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EXHIBIT 10.16a
SECOND AMENDMENT AGREEMENT
THIS SECOND AMENDMENT TO RESIDUAL INTEREST IN SECURITIZATIONS REVOLVING
CREDIT AND TERM LOAN AGREEMENT (this "Second Amendment") is dated as of November
17, 1998, by and among Consumer Portfolio Services, Inc., a California
corporation (the "Company"), and State Street Bank and Trust Company as agent
and lender ("State Street"), The Structured Finance High Yield Fund, LLC, as
lender and The Prudential Insurance Company of America, as lender. Said lenders
are sometimes herein collectively referred to as the "Lenders" and each
individually a "Lender". State Street in its capacity as agent for the Lenders
hereunder is sometimes herein referred to as the "Agent". This Second Amendment
(i) amends certain provisions of that certain Residual Interest in
Securitizations Revolving Credit and Term Loan Agreement dated as of April 30,
1998 by and among the Company, State Street, for itself and as Agent, and the
Lenders from time to time party thereto (as amended by a letter agreement dated
November 2, 1998 relating to the so-called "Bridge Loan" from Xxxxxx, and as
further amended by this Second Amendment, the "Loan Agreement") and (ii)
ratifies and confirms that certain Pledge and Security Agreement dated as of
April 30, 1998 by and among the Company, State Street, for itself and as Agent,
and the Lenders (as amended by and through to the date of the First Amendment,
the "Pledge and Security Agreement"), together with all other Loan Documents
heretofore executed in connection with the Loan Agreement. Certain capitalized
terms relating to the transactions contemplated by this Second Amendment are
defined in section 1(h) below. Other capitalized terms used herein and not
otherwise defined shall have the same meanings herein as in the Loan Agreement.
PREAMBLE
The Company has advised the Agent and the Lenders that it desires to
enter into a Securities Purchase Agreement dated as of the date hereof (the
"Xxxxxx Subordinated Agreement") with Xxxxxx Xxxxxxxxx Capital Partners II,
L.P., a California limited partnership ("Xxxxxx") and incur Subordinated Debt
thereunder in a principal amount of up to $25,000,000 (the "Xxxxxx Subordinated
Debt"), subject to the terms and conditions (including the subordination
provisions) hereof and of the Xxxxxx Subordinated Agreement. The Company's
execution of the Xxxxxx Subordinated Agreement and incurrence of the Xxxxxx
Subordinated Debt requires the consent of the Lenders pursuant to certain
provisions of the Loan Agreement. The Company has requested, and the Agent and
the Lenders have agreed, subject to the terms and conditions set forth herein,
that the Loan Agreement and the other Loan Documents be amended to the extent
necessary to permit the Company to execute the Xxxxxx Subordinated Agreement and
incur the Xxxxxx Subordinated Debt in accordance with the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Agent, and the
Lenders hereby agree as follows:
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1. Amendments to Loan Agreement.
(a) Amendment to Section 4. Section 4 (Conditions Precedent to Closing
Date and all Subsequent Loans; Conditions to Lending) is hereby amended by
adding the following subsection 4.11 thereto:
"4.11 Xxxxxx Subordinated Agreement. The Company and Xxxxxx
shall have executed the Xxxxxx Subordinated Agreement on terms
(including subordination terms) satisfactory in the sole discretion of
the Lenders.
(b) Amendment to Section 5. Section 5 (Affirmative Covenants) of the
Loan Agreement is hereby amended by adding the following subsection 5.13
thereto:
"5.13 Notice of Default Under Xxxxxx Subordinated Documents. The
Company shall immediately notify the Agent and the Lenders of its
receipt of any notice of a default or event or default under the Xxxxxx
Subordinated Agreement."
(c) Amendment to Subsection 6.1 of the Loan Agreement. Subsection 6.1 of
the Loan Agreement is hereby amended by adding the following subsection (k)
thereto:
"(k) Indebtedness of the Company under the Xxxxxx Subordinated Debt in a
maximum principal amount at any one time outstanding not to exceed
$25,000,000."
(d) Amendment to Subsection 6.5. Subsection 6.5 of the Loan Agreement is
hereby amended by deleting such subsection in its entirety, and inserting in
lieu thereof the following:
"6.5 Restricted Payments. The Company will not, and will not permit any
Subsidiary to, directly or indirectly declare, order, pay or make any
Restricted Payment or set aside any sum or property therefor if at the
time of such proposed action or immediately after giving effect thereto,
any Default or Event of Default exists, and unless expressly permitted
by this subsection 6.5.
As used herein, the term "Restricted Payments" means (i) any
dividend or other distribution, direct or indirect, on or on account of
any shares of any class of stock of the Company now or hereafter
outstanding (other than dividends payable exclusively in shares of the
Company's preferred stock); (ii) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of
the Company now or hereafter outstanding or of any warrants or rights to
purchase any such stock (including, without limitation, the repurchase
of any such stock or warrant or any refund of the purchase price thereof
in connection with the exercise by the holder thereof of any right of
rescission or similar remedies with respect thereto) provided, that
payment of the Warrant Purchase Price (as defined in the Xxxxxx
Subordinated Documents) by Xxxxxx in accordance with the provisions of
section 2.2 of the Xxxxxx Warrant shall not constitute a Restricted
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Payment; and (iii) any payment in respect of Subordinated Debt
(including, without limitation, the Xxxxxx Subordinated Documents).
Subject to the foregoing, the Company may: (a) make Restricted
Payments in the amount of scheduled (but not accelerated) payments due
the Subordinated Lenders under the Subordinated Agreements, (b) make
scheduled (but not accelerated) monthly payments of interest to Xxxxxx
in respect of the Xxxxxx Subordinated Debt,(c) make payment in an amount
not to exceed $10,000,000 from proceeds of the key man life insurance
policy obtained by the Company pursuant to section 8.8 of the Xxxxxx
Subordinated Agreement, provided that proceeds are applied by Xxxxxx in
reduction of the outstanding balance of principal of and accrued but
unpaid interest on the Xxxxxx Note, (d) make scheduled (but not
accelerated) "Extension Payments" under and as defined in section
8.21(b) of the Xxxxxx Subordinated Agreement, (e) make a payment in an
amount not to exceed $3,000,000 to fund the escrow account provided for
in section 5(a) of the Xxxxxx Note or in section 8.21 of the Xxxxxx
Subordinated Agreement, provided, that such escrow funds shall not be
paid over to Xxxxxx prior to payment in full of all obligations of the
Company to the Lenders under this Agreement, (f) make scheduled (but not
accelerated) payments in an aggregate amount not to exceed $275,000 to
pay the "consulting fee" referred to in section 1.4 of the Investor
Rights Agreement, together with payments to reimburse Xxxxxx for
reasonable out-of-pocket expenses incurred in connection with Xxxxxx'x
representative serving on the Company's Board of Directors or any
committee thereof, (g) make payments of fees and expenses payable
pursuant to section 12.15 of the Xxxxxx Subordinated Agreement or
section 14 of the Xxxxxx Note and (h) make payments (not to exceed
$700,000) of the "closing fee" under section 6.8 of the Xxxxxx
Subordinated Agreement.
Notwithstanding anything to the contrary in the Xxxxxx
Subordinated Debt Documents, the Company agrees that, except as
expressly set forth above, it will not at any time make any payment of
any kind or nature (or set aside any sums therefor), in respect of the
Xxxxxx Subordinated Debt. For the avoidance of doubt, the Company shall
not make any voluntary or involuntary prepayments of the Indebtedness
under the Xxxxxx Subordinated Documents except (i) from proceeds of the
key man life insurance policy in accordance with clause (c) above and
the other provisions of this subsection 6.5, and (ii) simultaneously
with the final repayment in full in cash of all obligations of the
Company to the Lenders under the Loan Agreement and the other Loan
Documents, with proceeds of loans under the New Senior Credit Facility
(as such term is defined in the Xxxxxx Subordinated Agreement)."
The provisions of this subsection 6.5 are solely for the purpose of
defining the relative rights of the Agent and the Lenders on the one hand, and
the holders of Subordinated Debt on the other hand, and none of such provisions
shall impair, as between the Company and any holder of the Subordinated Debt,
the obligations of the Company, which are unconditional and absolute, to pay to
such holder all of the Subordinated Debt in accordance with the terms thereof,
subject in each instance to the rights of the Agent
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and the Lenders under the provisions of this Agreement and under the
subordination provisions of such Subordinated Debt.
(e) Additional Amendments to Section 6. (i) Section 6 (Negative
Covenants) of the Loan Agreement is hereby amended by adding the following
subsection 6.17 thereto:
"6.17 Amendment to Xxxxxx Subordinated Documents. The Company
will not amend, modify or change (or consent to any such amendment,
modification or change) in any of the provisions of the Xxxxxx
Subordinated Documents if such amendment would: (i) increase the
principal amount of any Xxxxxx Subordinated Debt, (ii) increase the rate
of interest accruing on the Xxxxxx Subordinated Debt, (iii) change in
any manner the dates upon which any principal or interest payments on
the Xxxxxx Subordinated Debt are due, (iv) grant any lien or other
encumbrance on its assets to secure the Xxxxxx Subordinated Debt, or (v)
change in any manner, or add, any affirmative or negative covenants,
events of default, redemption provisions or subordination provisions of
any Xxxxxx Subordinated Debt that would adversely affect the rights of
the Lenders or otherwise have a material adverse effect on the Company.
Solely with respect to the Xxxxxx Subordinated Debt, the provisions of
this subsection 6.17 shall supersede the provisions of subsection 6.11
above."
(ii) Section 6.6 (Capital Expenditures) is hereby amended by
replacing the number "$3,000,000" appearing therein with the number "$3,250,000"
solely for the fiscal year of the Company ending December 31, 1998. The
$3,000,000 limitation on Capital Expenditures shall be reinstated commencing
with the fiscal year of the Company beginning January 1, 1999, and shall be
effective for each fiscal year thereafter during the term of this Agreement.
(f) Amendment to Subsection 3.30. Subsection 3.30 of the Loan Agreement
(Year 2000) is hereby amended by adding the following at the end of such
subsection:
"The Company shall be "Year 2000 Compliant" by December 31, 1999
and at all times thereafter. As used herein, the term "Year 2000
Compliant" means that all software utilized by and material to the
business operations and financial condition of the Company are able to
interpret and manipulate data on and involving all calender dates
correctly and without causing any abnormal ending scenario, including in
relation to dates ending in and after the year 2000."
(g) Amendment to Subsection 8.1. Subsection 8.1 (Events of Default;
Acceleration) of the Loan Agreement is hereby amended by adding the following
clause (m) thereto:
"(m) If there shall occur any default or event of default under and as
from time to time defined in the Xxxxxx Subordinated Documents."
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(h) Amendments to Section 9. Section 9 of the Loan Agreement is hereby
amended by adding the following definitions alphabetically therein:
"Investor Rights Agreement: shall have the meaning set forth in
the definition of Xxxxxx Subordinated Documents.
Xxxxxx: means Xxxxxx Xxxxxxxxx Capital Partners II, L.P., a
California limited partnership.
Xxxxxx Note: shall have the same meaning set forth in the
definition of Xxxxxx Subordinated Documents.
Xxxxxx Subordinated Debt: shall mean all Indebtedness of the
Company to Xxxxxx under the Xxxxxx Note (as originally executed) in a
principal amount not to exceed $25,000,000.
Xxxxxx Subordinated Agreement: shall mean that certain
Securities Purchase Agreement dated as of the date hereof by and between
the Company and Xxxxxx, as originally executed.
Xxxxxx Subordinated Documents: shall mean, collectively, the
Xxxxxx Subordinated Agreement, the Senior Subordinated Primary Note of
the Company in favor of Xxxxxx in the principal amount of $25,000,000
(the "Xxxxxx Note"), the Investor Rights Agreement (the "Investor Rights
Agreement"), and all other agreements, documents, certificates and
instruments executed and delivered in connection with the Xxxxxx
Subordinated Agreement, in each instance as originally executed."
In addition, the definition of "Subordinated Debt" appearing in section 9 of the
Loan Agreement is amended so as to expressly include all Indebtedness of the
Company under the Xxxxxx Subordinated Documents.
2. Confirmation of Representations, Warranties, Exhibits and Schedules
to the Loan Agreement.
The Company, by execution of this Second Amendment, certifies to the
Agent and each of the Lenders that, after giving effect to the substitution of
the Schedules to the Loan Agreement referred to in the last sentence of this
section 2, each of the representations and warranties set forth in the Loan
Agreement, the Security Documents and the other Loan Documents is true and
correct as of the date hereof, except to the extent such representations and
warranties expressly relate to an earlier date, as if fully set forth in this
Second Amendment and that, as of the date hereof, no Default or Event of Default
has occurred and is continuing under the Loan Agreement, any Security Documents,
any other Loan Document or any Eligible Securitization Transaction Document. The
Company acknowledges and agrees that this Second Amendment shall become a part
of the Loan Agreement and shall be a Loan Document. In connection with the
execution of this Second Amendment, the Company has delivered to the Agent
certain revised Schedules to the Loan Agreement. The Company hereby requests and
authorizes the Agent to substitute such revised Schedules for the corresponding
Schedules currently attached to the Loan Agreement.
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3. Conditions Precedent and (in the case of clause (c) below only)
Subsequent.
Prior to or concurrently with the execution by the Agent and the Lenders
of this Second Amendment, and as a condition to the effectiveness hereof and of
the Lenders to make Loans for the account of the Company on and after the date
hereof:
(a) The Company shall have delivered to the Agent and each of the
Lenders copies of the fully executed Xxxxxx Subordinated Documents, together
with such schedules and other information delivered in connection therewith as
may be designated by the Lenders;
(b) This Agreement and all other agreements, instruments and
certificates reasonably required by the Lenders in connection herewith and
therewith shall have been executed and delivered by each of the parties thereto;
(c) The Company shall pay all fees and expenses (including attorney's
fees) incurred by the Agent in connection with the Loan Agreement and the
negotiation, structuring and documentation of the transactions contemplated by
this Agreement and the Xxxxxx Subordinated Agreement immediately upon receipt of
a xxxx therefor; and
(d) The Company shall have paid to the Agent (for the ratable benefit of
the Lenders, a closing fee in the amount of $200,000 (the "Closing Fee"). The
Closing Fee shall be fully earned on the Closing Date, and will not be refunded
to the Borrower, in whole in or part, under any circumstances.
4. Conditions to Lending; Compliance with Loan Documents, etc.
The Company hereby represents and warrants to the Agent and the Lenders
that all of the conditions precedent to lending specified in Section 4 of the
Loan Agreement have been and continue to be satisfied as of the date hereof.
Without limiting the generality of the foregoing, the Company hereby confirms
that (a) the Company is in compliance with all of the terms and provisions set
forth in the Loan Agreement, the Security Documents each of the other Loan
Documents, as amended hereby, and each of the Eligible Securitization
Transaction Documents, on its part to be observed or performed on or prior to
the date hereof; (b) without limiting the foregoing, no Default or Event of
Default has occurred and is continuing; and (c) since December 31, 1997 there
has been no material adverse change in the assets or liabilities or in the
financial or other condition of the Company, except as disclosed in the
Company's periodic filings with the SEC.
5. No Novation; Effect; Ratification and Acknowledgment of Security
Documents; Counterparts; Governing Law.
Except to the extent specifically amended hereby, the Loan Agreement,
the Notes, each of the Security Documents and all other Loan Documents shall be
unaffected hereby and shall remain in full force and effect. The Company hereby
acknowledges, confirms and ratifies its obligations under the Loan Agreement,
the Notes, each of the Security Documents and all other Loan
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Documents. This Second Amendment may be executed in any number of counterparts,
and by the different parties on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all the counterparts shall
together constitute one instrument. This Second Amendment shall be governed by
the internal laws of The Commonwealth of Massachusetts (without reference to
conflicts of law principals) and shall be binding upon and inure to the benefit
of the parties hereto and the respective successors and assigns. The Company
shall pay all reasonable out-of-pocket expenses of the Agent in connection with
the preparation, execution and delivery of this Second Amendment.
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment Agreement as a sealed instrument as of the date first above written.
CONSUMER PORTFOLIO SERVICES, INC.
By:
---------------------------------
(Title)
STATE STREET BANK AND TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:
---------------------------------
(Title)
THE STRUCTURED FINANCE HIGH YIELD
FUND, LLC
By:
---------------------------------
(Title)
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
---------------------------------
(Title)
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