May 8, 1997
First Merchants Acceptance Corporation
000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Re:
LaSalle National Bank - First Merchants Acceptance Corporation
Dear Xx. Xxxxxxx:
Reference is hereby made to that certain Fourth Amended and Restated Loan
and Security Agreement dated as of February 28, 1996, among First Merchants
Acceptance Corporation ("Borrower"), LaSalle National Bank as Agent
("Agent"), and the other Lenders who are parties thereto (as heretofore and
from time to time hereafter amended or supplemented, the "Loan Agreement"),
and all documents, instruments and agreements executed and delivered
thereunder or in connection therewith (hereinafter, together with the Loan
Agreement, referred to collectively as the "Credit Agreements"). Initial
capitalized terms used herein which are not otherwise defined herein, shall
have the meanings provided therefor in the Credit Agreements.
Agent, on behalf of the Lenders, has previously advised Xxxxxxxx and
Xxxxxxxx has acknowledged that it is in default of various terms and conditions
of the Loan Agreement. Representatives of Xxxxxxxx have requested that Agent
and Lenders grant Borrower time in which to effect replacement financing and
that Agent and Xxxxxxx continue to extend credit to Xxxxxxxx and forbear in
the enforcement of their rights and remedies as a result of such Events of
Default.
Agent and Xxxxxxx have agreed to forbear in the exercise of their rights
and remedies, but without waiving any existing Events of Default, and to
continue to make limited extensions of credit to Borrower, all to the extent
and subject to the conditions and provisions stated in this letter agreement
("Forbearance Agreement").
To continue to assist Xxxxxxxx in obtaining replacement financing
arrangements, and notwithstanding the occurrence of Events of Default under the
Credit Agreements, Agent and Lenders agree that, absent any further Events of
Default by Borrower under the Credit Agreement, as modified by this
Forbearance Agreement, Agent and Lenders will forbear from taking action to
recover full payment of Borrower's Obligations to and including June 30,
1997 (the "Forbearance Expiry Date"), and Agent and Lenders will continue
to make Revolving Loans to Borrower, pursuant to the terms of the Loan
Agreement as modified by this Forbearance Agreement up to a maximum amount
of Obligations outstanding of One Hundred Million Dollars ($100,000,000.00)
(the "Cap") subject to and on the following terms and conditions:
Effective April 16, 1997, the interest rate on all outstanding Obligations,
regardless of whether such Obligations consist of Eurodollar Loans or bear
interest based upon the Prime Rate, shall be increased by two percent (2%)
per annum, which interest shall be payable to Agent on behalf of Lenders,
monthly, on the first day of each month. From and after April 16, 1997,
Xxxxxxxx shall not be entitled to request Eurodollar Loans and all
Revolving Loans made on or after such date shall bear interest at the rate
of two percent (2%) per annum in excess of the Prime Rate.
Borrower shall pay to Agent, for the pro rata benefit of the Lenders, on
the date of this Forbearance Agreement, a forbearance fee in the sum of
Fifty Thousand Dollars ($50,000.00).
Borrower shall reimburse Agent and each Lender for any and all reasonable
out-of-pocket costs, fees, and expenses incurred by any of them as a result
of the occurrence of the various Events of Default under the Loan
Agreement, the exercise by Agent and Lenders of their rights and remedies
subsequent to such Events of Default, the negotiation, documentation and
enforcement of the forbearance arrangements evidenced by this Forbearance
Agreement and the continued extension of credit pursuant to the terms of
this Forbearance Agreement. Such out-of-pocket costs, fees and expenses
shall include, without limitation, attorneys' fees and expenses of outside
counsel to Agent and Lenders, fees and expenses of accountants and other
professionals retained by Agent and Lenders to perform collateral and
financial audits and other business analyses, and all travel, food and
lodging expenses of Agent and Lenders.
Xxxxxxxx shall continue to cooperate fully with Agent and Xxxxxxx, their
attorneys and their attorneys' outside accountants, Xxxxx Xxxxxxxx & Co.,
in conducting an ongoing examination of Borrower's financial records and
the Collateral, and shall reimburse Agent for all costs and expenses of
each such audit or business analysis.
Borrower shall provide evidence to Agent and Lenders that not less than
eighty percent (80%) of the proceeds of all Revolving Loans made by Xxxxxxx
to Borrower from and after April 16, 1997 (exclusive of proceeds of
Revolving Loans used for payroll expenses) shall be for the purchase of
Eligible Contracts.
Borrower shall update Agent and Lenders, on a weekly basis, of the status
of Borrower's efforts towards obtaining replacement financing
accommodations and shall provide Agent and Lenders copies of all proposals
and commitments received by Borrower.
Borrower may, with the prior written consent of Agent and Lenders, which
consent will not be unreasonably withheld, conduct bulk sales of
Contracts. Any such sales shall be on terms and conditions deemed
reasonably acceptable to Agent and Lenders including, without limitation,
selection criteria of Contracts for sale in a manner similar to prior asset
securitizations, and which would not affect the Collateral which would
remain subsequent to such sale more adversely than prior asset
securitizations. Borrower shall provide Agent and Lenders with a
proforma Borrowing Base Certificate giving effect to any such Sale, at
the time of its request for Xxxxxx's consent. Any proceeds of approved
sales of assets by Borrower shall be applied to the outstanding
Obligations and shall be a permanent reduction of the Cap by an
amount equal to sixteen percent (16%) of the aggregate outstanding face
amount of all Contracts which are sold.
Borrower shall provide to Agent and Lenders Borrower Base Certificates (i)
on a weekly basis and (ii) on the date of each request for a Revolving
Loan, together with other evidence of Borrower's compliance with the
Borrowing Base, as well as such other reports and financial data as the
Agent and Lenders may reasonably request.
Borrower shall demonstrate to Agent and Lenders, together with each request
for a Revolving Loan, that Borrower is compliance with the Borrowing Base,
as modified by this Forbearance Agreement, including without limitation,
the imposition of the Cap, as such Cap may be reduced from time to time by
asset sales.
Any Lender may, without the consent of the Borrower, but with the consent
of Agent, which consent will not be unreasonably withheld, assign its
rights or obligations under this Forbearance Agreement and the Credit
Agreements.
Borrower further agrees, that in order to induce Agent and Lenders to
forbear from enforcing their rights and to continue to provide Revolving
Loans to Borrower as provided hereunder, to release and Borrower hereby
releases and discharges Agent and Lenders, their officers, agents,
shareholders, directors, and employees from any and all liabilities,
actions, omissions, claims, demands and damages, or any basis for
instituting suit for legal or equitable relief, in whatever nature and
form, which may exist, or which may be alleged to have existed on or prior
to the date hereof, arising under or in connection with the Credit
Agreements, or any prior business relationship between the parties thereto.
Further, Borrower indemnifies Agent and Xxxxxxx and their officers, agents,
shareholders, directors and employees from any and all liabilities,
actions, costs, claims, and attorneys' fees relating to any present or
future claim or action against Borrower arising out of or related to the
Credit Agreements, including without limitation, claims by any agency or
department of the United States government, or any state government, any
officer, director, or employee, present or future, of Borrower, or any
present or former shareholders. This release and indemnity shall survive
the termination of the forbearance hereunder.
On or prior to June 30, 1997, Xxxxxxxx shall repay in full the Obligations
and Agent and Lenders obligations to make additional Loans under the Credit
Agreements and this Forbearance Agreement, shall terminate.
Borrower shall continue to act as servicer of all Contracts sold pursuant
to a Permitted Securitization Transaction or approved bulk sale of
Contracts.
Borrower shall cause all proceeds of Contracts to be paid to the lock box
established with Agent or to bank accounts which are automatically swept
into an account under Agent's sole dominion and control.
Except as expressly provided herein, this Forbearance Agreement will not
constitute a waiver or modification of any provision of the Credit
Agreements or any Events of Default by Borrower thereunder or subsequent
Events of Default, whether of a different or like nature, or constitute a
course of conduct or dealing with respect to any Events of Default or
additional extensions of credit. This Forbearance Agreement shall not
constitute a waiver of any rights, powers or remedies of Agent or Lenders
under the Credit Agreements, all of which are hereby expressly reserved.
A breach of any term or condition of this Forbearance Agreement or any
other or additional breach of any provision of the Credit Agreements shall
constitute an additional Event of Default under the Credit Agreements
without notice to Borrower or the passage of time, and Agent and Lenders may
terminate their forbearance hereunder, cease making Revolving Loans and
exercise all of their rights and remedies under the Credit Agreements.
As between Borrower and Agent, and Xxxxxxxx and Lenders, in the event of
any conflict between the terms and provisions of the Credit Agreements and this
Forbearance Agreement, the terms and provisions of this Forbearance
Agreement shall prevail.
This Forbearance Agreement shall be construed and enforced in accordance
with the laws of the State of Illinois.
In order to acknowledge the understanding and agreement by Xxxxxxxx, Agent
and Xxxxxxx to the terms of Agent's and Xxxxxxx' forbearance and the continued
extensions of credit to Borrower hereunder, please have a duly authorized
officer of Borrower execute the enclosed duplicate original of this
Forbearance Agreement and return it to the undersigned prior to 5:00 P.M.,
May 9, 1997. The agreement of Agent and Xxxxxxx to forbear and to continue
making loans on the terms and conditions provided in the Credit Agreements
and hereunder is conditional upon and subject to Agent's receipt of the
executed counterpart original of this Forbearance Agreement, duly executed
by Xxxxxxxx, before 5:00 P.M., Thursday, May 8, 1997.
Very truly yours,
LASALLE NATIONAL BANK, as Agent for the Lenders
By: /s/ Xxxxx Xxxxxxx
_______________________________
Title: Vice President
_______________________________
Acknowledged and agreed to this ____ day of May, 1997:
FIRST MERCHANTS ACCEPTANCE CORPORATION
By: /s/ Xxxxxx Xxxxxxx
_______________________________
Title: Senior Vice President and Chief Financial
Officer
------------------------------
The undersigned hereby acknowledge and consent to the above Forbearance
Agreement and agree that notwithstanding the Forbearance Agreement, their
Commitments shall remain unchanged, but subject to the Cap on outstanding
Obligations provided under the Forbearance Agreement:
LASALLE NATIONAL BANK
By:
_______________________________
Title:
_______________________________
NBD BANK
By:
_______________________________
Title:
_______________________________
FIRSTAR BANK MILWAUKEE, N.A.
By:
_______________________________
Title:
_______________________________
XXXXXX TRUST AND SAVINGS BANK
By:
_______________________________
Title:
_______________________________
FIRST BANK, NATIONAL ASSOCIATION
By:
_______________________________
Title:
_______________________________
THE BOATMEN'S NATIONAL BANK OF ST. XXXXX
By:
_______________________________
Title:
_______________________________
FLEET BANK, NATIONAL ASSOCIATION
By:
_______________________________
Title:
_______________________________
CORESTATES BANK, N.A.
By:
_______________________________
Title:
_______________________________
MELLON BANK, N.A.
By:
_______________________________
Title:
_______________________________
