary to own or lease and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted. Since March 15, 2000, each of LINC and Samco has not
conducted any business whatsoever and is inactive. ARC owns or holds no assets,
does not, and will not, conduct any business and is inactive. No Subsidiary of
MFN is material to the business, condition (financial or otherwise) or
operations of MFN other than Mercury Finance Company and the "bankruptcy remote
special purpose" entities created by MFN for purposes of the MFN Securitization
Transactions completed through the date hereof.
(b) All of the outstanding Capital Stock of each Subsidiary
listed on SCHEDULE 3.2 has been duly authorized and is validly issued, fully
paid and non-assessable. The Company owns all of the outstanding Capital Stock
32
of each Person that is a Subsidiary of the Company as of the date hereof free
and clear of any Liens and of any other restrictions (including any restrictions
on the right to vote, sell or otherwise dispose of such Capital Stock) except
for Liens in favor of the Purchaser and as set forth in SCHEDULE 3.2, and,
immediately after the Closing, the Company will own all of the outstanding
Capital Stock of each Person that will be a Subsidiary of the Company
immediately after the Closing (including MFN) free and clear of any Liens and of
any other restrictions (including any restrictions on the right to vote, sell or
otherwise dispose of such Capital Stock), except for Liens in favor of the
Purchaser and as set forth in SCHEDULE 3.2.
3.3 QUALIFICATION. The Company and each of its Subsidiaries (other than
LINC) is duly qualified or licensed and in good standing as a "foreign
corporation" duly authorized to do business in each jurisdiction in which the
character of the properties owned or the nature of the activities conducted
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed could not have a Material Adverse Effect.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. The execution, delivery and
performance by the Company of this Agreement and each of the Related Agreements
to which it or any Subsidiary is a party, the amendment and restatement of the
First Amended and Restated Securities Purchase Agreement and the First Amended
Term B Note, the issuance, sale and delivery of the Bridge Note and the Term C
Note, the grant of Liens in favor of the Purchaser pursuant to the Collateral
Documents, the consummation of the MFN Merger and the transactions referenced in
SECTION 5.16 and the consummation of the other transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of the Company, MFN and their Subsidiaries, as applicable. This Agreement
has been duly executed and delivered by the Company and, at the Closing, each of
the Bridge Note, the Term C Note and the other Related Agreements will be duly
executed and delivered by the Company or its Subsidiaries that is a party
thereto. This Agreement is, and the Bridge Note, the Term C Note and each other
Related Agreement will at the time of the Closing be, a legal, valid and binding
obligation of the Company or its Subsidiaries that is a party thereto,
enforceable against such Person in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other laws or the public policy underlying
such laws.
3.5 NO VIOLATION; EXISTING DEFAULTS; SENIOR INDEBTEDNESS.
(a) The execution, delivery and performance by the Company of
this Agreement and each of the Related Agreements to which it or any Subsidiary
is a party, the amendment and restatement of the First Amended and Restated
Securities Purchase Agreement and the First Amended Term B Note, the issuance,
sale and delivery of the Bridge Note and the Term C Note, the grant of Liens in
favor of the Purchaser pursuant to the Collateral Documents and the consummation
of the MFN Merger, and the transactions referenced in SECTION 5.16 and the other
transactions contemplated hereby and thereby do not and will not violate or
conflict with, or cause a default under, or give rise to a right of termination
under, (i) the charter or bylaws of the Company, MFN or any of their respective
Subsidiaries, as in effect on the date hereof; (ii) any Applicable Laws; or
(iii) any term of any Material Contract (including any Securitization
33
Transaction Document and any Stanwich-Related Agreement), indenture, note,
mortgage, instrument or other agreement to which the Company, MFN or any of
their respective Subsidiaries is a party or by which any of its or their
properties or assets are bound.
(b) Except as disclosed in SCHEDULE 3.5(B), neither the
Company, MFN nor any of their respective Subsidiaries is in default, breach or
violation of (i) its charter or bylaws, as in effect on the date hereof, (ii)
any term of any Material Contract (including any Securitization Transaction
Document or any Stanwich-Related Agreement), indenture, note, mortgage,
instrument or other agreement to which the Company, MFN or any of their
respective Subsidiaries is a party or by which any of its or their properties or
assets are bound or (iii) to the best knowledge of the Company, any Applicable
Laws. Without limiting the generality of the foregoing, except as set forth in
SCHEDULE 3.5(B), no "default" or "event of default" has occurred and is
continuing under any agreement, instrument or other document to which the
Company, MFN or any of their respective Subsidiaries is a party which evidences
or governs any Indebtedness of the Company, MFN or their respective
Subsidiaries, as the case may be (other than such "defaults" or "events of
default" as have been duly waived by the appropriate Person pursuant to waivers
which are in effect as of the date hereof and are disclosed in SCHEDULE 3.5(B)).
(c) The outstanding principal balance of the First Amended
Term B Note is equal to $26,000,000. The First Amended Term B Note remains in
full force and effect. The Indebtedness evidenced by the Term B Note constitutes
"Senior Indebtedness" (as such term is defined in the RISRS Indenture, the PENS
Indenture and the Stanwich Debt Documents). Immediately following the Closing,
the Indebtedness evidenced by the Bridge Note and the Term C Note will also
constitute "Senior Indebtedness" (as such term is defined in the RISRS
Indenture, the PENS Indenture and the Stanwich Debt Documents), and there will
be no agreement, indenture, instrument or other document to which the Company or
any of its Subsidiaries is a party or by which it or they are bound that
requires the subordination in right of payment or rights upon liquidation of any
Obligations to Purchaser to the repayment of any other Indebtedness of the
Company or any of its Subsidiaries.
(d) Except as set forth on SCHEDULE 3.5(d), no Trigger Event
or Insurance Agreement Event of Default has occurred and is continuing.
(e) There are no contractual or other restrictions or
limitations which (i) prohibit the amendment and restatement of the First
Amended and Restated Securities Purchase Agreement or the First Amended Term B
Note, the issuance, sale and delivery of the Bridge Note and the Term C Note or
any other transaction contemplated hereby, (ii) prohibit or restrict any merger,
sale of assets or other event which could cause a Change in Control or (iii)
otherwise prohibit any other financings by the Company, including any public or
private debt or equity financings.
3.6 GOVERNMENTAL AND OTHER THIRD PARTY CONSENTS. Neither the Company
nor any of its Subsidiaries or other Affiliates is required to obtain any
Consent in connection with execution, delivery or performance of this Agreement
or any Related Agreement, the amendment and restatement of the First Amended
Term B Note, the issuance, sale and delivery of the Bridge Note or the Term C
Note or the grant of the Liens in favor of the Purchaser, or for the purpose of
maintaining in full force and effect any Licenses and Permits of the Company or
34
any of its Subsidiaries, from (a) any Governmental Authority, (b) any trustee,
Credit Enhancer, rating agency or other party to any Securitization Transaction
in connection with the execution and delivery of this Agreement or any Related
Agreement or (c) any other Person, except where the failure to obtain such
consent or maintain any such License or Permit, as the case may be, could not
have a Material Adverse Effect.
3.7 CAPITALIZATION.
(a) SCHEDULE 3.7(a) sets forth a true, correct and complete
description of the authorized capital stock of the Company and the number of
shares of each class or series of Capital Stock that is issued and outstanding
as of the date hereof. As of the date hereof, (i) 6,100,000 shares of Common
Stock were reserved for issuance under the Company Stock Plans, of which options
to purchase 642,531 shares are available for future grants, options to purchase
1,890,500 shares have been exercised and options to purchase 3,566,969 shares
are outstanding (of which options to purchase 1,966,371 shares are exercisable);
(ii) an aggregate of 2,412,228 shares of Common Stock were reserved for issuance
upon conversion of the PENS and the Stanwich Indebtedness; and (iii) 1,000
shares of Common Stock were reserved for issuance upon exercise of the Residual
Warrant. All of the issued and outstanding shares of Capital Stock of the
Company have been duly authorized and are validly issued, fully paid and
non-assessable, and are free and clear of any Liens and other restrictions
(including any restrictions on the right to vote, sell or otherwise dispose of
such Capital Stock but excluding any such restrictions under the Amended and
Restated Investor Rights Agreement) and of any preemptive or other similar
rights to subscribe for or to purchase any such Capital Stock. Except as set
forth on SCHEDULE 3.7(A) (which Schedule sets forth a true, correct and complete
description of, with respect to each security, title, name of the holder or
Person, as applicable, the number of shares of Capital Stock underlying such
security, exercise price, expiration date and percentage of shares of such
Capital Stock on a Fully Diluted Basis), as of the date hereof, there are: (i)
no outstanding Equity Rights; (ii) to the best knowledge of the Company, no
voting trusts or other agreements or undertakings with respect to the voting of
the Capital Stock of the Company; (iii) no obligations or rights (whether fixed
or contingent) on the part of the Company, any of its directors or officers or,
to the best knowledge of the Company, any other Person to purchase, repurchase,
redeem or "put" any outstanding shares of the Capital Stock of the Company or
Equity Rights; and (iv) no agreements to which the Company, any of its directors
or officers or, to the best knowledge of the Company, any other Person is a
party granting any other Person any rights of first offer or first refusal,
registration rights or "drag-along," "tag-along" or similar rights with respect
to any transfer of any Capital Stock of the Company or Equity Rights. All shares
of Capital Stock of the Company and Equity Rights that have been issued by the
Company have been offered, issued and sold in compliance with all applicable
federal and state securities laws.
(b) SCHEDULE 3.7(b) sets forth a true, correct and complete
description of the authorized capital stock of each Subsidiary of the Company on
the date hereof and of the authorized capital stock of each Subsidiary of the
Company immediately after the Closing and the number of shares of each class of
Capital Stock that is issued and outstanding as of the date hereof. There are no
options, warrants or similar rights to purchase or otherwise acquire any shares
of Capital Stock of any Subsidiary. All shares of Capital Stock of each
Subsidiary that have been issued have been offered, issued and sold in
compliance with all applicable federal and state securities laws.
35
(c) No shares of Capital Stock of the Company will become
issuable to any Person (including FSA) pursuant to any "anti-dilution" or other
provisions contained in any issued and outstanding Equity Rights on account of
the exercise of the Residual Warrant or the application of the "anti-dilution"
provisions contained in any LLCP Warrant.
(d) Except as set forth on SCHEDULE 3.7(d), the Company has
not incurred, and should not incur, any charges to its statement of operations
in connection with any repricing of stock options issued under the Company Stock
Plans.
(e) Pursuant to the FSA Stock Pledge Agreement, the Company
pledged to FSA, and FSA continues to have a valid first priority security
interest in, all of the Company's right, title and interest in and to the CPSRC
Shares as security for the full and complete performance of all Obligations (as
such term is defined therein). The FSA Stock Pledge Agreement has not been
amended, supplemented or otherwise modified.
3.8 VALIDITY AND ISSUANCE OF RESIDUAL WARRANT SHARES. The Residual
Warrant Shares have been duly authorized and, when issued, delivered and paid
for pursuant to the terms of the Residual Warrant, will be duly and validly
issued, fully paid and nonassessable.
3.9 TRANSACTIONS WITH AFFILIATES.
(a) SCHEDULE 3.9 contains a true, complete and accurate list
and description of each agreement, transaction, financial or other arrangement,
obligation or commitment between the Company or any of its Subsidiaries, on the
one hand, and any former or present officer, director or Affiliate of the
Company or any of its Subsidiaries, or any member of the Immediate Family of
such Person, on the other hand, other than the payment of compensation to such
Persons in the ordinary course of business. Neither the Company nor any
Subsidiary has loaned or advanced funds to any officer, director, employee or
minority shareholder except as disclosed on SCHEDULE 3.9.
(b) Except as set forth in SCHEDULE 3.9, since January 1,
1999, no shareholder, employee, officer, director or Affiliate of the Company or
any of its Subsidiaries or, to the best knowledge of the Company, Affiliate of
any such Person, and no member of the Immediate Family of any such Person, has
engaged in any transaction or relationship with the Company or any of its
Subsidiaries (other than the payment of compensation to such Persons in the
ordinary course of business).
(c) This SECTION 3.9 does not apply to transactions or
relationships involving (i) sales or transfers of Automobile Contracts (or
interests therein) between or among the Company and its Subsidiaries in
connection with any Securitization Transaction (including any Warehouse
Financing Transaction), (ii) any Investments disclosed on SCHEDULE 3.11(a) or
(iii) any purchases by the Company of Automobile Contracts from CARSUSA, so long
as the terms of such purchases are no less favorable to the Company than those
otherwise attainable from unrelated franchised dealers in an arm's length
transaction.
(d) Xxxxxxx X. Xxxxxxx, Xx. resigned as Chairman of the Board
of the Company on July 5, 2001.
36
3.10 FINANCIAL STATEMENTS; DISCLOSURE.
(a) The Company has delivered to the Purchaser copies of:
(i) Audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1998, 1999 and 2000, and audited
consolidated statements of operations, shareholders' equity and changes
in financial position or cash flows for each of the three (3) years
then ended, together with a report and an unqualified opinion of KPMG
LLP, the Company's independent public accountants;
(ii) Unaudited consolidated balance sheets of the Company and
its Subsidiaries as of December 31, 2001, and unaudited consolidated
statements of operations, shareholders' equity and changes in financial
position or cash flows for the twelve (12) month period then ended,
together with notes related thereto;
(iii) An unaudited consolidated balance sheet of the Company
and its Subsidiaries as of January 31, 2002, and an unaudited
consolidated statement of operations for the twelve (12) month period
then ended;
(iv) Audited consolidated balance sheets of MFN and its
Subsidiaries as of December 31, 1998, 1999 and 2000, and audited
consolidated statements of operations, shareholders' equity and changes
in financial position or cash flows for each of the three (3) years
then ended, together with a report and an unqualified opinion of from
MFN's independent auditors;
(v) Unaudited consolidated balance sheets of MFN and its
Subsidiaries as of December 31, 2001, and unaudited consolidated
statements of operations, shareholders' equity and changes in financial
position or cash flows for the twelve (12) month period then ended,
together with notes related thereto; and
(vi) The "monthly board packages" furnished to the Board of
Directors since January 1, 2001, including the unaudited financial
information contained therein (the financial statements and information
referred to in clauses (i) through (vi) being collectively referred to
as the "FINANCIAL Statements").
(b) The Financial Statements have been prepared in accordance
with GAAP (except that, with respect to the monthly board packages, the Dealer
acquisition fees reflected in the financial statements included therein have not
been accounted for in accordance with GAAP) and fairly present the consolidated
and consolidating financial position and results of operations of the Company
and its Subsidiaries as of the dates and for the periods indicated therein.
Except as set forth in SCHEDULE 3.10(A), since December 31, 2000, there has not
been any Material Adverse Change.
(c) All financial statements and other financial information
not included in the Financial Statements and previously furnished by or on
behalf of the Company, its Subsidiaries or any of their representatives or
agents to the Purchaser in connection with this Agreement and the transactions
contemplated hereby adequately reflect the financial position and results of
operations of the Company and its Subsidiaries, as applicable, as of the dates
37
and for the period indicated therein, and do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements herein or therein contained not misleading.
(d) Neither the Company nor any of its Subsidiaries, nor any
of its or their officers, directors or other Affiliates (i) is contemplating the
filing of a petition under the Bankruptcy Laws, or the liquidation of all or any
major portion of its or their assets or properties, or (ii) is aware of any
Person contemplating the filing of any petition against the Company or any of
its Subsidiaries under the Bankruptcy Laws. Neither the Company nor any of its
Subsidiaries is contemplating changing its business, as such business is being
conducted on the date hereof.
(e) SCHEDULE 3.10(d) sets forth a true, correct and complete
copy of a consolidated balance sheet of the Company and its Subsidiaries as of
February 28, 2002, as adjusted to give PRO FORMA effect to the consummation of
the transactions contemplated by this Agreement as if such transactions had
occurred on such date (the "PRO FORMA CLOSING BALANCE SHEET"), together with
footnotes describing the pro forma adjustments and the assumptions underlying
the PRO FORMA Closing Balance Sheet. The PRO FORMA Closing Balance Sheet
presents fully and fairly in all material respects the PRO FORMA consolidated
financial position of the Company and its Subsidiaries as of February 28, 2002,
and properly gives effect to the application of the PRO FORMA adjustments
described therein and contemplated herein. All assumptions underlying the PRO
FORMA Closing Balance Sheet were made in good faith and are reasonable under the
circumstances.
(f) Neither the Company nor any of its directors or officers
is aware of any fact or circumstance that would cause KPMG LLP, the Company's
independent public accountants, to render a qualified opinion with respect to
the consolidated financial statements of the Company and its Subsidiaries for
the fiscal year ended December 31, 2001.
(g) SCHEDULE 3.10(g) sets forth a true, correct and complete
description of each Warehouse Financing Transaction entered into by the Company,
MFN or any of their respective Subsidiaries and existing on the date hereof.
3.11 INDEBTEDNESS; LIENS; INVESTMENTS; ETC.
(a) SCHEDULE 3.11(a) sets forth a true and correct list, and
describes, as of the date or dates indicated therein, as applicable:
(i) all Indebtedness of the Company, MFN or their respective
Subsidiaries, whether accrued, absolute, contingent or otherwise (and
whether incurred individually or in the aggregate), outstanding
immediately prior to the Closing Date, which Schedule shows, as to each
item of material Indebtedness, the payee thereof and the total amount
outstanding (by principal, interest and other amounts, if applicable);
(ii) All UCC, Tax and judgment Liens granted by or imposed
against the Company, MFN or their respective Subsidiaries or their
respective assets and properties existing immediately prior to the
Closing ("EXISTING LIENS"), including all UCC financing statements
filed naming the Company, MFN or any such Subsidiary as a debtor and
all material pledges and other material Liens on the assets of the
38
Company, MFN or any such Subsidiary for which no UCC financing
statement has been filed, in each case immediately prior to the Closing
Date;
(iii) all Investments (other than Investments made in auto
receivables in trusts with respect to any Securitization Transactions)
of the Company, MFN or their respective Subsidiaries immediately prior
to the Closing Date; and
(iv) all Guarantees (including indemnification agreements) of
the Company, MFN or their respective Subsidiaries existing immediately
prior to the Closing Date.
(b) The Stanwich Replacement Note has been prepaid in cash in
full on or about January 31, 2001, and no principal, interest or other amounts
are owed thereunder.
(c) Immediately following the Closing, the Company and its
Subsidiaries will not have any Indebtedness, whether accrued, absolute,
contingent or otherwise (whether individually or in the aggregate), except for
the Indebtedness described in SCHEDULE 3.11(C) (collectively, "EXISTING
INDEBTEDNESS"), which Schedule sets forth, as to each item of material
Indebtedness, the payee thereof and the total amount outstanding (by principal,
interest and other amounts, if applicable).
(d) There are no outstanding loans, advances, indebtedness or
other obligations or commitments owing by NAB to the Company or any of its
Subsidiaries or other Affiliates or owing by the Company or any of its
Subsidiaries to NAB.
3.12 CERTAIN CHANGES. Except as set forth on SCHEDULE 3.12, since
December 31, 2000, there has not been:
(a) any damage or destruction to, or loss of, any asset of the
Company or any of its Subsidiaries, whether or not covered by insurance, which
could have a Material Adverse Effect;
(b) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it, other than those arising in the
ordinary course of business in connection with the Company's servicing and
collection activities relating to Automobile Contracts;
(c) any satisfaction or discharge of any Lien or payment of
any obligation by the Company or any of its Subsidiaries outside of the ordinary
course of business;
(d) any material change or amendment to any Automobile
Contract, Dealer Agreement or Material Contract by which the Company, any of its
Subsidiaries or any of its or their respective properties or assets is bound or
subject, other than those arising in the ordinary course of business in
connection with the Company's servicing and collection activities relating to
Automobile Contracts;
(e) any material adverse change in the assets, liabilities,
condition (financial or otherwise) or operations of the Company or any of its
Subsidiaries;
39
(f) any change in the Contingent Obligations of the Company or
any of its Subsidiaries, by way of Guarantees or otherwise, outside of the
ordinary course of business;
(g) any declaration or payment of any dividend or other
distribution of assets of the Company to its shareholders, or the adoption or
consideration of any plan or arrangement with respect thereto;
(h) any resignation or termination of the employment of any
director, officer or key employee of the Company or any of its Subsidiaries;
(i) any Investment by the Company or any of its Subsidiaries
in the Capital Stock of any Person other than Mergersub (PROVIDED that the
Company shall not be obligated to include on SCHEDULE 3.12 the employee loans
and advances disclosed on SCHEDULE 3.9);
(j) any offer, issuance or sale of any shares of Capital Stock
of the Company or any Equity Rights (other than as provided in the First Amended
and Restated Securities Purchase Agreement);
(k) any material change in the Company's credit guidelines and
policies, charge-off policies or accounting methods, procedures or policies;
(l) any incurrence of any Indebtedness by the Company or any
of its Subsidiaries;
(m) any agreement or commitment to do any of the foregoing;
(n) any deterioration in the quality of the portfolio of
Automobile Contracts owned by the Company or any of its Subsidiaries; or
(o) any other event or condition of any character which could
have a Material Adverse Effect.
3.13 MATERIAL CONTRACTS; AUTOMOBILE CONTRACTS.
(a) SCHEDULE 3.13(a) (which, with respect to MFN and its
Subsidiaries only, shall be delivered to the Purchaser within ten (10) calendar
days after the Closing, pursuant to SECTION 7.24) sets forth a true and complete
list of all material contracts, agreements, commitments or arrangements, whether
oral or written, of the Company, MFN and any of their respective Subsidiaries,
including all Securitization Transaction Documents, Stanwich-Related Agreements,
the MFN Merger Agreement, credit, loan or financing agreements, guaranties,
indemnity agreements, underwriting agreements, dealer affiliation agreements,
employment and other agreements with management, joint venture agreements,
partnership agreements, agreements, instruments and other documents evidencing
Indebtedness (including the Subordinated Agreements), leases (whether real or
personal property) and other agreements, commitments or arrangements involving,
in any instance, any obligation of the Company, MFN or any of their respective
Subsidiaries to pay an amount in excess of $100,000, or the breach or
termination of which could have a Material Adverse Effect (all of the foregoing
contracts, agreements, commitments and arrangements, whether entered into prior
to, on or after the Closing Date, being collectively referred to herein as the
"MATERIAL CONTRACTS").
40
(b) Each Material Contract is legal, valid, binding and
enforceable against the parties thereto in accordance with its terms and is in
full force and effect as of the date hereof. The Company, MFN or their
respective Subsidiaries, as applicable, and, to the best knowledge of the
Company, all third parties to the Material Contracts are in substantial
compliance with the terms thereof, and no default or event of default by the
Company, MFN or their respective Subsidiaries or, to the best knowledge of the
Company, any third party, exists thereunder which could cause a Material Adverse
Effect. Neither the Company, MFN nor their respective Subsidiaries is a party to
any contract, commitment, license, agreement, obligation or arrangement that
restricts it from carrying on its business or any part thereof, or from
competing in any line of business or with any other Person.
(c) [INTENTIONALLY OMITTED.]
(d) SCHEDULE 3.13(d) (which, with respect to MFN and its
Subsidiaries only, shall be delivered to the Purchaser within ten (10) calendar
days after the Closing pursuant to SECTION 7.24) sets forth true and correct
portfolio performance reports for the Company, MFN and their respective
Subsidiaries.
3.14 TRADE ACCOUNTS PAYABLE. Except to the extent disputed in good
faith by the Company, all trade accounts payable of the Company, MFN and their
respective Subsidiaries were incurred in the ordinary course of business and are
valid. SCHEDULE 3.14 sets forth a true, correct and complete list of all trade
accounts payable of the Company and its Subsidiaries as of a recent date,
reflecting agings per trade account payable in categories of thirty (30), sixty
(60), ninety (90) and more than ninety (90) days after the date of invoice.
3.15 LABOR AND EMPLOYEES.
(a) Neither the Company, MFN nor any of their respective
Subsidiaries is a party to any collective bargaining agreement, there is no
unfair labor practice or labor arbitration proceedings pending with respect to
the Company, MFN or any of their respective Subsidiaries or, to the best
knowledge of the Company, threatened, and there are no facts or circumstances
known to the Company or any of its Subsidiaries that could reasonably be
expected to give rise to such complaint or claim. To the best knowledge of the
Company, there are no organizational efforts presently underway or threatened
involving any employees of the Company, MFN or any of their respective
Subsidiaries or any of the employees performing work for the Company, MFN or any
of their respective Subsidiaries but provided by an outside employment agency,
if any. There has been no work stoppage, strike or other concerted action by
employees of the Company, MFN or any of their respective Subsidiaries.
(b) All employees of the Company, MFN or any of their
respective Subsidiaries are employed at will, except as set forth on SCHEDULE
3.15 and SCHEDULE 3.30. SCHEDULE 3.15 sets forth, individually and by category,
the name of each officer, employee and consultant, together with such person's
position or function, annual base salary, wage and other monetary compensation
with respect to such person or arrangement. Except as described in SCHEDULE
3.15, the completion of the transactions contemplated by this Agreement will not
result in any payment or increased payment becoming due from the Company, MFN or
any of their respective Subsidiaries to any officer, director, or employee of,
or consultant to the Company, MFN or any of their respective Subsidiaries and,
to the best of the knowledge of the Company, (i) no employee of the Company or
41
any of its Subsidiaries has made any threat, or otherwise revealed an intent, to
terminate said employee's relationship with the Company or any of its
Subsidiaries , for any reason, including because of the consummation of the
transactions contemplated by this Agreement, and (ii) no employee of MFN or any
of its Subsidiaries has made any threat, or otherwise revealed an intent, to
terminate said employee's relationship with MFN or any of its Subsidiaries, for
any reason, including because of the consummation of the transaction
contemplated by this Agreement, which could cause a Material Adverse Effect.
Neither Company, MFN nor any of their respective Subsidiaries is a party to any
agreement for the provision of labor from any outside agency, or to any
agreement with any consultant or other independent contractor, except as set
forth in SCHEDULE 3.15. To the best knowledge of the Company, except as set
forth in SCHEDULE 3.15, within the three (3) year period preceding the Closing
Date, there have been no claims by employees of such outside agencies, if any,
with regard to employees assigned to work for the Company, MFN or any of their
respective Subsidiaries , no claims by any governmental agency with regard to
such employees and no attempts by any labor organization to organize the
employees assigned by any outside agency to work for, at or on behalf of
Company, MFN or any of their respective Subsidiaries .
(c) Within the three (3)-year period preceding the Closing
Date, there have been no federal or state claims based on the sex, sexual or
other harassment, age, disability, race or other discrimination or common law
claims, including claims of wrongful termination, by any employees of the
Company, MFN or any of their respective Subsidiaries or by any of the employees
performing work for the Company, MFN or any of their respective Subsidiaries but
provided by an outside employment agency, that would result in a Material
Adverse Effect, and there are no facts or circumstances known to the Company,
MFN or any of their respective Subsidiaries that could reasonably be expected to
give rise to any such complaint or claim. Each of the Company, MFN and their
respective Subsidiaries has complied with all laws related to the employment of
employees except for such occurrences where non-compliance and liabilities could
not, individually or in the aggregate, reasonably expected to have a Material
Adverse Effect. Except as set forth on SCHEDULE 3.15, each of the Company, MFN
and any of their respective Subsidiaries has not received any notice of any
claim within the three (3) years preceding the Closing Date that it has not
complied in any material respect with any laws relating to the employment of
employees, including any provisions thereof relating to wages, hours, collective
bargaining, the payment of Social Security and similar taxes, equal employment
opportunity, employment discrimination, the federal Workers Adjustment and
Retraining Notification Act, as amended, employee safety, or that it is liable
for any arrearages of wages or any taxes or penalties for failure to comply with
any of the foregoing.
(d) The Company has no written policies and/or employee
handbooks or manuals except as set forth in SCHEDULE 3.15.
3.16 EMPLOYEE BENEFIT PLANS; ERISA. For purposes of this SECTION 3.16,
the term "COMPANY" shall include any ERISA Affiliate.
(a) SCHEDULE 3.16 (which, with respect to MFN and its
Subsidiaries only, shall be delivered to the Purchaser within ten (10) calendar
days after the Closing, pursuant to SECTION 7.24) sets forth a true, correct and
complete list of:
42
(i) Each termination or severance agreement involving the
Company or its Subsidiaries, on the one hand, and any of its respective
employees whose annual compensation is at a base rate equal to or
exceeding $60,000, on the other hand;
(ii) All employee benefit plans, as defined in Section 3(3) of
ERISA; and
(iii) All other profit-sharing, bonus, stock option, stock
purchase, stock bonus, restricted stock, stock appreciation right,
phantom stock, vacation pay, holiday pay, tuition reimbursement,
scholarship, severance, dependent care assistance, excess benefit,
incentive compensation, salary continuation, supplemental retirement,
employee loan or loan guarantee program, split dollar, cafeteria plan,
and other compensation arrangements;
in each case maintained or contributed to by the Company for the benefit of its
employees (or former employees) and/or their beneficiaries. All of these types
of arrangements shall be collectively referred to as "BENEFIT PLANS". An
arrangement will not fail to be a Benefit Plan simply because it only covers one
individual, or because the Company's obligations under the plan arise by reason
of its being a "successor employer" under Applicable Laws. Furthermore, a
Voluntary Employees' Beneficiary Association under Section 501(c)(9) of the IRC
will be considered a Benefit Plan for this purpose.
(b) All costs of administering and contributions required to
be made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the
IRC, or any other applicable law have been timely made, and are fully deductible
in the year for which they were paid. All other amounts that should be accrued
to date as liabilities of the Company under or with respect to each Benefit Plan
(including administrative expenses and incurred but not reported claims) for the
current plan year of the plan have been recorded on the books of the Company.
There will be no liability of the Company (i) with respect to any Benefit Plan
that has previously been terminated or (ii) under any insurance policy or
similar arrangement procured in connection with any Benefit Plan in the nature
of a retroactive rate adjustment, loss sharing arrangement, or other liability
arising wholly or partially out of events occurring before the Closing.
(c) Each Benefit Plan has been operated at all times in
accordance with its terms, and complies currently, and has complied in the past,
both in form and in operation, with all Applicable Laws, including ERISA and the
IRC. The Internal Revenue Service has issued a favorable determination letter
with respect to each Benefit Plan that is intended to qualify under Section
401(a) or 501(c)(9) of the IRC, and no event has occurred (either before or
after the date of the letter) that would disqualify the plan.
(d) The Company does not maintain any plan that provides (or
will provide) medical or death benefits to one or more former employees or
independent contractors (including retirees) following termination of
employment, other than benefits that are required to be provided under COBRA or
any state law continuation coverage or conversion rights. The Company has
complied in all material respects with the continuation coverage requirements of
COBRA.
43
(e) There are no audits, investigations, proceedings, lawsuits
or claims pending or, to the best knowledge of the Company, threatened relating
to any Benefit Plan.
(f) The Company does not have any intention or commitment,
whether legally binding or not, to create any additional Benefit Plan, or to
modify any existing Benefit Plan so as to increase benefits to participants or
the cost of maintaining the plan. The benefits under all Benefit Plans are as
represented, and have not been, and will not be increased subsequent to the date
documents are provided to the Purchaser except in the ordinary course of
business and consistent with competitive business standards. No statement,
either oral or written, has been made by the Company (or any agent of the
Company) to any Person regarding any Benefit Plan that is not in accordance with
the Plan that could have adverse economic consequences to the Purchaser.
(g) None of the persons performing services for the Company
have been improperly classified as being independent contractors, leased
employees, or as being exempt from the payment of wages for overtime, except
where the improper classification could not result in a Material Adverse Effect.
(h) None of the Benefit Plans provide any benefits that (i)
become payable or become vested solely as a result of the consummation of this
transaction or of transactions under the MFN Merger Agreement or (ii) would
result in excess parachute payments (within the meaning of Section 280G of the
IRC), either (A) solely as a result of the consummation of this transaction or
of transactions under the MFN Merger Agreement or (B) as a result of the
consummation of this transaction or of transactions under the MFN Merger
Agreement and any actions taken by the Purchaser after the Closing Date.
Furthermore, the consummation of this transaction will not require the funding
(whether formal or informal) of the benefits under any Benefit Plan (E.G.,
contributions to a "rabbi trust").
(i) None of the assets of any Benefit Plan that is a "pension
plan" within the meaning of Section 3(2) of ERISA are invested in a group
annuity contract or other insurance contract that is subject to any surrender
charge, interest rate adjustment, or other similar expense upon its premature
termination.
(j) No Benefit Plan has any interest in any annuity contract
or other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship, rehabilitation, or similar
proceeding.
(k) With respect to each Benefit Plan that is subject to Title
IV of ERISA:
(i) No amount is due or owing from the Company to the PBGC,
other than a liability for premiums under Section 4007 of ERISA;
(ii) All premiums have been paid to the PBGC on a timely
basis;
(iii) The present value of all accrued benefits under any such
Benefit Plans shall not, as of the Closing Date, exceed the value of
the assets of such Benefit Plans allocated to such accrued benefits,
based upon the applicable provisions of the Code and ERISA, and each
such Benefit Plan shall be capable of being terminated as of the
Closing Date in a "standard termination" under Section 4041(b) of
ERISA;
44
(iv) No amount is due or owing from the Company to the PBGC or
to any such Benefit Plan on account of any withdrawal therefrom, and no
such Benefit Plan has been terminated other than in accordance with
ERISA or at a time when the plan was not sufficiently funded;
(v) The transactions contemplated under this Agreement and by
the MFN Merger Agreement shall not result in any such withdrawal or
other liability under ERISA;
(vi) There are no liens against the assets of the Company
under Section 412(n) of the IRC or Sections 302(f) or 4068 of ERISA;
(vii) No Termination Event has occurred; and
(viii) No reportable events (within the meaning of Section
4043 of ERISA) have occurred.
(l) In the case of each Benefit Plan that is subject to IRC
Section 412, there is no, and has never been any, accumulated funding deficiency
(within the meaning of IRC Section 4971), whether or not such deficiency has
been waived.
(m) The Company does not contribute to, and is not a
participant in, and has never contributed to or been a participant in, any
Multiemployer Plan.
(n) The Company has delivered to the Purchaser a true and
complete copy of the following documents, to the extent that they are
applicable:
(i) Each Benefit Plan and any related funding agreements
(E.G., trust agreements or insurance contracts), including all
amendments (and SCHEDULE 3.16 includes a description of any such
amendment that is not in writing);
(ii) The current draft of the Summary Plan Description and all
subsequent Summaries of Material Modifications of each Benefit Plan;
(iii) The most recent Internal Revenue Service determination
letter for each Benefit Plan that is intended to qualify for favorable
income tax treatment under Section 401(a) or 501(c)(9) of the Code,
which determination letter reflects all amendments that have been made
to the plan (except as set forth in SCHEDULE 3.16); and
(iv) The two (2) most recent Form 5500s (including all
applicable Schedules and the opinions of the independent accountants)
that were filed on behalf of the Benefit Plan.
3.17 TAXES.
(a) The Company and each of its Subsidiaries has filed within
the required time periods all federal, state and other Tax returns required to
have been filed by it or them, and such returns are true and correct in all
respects. No extensions to file such returns have been requested by the Company
or its Subsidiaries. The Company and each of its Subsidiaries has paid all Taxes
45
which were due and payable by it or them, prior to the date hereof, other than
(i) Taxes that are being contested in good faith and for which reserves have
been properly established on the PRO FORMA Closing Balance Sheet and the
internal consolidated balance sheets of the Company in accordance with GAAP and
(ii) personal property Taxes not to exceed $20,000. No Governmental Authority in
a jurisdiction where the Company and its Subsidiaries do not file Tax returns
has asserted that the Company or any of its Subsidiaries is subject to taxation
in that jurisdiction.
(b) The Company and each of its Subsidiaries has withheld and
paid over on a timely basis to the appropriate Government Authority all Taxes
required to be withheld by it or them in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(c) Except as set forth on SCHEDULE 3.17(c): (i) Neither the
Company nor any of its Subsidiaries has been advised that any Tax returns have
been, are being, or will be audited by any Governmental Authority; (ii) there
are no agreements, waivers or other arrangements providing for a waiver of any
statute of limitations with respect to any Taxes or an extension of time with
respect to the assessment of any Taxes or deficiency against the Company or any
of its Subsidiaries, and the statute of limitations has run for such assessment
by the Internal Revenue Service through the Company's taxable year ended
December 31, 1997; (iii) there are no actions, suits, proceedings or claims now
pending by or against the Company or any of its Subsidiaries in respect of any
Taxes or assessments; and (iv) there is no pending or, to the best knowledge of
the Company, threatened audit or investigation of the Company or any of its
Subsidiaries by any Governmental Authority relating to any Taxes or assessments,
or any claims for additional taxes or assessments asserted by any Governmental
Authority.
(d) Neither the Company nor any of its Subsidiaries is a party
to or bound by any tax sharing, tax indemnity or tax allocation agreement or
other similar arrangement.
(e) Neither the Company nor any of its Subsidiaries is a party
to or bound by any agreement, arrangement, or commitment with any Governmental
Authority concerning the determination of its Tax liability for current or
future periods, such as a closing agreement or advance pricing agreement.
(f) The Company has not made and will not make an election
under Section 338 of the IRC to treat the acquisition of MFN or any of its
Subsidiaries as an acquisition of assets for federal income Tax purposes.
(g) Neither MFN nor any Subsidiary of MFN has ever been a
member of an affiliated group of corporations other than the affiliated group of
corporations of which MFN is the common parent, and neither MFN nor any
Subsidiary of MFN is liable for the Taxes of any person other than MFN and its
Subsidiaries pursuant to Treasury Regulation ss.1.1502-6, as a transferee or
successor, by contract or otherwise.
(h) In connection with the consummation of the MFN Merger,
none of the Company, the Subsidiaries of the Company, MFN, or the Subsidiaries
of MFN will make, or become obligated to make, any payment that would be subject
to limitations on the deduction of such payment imposed by Sections 162(m) and
280G of the Code. None of the Company or its Subsidiaries is obligated to
46
reimburse or indemnify anyone for excise taxes imposed on any "golden parachute
payment," and neither the Company nor any of its Subsidiaries (including the
companies acquired in the MFN Merger) will agree to such reimbursement or
indemnification in the future.
3.18 ACTIONS AND LEGAL PROCEEDINGS. Except as set forth on SCHEDULE
3.18, and except with respect to Automobile Contracts, there are no (a) actions,
suits, claims, proceedings or investigations pending or threatened before any
Governmental Authority against or affecting the Company, MFN or any of their
respective Subsidiaries or Affiliates or (b) orders, decrees, judgments,
injunctions or rulings of any Governmental Authority against or affecting the
Company, MFN or any of their respective Subsidiaries or Affiliates. Such
Schedule sets forth, as to each matter identified therein, the names of the
parties thereto, the forum for such matter, a summary of the details of the
matter, the settlement or other disposition of the matter (including the
monetary value of such settlement or other disposition) or, if such matter is
still pending, a statement to that effect. None of the actions, suits, claims,
proceedings or investigations against or affecting the Company, MFN or any of
their respective Subsidiaries could have a Material Adverse Effect. All claims
pending against the Company or any of its Subsidiaries under or with respect to
any Automobile Contracts not disclosed on SCHEDULE 3.18 do not exceed $500,000
in the aggregate. There is no action, suit, claim or other proceeding pending or
threatened which questions the validity of this Agreement, the Notes, the other
Related Agreements or the MFN Merger, or any action taken or to be taken
pursuant hereto or thereto, which could, individually or in the aggregate, have
a Material Adverse Effect.
3.19 GOVERNMENTAL REGULATION; MARGIN STOCK. Neither the Company, MFN or
any of their respective Subsidiaries is subject to the Investment Company Act of
1940, as amended, or to any Applicable Laws limiting its ability to incur
Indebtedness or to create Liens on any of its properties or assets to secure
such Indebtedness. Neither the Company, MFN or any of their respective
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purposes of purchasing or carrying
Margin Stock. The value of all Margin Stock held by the Company, MFN and their
respective Subsidiaries constitutes less than 5.0% of the value, as determined
in accordance with the Margin Regulations, of all assets of the Company, MFN and
their respective Subsidiaries.
3.20 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. Each of the Company,
MFN and their respective Subsidiaries is in compliance with all Applicable Laws,
except to the extent that non-compliance could not reasonably be expected to
have a Material Adverse Effect. Without limiting the generality of the
foregoing, each of the Company, MFN and their respective Subsidiaries, and its
or their employees, agents and other representatives is in compliance with the
Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C. ss.78dd-2 ET SEQ.),
and each Automobile Contract, the sale of Financed Vehicles and the other Goods
complied at the time it was originated or made, and at the execution of this
Agreement complies, in all material respects with all Applicable Laws. SCHEDULE
3.20 sets forth a true, correct and complete list of all material Licenses and
Permits held by the Company, MFN and their respective Subsidiaries in connection
with the ownership of its or their assets or the conduct of its or their
businesses (which Schedules shall set forth, with respect to each License and
Permit, its name, the issuing Person, the date it was issued and the date of
expiration), and such Licenses and Permits constitute all of the Licenses and
Permits required under Applicable Laws to own their respective assets or conduct
their respective businesses as now conducted and as proposed to be conducted.
47
All of the Licenses and Permits are validly issued and in full force and effect,
and the Company, MFN and their respective Subsidiaries have fulfilled and
performed in all material respects their obligations with respect thereto and
have full power and authority to operate thereunder.
3.21 TITLE TO PROPERTIES AND ASSETS; LIENS. Each of the Company and its
Subsidiaries has good and marketable title to all of its properties and assets
(including all shares of Capital Stock owned or held by it), and none of such
properties or assets is subject to any Liens except for the Existing Liens and
the Permitted Liens. Each of the Company and its Subsidiaries enjoys quiet
possession under all leases to which they are parties as lessees, and all of
such leases are valid, subsisting and in full force and effect. None of such
leases contains any provision restricting the incurrence of indebtedness by the
lessee or any unusual or burdensome provision materially adversely affecting the
current and proposed operations of the Company and its Subsidiaries. Neither
LINC nor Samco has any material assets, properties or operations.
3.22 INTELLECTUAL PROPERTY.
(a) Each of the Company and its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is used in the conduct of its business as currently
conducted and as proposed to be conducted, except where the failure to own,
license or possess the same could not have a Material Adverse Effect. SCHEDULE
3.22 lists (i) all patents, patent applications, trademarks, servicemarks,
trademark and servicemark applications, copyrights, trade names and domain names
owned or held by the Company or any of its Subsidiaries and used in the conduct
of its or their businesses, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any such
application for such issuance or registration has been filed; (ii) all material
written licenses, sublicenses and other agreements to which the Company or any
of its Subsidiaries is a party and pursuant to which any Person (other than
employees of the Company in the course of their employment) is authorized to use
any such Intellectual Property rights; and (iii) all material written licenses,
sublicenses and other agreements to which the Company or any of its Subsidiaries
is a party and pursuant to which the Company or any of its Subsidiaries is
authorized to use any third party patents, trademarks or copyrights, including
computer software which are used in the businesses of the Company or the
Subsidiaries or which form a part of any product or service of the Company or
its Subsidiaries ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS"), all of which are
in full force and effect. The Company has made available to the Purchaser
correct and complete copies of all such patents, registrations, applications,
licenses and agreements and related documentation, all as amended to date.
Neither the Company nor any of its Subsidiaries has agreed to indemnify any
Person for or against any infringement, misappropriation or other conflict with
respect to any item of Intellectual Property that the Company owns or uses.
Neither the Company nor any of its Subsidiaries is a party to any oral license,
sublicense or agreement which, if reduced to written form, would be required to
be listed in SCHEDULE 3.22 under the terms of this SECTION 3.22.
(b) Neither the Company nor any of its Subsidiaries will be,
as a result of the execution and delivery of this Agreement or the performance
of the Company's obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Intellectual Property or Third
Party Intellectual Property Rights.
48
(c) Neither the Company nor any of its Subsidiaries has been
named in any suit, action or other proceeding which involves a claim of
infringement of any Intellectual Property rights of any third party. Except as
disclosed in SCHEDULE 3.22, the performance of the services offered by the
Company and its Subsidiaries do not infringe on any Intellectual Property right
of any other Person, and to the best knowledge of the Company, the Intellectual
Property rights of the Company and its Subsidiaries are not being infringed by
activities, products or services of any third party.
3.23 BROKERS; CERTAIN EXPENSES. Neither the Company, MFN nor any of
their respective Subsidiaries has paid or is obligated to pay any fee,
commission or other payment to any broker, finder, investment banker or other
intermediary in connection with this Agreement, any Related Agreement or any of
the transactions contemplated hereby or thereby (including the MFN Merger) other
than, in the case of MFN, Xxxxx Xxxxxxxx & Xxxxx, Inc. Neither the Company, MFN
nor any of their respective Subsidiaries is bound by any agreement or commitment
for the provision of investment banking or financial advisory services with
respect to any proposed recapitalization, issuance of debt or equity securities
or other transactions involving the Company, MFN or any of their respective
Subsidiaries or the provision of any other investment banking or financial
advisory services to the Company or any of its Subsidiaries other than certain
agreements with GCM and West LB with respect to Securitization Transactions.
3.24 REAL PROPERTY LEASES. SCHEDULE 3.24 sets forth a true and complete
list of all real property leases, subleases and licenses pursuant to which the
Company or any of its Subsidiaries is a lessor, lessee, sublessor, sublessee,
licensor or licensee of real property, including the term thereof, any extension
and renewal options, and the rent payable thereunder. The Company has delivered
to the Purchaser correct and complete copies of the same (as amended to date).
With respect to each such lease, sublease and license, except as set forth on
SCHEDULE 3.24:
(a) Such lease, sublease and license is legal, valid, binding
and enforceable against the parties thereto;
(b) No party thereto is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(c) There are no disputes, oral agreements or forbearance
programs in effect;
(d) Neither the Company nor any of its Subsidiaries, as the
case may be, has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest therein; and
(e) All parking lots located on any real property subject
thereto are in compliance with Applicable Laws, including zoning requirements.
3.25 POWERS OF ATTORNEY. There are no outstanding powers of attorney
granted by or on behalf of the Company or any of its Subsidiaries, other than
powers of attorney granted to (a) purchasers of Automobile Contracts from the
Company in order to assign or transfer such Contracts to third parties and (b)
Persons who repossess Financed Vehicles in order to convey title thereto to
third parties.
49
3.26 INSURANCE. SCHEDULE 3.26 sets forth a true and complete list of
all liability and other insurance policies insuring the Company and its
Subsidiaries against losses arising out of or related to the businesses of the
Company and its Subsidiaries (and accurately describes the coverage carried and
expiration dates of such policies) and all key man life insurance policies owned
or maintained by the Company (including the directors and officers liability
insurance and key man life insurance policy on the life of Xxxxxxx X. Xxxxxxx,
Xx. required to be maintained under SECTION 7.6). Each of the Company and its
Subsidiaries is covered by insurance in scope and amount customary and
reasonable for the businesses in which it is engaged and will be so covered
after consummation of the transactions contemplated hereby. The insurance
policies listed on SCHEDULE 3.26 constitute insurance protection against all
liability, claims and risks occurring in the ordinary course of business
customarily included within comprehensive liability coverage and at amounts and
levels customarily maintained for a business of this type. All such policies are
in full force and effect.
3.27 BOOKS AND RECORDS. The minute books and other similar records of
the Company and its Subsidiaries contain true and complete records of all
actions taken at any meetings of the Board of Directors of the Company or any
committees thereof and shareholders of the Company and its Subsidiaries and of
all written consents executed in lieu of the holding of any such meetings. The
books and records of the Company accurately reflect in all respects the assets,
liabilities, business, financial condition and results of operations of the
Company and have been maintained in accordance with good business, accounting
and bookkeeping practices.
3.28 DEALERS. SCHEDULE 3.28 sets forth a true and complete list of all
Dealers as of the date hereof. No Dealer accounts for more than five percent
(5.0%) of the aggregate Amount Financed under Automobile Contracts purchased by
the Company during the calendar year ended December 31, 2001.
3.29 PERSONAL PROPERTY LEASES. SCHEDULE 3.29 sets forth a true and
complete list and description of all agreements (or group of related agreements)
for the lease of personal property requiring payments by the Company, MFN or any
of their respective Subsidiaries over the remaining life of the lease of $10,000
or more. Neither the Company, MFN nor any of their respective Subsidiaries has
breached any agreement pertaining to, is in default with respect to, or is
overdue in payment of, any amounts owing under any agreement for the lease of
real property, except where any such breach (or breaches) or default (or
defaults), individually or in the aggregate, could not have a Material Adverse
Effect. No such lease agreement contains any provisions which restrict or
prohibit (a) the amendment and restatement of the First Amended and Restated
Securities Purchase Agreement or the First Amended Term B Note, (b) the issuance
and sale of the Bridge Note or the Term C Note, (c) any other financings by the
Company, MFN or any of their respective Subsidiaries, including any public or
private debt or equity financings or (d) other than ordinary restrictions on
assignment, any merger, sale of assets or other event which could cause a Change
in Control.
3.30 EMPLOYMENT AND AGENCY AGREEMENTS. SCHEDULE 3.30 sets forth a true
and complete list of all employment, agency, independent contractor or sales
representative agreements, compensation agreements, golden parachute agreements
and non-competition or non-solicitation agreements to which the Company, MFN or
any of their respective Subsidiaries is a party, true and complete copies of
which have been provided to the Purchaser. Each such agreement is in writing, is
a valid and binding agreement enforceable in accordance with its terms, and no
50
party to any such agreement is in breach of, or in default with respect to, its
obligations under such agreement nor is the Company or any of its Subsidiaries
aware of any facts or circumstances which might give rise to a breach or default
thereunder.
3.31 SOLVENCY. Each of the Company and its Subsidiaries (other than
LINC and Samco) is, and immediately following the consummation of the
transactions contemplated by this Agreement each of the Company and its
Subsidiaries (including MFN and its Subsidiaries but excluding LINC and Samco)
will be, Solvent. Neither the Company, MFN nor any of their respective
Subsidiaries will, by virtue of the consummation of the transactions
contemplated hereby and by the Related Agreements, incur debts that will be
beyond its ability to pay as they mature. No transfer of property is being made
and no obligation is being incurred in connection with the transactions
contemplated by this Agreement and the Related Agreements with the intent to
hinder, delay or defraud either present or future creditors of the Company, MFN
or any of their respective Subsidiaries.
3.32 ENVIRONMENTAL MATTERS. Neither the Company nor any of its
Subsidiaries has ever caused or permitted any Hazardous Materials to be disposed
of on or under any Real Property, and no Real Property has ever been used (by
the Company and/or any Subsidiary or, to the best knowledge of the Company, by
any other Person) as (a) a disposal site or permanent storage site for any
Hazardous Materials or (b) a temporary storage site for any Hazardous Materials.
Each of the Company or its Subsidiaries has been issued and is in compliance
with all material Licenses and Permits relating to environmental matters and
necessary or desirable for its business, and has filed all notifications and
reports relating to chemical substances, air emissions, underground storage
tanks, effluent discharges and Hazardous Materials waste storage, treatment and
disposal required in connection with the operation of its businesses, the
failure to have or comply with which, individually or in the aggregate, has had
or could have a Material Adverse Effect. All Hazardous Materials used or
generated by the Company or any of its Subsidiaries or any business merged into
or otherwise acquired by the Company or any of its Subsidiaries have been
generated, accumulated, stored, transported, treated, recycled and disposed of
in compliance with all Environmental Laws, the violation of which has any
reasonable likelihood of having a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has any liabilities with respect to Hazardous
Materials, and to the best knowledge of the Company, no facts or circumstances
exist which could give rise to liabilities with respect to the violation
(whether by the Company or any other Person) of any Environmental Laws and/or
Hazardous Materials which could have any Material Adverse Effect.
3.33 PUBLIC HOLDING COMPANY; INVESTMENT COMPANY. Neither the Company
nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.34 DEPOSITORY AND OTHER ACCOUNTS. SCHEDULE 3.34 sets forth a true and
complete list of all banks and other financial institutions and depositories at
which the Company or any of its Subsidiaries maintains (or has caused to be
maintained) deposit accounts, spread accounts, yield supplement reserve
accounts, operating accounts, trust accounts, trust receivable accounts or other
accounts of any kind or nature into which funds of the Company or any of its
51
Subsidiaries (including funds in which the Company maintain a contingent or
residual interest) is deposited from time to time. Such SCHEDULE 3.34 correctly
identifies the name and address of each depository, the name in which each
account is held, the purpose of the account, the account number, the contact
person at such depository and his or her telephone number. The Company will from
time to time notify the Purchaser and supplement SCHEDULE 3.34 as new accounts
are established within two (2) Business Days thereof.
3.35 TAX STATUS OF SECURITIZATION TRANSACTIONS. None of the trusts
formed or created in connection with any Securitization Transaction is, or will
be, classified as an association taxable as a corporation under the IRC or is,
or will be, otherwise taxable as a separate entity for federal income tax
purposes.
3.36 BURDENSOME OBLIGATIONS; FUTURE EXPENDITURES. Neither the Company
nor any of its Subsidiaries is a party to or bound by any agreement or contract
(including the Material Contracts listed on Schedule 3.13(a)), instrument, deed
or lease or is subject to any charter, bylaw or other restriction, commitment or
requirement which, in the opinion of its management, is so unusual or burdensome
that in the foreseeable future it could have, or cause or create a material risk
of having or causing, a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries anticipates that the future expenditures, if any, by the
Company and its Subsidiaries needed to meet the provisions of any Applicable
Laws will be so burdensome as to have or cause, or create a material risk of
having or causing, a Material Adverse Effect.
3.37 CREDIT ENHANCER INDEBTEDNESS AND LIABILITIES. None of the Company,
any of its Subsidiaries or any trust maintained in connection with any
Securitization Transaction occurring prior to the Closing Date has any
Indebtedness owing to any Credit Enhancer (or any Affiliate of any Credit
Enhancer) pursuant to any agreement, commitment or arrangement to which the
Credit Enhancer (or any such Affiliate) is a party, other than Indebtedness
incurred in connection with such Securitization Transaction of the type which
the Company believes is reasonably and customarily incurred in connection with
similar securitization transactions insured by similarly situated Credit
Enhancers, the assets of which consist solely of Automobile Contracts.
3.38 [INTENTIONALLY OMITTED.]
3.39 COMPANY SEC DOCUMENTS.
(a) The Company has timely filed all Company SEC Documents
which were required to be filed by it with the SEC and the Nasdaq and the NYSE
since December 31, 1998. SCHEDULE 3.39 sets forth a true, complete and correct
list of all Company SEC Documents required to be filed by the Company since
December 31, 1999, the respective dates on which they were filed and a notation
to the effect, if true, that such filing was late.
(b) As of their respective dates, the Company SEC Documents
complied with the requirements of the Securities Act or the Exchange Act, as the
case may be, and none of the Company SEC Documents, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents
complied as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the published
52
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q and the SEC) applied on a consistent basis during the periods
involved and fairly present the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). Such
financial statements reflect appropriate reserves established for all Automobile
Contracts and general ledger accounts in accordance with GAAP.
3.40 LISTING OF COMMON STOCK. The Common Stock is listed for trading
solely on the Nasdaq. Except for the RISRS and the PENS which are listed for
trading on the NYSE, no Capital Stock or other securities of the Company or any
of its Subsidiaries are listed for trading on any other securities exchange or
on Nasdaq.
3.41 MFN-RELATED MATTERS. Each of the representations and warranties
made by MFN in the MFN Merger Agreement that is qualified by materiality was
true and correct in all respects on and as of the date when made, and will be
true and correct in all respects as of the Closing Date, with the same effect as
if made on and as of the Closing Date; each of the representations and
warranties made by MFN in the MFN Merger Agreement that is not qualified by
materiality was true and correct in all material respects on and as of the date
when made and shall be true and correct in all material respects on and as of
the Closing Date, with the same effect as if made on and as of the Closing Date;
and each of the conditions precedent to the consummation of the MFN Merger,
including those set forth in Article 6 of the MFN Merger Agreement, has been
satisfied or will be satisfied on or prior to the Closing.
3.42 STANWICH-RELATED MATTERS.
(a) Other than the March 0000 Xxxxxxxx Shares (as defined in
the Waiver Agreement), since November 17, 1998, the Company has not issued to
Stanwich (or any of its Affiliates) any shares of Common Stock or any Equity
Rights.
(b) Other than the Stanwich Indebtedness, no Indebtedness or
other amounts are due or payable by the Company or any of its Subsidiaries to
Stanwich or any of Stanwich's shareholders, officers, directors, employees or
other Affiliates (including Xxxxxxx X. Xxxxxxx, Xx. or Xxxxxxx X. Xxxxxxx, Xx.).
The definition of Stanwich Debt Documents lists all presently existing
agreements, instruments or other documents, and all amendments or supplements
thereto, representing or evidencing any obligation of the Company or any of its
Subsidiaries to pay to Stanwich or any of its Affiliates any Indebtedness or
other amounts.
3.43 CLASS B CERTIFICATE. The Company is the beneficial owner and owner
of record of the Class B Certificate, free and clear of all security interests
and Liens except those in favor of the Purchaser. The principal balance of the
Class B Certificate outstanding as of the date hereof is $11,241,931.00 Other
than the Company, no Person has any right or interest in the Class B
Certificate.
3.44 DISCLOSURE. After due inquiry of the directors, executive officers
and employees of the Company and its Subsidiaries having knowledge of the
matters represented, warranted or stated herein, no representation, warranty,
statement or information (whether regarding the Company, MFN, any of their
53
respective Subsidiaries or otherwise) made or furnished to the Purchaser by or
on behalf of the Company, its Subsidiaries or its or their respective
representatives and agents, whether written or oral, whether included in any
materials or documents furnished to the Purchaser prior to the date hereof or
included in this Agreement or any Related Agreement or in any Exhibit or
Schedule, is untrue with respect to any material fact or omits to state a
material fact necessary in order to make the statement made herein or therein,
in light of the circumstances in which such statement was made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that the following statements are true
and correct as of the date hereof:
4.1 ORGANIZATION AND GOOD STANDING. The Purchaser is a limited
partnership formed and validly existing under the laws of the State of
California, and has all requisite power and authority to enter into this
Agreement and each Related Agreement to which it is a party and to consummate
the transactions contemplated hereby and thereby.
4.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and of each of the Related Agreements to which the Purchaser is a
party, and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the Purchaser.
4.3 DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS. This Agreement has
been duly executed and delivered by the Purchaser. This Agreement is, and at the
time of the Closing each Related Agreement to which the Purchaser is a party
will be, a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability and except as
rights of indemnity or contribution may be limited by federal or state
securities or other laws or the public policy underlying such laws.
4.4 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement and each Related Agreement to which the Purchaser is
a party, and the consummation of the transactions contemplated hereby, do not
violate (a) the limited partnership agreement of the Purchaser as in effect on
the date hereof, (b) any law, statute, rule or regulation applicable to the
Purchaser, (c) any order, ruling, judgment or decree of any Governmental
Authority binding on the Purchaser or (d) any term of any material indenture,
mortgage, lease, agreement or instrument to which the Purchaser is a party.
4.5 INVESTMENT INTENT. The Purchaser is acquiring the Term B Note, the
Bridge Note, the Term C Note and its interest in the Class B Certificate under
the Option Agreement for its own account, for investment purposes, and not with
a view to or for sale in connection with any distribution thereof. The Purchaser
understands that none of the Notes nor the Class B Certificate has been
registered under the Securities Act or registered or qualified under any state
securities law in reliance upon specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of the Purchaser's
investment intent as expressed herein.
54
4.6 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
investor" (as such term is defined in Rule 501 of Regulation D under the
Securities Act). By reason of its business and financial experience, the
Purchaser has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
investment in the Term B Note, the Bridge Note, the Term C Note and its interest
in the Class B Certificate under the Option Agreement, has the capacity to
protect its own interests and is able to bear the economic risk of such
investment. The Purchaser has had an opportunity to review the books and records
of the Company and all documents, information and agreements furnished to the
Purchaser by the Company relating to the Class B Certificate, and to ask
questions of representatives of the Company concerning the terms and conditions
of the transactions contemplated by this Agreement.
4.7 PURCHASER CONSENTS. The execution and delivery by the Purchaser of
this Agreement and each of the Related Agreements to which it is a party, and
the consummation by the Purchaser of the transactions contemplated hereby, do
not and will not require the Consent of any Governmental Authority or any other
Person, other than Consents that have already been obtained or made.
4.8 BROKERS. Neither the Purchaser nor any of its Affiliates has paid
or is obligated to pay any fee or commission to any broker, finder, investment
banker or other intermediary in connection with this Agreement, any Related
Agreement or any of the transactions contemplated hereby or thereby.
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions contemplated hereby, including the
purchase of the Bridge Note and the Term C Note, is subject to the satisfaction,
prior to or at the Closing, of the condition that the Closing shall occur on or
prior to the date hereof and of the other conditions set forth below in this
SECTION 5; PROVIDED, HOWEVER, that any or all of such conditions may be waived,
in whole or in part, by the Purchaser in its sole and absolute discretion:
5.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Company shall have
delivered to the Purchaser an Officers' Certificate, duly executed by the
President and Chief Executive Officer and the Chief Financial Officer of the
Company, dated as of the Closing Date, to the effect that (a) each of the
representations and warranties of the Company contained in this Agreement that
is qualified by materiality was true and correct in all respects on and as of
the date hereof and shall be true and correct in all respects on and as of the
Closing Date, with the same effect as if made on and as of the Closing Date; (b)
each of the representations and warranties of the Company contained in this
Agreement that is not qualified by materiality was true and correct in all
material respects on and as of the date hereof and shall be true and correct in
all material respects on and as of the Closing Date, with the same effect as if
made on and as of the Closing Date; (c) each of the covenants, agreements and
obligations of the Company required to be performed or satisfied under this
Agreement on or prior to the Closing Date shall have been performed or satisfied
on or before the Closing Date; (d) no Default or Event of Default shall have
occurred and be continuing on the Closing Date or would result from the
transactions contemplated by or related to this Agreement, including the
execution and delivery of this Agreement or the Term B Note, the issuance, sale
and delivery of the Bridge Note or the Term C Note, the consummation of the MFN
Merger, the incurrence of any other Indebtedness in connection with the MFN
Merger (including Indebtedness owing to West LB), the consummation of the
55
Securitization Transactions or the Warehouse Financing Transaction being
established on or prior to the Closing Date or the consummation of the other
transactions contemplated by or related to this Agreement or any Related
Agreement; and (e) each of the other conditions set forth in this SECTION 5 has
been satisfied and fulfilled.
5.2 FEES. The Company shall have paid to the Purchaser at or before the
Closing, by wire transfer in immediately available funds to a bank account
designated by the Purchaser, aggregate fees of $2,400,000, consisting of
$1,400,000, which represents the unpaid portion of the non-refundable,
non-accountable closing fee of $1,750,000, and a non-refundable investment
banking fee of $1,000,000 (which aggregate fees may be withheld by the Purchaser
from the proceeds of the Bridge Note and/or the Term C Note).
5.3 DEFAULT INTEREST; DEFERRED FEES. The Company shall have paid to the
Purchaser the aggregate amount of $426,181.00 representing accrued interest at
the Default Rate on the First Amended Term B Note with respect to the Specified
Defaults and deferred fees.
5.4 REIMBURSEMENT OF FEES AND EXPENSES. The Company shall have paid
directly to the Purchaser's attorneys, by wire transfer in immediately available
funds to a bank account designated by its attorneys, all attorneys' fees and
expenses incurred by or on behalf of the Purchaser in connection with the
diligence, preparation, negotiation, execution and delivery of this Agreement
and the Related Agreements and the administration, exercise and enforcement of
the Purchaser's rights, remedies and powers against the Company through the
Closing Date.
5.5 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws. Without limiting the
generality of the foregoing, the consummation of the transactions contemplated
hereby shall otherwise comply with all applicable requirements of federal
securities and state securities or "blue sky" laws.
5.6 NO MATERIAL ADVERSE CHANGES. Since December 31, 2000, there shall
not have occurred any Material Adverse Change.
5.7 NO INJUNCTION OR ORDER. There shall not have been issued any
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the Related Agreements, and there
shall not be any action, suit, proceeding or investigation pending or, to the
best knowledge of the Company, threatened against the Company that (a) draws
into question the validity, legality or enforceability of the MFN Merger
Agreement, this Agreement or the Related Agreements or the consummation of the
transactions contemplated hereby or thereby or (b) might result, in the judgment
of the Purchaser, in the imposition of a penalty if the Term B Note, the Bridge
Note or the Term C Note were delivered as contemplated hereunder or in any
Material Adverse Change.
5.8 LEGAL OPINIONS. The Purchaser shall have received the following:
(a) an opinion letter of Xxxxxxx Xxxx LLP, special counsel to the Company, dated
the Closing Date and addressed to the Purchaser, in form and substance
satisfactory to the Purchaser and its legal counsel, (b) an opinion letter of
Xxxxxxx & Xxxxx LLP, special counsel to the Company, dated the Closing Date and
addressed to the Purchaser, in form and substance satisfactory to the Purchaser
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and its legal counsel and (c) an opinion letter of Xxxx X. Xxxxxxxx, Esq.,
General Counsel to the Company, dated the Closing Date and addressed to the
Purchaser, in form and substance satisfactory to the Purchaser and its counsel.
5.9 DELIVERY OF CERTAIN CLOSING DOCUMENTS. The Company shall have
delivered to the Purchaser the following closing documents, each dated as of the
Closing Date:
(a) This Agreement, duly executed by the Company, together
with the Exhibits and the Disclosure Schedules;
(b) The Bridge Note, duly executed by the Company;
(c) The Term C Note, duly executed by the Company;
(d) The Term B Note, executed by the Company;
(e) The Amended and Restated Registration Rights Agreement,
duly executed by the Company;
(f) The Amended and Restated Investor Rights Agreement, duly
executed by the Company;
(g) The Subsidiary Guaranty, duly executed by the Subsidiary
Guarantors;
(h) (i) An escrow agreement, in form and substance
satisfactory to the Purchaser, among the Company, West LB, the Purchaser and the
Closing Escrow Agent, duly executed by the Company, West LB and the Closing
Escrow Agent ("WEST LB ESCROW AGREEMENT I"), and (ii) an escrow agreement, in
form and substance satisfactory to the Purchaser, among Mergersub, West LB and
the Closing Escrow Agent, duly executed by Mergersub, West LB and the Closing
Escrow Agent ("WEST LB ESCROW AGREEMENT II");
(i) The Option Agreement, duly executed by the Company;
(j) A side letter, in form and substance satisfactory to the
Purchaser, duly executed by the Company (the "INDEMNITY SIDE LETTER"); and
(k) Such other documents as the Purchaser may request,
including a side letter, in form and substance satisfactory to the Purchaser,
executed by the Company regarding the Xxxxxx Matter (as defined therein).
5.10 COLLATERAL DOCUMENTS. The Company shall have delivered to the
Purchaser at or prior to the Closing the following collateral documents, each
dated as of the Closing Date (except as provided below):
(a) The Amended and Restated Security Agreement, duly executed
by the Company, together with the exhibits and schedules thereto;
(b) The Pledge Agreement, duly executed by the Company,
together with the exhibits and schedules thereto;
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(c) Original certificates representing or evidencing the
Pledged Stock (as such term is defined in the Pledge Agreement) that are not
currently being held by the Purchaser as collateral security for the payment and
performance of the Obligations to Purchaser, together with stock powers duly
executed by the Company in blank;
(d) The Intellectual Property Security Agreement, duly
executed by the Company, together with exhibits and schedules thereto;
(e) Amended and restated UCC-1 financing statements naming the
Company as debtor, as requested by, and in form and substance satisfactory to,
the Purchaser;
(f) [Intentionally Omitted];
(g) The original Class B Certificate, registered in the name
of the Purchaser, together with written evidence that CPS Auto Receivables Trust
2001-A has registered the Class B Certificate in the name of the Purchaser;
(h) File-stamped copies of UCC termination statements, naming
the Company, MFN or their respective Subsidiaries as debtors, terminating the
UCC-1 financing statements identified by the Purchaser; and
(i) Such other documents relating to the Collateral as the
Purchaser may request.
5.11 MFN MERGER-RELATED MATTERS.
(a) The Purchaser shall have received a Secretary's
Certificate, in form and substance satisfactory to the Purchaser, duly executed
by the Secretary of the Company, certifying as to the resolutions of the Board
of Directors of MFN and the shareholders of MFN adopting and approving the MFN
Merger Agreement, the MFN Merger and the other transactions contemplated by the
MFN Merger Agreement.
(b) The Purchaser shall have received an Officers'
Certificate, duly executed by the President and Chief Executive Officer and the
Chief Financial Officer of the Company, certifying that (i) attached thereto is
a true, correct and complete copy of the proxy statement distributed to the
stockholders of MFN soliciting their vote or consent to the approval and
adoption of the MFN Merger Agreement; (ii) attached thereto are true, correct
and complete copies of the MFN Merger Agreement and all exhibits, schedules and
amendments thereto; and (iii) the MFN Merger has become effective.
(c) The Purchaser shall have received a copy of the MFN
Certificate of Merger, certified by the Secretary of State of the State of
Delaware.
(d) The Tax Sharing Agreement dated as of March 23, 1999,
among MFN and its Subsidiaries shall have been terminated in writing effective
as of the Closing Date, and the Purchaser shall have received a copy of such
termination agreement.
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5.12 STANWICH-RELATED MATTERS.
(a) Stanwich shall have delivered to the Purchaser at or prior
to the Closing the following closing documents:
(i) An Agreement and Confirmation Regarding Subordination
dated as of the Closing Date, in form and substance satisfactory to the
Purchaser, duly executed by Stanwich and the Company; and
(ii) An Agreement and Confirmation Regarding Subordination
dated as of the Closing Date, in form and substance satisfactory to the
Purchaser, duly executed by Xxxxx and the Company.
5.13 DELIVERY OF COMPANY CORPORATE DOCUMENTS. The Company shall have
delivered to the Purchaser at or prior to the Closing the following corporate
documents with respect to the Company, in each case certified by the Secretary
of the Company:
(a) Certified copies of its charter or similar organizational
documents as amended through the Closing Date, certified by its Secretary as
being in full force and effect as of the Closing Date;
(b) Copies of its bylaws or similar governing document as
amended through the Closing Date, certified by its Secretary as being in full
force and effect as of the Closing Date;
(c) A good standing certificate and, if available, a good
standing tax certificate, issued by the Secretary of State of the State of
California and the Franchise Tax Board, in each case dated as of a recent
practicable date prior to the Closing Date;
(d) Foreign good standing certificates from each jurisdiction
in which it is required to be qualified to transact business as a foreign
corporation or other entity, in each case dated as of a recent practicable date
prior to the Closing Date;
(e) Resolutions of its Board of Directors approving and
authorizing, as applicable, the execution, delivery and performance of this
Agreement, the Term B Note, the Bridge Note, the Term C Note, the Collateral
Agreements and the other Related Agreements to which it is a party and the
consummation of the transactions contemplated thereby, including the issuance
and sale of the Bridge Note and the Term C Note, certified by its Secretary as
being in full force and effect as of the Closing Date;
(f) Incumbency certificates of its officers who are authorized
to execute, deliver and perform this Agreement, the Related Agreements and any
other agreements, instruments, certificate or other documents required to be
executed by it in connection herewith; and
(g) Such other documents as the Purchaser may request.
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5.14 DELIVERY OF SUBSIDIARY CORPORATE DOCUMENTS.
(a) The Company shall have delivered to the Purchaser at or
prior to the Closing the following corporate documents with respect to each
Subsidiary of the Company immediately prior to the Closing, MFN and Mercury
Finance Company:
(i) Certified copies of its charter or similar organizational
documents as amended through the Closing Date, certified by its
Secretary as being in full force and effect as of the Closing Date;
(ii) A good standing certificate and, if available, a good
standing tax certificate, issued by the Secretary of State of its
jurisdiction of incorporation and the state taxing authority of such
jurisdiction, in each case dated as of a recent practicable date prior
to the Closing Date;
(iii) Foreign good standing certificates from each
jurisdiction in which it is required to be qualified to transact
business as a foreign corporation or other entity, in each case dated
as of a recent practicable date prior to the Closing Date;
(iv) Copies of its bylaws or similar governing document as
amended through the Closing Date, certified by its Secretary as being
in full force and effect as of the Closing Date;
(v) If applicable, resolutions of its Board of Directors
approving and authorizing the execution, delivery and performance of
the Related Agreements to which it is a party and the consummation of
the transactions contemplated thereby, certified by its Secretary as
being in full force and effect as of the Closing Date and the date of
delivery; and
(vi) Such other documents as the Purchaser may request.
(b) The Company shall have delivered to the Purchaser at or
prior to the Closing the good standing certificates described in SECTION
5.14(a)(ii) for each MFN Subsidiary (other than Mercury Finance Company).
5.15 REPAYMENT OF INDEBTEDNESS. Prior to or simultaneously with the
Closing, MFN shall have paid in full all Indebtedness, liabilities and other
obligations owed by it and its Subsidiaries under the MFN Receivables Financing
Documents, and the Company shall have delivered to the Purchaser true and
correct copies of all documentation relating thereto, including payoff letters,
UCC termination statements and other lien releases.
5.16 NEW SECURITIZATION TRANSACTIONS; NEW RECEIVABLES FACILITY.
(a) The Purchaser shall have received executed copies of all
Securitization Transaction Documents relating to the MFN Auto Receivables Trust
2002-A Securitization Transaction, all of which shall be in form and substance
satisfactory to the Purchaser and certified by the Secretary of the Company.
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(b) The Purchaser shall have received executed copies of all
agreements, instruments and other documents relating to the Warehouse Financing
Transaction being financed by West LB on or prior to the Closing Date, all of
which shall be in form and substance satisfactory to the Purchaser and certified
by the Secretary of the Company.
(c) The Purchaser shall have received executed copies of all
Securitization Transaction Documents relating to the CPS Auto Receivables Trust
2002-A Securitization Transaction, all of which shall be in form and substance
satisfactory to the Purchaser and certified by the Secretary of the Company.
5.17 INSURANCE. The Company shall deliver to the Purchaser original
certificates of insurance with respect to the insurance policies required to be
maintained by the Company and its Subsidiaries as of the Closing Date pursuant
to Section 7.6 (including the directors and officers liability insurance and the
key man life insurance policy on the life of Xxxxxxx X. Xxxxxxx, Xx.), together
with additional insured and lender's loss payable endorsements in favor of the
Purchaser, all in form and substance satisfactory to the Purchaser.
5.18 THIRD PARTY CONSENTS. The Company and each of its Subsidiaries
shall have obtained all Consents required to be obtained in connection with the
execution, delivery and performance of this Agreement, the amendment and
restatement of the First Amended Term B Note, the issuance, sale and delivery of
the Bridge Note and the Term C Note and the consummation of the other
transactions contemplated by this Agreement (including the MFN Merger).
5.19 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a Compliance Certificate, in form and substance satisfactory to the
Purchaser, duly executed by the Chief Financial Officer of the Company,
certifying as to the Company's compliance with the financial covenants set forth
in Section 8.15 of the Securities Purchase Agreement.
5.20 FINANCIAL PROJECTIONS. The Company shall have delivered to the
Purchaser an Officers' Certificate, in form and substance satisfactory to the
Purchaser, duly executed by the President and Chief Executive Officer and the
Chief Financial Officer of the Company, certifying as to the projected annual
balance sheets, income statements and statements of cash flows of the Company
and its Subsidiaries, on a consolidated basis, for the four (4) year period
ending December 31, 2005, and a list of the key assumptions underlying such
projections. Such Officers' Certificate shall state that (a) the projections,
which shall be attached thereto, have been prepared by management of the Company
and are the responsibility of management, (b) the projections have been prepared
on a reasonable basis and in good faith by management and are believed by
management to be reasonable, (c) all assumptions underlying such projections
were made in good faith and are reasonable under the circumstances and (d)
neither the Company nor any of its directors or officers is aware of any fact or
other information that would lead the Company to believe that the Financial
Projections are incorrect or misleading in any material respect.
5.21 SOLVENCY CERTIFICATE. The Purchaser shall have received a Solvency
Certificate, in form and substance satisfactory to the Purchaser, duly executed
by the President and Chief Executive Officer and the Chief Financial Officer of
the Company, certifying as to the matters described therein.
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5.22 DOCUMENTS IN SATISFACTORY FORM. All proceedings taken prior to or
at the Closing in connection with the amendment and restatement of the First
Amended and Restated Securities Purchase Agreement and the First Amended Term B
Note, the issuance and sale of the Bridge Note and the Term C Note and the
consummation of the other transactions contemplated hereby (including the MFN
Merger), and all papers and other documents relating thereto, shall be in form
and substance satisfactory to the Purchaser and its legal counsel, and the
Purchaser shall have received copies of such documents and papers, all in form
and substance satisfactory to the Purchaser and its counsel, all such documents,
where appropriate, to be counterpart originals and/or certified by proper
authorities, corporate officials and other Persons. Without limiting the
generality of the foregoing, the Company shall have made such arrangements as
may be requested by the Purchaser (a) to ensure that the proceeds from the
issuance and sale of the Bridge Note and the Term C Note will be applied in the
manner set forth in SECTION 2.4 and (b) for the direct payment to the
Purchaser's third party service providers of the costs and expenses incurred by
the Purchaser, as provided in SECTION 11.8.
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the Company
to consummate the transactions contemplated hereby is subject to the
satisfaction, at or prior to the Closing, of the conditions set forth in this
SECTION 6; PROVIDED, HOWEVER, that any or all of such conditions may be waived,
in whole or in part, by the Company in its sole and absolute discretion:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date after giving effect to the
transactions contemplated by this Agreement, as if made on and as of such date,
and the Purchaser shall have performed or satisfied all of its covenants and
agreements hereunder to be performed or satisfied on or prior to the Closing
Date.
6.2 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order or decree. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.
6.3 NO MATERIAL JUDGMENT OR ORDER. There shall not have been issued any
judgment, injunction, order, decree or ruling that prohibits or limits any of
the transactions contemplated by this Agreement or the Related Agreements, and
there shall not be any action, suit, proceeding or investigation pending or, to
the best knowledge of the Company, threatened against the Company that (a) draws
into question the validity, legality or enforceability of the MFN Merger
Agreement, this Agreement or the Related Agreements or the consummation of the
transactions contemplated hereby or thereby, (b) prohibits the amendment and
restatement of the Securities Purchase Agreement or the First Amended Term B
Note or the issuance, sale or delivery of the Bridge Note or the Term C or (c)
might result, in the judgment of the Purchaser, in the imposition of a penalty
if the Bridge Note or the Term C Note were delivered, or the Term B Note were
amended and restated, as contemplated hereunder or in any Material Adverse
Change.
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6.4 PAYMENT FOR NOTES. The Purchaser shall have delivered to the
Company the Bridge Note Purchase Price and the Term C Purchase Price, MINUS the
fees, costs and expenses to be reimbursed by the Company under SECTION 11.8.
7. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, until all
Indebtedness (including all principal of, premium, if any, and interest) and
other amounts owing under the Notes shall have been indefeasibly paid in full,
the Company shall perform, comply with and observe the covenants set forth in
this SECTION 7, PROVIDED that the covenants contained in SECTION 7.4 (Legal
Existence; Compliance with Laws), SECTION 7.13 (Nasdaq Listing) and SECTION 7.15
(Securities and Exchange Act Compliance) shall survive the payment of all such
Indebtedness and other amounts.
7.1 PAYMENTS WITH RESPECT TO NOTES. The Company shall pay all principal
of, premium, if any, interest and other amounts due pursuant to the terms of the
Notes on the dates and in the manner provided for therein, including all
mandatory prepayments of principal of and interest on the Notes as specifically
required under the terms of the Notes.
7.2 INFORMATION COVENANTS. The Company shall furnish to the Purchaser:
(a) Within ninety (90) days after the end of each fiscal year
of the Company, (i) the audited consolidated and consolidating balance sheets of
the Company and its Subsidiaries at the end of such year, and (ii) the related
audited consolidated and consolidating statements of income, shareholders'
equity and cash flows for such fiscal year, setting forth in comparative form
with respect to such financial statements figures for the previous fiscal year,
all in reasonable detail, together with the opinion thereon of independent
public accountants selected by the Company and reasonably satisfactory to the
Purchaser (it being understood that the current accountants of the Company are
satisfactory to the Purchaser), which opinion shall be unqualified and shall
state that such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year (except for
changes, if any, which shall be specified and approved by the Purchaser in
advance of the delivery of such opinion) and that the audit by such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards; PROVIDED, HOWEVER, that such accountants'
certification may be limited to the consolidated financial statements, in which
case the consolidating financial statements shall be certified by the Chief
Financial Officer of the Company; PROVIDED FURTHER, HOWEVER, that the Company
shall not be required to furnish to the Purchaser the information set forth in
this clause (a) if the Company is required to file with the SEC, at the time
such information is required to be furnished to the Purchaser under this clause
(a), the information, documents and other reports required to be filed with the
SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act;
(b) Within forty-five (45) days after the end of each of the
first three (3) quarterly accounting periods in each fiscal year of the Company,
(i) the unaudited consolidated and consolidating balance sheets of the Company
and its Subsidiaries as at the end of such period, and (ii) the related
unaudited consolidated and consolidating statements of income and cash flows for
such period and for the period from the beginning of the current fiscal year to
the end of such period, all in reasonable detail and signed by the Chief
Financial Officer of the Company; PROVIDED, HOWEVER, that the Company shall not
be required to furnish to the Purchaser the information set forth in this clause
(b) if the Company is required to file with the SEC, at the time such
63
information is required to be furnished to the Purchaser under this clause (b),
the information, documents and other reports required to be filed with the SEC
pursuant to Section 13, 14 or 15(d) of the Exchange Act;
(c) [Intentionally Omitted]
(d) Promptly (but not later than three (3) Business Days)
after it becoming available, a copy of the Company's annual USAP Audit;
(e) Promptly (but not later than three (3) Business Days)
after their becoming available, copies of all filings by the Company or any of
its Subsidiaries, or by any party in connection with any Securitization
Transaction, with the SEC, or any periodic or special reports filed with any
other Governmental Authority, and copies of any material notices and other
material communications from the SEC or from any other Governmental Authority
which specifically relate to the Company or any of its Subsidiaries;
(f) Promptly upon (but not later than three (3) Business Days
after) receipt thereof, copies of all audit reports and management letters, if
any, submitted to the Company or any of its Subsidiaries by independent public
accountants in connection with each interim or special audit of the books of the
Company or any of its Subsidiaries made by such accountants and copies of all
financial statements, reports, notices and proxy statements, if any, sent by the
Company to its shareholders;
(g) Immediately, notice of: (i) the institution or
commencement of any action, suit, proceeding or investigation by or against or
affecting the Company, any of its Subsidiaries or any of its or their respective
assets, including any action, suit, proceeding or investigation involving the
SEC, the Nasdaq or the NYSE; (ii) any litigation or proceeding instituted by or
against the Company or any of its Subsidiaries, or any judgment, award, decree,
order or determination relating to any litigation or proceeding involving the
Company or any of its Subsidiaries; (iii) the imposition or creation of any Lien
(other than a Permitted Lien securing not more than $1,000) against any asset of
the Company or any of its Subsidiaries; (iv) any reportable event under ERISA,
together with a statement of the Chief Executive Officer, Chief Financial
Officer and/or Controller of the Company as to the details thereof and a copy of
its notice thereof to the PBGC; (v) any known release or threat of release of
Hazardous Materials on or onto any Real Property or the incurrence of any
expense or loss in connection therewith or upon the Company's obtaining
knowledge of any investigation, action or the incurrence of any expense or loss
by any Governmental Authority in connection with the containment or removal of
any Hazardous Materials for which expense or loss the Company may be liable or
potentially responsible (all such notices shall describe the nature of any
lawsuit); PROVIDED, HOWEVER, that no notice shall be required to be given under
this clause (g) to disclose (A) the replevin of any Financed Vehicle; (B) the
enforcement of the Company's rights under any Automobile Contract; or (C) the
commencement of any consumer bankruptcy proceeding with respect to a Financed
Vehicle;
(h) Immediately upon receipt or issuance by the Company or any
of its Subsidiaries, (i) copies of all covenant compliance certificates,
budgets, projections, requests for waivers, notices of default, requests for
amendments or other material documents relating to any agreements, instruments
or other documents evidencing or governing any Subordinated Indebtedness, (ii)
64
to the extent not inconsistent with any confidentiality provisions, copies of
any agreements or other documents to which the Company (or any of its
Subsidiaries) and any Credit Enhancer (including FSA or any Affiliate of FSA)
are parties and (iii) any agreements, instruments and other material documents
relating to any Indebtedness or any Securitization Transactions;
(i) Together with the information package for each calendar
month required to be delivered under clause (j) below (but not later than the
twenty fifth day after the end of such calendar month), a certificate of the
Chief Financial Officer of the Company, in form and substance satisfactory to
the Purchaser (a "COMPLIANCE CERTIFICATE"), setting forth, among other things,
the calculations required to establish compliance with the financial covenants
set forth in SECTION 8.15 with respect to such calendar month;
(j) Simultaneously with its delivery to the members of the
Board of Directors of the Company, all reports, budgets, materials and other
information furnished to such Board members with respect to the Company and its
Subsidiaries, including copies of the monthly information package delivered to
such Board members, which package shall consist of (i) monthly financial
statements; (ii) financial ratio analysis and departmental cost accounting
information; (iii) an executive summary with respect to monthly performance;
(iv) year-to-date origination information; (v) twelve-month historical
origination information; (vi) portfolio performance data; (vii) asset
recovery/dealer compliance information; and (viii) stock price performance; and
(ix) such additional information as may be included therein; PROVIDED, HOWEVER,
that if the information package for any month or the annual operating budget for
any fiscal year is not delivered to the Board members with respect to any
particular month or fiscal year, as the case may be, the Company shall
nonetheless deliver the same to LLCP within thirty (30) days after the end of
such month or not later than thirty (30) days prior to the commencement of such
fiscal year, as the case may be;
(k) Simultaneously with its delivery to the trustee with
respect to any Securitization Transactions, copies of all servicer certificates
delivered with respect thereto;
(l) Immediately, a written notice to the Purchaser if any
"back-up servicer," "sub-servicer" or similar servicer resigns or is terminated
or replaced with respect to any Securitization Transaction;
(m) Within ten (10) days after the end of each calendar month,
a certificate, in form and substance satisfactory to the Purchaser, signed by
the Chief Financial Officer of the Company and certifying to the Purchaser that
no payments or other amounts have been paid by the Company during such calendar
month to Xxxxxxx X. Xxxxxxx, Xx., Xxxxx or any former or present director of the
Company, or any of their Affiliates, and that any payments or other amounts so
paid were in compliance with the terms of this Agreement; and
(n) Promptly (but not later than five (5) Business Days) after
its request, such other information concerning the business, affairs and
condition of the Company and its Subsidiaries as the Purchaser may from time to
time reasonably request.
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7.3 PERFORMANCE OF RELATED AGREEMENTS. The Company shall perform,
comply with and observe all of its obligations under the Notes and each other
Related Agreement in accordance with their respective terms.
7.4 LEGAL EXISTENCE; COMPLIANCE WITH LAWS. The Company shall, and shall
cause its Subsidiaries to, (a) maintain its corporate existence and business;
(b) maintain all properties which are reasonably necessary for the conduct of
such business, now or hereafter owned, in good repair, working order and
condition; (c) take all actions necessary to maintain and keep in full force and
effect all of its Licenses and Permits; and (d) comply in all material respects
with all Applicable Laws in respect of the conduct of its business and the
ownership of its properties in the states in which it conducts its business;
PROVIDED, HOWEVER, that nothing in this SECTION 7.4 shall be interpreted to
restrict or in any manner affect the Company's or any of its Subsidiaries'
ability to elect to discontinue any line of business or to discontinue doing
business in any state if the Board of Directors of the Company or of such
Subsidiary, as the case may be, deems such discontinuance to be in its or their
best interests.
7.5 BOOKS, RECORDS AND INSPECTIONS. The Company shall, and shall cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and complete entries in conformity with GAAP and all requirements of
Applicable Laws shall be made of all dealings and transactions in relation to
its business and activities. If at any time an LLCP Representative is not a duly
elected and current member of the Board of Directors of the Company, the Company
shall, and shall cause each of its Subsidiaries to, permit officers and
designated representatives and/or agents of the Purchaser to visit and inspect
any of the properties of the Company or such Subsidiaries, to examine the books
of account of the Company or such Subsidiaries and to discuss the affairs,
finances and accounts of the Company or such Subsidiaries with, and be advised
as to the same by, its officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the Purchaser
may then request.
7.6 INSURANCE.
(a) The Company shall maintain with financially sound and
reputable insurers policies of insurance, coverage amounts and related terms and
conditions for the Company and its Subsidiaries normally maintained by companies
engaged in the same or similar business as the Company against loss or damage
and such other policies of insurance and coverage amount as may be reasonably
requested by the Purchaser. Such insurance shall include, without limitation,
comprehensive general liability, fire and extended coverage, product liability
and recall, property damage, workers' compensation, flood insurance (if
customarily maintained in locations in which the Company or any of its
Subsidiaries is located), earthquake loss insurance, environmental liability
insurance, business interruption insurance (either for loss of revenues or for
additional expenses) and directors and officers liability insurance as provided
in the Amended and Restated Investor Rights Agreement. All insurance covering
liability shall irrevocably name the Purchaser as an additional insured, and all
insurance covering property shall irrevocably name the Purchaser as a loss payee
with respect to any casualty or loss.
(b) In addition, as soon as practicable but not later than the
six (6) months anniversary of the Closing Date, the Company shall increase the
existing insurance coverage under the key man life insurance policy on the life
of Xxxxxxx X. Xxxxxxx, Xx., the President and Chief Executive Officer of the
66
Company, from $10,000,000 to $20,000,000 and shall maintain such increased
coverage until the Obligations to Purchaser have been indefeasibly paid in full.
Such key man life insurance policy shall continue to name the Company as the
owner and name the Purchaser as the irrevocable beneficiary thereunder. Each of
the insurance policies required to be maintained under this SECTION 7.6 shall
provide for at least thirty (30) days' prior written notice to the Purchaser of
the cancellation or substantial modification thereof.
7.7 TAXES.
(a) The Company shall, and shall cause each of its
Subsidiaries to, file within the required time periods all federal, state and
other Tax returns required to be filed by it or them, and such returns will be
true and correct in all respects. The Company shall, and shall cause each of its
Subsidiaries to, pay all Taxes which are due and payable by it or them, other
than Taxes that are being contested in good faith and by appropriate proceedings
if adequate reserves (in the good faith judgment of the management of the
Company) have been established with respect thereto.
(b) The Company shall, and shall cause each of its
Subsidiaries to, withhold and pay over on a timely basis to the appropriate
Government Authority all Taxes required to be withheld by it or them in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
7.8 ERISA MATTERS.
(a) The Company shall, and shall cause each of its ERISA
Affiliates to, cause each Benefit Plan to be operated in compliance with the
terms of such Benefit Plan and Applicable Law and shall pay and discharge
promptly any liability imposed upon it or them pursuant to the provisions of
such Benefit Plan and Applicable Law; PROVIDED, HOWEVER, that the Company and
its ERISA Affiliates shall not be required to pay any such liability if (i) the
amount, applicability, or validity thereof shall be diligently contested in good
faith by appropriate proceedings and (ii) such Person shall have set aside on
its books reserves which, in the opinion of its independent certified public
accountants, are adequate with respect thereto.
(b) The Company shall, and shall cause each of its ERISA
Affiliates to, deliver to the Purchaser promptly, but in no event more than five
(5) Business Days after any officer of the Company obtains knowledge of, (i) the
intention of the Internal Revenue Service to (A) revoke the tax-qualified status
of any Benefit Plan that is a tax-qualified retirement plan, (B) impose an
excise tax upon the occurrence of a "prohibited transaction" as such term is
defined in Section 4975 of the IRC, or (C) disallow a deduction (in whole or in
part) for a contribution to a Benefit Plan, (ii) the institution of a lawsuit
against a Benefit Plan (or a Fiduciary of such plan), (iii) any event which
might reasonably result in a withdrawal from any Benefit Plan subject to the
provisions of Title IV of ERISA (including a Multiemployer Plan), (iv) the
termination of, or any "reportable event," as such term is defined in Section
4043(b) of ERISA, with respect to, any of such Benefit Plans, (v) the occurrence
of any Termination Event, (vi) any strike, slowdown, work stoppage, or material
charge of unfair labor practice, labor dispute, grievance, complaint, or
arbitration proceeding, (vii) any attempt by a labor union or employee
organization to represent any employees of the Company or any of its ERISA
Affiliates not represented as of the Closing Date, (viii) any notice by any
67
labor union or employee organization that it desires to renegotiate any
collective bargaining agreement, or (ix) the imposition of a lien of the assets
of the Company or any of its ERISA Affiliates under Section 412(n) of the IRC or
Sections 302(f) or 4068 of ERISA; (x) the Company or any of its ERISA Affiliates
being obligated to contribute to or participate in any Multiemployer Plan; or
(xi) the intention of the United Stated Department of Labor's imposition of a
penalty under Section 502 of ERISA relating to a Benefit Plan, a written notice
specifying the nature of such action, what action has been taken, is being
taken, or is proposed to be taken with respect thereto, and a copy of any
correspondence or other documentation relating to the matter.
7.9 PERFORMANCE OF SERVICING DUTIES; CLEAN-UP CALLS. The Company shall,
and shall cause its Subsidiaries to, comply with the terms of any and all
Securitization Transaction Documents to which it is a party, including
performing its duties and obligations as a "servicer" in compliance with the
applicable terms thereof. The Company may make (or cause to make) "clean up"
calls under, or in connection with, any Securitization Transaction at any time
or from time to time when the Company has the right to do so.
7.10 COMMUNICATION WITH ACCOUNTANTS. So long as no Default or Event of
Default shall have occurred and be continuing, the Purchaser shall not
communicate directly with the Company's independent certified public accountants
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld. If any Default or Event of Default shall have occurred
and be continuing, the Company hereby authorizes its independent certified
public accountants to (a) furnish to the Purchaser any and all financial
statements and other supporting financial documents, work papers and schedules
as the Purchaser may request and (b) discuss with the Purchaser, as often as the
Purchaser may reasonably request, the accounts, financial condition, business
and affairs of the Company and its Subsidiaries, in each case without the
consent of the Company.
7.11 FURTHER ASSURANCES. From time to time after the date hereof, the
Company will execute and deliver, and will cause any of its Subsidiaries and any
other Persons to execute and deliver, such additional instruments, certificates
and documents, and will take all such actions, as the Purchaser may reasonably
request, for the purposes of implementing or effectuating the provisions of this
Agreement, the Notes or any other Related Agreement or to establish, maintain,
perfect or continue the Purchaser's security interests in the Collateral. Upon
exercise by the Purchaser of any power, right, privilege or remedy pursuant to
this Agreement or any Related Agreement which requires any Consent, the Company
will execute and deliver, and will cause any of its Subsidiaries and any other
Persons to execute and deliver, all applications, certifications, instruments
and other documents and papers that may be required to be obtained for such
Consent.
7.12 FUTURE INFORMATION. All data, certificates, reports, statements,
documents and other information furnished by or on behalf of the Company, any of
its Subsidiaries or any of its or their respective representatives or agents to
the Purchaser in connection with this Agreement, the Related Agreements or the
transactions contemplated hereby and thereby, at the time the information is so
furnished, shall not contain any untrue statement of a material fact, shall be
complete and correct in all material respects to the extent necessary to give
the Purchaser sufficient and accurate knowledge of the subject matter thereof,
and shall not omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such information is furnished.
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7.13 NASDAQ LISTING. The Company shall do or cause to be done all
things necessary to maintain the listing of its Common Stock on the Nasdaq (or,
if the Company so elects, maintain a listing of its Common Stock for trading on
the NYSE).
7.14 CARSUSA FLOORING LINE. The Company shall not permit, and shall
cause its Subsidiaries not to permit, the outstanding balance of the CARSUSA
flooring line to exceed $339,000 at any time. In addition, the Company shall use
its best efforts to reduce the outstanding balance of the CARSUSA flooring line
to zero as soon as practicable.
7.15 SECURITIES AND EXCHANGE ACT COMPLIANCE.
(a) The Company shall timely file with the SEC, and provide to
the Purchaser concurrently therewith, all Company SEC Documents as are specified
in the Exchange Act as being required to be filed by U.S. corporations that are
subject to reporting requirements of the Exchange Act. In addition, the Company
shall timely file with the Nasdaq and the NYSE and provide to the Purchaser
concurrently therewith, all Company SEC Documents required to be filed
therewith. Each Company SEC Document to be filed by the Company, when filed with
the SEC or the Nasdaq, as the case may be, will comply with all applicable
requirements of the Securities Act, the Exchange Act, the Nasdaq rules and the
NYSE rules, as applicable, and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company and its Subsidiaries to be included in each Company SEC Document to be
filed by the Company will comply as to form, as of the date of its filing with
the SEC, with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, will be prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by the SEC) and
will fairly present in all material respects the consolidated financial position
of the Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments
consistent with past practices and consistently applied). Notwithstanding
anything to the contrary contained in this SECTION 7.15, the Company shall not
be deemed to be in default of this SECTION 7.15 if the Company is late in filing
any Company SEC Document, PROVIDED that (a) such Company SEC Document is filed
with the SEC within ten (10) Business Days after the filing was due, shall
notify the Purchaser in writing of the late filing and (b) such late filing
shall not in any manner adversely affect the Purchaser's right to avail itself
of the benefits under Rule 144 promulgated under the Securities Act with respect
to the Warrant Shares, and PROVIDED FURTHER that the Company shall not rely on
the grace period in this sentence on more than two (2) occasions during the term
of this Agreement.
(b) If the exercise, sale or other disposition of the Residual
Warrant pursuant to or in connection with any sale, reorganization, merger or
other business combination involving the Company would be subject to the
provisions of Section 16(b) of the Exchange Act, then the Company shall pay to
Purchaser, prior to or upon the consummation of any such sale, reorganization,
merger or other business combination, in lieu of such exercise, sale or
disposition and in satisfaction of the Residual Warrant and to the extent of the
number of Residual Warrant Shares set forth in clause (ii) below, an amount in
cash equal to the product of (i) the difference between the fair value of the
consideration to be received for each share of Common Stock pursuant to such
sale, reorganization, merger or other business combination and the Warrant
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Purchase Price (as defined in the Residual Warrant) then in effect, MULTIPLIED
BY (ii) the number of Residual Warrant Shares, the sale or other disposition of
which would be subject to the provisions of Section 16(b) of the Exchange Act.
7.16 ADDITIONAL SUBSIDIARY GUARANTORS. The Company shall take all such
action, and will cause each of its Subsidiaries to take all such action, from
time to time as shall be necessary to ensure that all Subsidiaries of the
Company (other than Special Purpose Entities) are Subsidiary Guarantors under
the Subsidiary Guaranty. Without limiting the generality of the foregoing, if,
subject to SECTION 8.5, the Company or any of its Subsidiaries shall form or
acquire any new Subsidiary after the date hereof (or any Subsidiary ceases to be
a Special Purpose Entity), the Company or such Subsidiary will cause such new
Subsidiary (a) to execute and deliver a joinder agreement to the Subsidiary
Guaranty, in form and substance satisfactory to the Purchaser, pursuant to which
such Subsidiary would become a Subsidiary Guarantor, (b) to execute and deliver
such collateral security agreements, instrument and other documents, including
security agreements, stock pledge and control agreements and intellectual
property security agreements, in form and substance satisfactory to the
Purchaser, under which such Subsidiary would grant a valid first priority
security interest and lien on all of its assets, properties and rights to secure
the payment and performance of all obligations of such Subsidiary under the
Subsidiary Guaranty; (c) if such Subsidiary has any Subsidiaries, to execute and
deliver pledge agreements, together with (i) certificates representing all of
the Capital Stock of any Person owned by such Subsidiary and (ii) undated stock
powers executed in blank, (d) to execute and deliver such other agreements,
instruments, approvals or other documents as may be requested by the Purchaser
in order to create, perfect, establish, and maintain the first priority of any
Lien in favor of the Purchaser or to effect the intent that such Subsidiary
shall become bound by all of the terms, covenants and agreements contained in
the Related Agreements to which Subsidiary Guarantors are parties, and (e) to
deliver opinions of counsel to the Company or such Subsidiary as to such matters
as the Purchaser may request. In addition, the Company shall grant to the
Purchaser a valid first priority perfected security interest in the Capital
Stock of any Subsidiary to secure the Obligations to Purchaser, subject to
SECTION 7.17.
7.17 CPSRC SHARES. The Company covenants and agrees that, if the
security interest granted by the Company to FSA in and to the CPSRC Shares
terminates or is released pursuant to Section 18 of the FSA Pledge Agreement or
otherwise, it shall (a) immediately notify the Purchaser of such event in
writing and (b) within three (3) Business Days following the effective date of
termination, (i) grant to the Purchaser a valid, perfected first priority pledge
and security interest in and to the CPSRC Shares, free and clear of any Liens of
any other Person, on terms and conditions substantially similar to those
contained in the Security Agreement, and (ii) deliver to the Purchaser the
original certificate or certificates evidencing or representing the CPSRC
Shares, together with stock powers duly executed in blank. In addition to, and
notwithstanding, the foregoing provisions of this SECTION 7.17, the Company
shall use its reasonable best efforts to obtain from FSA, at such time or times
prior to the termination of FSA's security interest in the CPSRC Shares as the
Company reasonably believes it has an opportunity to do so, FSA's consent to the
grant by the Company to the Purchaser of a valid pledge and security interest in
and to the CPSRC Shares, subject only to the security interest of FSA.
7.18 LANDLORD CONSENTS AND WAIVERS. The Company shall use its best
efforts to deliver (or cause to be delivered) to the Purchaser, as soon as
practicable but not later than one hundred and twenty (120) days following the
Closing Date, landlord consents and waivers, in form and substance satisfactory
70
to the Purchaser, executed by the Company's real property lessors or landlords
with respect to the business locations that are leased by the Company.
7.19 [INTENTIONALLY OMITTED.]
7.20 PAYMENT OF CERTAIN INDEBTEDNESS. Not later than March 16, 2002,
the Company shall cause MFN to pay in full all principal of, accrued and unpaid
interest on and other amounts owing with respect to the MFN Senior Subordinated
Notes.
7.21 CORPORATE SEPARATENESS.
(a) All customary formalities regarding the corporate
existence of the Company and its Subsidiaries (including MFN) will be observed
at all times.
(b) The Company will not commingle its assets with those of
any of its Subsidiaries, any of its other Affiliates or any other Person. The
Company will accurately maintain its own bank accounts and separate books of
account.
(c) The Company will pay its own liabilities from its own
separate assets, and each Subsidiary will pay its own liabilities from its own
separate assets.
(d) The Company will properly and adequately disclose, and
will cause each of its Subsidiaries so to disclose, all Securitization
Transactions, indicating the transfer of ownership of the Automobile Contracts
subject thereto, by footnotes to its financial statements or otherwise. The
Company will not, and will not permit any Subsidiary to, hold out any assets
transferred in Securitization Transactions, or any assets of any Affiliate of
such Person, as applicable, as available to creditors of, or other interest
holders in, such Person.
7.22 BALANCE SHEET ITEMS; DISSOLUTION OF CERTAIN SUBSIDIARIES. The
Company shall use its reasonable best efforts to (a) perform each of the matters
described in SCHEDULE 7.22 and (b) liquidate, wind up and dissolve each of LINC,
Samco, Xxxxx Receivables Corp., WareCo and FundCo in accordance with Applicable
Laws, in each case not later than June 30, 2002. The Company shall deliver to
the Purchaser documentation evidencing the liquidation, winding up and
dissolution of each such entity not later than July 15, 2002.
7.23 ADDITIONAL MFN COLLATERAL SECURITY FOR OBLIGATIONS. The Company
covenants and agrees that, not later than March 16, 2002, the Company shall (a)
cause MFN and each Subsidiary of MFN (other than a Special Purpose Entity)
identified by the Purchaser (each an "MFN SIGNIFICANT SUBSIDIARY") to (i)
execute and deliver a joint and several general and continuing guaranty, in form
and substance satisfactory to the Purchaser (the "MFN GUARANTY"), pursuant to
which MFN and such MFN Subsidiaries would jointly and severally guaranty as and
when due any and all Obligations to Purchaser from time to time owing by the
Company to the Purchaser and (ii) execute and deliver such collateral security
agreements, instrument and other documents, including security agreements, stock
pledge and control agreements and intellectual property security agreements, in
form and substance satisfactory to the Purchaser, under which MFN and the MFN
Significant Subsidiaries would grant in favor of the Purchaser valid first
priority security interests and Liens (subject only to Permitted Liens) on all
of its or their assets, properties and rights as collateral security to secure
the prompt and timely payment and performance of their obligations under the MFN
Guaranty (the "MFN COLLATERAL DOCUMENTS"); (b) to the extent that MFN and the
71
MFN Significant Subsidiaries have any Subsidiaries, cause MFN and the MFN
Significant Subsidiaries to deliver to the Purchaser (i) certificates
representing all of the Capital Stock of the pledged entities and (ii) undated
stock powers executed in blank, (c) cause MFN and the MFN Significant
Subsidiaries to execute and deliver such other agreements, instruments,
approvals or other documents as may be requested by the Purchaser in order to
create, perfect, establish, and maintain the first priority of any security
interests and Liens granted by MFN and the MFN Significant Subsidiaries in favor
of the Purchaser or to effect the intent that such Subsidiary shall become bound
by all of the terms, covenants and agreements contained in the Related
Agreements to which they may become parties and (d) deliver such opinions of
counsel as to such matters as the Purchaser may request. In addition, MFN and
each MFN Significant Subsidiary shall grant to the Purchaser a valid first
priority perfected security interest in the Capital Stock of any Subsidiary of
MFN to secure the payment and performance of the guarantors under the MFN
Guaranty.
7.24 POST-CLOSING DELIVERIES. As soon as practicable, but not later
than ten (10) calendar days after the Closing Date, the Purchase shall deliver
to the Purchaser the following:
(a) The Company shall deliver the following Disclosure
Schedules with respect to MFN and its Subsidiaries only, and each such Schedule
shall be true, correct and complete as of the Closing Date and as of the date
such Disclosure Schedules are delivered to the Purchaser: SCHEDULE 3.13(A)
(Material Contracts), SCHEDULE 3.13(D) (Portfolio Performance Reports) and
SCHEDULE 3.16 (Benefit Plans);
(b) The Company shall deliver the following corporate
documents with respect to each Subsidiary of MFN other than Mercury Finance
Company:
(i) Certified copies of its charter or similar organizational
documents as amended through the Closing Date, certified by its
Secretary as being in full force and effect as of the Closing Date and
the date of delivery;
(ii) Foreign good standing certificates from each jurisdiction
in which it is required to be qualified to transact business as a
foreign corporation or other entity, in each case dated as of a recent
practicable date prior to the date of delivery;
(iii) Copies of its bylaws or similar governing document as
amended through the Closing Date, certified by its Secretary as being
in full force and effect as of the Closing Date and the date of
delivery;
(iv) If applicable, resolutions of its Board of Directors
approving and authorizing the execution and delivery of the Related
Agreements to which it is a party and the consummation of the
transactions contemplated thereby, certified by its Secretary as being
in full force and effect as of the Closing Date and the date of
delivery; and
(v) Such other documents as the Purchaser may request;
(c) The Company shall deliver control agreements, in form and
substance satisfactory to the Purchaser, duly executed by the Company and each
of its banks covering the deposit accounts listed on SCHEDULE II to the Security
Agreement and deposit accounts and securities accounts as contemplated by the
Pledge Agreement (PROVIDED that the control agreements will provide that the
72
Company will continue to have the right to direct transactions in funds and
financial assets in such accounts until the occurrence of a Modified Event of
Default (as defined in the Pledge Agreement));
(d) The Company shall cause Xxxxxxx & Xxxxx LLP (or such other
counsel as may be acceptable to the Purchaser) to deliver a legal opinion
letter, effective as of the Closing Date, with respect to "no conflicts" with
the Material Contracts described on SCHEDULE 3.13(a);
(e) The Company shall deliver a financial analysis, in form
and substance satisfactory to the Purchaser, reflecting a "break even" analysis
of the business operations of CPSL;
(f) The Company shall deliver a list of shareholders of the
Company as of a recent practicable date;
(g) The Company shall deliver documentation evidencing the
Company's guaranties of certain obligations of CPSL;
(h) The Company shall update and deliver, in form and
substance satisfactory to the Purchaser, the financial projections delivered by
the Company at the Closing pursuant to SECTION 5.20;
(i) The Company shall update and deliver the following
Disclosure Schedule, which Schedule shall be true, correct and complete as of
the Closing Date and as of the date such Disclosure Schedule is delivered to the
Purchaser: SCHEDULE 3.11(a) (Existing Liens); and
(j) All documents required to be delivered to the Purchaser at
the Closing that were not so delivered and for which the Purchaser hereby
reserves its rights.
8. NEGATIVE COVENANTS. In addition, the Company covenants and agrees that, until
all Indebtedness (including all principal of, premium, if any, and interest) and
other amounts owing under the Notes shall have been indefeasibly paid in full,
the Company shall perform, comply with and observe the covenants set forth in
this ARTICLE 8.
8.1 LIMITATIONS ON INDEBTEDNESS. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or become or remain
liable in respect of any Indebtedness, except for:
(a) Obligations to Purchaser;
(b) Existing Indebtedness (other than as provided in CLAUSE
(g) below), including any refinancings, renewals, replacements, restructurings
or exchanges thereof, but subject to SECTION 8.11(a);
(c) Unsecured Subordinated Indebtedness that is expressly made
subordinate in right of payment and rights upon liquidation to all Senior
Indebtedness, including the Indebtedness evidenced by the Notes, PROVIDED that
such Indebtedness (i) does not exceed, when taken together with all other
Subordinated Indebtedness, the Consolidated Net Worth (as defined in the RISRS
Indenture or the PENS Indenture, as the case may be) of the Company at any time
73
outstanding, (ii) does not mature prior to the one (1) year anniversary of the
stated maturity date of the Term B Note; and (iii) is on terms and conditions
reasonably satisfactory to the Purchaser;
(d) Indebtedness in the form of Capital Lease Obligations used
to finance the acquisition, construction or improvement of assets of the Company
or any of its Subsidiaries in an aggregate amount not to exceed $5,000,000;
(e) Indebtedness incurred by any Special Purpose Entity in
connection with any Warehouse Financing Transaction, subject to SECTION 8.11(a);
(f) Indebtedness of the type described in clause (v) of the
definition of the term "Indebtedness," but only to the extent that such
Indebtedness is secured by a Permitted Lien;
(g) The MFN Senior Subordinated Notes, PROVIDED that all
principal of, accrued interest on and other amounts owing under the MFN Senior
Subordinated Notes is paid not later than March 16, 2002, as provided in SECTION
7.20;
(h) Unsecured Indebtedness owing to West LB, in an amount not
greater than $60,000,000, borrowed by the Company on the Closing Date pursuant
to the West LB Commitment Letter, PROVIDED, HOWEVER, that all such Indebtedness
shall be repaid by the Company prior to the close of business on the Closing
Date;
(i) Unsecured indemnification obligations incurred by the
Company in favor of Credit Enhancers, private placement agents or underwriters
in connection with any Securitization Transaction for the Company's own
misconduct or for misstatements of, or omissions to state, a material fact in
connection with the consummation of such Securitization Transaction, all on
customary terms for similar transactions (PROVIDED that in no event shall the
Company guaranty any principal, interest or other amounts with respect to
securities issued by any Special Purpose Entity or other Subsidiary);
(j) An unsecured Guarantee dated on or about the date hereof
and entered into by the Company in favor of GCM pursuant to which the Company
guaranties the payment of all obligations of MFN under the Note Purchase
Agreement entered into in connection with the MFN Auto Receivables Trust 2002-A
Securitization Transaction; and
(k) An unsecured Guaranty dated on or about the date hereof
and entered into by the Company in favor of the Benefited Parties (as defined
therein) pursuant to which the Company guaranties the performance of all
obligations of MFN under certain agreements entered into in connection with the
MFN Auto Receivables Trust 2002-A Securitization Transaction.
8.2 LIMITATIONS ON LIENS. The Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist, or agree to create, incur, assume or suffer to exist, or
consent to cause or permit in the future the creation, incurrence or existence
of, any Lien with respect to any assets, rights or properties (whether real or
personal, tangible or intangible, now existing or hereafter acquired), except
for:
(a) Liens in favor of the Purchaser;
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(b) Permitted Liens;
(c) The Liens reflected on SCHEDULE 3.11(a), other than the
Liens being terminated as of the Closing and Liens required by the Purchaser to
be terminated;
(d) Liens granted (i) by Special Purpose Entities in favor of
any Credit Enhancers, (ii) by the Company in favor of FSA under the FSA Stock
Pledge Agreement and (iii) covering Automobile Contracts that are transferred by
the Company to any Special Purpose Entity in connection with any Warehouse
Financing Transaction; and
(e) Any Lien constituting a renewal, extension or replacement
of any of the foregoing Liens, PROVIDED that the principal amount of any
Indebtedness or other obligation secured by such renewal, extension or
replacement Lien does not exceed the principal amount of the Indebtedness or
other obligation renewed, extended or replaced.
8.3 LIMITATIONS ON INVESTMENTS. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, make or own any
Investment, except:
(a) Permitted Investments;
(b) The Investments and Guarantees set forth on SCHEDULE
3.11(a);
(c) Automobile Contracts; and
(d) Investments permitted under SECTION 8.14.
8.4 LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment.
8.5 SUBSIDIARIES; CHANGES IN BUSINESS. The Company shall not, and shall
not permit any of its Subsidiaries to, form or create any Subsidiaries other
than the Subsidiaries in existence immediately following the Closing (PROVIDED,
HOWEVER, that the Company may from time to time form or create Special Purpose
Entities for the sole purpose of effectuating any Securitization Transactions).
The Company shall not, and shall not permit its Subsidiaries to, engage in any
business other than the purchasing, selling and servicing of Automobile
Contracts.
8.6 OBSERVANCE OF STANWICH SUBORDINATION PROVISIONS. The Company shall
not make, or cause or permit to be made, any payments in respect of any Stanwich
Indebtedness in contravention of any of the subordination provisions applicable
to any such Stanwich Indebtedness.
8.7 ENVIRONMENTAL LIABILITIES. The Company shall not, and shall not
permit any of its Subsidiaries to, violate any material Environmental Laws or
other requirement of law, rule or regulation regarding Hazardous Materials.
Without limiting the generality of the foregoing, the Company shall not, and
shall not permit any of its Subsidiaries to, dispose of any Hazardous Materials
into or onto, or from, any Real Property, nor allow any Lien imposed pursuant to
any Environmental Laws to be imposed or to remain on such Real Property, except
for Liens being contested in good faith by appropriate proceedings and for which
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adequate reserves have been established and are being maintained on the books of
the Company or its Subsidiaries, as the case may be.
8.8 AMENDMENTS TO SECURITIZATION TRANSACTION DOCUMENTS. The Company
shall not, and shall not permit any of its Subsidiaries to, amend, modify or
change (or consent to any such amendment, modification or change), in any manner
adverse to the interests of the Purchaser, any of the provisions set forth in
the Securitization Transaction Documents without the prior written consent of
the Purchaser (it being understood that the Purchaser has no interest in any
Automobile Contracts transferred in any Securitization Transaction). Without
limiting the generality of the foregoing, the Company shall not, and shall not
permit any of its Subsidiaries to, consent or agree, without the prior written
consent of the Purchaser, to (a) any increase in the amount on deposit in any
"spread accounts" so as to maintain the rating of the related Securitization
Transaction or (b) alter the priorities for payment from any collection account,
distribution account, or spread account in a manner which would reduce the
amounts payable to the Company or any of its Subsidiaries.
8.9 LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Company shall not,
and shall not permit any of its Subsidiaries to, enter into any direct or
indirect transaction, agreement or arrangement with any officer, director,
employee or Affiliate of the Company at any time on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those
otherwise obtainable in an arm's length transaction at such time from a Person
who is not an officer, director, employee or other Affiliate of the Company and,
in any event, unless approved in writing by the Purchaser. The Company agrees
that any direct or indirect transaction, agreement or arrangement between the
Company, on the one hand, and any of its Subsidiaries or other Affiliates, on
the other, shall be unanimously approved in advance by all of the members of the
Board of Directors of the Company who are not interested in the transaction and
approved by the Purchaser; PROVIDED, HOWEVER, that no such Board approval shall
be required with respect to sales of Automobile Contracts made by the Company to
its Subsidiaries, or by its Subsidiaries to the Company, in the ordinary course
of its business so long as such sales are made on terms that are no less
favorable to the Company than those that might be obtained in an arm's length
transaction with a Person who is not an Affiliate of the Company.
8.10 RESTRICTIONS ON FUNDAMENTAL CHANGES. The Company shall not, and
shall not permit any of its Subsidiaries to:
(a) make any change in its business (which shall be the
purchase and sale of Automobile Contracts), purposes, corporate name, structure
or operations;
(b) amend any of its organizational documents (including its
charter, bylaws, certificate of formation, limited liability company agreement,
partnership agreement or trust agreement, as applicable);
(c) sell, assign, lease, transfer or otherwise dispose of, in
one transaction or a series of transactions, all or a significant portion of its
assets, other than Asset Sales expressly permitted hereby in connection with
Securitization Transactions and dispositions of assets in the ordinary course of
business consistent with past practice;
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(d) merge (other than the MFN Merger), consolidate, reorganize
or recapitalize; or
(e) liquidate, wind up or dissolve (except as expressly
provided for herein).
8.11 AGREEMENTS AFFECTING CAPITAL STOCK AND INDEBTEDNESS; AMENDMENTS TO
MATERIAL CONTRACTS.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Purchaser, (i) enter
into any voting agreement, voting trust, irrevocable proxy or other agreement
affecting the voting rights of shares of the Capital Stock of the Company (other
than revocable proxies in connection with meetings of shareholders of the
Company) or its Subsidiaries, except as contemplated by this Agreement or any
Related Agreement; (ii) refinance, renew, replace, restructure or exchange any
Existing Indebtedness (other than Existing Indebtedness incurred by a Special
Purpose Entity in connection with any Securitization Transaction); or (iii)
amend, supplement or otherwise modify, or waive, any term or provision of any
agreement, instrument or other document evidencing or governing any Indebtedness
of the Company or any of its Subsidiaries (including the RISRS Indenture, the
PENS Indenture, any Stanwich Debt Documents or any other Subordinated
Agreements).
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, cancel or terminate any Material Contract (or consent to or
accept any cancellation or termination thereof), amend or otherwise modify any
Material Contract or give any consent, waiver or approval thereunder, waive any
breach of or default under any Material Contract, or take any action in
connection with any Material Contract that would impair the value of the
interests or rights of the Company thereunder or that would impair the interest
or rights of the Purchaser hereunder or under this Agreement or any Related
Agreement.
8.12 INDEBTEDNESS TO CREDIT ENHANCER. The Company shall not, and shall
not permit any of its Subsidiaries to, have outstanding at any time Indebtedness
for the payment of money of any kind or nature (whether matured or unmatured or
contingent or non-contingent) to any Credit Enhancer or any Affiliate of any
Credit Enhancer pursuant to any agreement to which such Credit Enhancer is a
party, other than Indebtedness (whether matured or unmatured or contingent or
non-contingent) in connection with any Securitization Transactions of the type
which is consistent with past practice and which the Company reasonably believes
is customary in securitization transactions insured by such Credit Enhancer, the
assets of which consist solely of Automobile Contracts.
8.13 PAYMENT RESTRICTIONS AFFECTING CERTAIN SUBSIDIARIES. The Company
shall not, and shall not permit any of its Subsidiaries (other than a Special
Purpose Entity) to, enter into or permit to exist any agreement, instrument or
other document which, directly or indirectly, prohibits or restricts in any
manner, or would have the effect of prohibiting or restricting in any manner,
the ability of any such Subsidiary to (a) pay dividends or make other
distributions in respect of its Capital Stock owned by the Company or any other
such Subsidiary, (b) pay or repay any Indebtedness owed to the Company or any
other such Subsidiary, (c) make loans or advances to the Company or (d) transfer
any of its properties or assets to the Company or any other such Subsidiary.
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8.14 NO NEW LOANS AND ADVANCES. The Company shall not, and shall not
permit any of its Subsidiaries to, make any loans or advances to any directors,
officers, Affiliates or employees of the Company or any of its Subsidiaries, or
renew, refinance or restructure any of such loans or advances or the terms
thereof, without the prior written consent of the Purchaser; PROVIDED, HOWEVER,
that the Company and its Subsidiaries may make advances for reasonable and
incidental business expenses approved in advance by the Chief Financial Officer
of the Company not to exceed $2,500 in any one (1) month to any employee in the
ordinary course of business, all of which shall be repaid within thirty (30)
days after the date such loan or advance is made. The Company shall ensure that
all loans and advances made by the Company, whether made prior to, on or after
the date hereof, are evidenced by a promissory note or other written instrument
or agreement (copies of which shall be provided to the Purchaser) which provides
for the repayment in full in cash of such loans and advances. In addition, on
the last Business Day of each calendar month, the Company shall deliver to the
Purchaser a certificate, duly signed by the President and Chief Executive
Officer and the Chief Financial Officer of the Company, listing all such loans
and advances, including the dates made, the names of the obligors and the
outstanding principal, interest and other amounts due, and certifying that such
list is true, accurate and complete as of the date of such certificate.
8.15 FINANCIAL COVENANTS. The Company shall, and shall cause its
Subsidiaries to, comply with the following covenants:
(a) MAXIMUM CAPITAL EXPENDITURES. The Company and its
Subsidiaries shall not incur Capital Expenditures during any fiscal year,
commencing with the fiscal year ending December 31, 2002, in excess of
$2,000,000.
(b) LLCP COVERAGE RATIO. Commencing with the calendar month
ending March 31, 2002, and for each calendar month thereafter, the LLCP Coverage
Ratio shall not be less than (i) 125% at and as of the end of each such calendar
month through May 31, 2002, (ii) 150% at and as of the end of each such calendar
month through August 31, 2002, (iii) 175% at and as of the end of each such
calendar month through November 30, 2002 and (iv) 200% at and as of the end of
each such calendar month thereafter.
8.16 CPS LEASING. The Company shall not permit CPSL to conduct any
business other than collecting receivables owing to CPSL.
8.17 LINC AND SAMCO. The Company shall not, and shall not permit its
Subsidiaries to, transfer any assets or properties to LINC, unless the Company
or any such Subsidiary is compelled to do so by a non-appealable written order
of a court of competent jurisdiction (and, in such event, the Company will
deliver a copy of such order to the Purchaser), and LINC shall continue to
conduct no business and remain inactive. In addition, the Company shall not, and
shall not permit its Subsidiaries to, transfer any assets or properties to
Samco.
9. INDEMNIFICATION.
9.1 TRANSFER TAXES. The Company shall pay all stamp, transfer and other
similar Taxes (together in each case with interest and penalties, if any)
payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Notes and shall hold
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harmless the Purchaser from and against any and all liabilities with respect to
or resulting from any delay in paying, or omission to pay, such Taxes.
9.2 LOSSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated, the Company shall indemnify and hold harmless the
Purchaser, its successors and assigns, and its Affiliates, employees, partners,
officers, directors, representatives, agents, attorneys, successors and assigns
(the "INDEMNIFIED PARTIES"), from and against any and all losses, claims,
damages, liabilities, judgments, expenses and costs, including attorneys' fees
and other fees and expenses incurred in, and the costs of preparing for,
investigating or defending any matter (collectively, "LOSSES"), incurred by such
Indemnified Party in connection with or arising from:
(i) Any breach of any warranty or the inaccuracy of any
representation made by the Company or any of its Subsidiaries in this
Agreement or any Related Agreement;
(ii) The failure of the Company or any of its Subsidiaries to
fulfill any of its covenants, agreements or undertakings under this
Agreement or any Related Agreement (or any other document or instrument
executed herewith or pursuant hereto);
(iii) Any breach, violation, Default or Event of Default under
any Prior Investment Document, this Agreement or any Related Agreement,
which 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 Effective Date or (B) fraud
(including intentional misrepresentation and misappropriation of funds)
occurring at any time prior to the Closing Date; and
(iv) Any third party actions, suits, proceedings or claims
brought against any Indemnified Party in connection with, arising out
of or with respect to (A) any other matters arising out of or in
connection with the transactions contemplated by any Prior Investment
Document, this Agreement, the Notes or any other Related Agreement
(including the Indemnity Side Letter), (B) the Stanwich Case, (C) the
MFN Merger, (D) the West LB Escrow Agreements or (D) the business,
operations or affairs of the Company or any of its Subsidiaries
(including any litigation in which any Company or any Subsidiary is
involved).
(b) The Company shall either pay directly all Losses which it
is required to pay hereunder or reimburse any Indemnified Party within ten (10)
calendar days after any request for such payment. The obligations of the Company
to the Indemnified Parties under this SECTION 9 shall be separate obligations to
each Indemnified Party, and the liability of the Company to such Indemnified
Parties hereunder shall not be extinguished solely because any Indemnified Party
is not entitled to indemnity hereunder.
(c) The obligations of the Company to the Indemnified Parties
under this SECTION 9 shall survive (i) the repayment of the Notes (whether at
maturity, by prepayment or acceleration or otherwise), (ii) any transfer of the
Notes or any interest therein, (iii) the termination of this Agreement or any
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Related Agreement and (iv) the issuance, exercise, assignment and/or sale of any
LLCP Warrants (or any interest therein) or the sale of any Warrant Shares.
9.3 INDEMNIFICATION PROCEDURES. Any Person entitled to indemnification
under this SECTION 9 shall (a) give prompt written notice to the Company of any
claim with respect to which it seeks indemnification and (b) permit the Company
to assume the defense of such claim with counsel selected by the Company and
reasonably acceptable to such Person; PROVIDED, HOWEVER, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person, unless (i) the
Company has agreed to pay such fees or expenses; (ii) the Company has failed to
notify such Person in writing within ten (10) calendar days of its receipt of
such written notice of claim that it will assume the defense of such claim and
employ counsel reasonably satisfactory to such Person; or (iii) in the judgment
of any such Person, based upon the written advice of counsel, a conflict of
interest may exist between such Person and the Company with respect to such
claims (in which case, if the Person notifies the Company in writing that such
Person elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such claim on behalf
of such Person). The Company will not be subject to any liability for any
settlement made without its consent (but such consent may not be unreasonably
withheld). No Indemnified Party may, without the consent (which consent will not
be unreasonably withheld) of the Company, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Company of a release from
all liability in respect of such claim or litigation.
9.4 CONTRIBUTION. If the indemnification provided for in this SECTION 9
is unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses, in such proportion as is appropriate to reflect the relative fault
of the Company, on the one hand, and such Indemnified Party on the other hand,
in connection with the actions, statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and such Indemnified Party on the other
hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, either the Company or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this SECTION 9.4 were determined by PRO RATA allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
9.5 COSTS OF COLLECTION. The Company agrees to pay all fees, costs and
expenses, including the fees and expenses of any attorneys, accountants and
other experts retained by the Holder, which are expended or incurred by the
Holder in connection with (a) the administration and enforcement of the Notes
and the other Obligations or the collection of any sums due thereunder, whether
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or not any action, suit or other proceeding is commenced; (b) any actions for
declaratory relief in any way related to the Notes or any other Obligations; (c)
the protection or preservation of any rights of the Holder under this Agreement,
the Notes or any other Related Agreement; (d) any actions taken by the Holder in
negotiating any amendment, waiver, consent or release of or under this
Agreement, the Notes or any other Related Agreement; (e) any actions taken in
reviewing the Company's or any of its Subsidiaries' financial affairs if an
Event of Default has occurred or the Holder has determined in good faith that an
Event of Default may likely occur, including the following actions: (i) inspect
the facilities of the Company and any of its Subsidiaries or conduct audits or
appraisals of the financial condition of the Company and any of its
Subsidiaries; (ii) have an accounting firm chosen by the Holder review the books
and records of the Company and any of its Subsidiaries and perform a thorough
and complete examination thereof; (iii) interview the Company's and each of its
Subsidiaries' employees, accountants, customers and any other individuals
related to the Company or its Subsidiaries which the Holder believes may have
relevant information concerning the financial condition of the Company and any
of its Subsidiaries; and (iv) undertake any other action which the Holder
believes is necessary to assess accurately the financial condition and prospects
of the Company and any of its Subsidiaries; (f) the Holder's participation in
any refinancing, restructuring, bankruptcy or insolvency proceeding involving
the Company, any of its Subsidiaries or any other Affiliate of the Company; (g)
verifying, maintaining, or perfecting any security interest or other Lien
granted to the Holder in any collateral; (h) any effort by the Holder to
protect, assemble, complete, collect, sell, liquidate or otherwise dispose of
any Collateral, including in connection with any case under Bankruptcy Law; or
(i) any refinancing or restructuring of this Agreement, the Notes or any other
Related Agreement, including any restructuring in the nature of a "work out" or
in any insolvency or bankruptcy proceeding.
10. DEFAULTS AND REMEDIES.
10.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) The Company shall (i) fail to pay as and when due (whether
at stated maturity, upon acceleration or required prepayment or otherwise) any
principal on any Note, or (ii) fail to pay any interest, premium, if any, fees,
costs, expenses or other amounts payable under this Agreement, any Note or any
other Related Agreement within one (1) Business Day after the date due
thereunder; or
(b) (i) The Company shall breach or fail to perform, comply
with or observe any agreement, covenant or obligation required to be performed
by it under SECTION 7.1 (Payments with Respect to Notes), CLAUSES (a), (b), (i),
(j) or (k) of SECTION 7.2 (Information Covenants), SECTION 7.9 (Performance of
Servicing Duties; Clean-Up Calls), SECTION 7.14 (CARSUSA Flooring Line), SECTION
7.15 (Securities and Exchange Act Compliance), SECTION 7.20 (Payment of Certain
Indebtedness), SECTION 8.1 (Limitations on Indebtedness), SECTION 8.2
(Limitations on Liens), SECTION 8.6 (Observance of Stanwich Subordination
Provisions), SECTION 8.8 (Amendments to Securitization Transaction Documents),
SECTION 8.9 (Limitations on Transactions with Affiliates) SECTION 8.10
(Restrictions on Fundamental Changes) and SECTION 8.15 (Financial Covenants);
(ii) The Company shall breach or fail to perform, comply with
or observe any agreement, covenant or obligation required to be
performed by it under Section 7.2 (Information Covenants) (other than
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clauses (a), (b), (i), (j) or (k)), and such breach or failure shall
not have been remedied within three (3) Business Days after written
notice thereof by the Purchaser to the Company; or
(c) The Company or any of its Subsidiaries shall breach or
fail to perform, comply with or observe any agreement, covenant or obligation
required to be performed by it under this Agreement or any Related Agreement
(other than the agreements, covenants or obligations expressly covered by
SECTIONS 11.1(A) and (b)) and such breach or failure shall not have been
remedied within thirty (30) days after written notice thereof by the Purchaser
to the Company; or
(d) Any representation or warranty made by the Company or any
of its Subsidiaries under, relating to or in connection with this Agreement or
any Related Agreement shall be false or misleading when made (or deemed made);
or
(e) The Company or any of its Subsidiaries (other than LINC or
Samco) shall:
(i) default in the payment (whether at stated maturity, upon
acceleration or required prepayment or otherwise), beyond any period of
grace provided therefor, of any principal of or interest on any other
Indebtedness with a principal amount in excess of $100,000; or
(ii) commit any breach of or default under (other than as
provided in Section 10.1(e)(i) above) any term of any agreement,
indenture or instrument evidencing or governing any other Indebtedness
(other than Capital Lease Obligations) in excess of $50,000
individually or $250,000 in the aggregate, if the effect of such breach
or default is to cause, or to permit the holder or holders of such
other Indebtedness to cause (upon the giving of notice or the passage
of time or both), such other Indebtedness to become or be declared due
and payable, or required to be prepaid, redeemed, purchased or defeased
(or an offer of prepayment, redemption, purchase or defeasance is made)
prior to its stated maturity, unless such breach or default has been
waived within ten (10) calendar days following such breach or default
by the Person or Persons entitled to give such waiver; or
(iii) be in default of any of its lease obligations (whether
Capital Lease Obligations or otherwise) in excess of $500,000 at any
time outstanding and the lessor under any defaulted capital lease to
which the Company or any of its Subsidiaries is a party shall retake
possession of the property leased thereunder or shall initial legal
proceedings to repossess (or recover possession of) such leased
property; or
(iv) default (which default may or may not be an Insurance
Agreement Event of Default) under any of its insurance and/or indemnity
agreements with FSA or any other Credit Enhancer and, as a result
thereof, (A) FSA or such other Credit Enhancer (I) forecloses on any of
its collateral, (II) does not release to the Company, or withholds,
funds which are otherwise to be released or distributed to the Company
and such funds are not released for a period of thirty-one (31)
consecutive days, or (III) otherwise exercises any of its other rights,
powers or remedies against the Company or any such Subsidiary with
respect thereto, or (B) a default or event of default occurs, beyond
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any period of grace provided therefor (and which has not been waived in
writing during such grace period, if any), under any other
Securitization Transaction Document or other agreement, instrument or
other document to which the Company or any such Subsidiary is a party;
or
(f) This Agreement or any Related Agreement, or any material
provision thereof, shall cease to be of full force and effect for any reason
other than in accordance with its terms, or the Company or any of its
Subsidiaries or other Affiliates shall repudiate or disavow any of its
obligations under or the validity or enforceability of this Agreement or any
Related Agreement, or any material provision thereof, including by operation of
law or otherwise; or
(g) There shall be commenced against the Company or any of its
Subsidiaries an involuntary case seeking the liquidation or reorganization of
such Person under the Bankruptcy Code or any similar proceeding under any other
Applicable Law or an involuntary case or proceeding seeking the appointment of a
Custodian or to take possession of all or a substantial portion of its
properties or to operate all or a substantial portion of its business, and any
of the following events occur: (i) any such Person consents to the institution
of the involuntary case or proceeding; (ii) the petition commencing the
involuntary case or proceeding is not timely controverted; (iii) the petition
commencing the involuntary case or proceeding remains undismissed and unstayed
for a period of sixty (60) days; or (iv) an order for relief shall have been
issued or entered therein; or
(h) The Company or any of its Subsidiaries shall institute a
voluntary case seeking liquidation or reorganization under the Bankruptcy Code
or any similar proceeding under any other Applicable Law, or shall consent
thereto; or shall consent to the conversion of an involuntary case to a
voluntary case; or shall file a petition, answer a complaint or otherwise
institute any proceeding seeking, or shall consent or acquiesce to the
appointment of, a Custodian or to take possession of all or a substantial
portion of its property or to operate all or a substantial portion of its
business; or shall make a general assignment for the benefit of creditors; or
shall generally not pay its debts as they become due; or the Board of Directors
of any such Person (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or
(i) The Company or any of its Subsidiaries shall suffer any
money judgments, writs, warrants of attachment or other orders that involve an
amount or value in excess of $100,000, and such judgments, writs, warrants or
other orders shall continue unsatisfied and unstayed for a period of thirty (30)
days; or
(j) As a result of the current bankruptcy proceeding involving
LINC or the insolvency of Samco, as the case may be, a default or event of
default occurs under any agreement, instrument or other document to which LINC
or Samco, as the case may be, is a party, or any Person to whom LINC or Samco is
indebted accelerates such indebtedness, and, as a result, any creditor of LINC
or Samco asserts any claim involving the substantive consolidation of the
Company or any of its Subsidiaries (other than LINC or Samco) or recovers any
indebtedness or other amount in excess of $500,000 owed by LINC or Samco from
the Company or any of its Subsidiaries (other than LINC or Samco); or
(k) There shall occur a Material Adverse Change; or
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(l) There shall occur a Change in Control; or
(m) There shall occur any "Special Redemption Event" (as
defined in the RISRS Indenture); or
(n) The LLCP Representative, if appointed pursuant to Section
1.1 of the Amended and Restated Investor Rights Agreement, shall be removed from
the Board of Directors of the Company, or the LLCP Representative shall not be
elected or appointed to such Board at any future election of directors, and, in
each such case, the Company shall not have caused any other individual
designated by LLCP as the LLCP Representative to have been elected or appointed
as a member of such Board within two (2) days after the Purchaser shall have
designated such other individual (provided, however, that the voluntary
resignation of the LLCP Representative shall not be deemed to constitute an
Event of Default under this clause (n)); or
(o) (i) Any Termination Event shall occur that, when taken
together with all other Termination Events that have occurred, could result in a
liability to the Company or any ERISA Affiliate in excess of $100,000; (ii) the
Company or any ERISA Affiliate shall have committed a failure described in
Section 302(f)(1) of ERISA and the amount determined under Section 302(f)(3) of
ERISA is at least $100,000; (iii) any failure to make full payment (including
all required installments) when due of all amounts that, under the provisions of
any Benefit Plan or Applicable Law, the Company or any ERISA Affiliate is
required to pay as contributions thereto, which would result in a liability to
the Company or ERISA Affiliate in excess of $100,000; (iv) the Company or any
ERISA Affiliate shall have incurred any accumulated funding deficiency in excess
of $100,000, whether or not waived, with respect to any Benefit Plan; (v) a lien
is imposed on the assets of the Company or any ERISA Affiliate under Section
412(n) of the IRC or Section 4068 of ERISA, (vi) the Company or any of its ERISA
Affiliates is liable under Section 502 of ERISA in an amount greater than
$100,000, or (vii) the present value of all accrued benefits under any Benefit
Plan exceeds the value of the assets of such Benefit Plan allocated to such
accrued benefits by more than $100,000, based upon the applicable provisions of
the IRC and ERISA, such that such Benefit Plan is not capable of being
terminated in a "standard termination" under Section 4041(b) of ERISA; or
(p) Any Securitization Transaction shall have been terminated
by any Credit Enhancer, trustee or noteholder for any reason other than the
payment in full to the noteholders and other Persons holding interests issued
pursuant to such Securitization Transaction of all obligations to such Persons;
or
(q) There shall have occurred any event (other than as
provided in clause (p) above) as a result of which any noteholder, or other
Person holding interests issued in any Securitization Transaction, or any Credit
Enhancer or trustee, shall have the present right to terminate such
Securitization Transaction, which shall not have been duly waived or cured
within ten (10) Business Days after the date of such occurrence; or
(r) Any Person that is not an Affiliate of the Company shall
have replaced the Company or, as applicable, any Subsidiary, as "servicer" in
connection with any Securitization Transaction; or
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(s) Until all Indebtedness and other amounts owing under the
Bridge Note shall have been indefeasibly paid in full, there shall have
occurred, with respect to any Securitization Transaction, any "Level 2" Trigger
Event.
The foregoing Events of Default shall be deemed to have
occurred, respectively, and any adjustments in the interest rate under the Notes
or the right to exercise any other rights, powers or remedies by the Purchaser
hereunder or thereunder shall accrue, at the following times:
(i) in the case of the clause (a) above, as of 12:00 p.m.
(noon) (Los Angeles time) on the day on which such payment is due but
has not been paid;
(ii) in the case of clause (b)(i) above, immediately upon the
occurrence of any such breach of failure, or in the case of clause
(b)(ii), as of the close of business on such third Business Day, if
such breach of failure shall not have been cured by such date;
(iii) in the case of clause (c) above, as of the close of
business on such thirtieth day, if such breach or failure shall not
have been cured by such date;
(iv) in the case of clause (d) above, as of the close of
business on the day on which the Company first became aware, or should
have become aware, that such representation or warranty was false or
misleading when made;
(v) in the case of clause (e)(i) above, as of the close of
business on the day on which such payment of principal or interest is
due, or in the case of clause (e)(ii), as of the close of business on
the tenth day following such breach or default if such breach or
default has not been waived by the Person or Persons entitled to give
such waiver, or in the case of (e)(iii), as of the close of business on
the day that such lessor retakes possession of the leased property or
initiates legal proceedings to repossess, or in the case of (e)(iv)(A),
as of the close of business on the date upon which FSA forecloses on
its collateral, or as of the close of business on such thirty-first
day, or as of the close of business on the date upon which FSA
exercises any such rights, powers and remedies, or in the case of
(e)(iv)(B), as of the close of business on the day such default or
event of default occurs (or if there is a grace period therefor, the
day that such grace period expires and the default or event of default
shall not have been previously waived in writing or cured);
(vi) in the case of clause (f) above, as of the close of
business on the day such provision ceases to be enforceable or is
repudiated or disavowed;
(vii) in the case of clause (i) above, as of the close of
business on the last day of such thirty (30) day period if such
judgment, writ, warrant or other order remains unsatisfied or unstayed;
(viii) in the case of clauses (g) and (h) above, immediately
prior to the occurrence of any of the events enumerated therein;
(ix) in the case of clause (j) above, immediately upon any
such claim assertion or recovery;
85
(x) in the case of clause (k) above, immediately upon the
occurrence of the Material Adverse Change occurs;
(xi) in the case of clauses (l) or (m) above, immediately upon
the occurrence of the Change in Control or the "Special Redemption
Event," as the case may be;
(xii) in the case of clause (n) above, as of the close of
business on the last day of such five (5) day period if the Board of
Directors shall not have elected or appointed such other LLCP
Representative to such Board;
(xiii) in the case of clause (o) above, immediately upon the
occurrence of any such events; and
(xiv) in the case of clause (p) above, as of the close of
business on the date upon which such Securitization Transaction shall
have been terminated;
(xv) in the case of clause (q) above, as of the close of
business on such tenth Business Day, if such event shall not have been
waived or cured by such date;
(xvi) in the case of clause (r) above, as of the opening of
business on the date upon which the Company or such Subsidiary shall
have been replaced as the "servicer" with respect to such
Securitization Transaction; or
(xvii) in the case of clause (s) above, as of the close of
business on date of such "Level 2" Trigger Event.
10.2 ACCELERATION. If any Event of Default (other than an Event of
Default specified in clause (g) or (h) of SECTION 10.1) occurs and is
continuing, the Purchaser may, by written notice to the Company, declare all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts owing under the Notes, and all other Obligations, to be due
and payable. Upon any such declaration of acceleration, all such principal,
premium, interest and other amounts, and all such other Obligations, shall
become immediately due and payable. If an Event of Default specified in clause
(g) or (h) of SECTION 10.1 occurs, all outstanding principal of, premium, if
any, accrued and unpaid interest on, and all other amounts owing under the
Notes, and all other Obligations, shall become immediately due and payable
without any declaration or other act on the part of the Purchaser. The Company
hereby waives all presentment for payment, demand, protest, notice of protest
and notice of dishonor, and all other notices of any kind to which it may be
entitled under Applicable Law or otherwise.
10.3 OTHER REMEDIES. If any Default or Event of Default shall occur and
be continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any Related Agreement by exercising all rights
and remedies available under this Agreement, any Related Agreement or Applicable
Laws (including the UCC), either by suit in equity or by action at law, or both,
whether for the collection of principal of or interest on the Notes, to enforce
the specific performance of any covenant or other term contained in this
Agreement or any Related Agreement. No remedy conferred in this Agreement upon
the Purchaser is intended to be exclusive of any other remedy, and each and
86
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
10.4 APPOINTMENT OF RECEIVER. In addition to all other rights, powers
and remedies that the Purchaser has under this Agreement, any Related Agreement
or Applicable Law or otherwise, the Purchaser shall, upon the occurrence of an
Event of Default, be entitled to, and the Company and the Guarantors hereby
consent in advance to, the appointment of a receiver by any court of competent
jurisdiction to take possession of the Collateral and to take control of the
Company for the purpose of operating and thereafter selling the Company to
satisfy its obligations to its creditors, including the Purchaser.
10.5 WAIVER OF PAST DEFAULTS. The Purchaser may, by written notice to
the Company, waive any Default or Event of Default and its consequences with
respect to this Agreement, the Notes or any other Related Agreement; PROVIDED,
HOWEVER, that no such waiver will extend to any subsequent or other Default or
Event of Default or impair any rights of the Purchaser which may arise as a
result of such Default or Event of Default.
11. MISCELLANEOUS.
11.1 CONSENT TO AMENDMENTS. No amendment, supplement or other
modification to this Agreement or any Related Agreement shall be effective
unless the same shall be in writing and signed by the Purchaser, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if, and only if, the Company shall have obtained
the prior written consent of the Purchaser to any such action or omission. No
course of dealing between the Company or its Subsidiaries, on the one hand, and
the Purchaser (or any other Holder), on the other hand, nor any delay in
exercising any rights hereunder or under any Note or any other Related Agreement
shall operate as a waiver of any rights of the Purchaser (or any other Holder).
Notwithstanding anything to the contrary contained in this Agreement, whenever
the Purchaser is required or permitted to give its consent, such consent shall
not be unreasonably withheld; PROVIDED, HOWEVER, that the Purchaser may withhold
its consent to the taking of any action by the Company, and the Purchaser may
request the payment by the Company of a consent fee as a condition to giving its
consent, if (a) in the good faith judgment of the Purchaser, such action would,
when taken, (i) adversely affect or impair (or threaten to adversely affect or
impair) the ability of the Company or any of its Subsidiaries to make any
payments under this Agreement, any Note or any other Related Agreement, (ii)
materially adversely affect or impair (or threaten to materially adversely
affect or impair) the ability of the Company or any of its Subsidiaries to
perform its material covenants and obligations thereunder or (iii) adversely
affect the Collateral or the perfection, priority, continuation or validity of
the Liens therein, or (b) such consent is requested in connection with the
matters set forth under SECTION 8.2 (Limitation on Liens), SECTION 8.4
(Limitations on Restricted Payments), SECTION 8.6 (Observance of Stanwich
Subordination Provisions), SECTION 8.9 (Limitations on Transactions with
Affiliates) or SECTION 8.10 (Restrictions on Fundamental Changes).
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; PURCHASER
INVESTIGATION. All representations and warranties of the Company contained
herein, or made in writing by or on behalf of the Company pursuant hereto or in
connection herewith, shall survive the execution and delivery of this Agreement,
the issuance, sale and/or delivery of the Notes, the repayment of the Notes and
the due diligence or other investigation of the Company and its Subsidiaries
87
made by and on behalf of the Purchaser. The Company hereby agrees that neither
the Purchaser's review of the books and records or condition (financial or
otherwise), business, assets, properties, operations or prospects of the Company
or any of its Subsidiaries or other Affiliates, nor any other due diligence
investigation conducted by or on behalf of the Purchaser, shall be deemed to
constitute knowledge by the Purchaser of the existence or absence of any facts
or any other matters so as so reduce the Purchaser's right to rely on the
accuracy of the representations and warranties of the Company contained in this
Agreement or any Related Agreement.
11.3 ENTIRE AGREEMENT. This Agreement, the Notes and the other Related
Agreements constitute the full and entire agreement and understanding between
the Purchaser and the Company relating to the subject matter hereof and thereof,
and supersede all prior oral and written, and all contemporaneous oral,
agreements and understandings relating to the subject matter hereof. The parties
further acknowledge that the Bridge Financing Commitment Letter dated November
16, 2001 (the "LLCP COMMITMENT LETTER"), and the letter dated February 27, 2002,
in each case between the Company and the Purchaser shall be superseded by this
Agreement, the Notes and the other Related Agreements.
11.4 SUCCESSORS AND ASSIGNS; ASSIGNMENTS. This Agreement shall inure to
the benefit of, and be binding upon, the parties and their respective successors
and permitted assigns. The Purchaser may, without the consent of the Company,
sell, assign or delegate to one or more Persons (each an "ASSIGNEE") all or any
part of its right, title and interest in and to this Agreement, any Note or any
other Related Agreement, including all or any part of the Obligations to
Purchaser, subject to compliance with applicable federal and state securities
laws; PROVIDED, HOWEVER, that, in any privately negotiated transaction involving
a sale or assignment by the Purchaser of any such right, title or interest, the
Purchaser shall obtain from the Assignee in writing investment intent
representations which would be customarily obtained in transactions of such
nature; and PROVIDED FURTHER, HOWEVER, that the Company may continue to deal
solely and directly with the Purchaser in connection with any right, title or
interest so assigned until written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company. If the Purchaser assigns to any
Assignee a fifty percent (50.0%) or lesser interest in and to the aggregate
principal amount of the Notes then outstanding, any decisions that the Purchaser
is entitled to make under this Agreement, the Notes and the other Related
Agreements shall be made by the Purchaser, and the Company may continue to deal
solely and directly with respect to the Purchaser in connection with the
interests so assigned to the Assignee.
11.5 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
11.6 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:
88
(i) If to the Purchaser, at:
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 Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO:
--------------
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(ii) If to the Company, at:
Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO:
--------------
Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this SECTION
11.6.
11.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
11.8 FEES AND EXPENSES. The Company shall reimburse the Purchaser for,
and shall pay, all actual and estimated out-of-pocket fees, Default interest,
deferred fees, costs, and expenses of every type and nature (including fees and
expenses of counsel, accounting fees and expenses, fees and expenses related to
any due diligence investigation and all other deal-related costs and expenses)
expended or incurred by or on behalf of the Purchaser in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Term B
Note, the Bridge Note, the Term C Note, the Collateral Documents and the other
89
Related Agreements and the consummation of the transactions contemplated hereby
(which fees, interest, deferred fees, costs and expenses may be withheld by the
Purchaser from the proceeds to be paid to the Company for the Bridge Note and
the Term C Note) and, at the direction of the Purchaser, the Company shall pay
directly to the Purchaser's third party service providers all such costs and
expenses incurred by the Purchaser.
11.9 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
11.10 CONSENT TO JURISDICTION AND VENUE. EACH OF THE COMPANY AND THE
PURCHASER HEREBY CONSENTS AND AGREES THAT ALL ACTIONS, SUITS OR OTHER
PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY
OTHER RELATED AGREEMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY AND ALL
CLAIMS, CONTROVERSIES AND DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT,
THE NOTE OR ANY OTHER RELATED AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS
SECTION 11.10 SHALL PRECLUDE THE PURCHASER FROM BRINGING ANY ACTION, SUIT OR
OTHER PROCEEDING IN THE COURTS OF ANY OTHER LOCATION WHERE THE COMPANY PARTIES
OR ANY ONE OF THEM OR ANY OF ITS OR THEIR ASSETS OR THE COLLATERAL MAY BE FOUND
OR LOCATED OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER.
EACH OF THE COMPANY AND THE PURCHASER HEREBY (A) IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY SUCH
COURT, (B) WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR ANY OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION OR IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH OF THE
COMPANY AND THE PURCHASER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT OR OTHER PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER PROCEEDING
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH
IN SECTION 11.6 (NOTICES) AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER
DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
90
TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE COMPANY HEREBY WAIVES, IN RESPECT OF ANY SUCH ACTION, SUIT OR
OTHER PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR
HEREAFTER, BY REASON OF SUCH PERSON'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE,
MAY BE AVAILABLE TO IT.
11.11 PUBLICITY. Each party will consult with the other before issuing,
and provide each other the opportunity to review, comment upon and concur with
and use reasonable efforts to agree on, any press release or other public
statement with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make such other public announcement
prior to such consultation, except as either party may determine is required
under Applicable Laws or by obligations pursuant to any listing agreement with
any national securities exchange or Nasdaq. The parties agree that any initial
press release to be issued after the Closing shall be in the form heretofore
agreed to by the parties.
11.12 LIMITATION ON LIABILITY. No claim shall be made by the Company or
any of its Affiliates against the Purchaser, or any Affiliates, partners,
directors, officers, employees, agents or representatives of the Purchaser, for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or under any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, the Notes, any other
Related Agreement, the Prior Investment Documents or any act, omission or event
occurring in connection therewith. The Company hereby waives, releases and
agrees not to xxx upon any claim for such damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
11.13 AMENDMENT AND RESTATEMENT. Effective on and as of the Closing
Date, this Agreement shall supersede the First Amended and Restated Securities
Purchase Agreement insofar as the two are inconsistent. However, the execution
and delivery of this Agreement shall not excuse, or, except as set forth in
SECTION 2.5 with respect to the Specified Defaults, constitute a waiver of, any
Defaults or Events of Default under the First Amended and Restated Securities
Purchase Agreement, it being understood that this Agreement is not a termination
of the First Amended and Restated Securities Purchase Agreement, but is a
modification (and, as modified, a continuation) of the First Amended and
Restated Securities Purchase Agreement. The Company acknowledges and agrees that
the First Amended and Restated Securities Purchase Agreement, as amended and
restated hereby, is affirmed in all respects.
11.14 WAIVER OF TRIAL BY JURY TRIAL. EACH PARTY HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COUNSEL, WAIVES AND
FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT,
THE NOTES OR ANY OTHER RELATED AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION, SUIT OR
OTHER PROCEEDING.
91
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.
COMPANY
CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation
By: _______________________________________
Xxxxxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
By: _______________________________________
Xxxxx Xxxxxxxxx
Senior Vice President and Chief
Financial Officer
PURCHASER
XXXXXX XXXXXXXXX CAPITAL PARTNERS, INC.,
a California corporation
On behalf of XXXXXX XXXXXXXXX CAPITAL
PARTNERS II, L.P., a California limited
partnership
By: _______________________________________
Xxxxxx X. Xxxxxx
President
92
