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SUBORDINATED SECURED SENIOR NOTE
PURCHASE AGREEMENT
BETWEEN
FIRSTCITY FINANCIAL CORPORATION,
AS ISSUER
AND
IFA INCORPORATED,
AS PURCHASER
DECEMBER 20, 1999
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54892.0004
TABLE OF CONTENTS*
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1. DEFINITIONS AND TERMS....................................................................................1
1.1 Definitions.....................................................................................1
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1.2 GAAP...........................................................................................13
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1.3 Company........................................................................................13
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1.4 Rules of Construction..........................................................................14
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2. ISSUE AND SALE OF SECURITIES............................................................................15
2.1 Authorization and Issuance of the Notes, the Warrants and the Option...........................15
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2.2 Initial Sale and Purchase......................................................................15
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2.3 [Intentionally deleted]........................................................................15
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2.4 [Intentionally deleted]........................................................................15
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2.5 The Closing....................................................................................15
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2.6 Payments.......................................................................................16
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3. CONDITIONS AND AGREEMENTS...............................................................................16
3.1 Conditions to Purchase of Securities...........................................................16
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3.2 Taxes..........................................................................................19
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3.3 Maximum Lawful Rate............................................................................20
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3.4 Change of Laws.................................................................................21
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4. ANCILLARY AGREEMENTS....................................................................................21
4.1 Guarantees.....................................................................................21
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4.2 Note Pledge Agreements.........................................................................21
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4.3 Stock Pledge Agreements........................................................................22
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4.4 Security Agreements............................................................................22
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5. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS.......................................................22
5.1 General Representations and Warranties.........................................................22
5.2 Survival of Warranties and Representations.....................................................30
5.3 Exclusion of Harbor Debtors....................................................................31
6. COVENANTS AND CONTINUING AGREEMENTS.....................................................................31
6.1 Financial Covenants............................................................................31
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6.2 Affirmative Covenants..........................................................................31
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6.3 Negative Covenants.............................................................................38
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6.4 Required Notices...............................................................................44
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6.5 Year 2000 Compliance...........................................................................45
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* The headings contained in this Table of Contents are for purposes of
reference and convenience only and shall not limit or otherwise affect the
meaning of this Agreement.
Table continued...
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7. DEFAULT.................................................................................................46
7.1 Events of Default..............................................................................46
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7.2 Remedies Cumulative............................................................................49
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7.3 Acceleration...................................................................................50
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7.4 Remedies.......................................................................................50
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7.5 Injunctive Relief..............................................................................50
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7.6 [Intentionally deleted]........................................................................50
7.7 Subordination..................................................................................50
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8. GENERAL.................................................................................................50
8.1 Compliance with ERISA..........................................................................50
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8.2 Costs..........................................................................................56
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8.3 Statement......................................................................................56
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8.4 Notices........................................................................................56
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8.5 Amendments and Waivers.........................................................................56
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8.6 No Implied Waiver; Remedies Cumulative.........................................................57
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8.7 Severability...................................................................................57
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8.8 Incorporation of Other Agreements..............................................................57
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8.9 Acceptance.....................................................................................58
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8.10 Knowledge......................................................................................58
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8.11 Waiver by the Company..........................................................................58
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8.12 Governing Law..................................................................................58
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8.13 Waiver of Marshalling..........................................................................59
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8.14 Limitation by Law..............................................................................59
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8.15 Survival of Representations, Warranties and Covenants..........................................59
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8.16 Service of Process.............................................................................59
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8.17 Representation by Counsel......................................................................59
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8.18 Release of the Purchasers......................................................................60
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8.19 Invalidated Payments...........................................................................60
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8.20 Headings.......................................................................................60
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8.21 Counterparts...................................................................................60
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8.22 Fax Execution..................................................................................60
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8.23 No Third Party Beneficiaries...................................................................61
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8.24 Domicile of Note...............................................................................61
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8.25 Entire Agreement...............................................................................61
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8.26 Construction...................................................................................61
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8.27 Successors and Assigns.........................................................................62
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8.28 Texas Language.................................................................................62
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8.29 Waiver of Trial by Jury........................................................................63
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8.30 Waiver of Claims...............................................................................63
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8.31 No Agency or Partnership.......................................................................63
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8.32 Application of Payments........................................................................64
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Table continued...
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9. INDEMNIFICATION; SET OFF................................................................................64
9.1 Indemnification................................................................................64
9.2 Set-Off........................................................................................64
10. AGENT...................................................................................................65
10.1 Appointment....................................................................................65
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10.2 Nature of Duties..................................................................................65
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10.3 Lack of Reliance..................................................................................66
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10.4 Certain Rights....................................................................................67
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10.5 Reliance..........................................................................................67
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10.6 Indemnification...................................................................................67
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10.7 Collateral Agent, Individually....................................................................67
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10.8 Holders of Notes..................................................................................68
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10.9 Resignation.......................................................................................68
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10.10 Reimbursement....................................................................................68
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Exhibit A Name and Address of the Purchasers
Exhibit B Form of Note
Exhibit C Form of Warrant
Exhibit D Form of Option
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SUBORDINATED SECURED SENIOR NOTE PURCHASE AGREEMENT
$25,000,000 Principal Amount of Subordinated Secured Senior Notes
due 2003 of FirstCity Financial Corporation
SUBORDINATED SECURED SENIOR NOTE PURCHASE AGREEMENT, dated as of
December 20, 1999, by and among FIRSTCITY FINANCIAL CORPORATION, a Delaware
corporation (the "Company"), and IFA Incorporated, an Illinois corporation
("IFA"), as Collateral Agent and Purchaser.
WHEREAS
The Company desires to issue and sell and the other parties to this
Agreement desire to purchase up to $25,000,000 in aggregate principal amount of
the Company's Subordinated Secured Senior Notes due 2003 (the "Notes") on the
terms and conditions set forth in this Agreement; and
In order to induce such other parties to purchase the Notes to be
issued pursuant to this Agreement, the Company has agreed to issue to such
parties (i) warrants to purchase an aggregate of 425,000 shares of voting common
stock, par value $0.01 per share, of the Company (the "Voting Common Stock"),
and (ii) an option to acquire warrants to purchase an aggregate of 1,975,000
shares of Non-Voting Common Stock of the Company (the Non-Voting Common Stock,
together with the Voting Common Stock, the "Common Stock"), in each case subject
to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and their mutual covenants and agreements herein set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. DEFINITIONS AND TERMS
1.1 Definitions. The following words, terms and/or phrases shall have
the meanings set forth thereafter and such meanings shall be applicable to the
singular and plural form thereof, giving effect to the numerical difference:
"Affiliate": any Person (i) in which the Company and/or any
Parent, individually, jointly and/or severally, now or at any time or
times hereafter, has or have an equity or other ownership interest
equal to or in excess of twenty-five percent (25%) of the total equity
of or other ownership interest in such Person; and/or (ii) which
directly or indirectly through one or more intermediaries controls or
is controlled by, or is under common control with the Company; and/or
(iii) any officer or director of the Company or any Affiliated Entity.
For purposes of this definition, "control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of Stock, by contract or otherwise, and in any case shall
include direct
1
or indirect ownership (beneficially or of record) of, or direct or
indirect power to vote, 25% or more of the outstanding shares of any
class of capital stock of such Person (or in the case of a Person that
is not a corporation, 25% or more of any class of equity interest).
Notwithstanding the foregoing, none of the Harbor Debtors shall be
deemed to be an Affiliate for the purposes of this Agreement.
"Affiliated Entity": each Guarantor, Primary Obligor and
Secondary Obligor.
"Agreement": this Subordinated Secured Senior Note Purchase
Agreement, together with all Modifications hereto.
"and/or": one or the other or both, or any one or more or all,
of the things or Persons in connection with which the conjunction is
used.
"Assets": any and all real, personal and intangible property
of a Person, including, without limitation, accounts, chattel paper,
contract rights, letters of credit, instruments and documents,
equipment, general intangibles, inventory, leases, options, licenses,
and real property, whether now existing or hereafter acquired or
arising.
"Business Day": any day, other than a Saturday, Sunday, a day
that is a legal holiday under the laws of the State of Illinois, the
State of New York or the State of Texas or any other day on which
banking institutions located in the State of Illinois, the State of New
York or the State of Texas are authorized or required by law or other
governmental action to close.
"Capitalized Lease": at any time any lease which is, or is
required under GAAP to be, capitalized on the balance sheet of the
lessee at such time, and "Capitalized Lease Obligation" of any Person
at any time shall mean the aggregate amount which is, or is required
under GAAP to be, reported as a liability on the balance sheet of such
Person at such time as lessee under a Capitalized Lease.
"Charges": all Federal, state, county, city, municipal and/or
other governmental (or any instrumentality, division, agency, body or
department thereof, including without limitation the Pension Benefit
Guaranty Corporation) taxes, levies, assessments, charges upon and/or
relating to the Company's Assets, the Company's Obligations, the
Company's business, the Company's ownership and/or use of any of its
Assets, the Company's income and/or gross receipts and/or the Company's
ownership and/or use of any of its material Assets.
"Closing": the meaning assigned to that term in Section 2.5
hereof.
"Closing Date": December 20, 1999.
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"Closing Date Exceptions Schedule": the meaning assigned to
that term in the introductory paragraph to Section 5.1 hereof. "Code":
the Internal Revenue Code of 1986, as amended.
"Collateral Agent": IFA, its successors and assigns.
"Common Stock": the meaning set forth in the Recitals to this
Agreement.
"Company's Liabilities": all obligations and liabilities of
the Company to the Purchasers under the terms of this Agreement and the
Other Agreements, and all extensions and renewals or refinancing
thereof, whether such obligation or liability is direct or indirect,
secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, whether heretofore
arising, now existing or hereafter arising, however evidenced, created,
incurred, acquired or owing and whether now contemplated or hereafter
arising. Without limitation of the foregoing, such liability and
obligations include the principal amount of the Notes, interest, fees,
indemnities or expenses under this Agreement and all Other Agreements,
and all extensions, renewals and refinancing thereof, whether or not
such Notes were made in compliance with the terms and conditions of
this Agreement. The Company's Liabilities shall remain the Company's
Liabilities, notwithstanding any assignment or transfer or any
subsequent assignment or transfer of any of the Company's Liabilities
or any interest therein.
"Company's Obligations": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions
(other than the Company's Liabilities) to be performed, discharged,
kept, observed or complied with by the Company to or for the benefit of
the Purchasers under the terms of this Agreement and all Other
Agreements, and all extensions and renewals or refinancing thereof,
whether such obligation is direct or indirect, secured or unsecured,
joint or several, absolute or contingent, due or to become due, whether
heretofore arising, now existing or hereafter arising, however
evidenced, created, incurred, acquired or owing and whether now
contemplated or hereafter arising. The Company's Obligations shall
remain the Company's Obligations, notwithstanding any assignment or
transfer or any subsequent assignment or transfer of any of the
Company's Obligations or any interest therein.
"Consolidated Group": the Company and those Affiliates of the
Company required to file consolidated tax returns pursuant to Section
1502 of the Code, other than the Harbor Debtors.
"Costs": any and all reasonable costs and expenses (including,
without limitation, the reasonable fees and expenses of any counsel,
accountants, appraisers or other professionals) incurred by a Purchaser
or the Collateral Agent at any time, in connection with: (i) the
preparation, negotiation, execution and administration of this
Agreement and all Other Agreements; (ii) the preparation, negotiation
and execution of any amendment or
3
modification of this Agreement or the Other Agreements; (iii) the
custody, preservation, use or operation of, or the sale of, collection
from or other realization upon the Pledged Property; (iv) the exercise
or enforcement of any of the rights of the Purchasers hereunder; (v)
any failure by the Company to perform or observe any of the provisions
hereunder; (vi) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by one or more Purchasers, the Company or
any other Person) in any way relating to this Agreement, the Other
Agreements, the Secured Obligations, the Pledged Property, or, to the
extent instituted by any third party, the Company's affairs or any
Affiliate's affairs; (vii) any attempt to enforce any rights of the
Purchasers against the Company or any other Person which may be
obligated to the Purchasers by virtue of this Agreement or the Other
Agreements; and (viii) performing any of the obligations relating to or
payment of any of the Secured Obligations hereunder in accordance with
the terms hereof. Notwithstanding anything to the contrary contained
herein, Costs shall not include any fees, cost, loss, expense or damage
arising from any dispute, proceeding or claim by, between or among (A)
any one or more of the Purchasers and (B) any other Purchaser or
Purchasers, relative to the rights, duties and/or liabilities of any
such Person herein or under any of the Other Agreements.
"Default Rate": interest at the rate of the greater of (i) 14%
per annum or (ii) the rate which Citibank N.A. announces from time to
time as its prime lending rate as in effect from time to time, plus 6%
per annum.
"Environmental Laws": any Federal, state or local law, rule,
regulation, ordinance, order, code or statute applicable to the Company
or its property, in each case as amended (whether now existing or
hereafter enacted or promulgated), controlling, governing or relating
to the pollution or contamination of the air, water or land or
concerning hazardous, special or toxic materials, wastes or substances,
or any judicial or administrative interpretation of such laws, rules or
regulations, including, without limitation, the Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), Resource Conservation and Recovery
Act (42 U.S.C. ss. 6901 et seq.), Safe Drinking Water Act (42 U.S.C.
ss. 3000(f) et seq.), Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), Clean Air Act (42 U.S.C. ss. 7401 et seq.), and Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
ss. 9601 et seq.).
"Event of Default": the meaning assigned to that term in
Section 7.1 hereof.
"Exchange Act": the Securities Exchange Act of 1934, as
amended.
"Excluded Entities": the meaning assigned to that term in
Section 4.3 hereof.
"Excluded Notes": the meaning assigned to that term in Section
4.2 hereof.
"FC Capital": FC Capital Corp., a New York corporation.
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"FC Commercial": FirstCity Commercial Corporation, a Texas
corporation.
"FC Commercial Line of Credit": a line of credit or loan
facility, approved in writing by the Lenders or the Majority
Noteholders (such approval not to be unreasonably withheld), to be made
available by a Person to FC Commercial, FC International and/or FC
Holdings in an amount not to exceed $17,000,000 in the aggregate to be
used for the purpose of funding investments in entities formed to
acquire asset portfolios or to service asset portfolios and which line
of credit or loan facility will be secured by first priority security
interests in the assets of FC International and in the equity interests
acquired with the proceeds of the line of credit or loan facility.
"FC Consumer Lending": FirstCity Consumer Lending Corporation,
a Texas corporation.
"FC Consumer Lending Line of Credit": a line of credit or loan
facility, approved in writing by the Lenders or the Majority
Noteholders (such approval not to be unreasonably withheld), to be made
available by a Person to FC Consumer Lending and/or its Subsidiaries in
an amount not to exceed the lesser of (a) 30% of the book value of auto
residuals, or (b) $25,000,000 which will be secured by the Assets of FC
Consumer Lending, except for equity interests in FirstCity Funding L.P.
or FirstCity Consumer Finance Corporation.
"FC Financial": FirstCity Financial Corporation, a Delaware
corporation.
"FC Holdings": FirstCity Holdings Corporation, a Texas
corporation.
"FC International": FirstCity International Corporation, a
Texas corporation.
"FC Servicing": FirstCity Servicing Corporation, a Texas
corporation.
"Fee Agreements": any partnership agreement, management
agreement, consulting agreement, or other agreements pursuant to which
the Company or any Affiliated Entity is to be paid fees, distributions,
allocations, expense reimbursements, consideration, salary or other
compensation in consideration for providing management, personnel or
services, in any form whatsoever, from any Affiliate or from any other
Person. Services to be rendered under Fee Agreements may include, but
not be limited to, consulting, collecting revenues, paying operating
expenses not paid directly by others, and providing clerical and
bookkeeping services.
"Financials": those financial statements of the Company,
heretofore, concurrently herewith or hereafter delivered by or on
behalf of the Company to the Purchasers, including but not limited to
those financial statements and reports delivered by the Company to the
Purchasers pursuant to Section 6.2(c).
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"First B": the meaning assigned to such term in the Loan
Agreement.
"First X": the meaning assigned to such term in the Loan
Agreement.
"GAAP": generally accepted accounting principles applied in
the preparation of the financial statements of a Person with such
changes thereto as: (i) shall be consistent with the then-effective
principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors and successors, and (ii) shall be concurred
in by the independent certified public accountants of recognized
standing acceptable to the Purchasers reviewing such financial
statements of such Person; provided that KPMG LLP shall be deemed to be
acceptable to the Purchasers as independent certified public
accountants of recognized standing for the purposes of applying GAAP.
"Governmental Authority": any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand
jury or arbitrator, in each case whether foreign or domestic.
"Guaranty" or "Guarantees": any one or more of the guarantees
of payment and performance, dated as of the date hereof, granted by the
Guarantors to guaranty repayment of the Secured Obligations, together
with all Modifications thereto.
"Guarantors": collectively and jointly and severally, (i) FC
Commercial, (ii) FC Consumer Lending, (iii) FC International, (iv) FC
Servicing, (v) FC Capital and (vi) FC Holdings and each other Person
who has guaranteed all or any portion of the Secured Obligations.
"Guaranty Equivalent": any agreement, document or instrument
pursuant to which a Person directly or indirectly guarantees, becomes
surety for, endorses, assumes, agrees to indemnify the obligee of any
other Person against, or otherwise agrees, becomes or remains liable
(contingently or otherwise) for, such obligation, other than by
endorsements of instruments in the ordinary course of business. Without
limitation, a Guaranty Equivalent shall be deemed to exist if a Person
agrees, becomes or remains liable (contingently or otherwise), directly
or indirectly: (i) to purchase or assume, or to supply funds for the
payment, purchase or satisfaction of, an obligation; (ii) to make any
loan, advance, capital contribution or other investment in, or a
purchase or lease of any property or services from, a Person; (iii) to
maintain the solvency of such Person; (iv) to enable such Person to
meet any other financial condition; (v) to enable such Person to
satisfy any obligation or to make any payment; (vi) to assure the
holder of an obligation against loss; (vii) to purchase or lease
property or services from such Person regardless of the non-delivery of
or failure to furnish of such property or services; or (viii) in
respect of any other transaction the effect of which is to assure the
payment or performance (or payment of damages or other remedy in the
event of nonpayment or nonperformance) of any obligation.
6
"Harbor Debtors": collectively, (i) Harbor Financial Mortgage
Corp., (ii) NAF, Inc. (f/k/a New America Financial, Inc.), (iii)
Xxxxxxxx Financial Services Corp., (iv) Community National Mortgage
Corp., (v) CalCap, Inc. and (vi) Harbor Financial Group, Inc.
"Harbor Proceedings": The jointly administered Chapter 11
bankruptcy cases, bearing Case No. 99-37255-SAF-11, styled as In Re
Harbor Financial Group, Inc., et al., pending in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division,
under which the Harbor Debtors are operating as debtors-in-possession,
including any conversion of such Chapter 11 cases to Chapter 7
"HSR Act": means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (or any successor statute in effect from time
to time), and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"IFA": the meaning assigned to that term in the introductory
paragraph to this Agreement.
"Indebtedness": with respect to any Person, at a particular
time (without duplication): (i) all obligations on account of money
borrowed by, or credit extended to or on behalf of, or for or on
account of deposits with or advances to, such Person, except for
inter-affiliate transactions entered into in the ordinary course of
business on arms-length terms by and among FC Financial and any
Affiliate or by and among the Affiliates which are accounted for in
book entries in the books and records of the applicable persons and
which is not evidenced by a note or other instrument; (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments; (iii) all obligations of such Person for the
deferred purchase price of property or services other than trade
payables incurred in the ordinary course of business and on terms
customary in the trade and not more than sixty (60) days past due; (iv)
all obligations secured by a Lien on property owned by such Person
(whether or not assumed); and all obligations of such Person under
Capitalized Leases (without regard to any limitation of the rights and
remedies of the holder of such Lien or the lessor under such
Capitalized Lease to repossession or sale of such property); (v) the
face amount of all letters of credit issued for the account of such
Person and, without duplication, the unreimbursed amount of all drafts
drawn thereunder, and all other obligations of such Person associated
with such letters of credit or draws thereon; (vi) all obligations of
such Person in respect of acceptances or similar obligations issued for
the account of such Person; (vii) all obligations of such Person under
a product financing or similar arrangement; (viii) all obligations of
such Person under any interest rate or currency protection agreement,
interest rate or currency future, interest rate or currency option,
interest rate or currency swap or cap or other interest rate or
currency hedge agreement; and (ix) all obligations and liabilities with
respect to unfunded vested benefits under any "employee benefit plan"
or with respect to withdrawal liabilities incurred under ERISA by the
Company or any ERISA Affiliate to a "multiemployer plan", as such terms
are defined under the Employee Retirement Income Security Act of 1974.
7
"Indebtedness Instrument": any note, mortgage, indenture,
chattel mortgage, deed of trust, loan agreement, hypothecation
agreement, pledge agreement, security agreement, financing statement or
other document, instrument or agreement evidencing or securing the
payment of or otherwise relating to the borrowing of monies.
Indebtedness Instruments shall include, but not be limited to, the
Senior Note, the Loan Agreement, the Notes, this Agreement and the
Other Agreements (other than the Warrants and the Option).
"Initial Closing": the meaning assigned to that term in
Section 2.5 hereof.
"Initial Closing Date": the Closing Date.
"Initial Notes": the meaning assigned to that term in Section
2.1 hereof.
"Initial Securities": the meaning assigned to that term in
Section 2.1 hereof.
"Initial Warrants": the meaning assigned to that term in
Section 2.1 hereof.
"Issue Price": $25,000,000
"Lenders" and "Lender": (x) Bank of Scotland, acting through
its branch in New York, New York, with its principal place of business
at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as managing agent,
administrative agent and collateral agent on behalf of the lenders from
time to time party to the Loan Agreement, and (y) individually and
collectively, the lenders from time to time party to the Loan
Agreement, subject to the provisions contained therein pertaining to
Persons becoming or ceasing to be Lenders. Any reference to "Lenders"
shall be deemed to mean all, or any one or more Lenders, unless the
context clearly provides otherwise.
"Lien": any mortgage, deed of trust, pledge, lien,
hypothecation, security interest, charge or other encumbrance or
security arrangement of any nature whatsoever, including but not
limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the
effect of, security.
"Loan Agreement": the amended and restated Loan Agreement
dated as of the date hereof by and among the Company and the Lenders
and all documents and instruments entered into in connection therewith,
including without limitation the Senior Notes, each as in effect on the
Closing Date, together with all Modifications thereto to the extent
permitted by the terms of the Subordination Agreement.
"Loan Documents": the meaning assigned in Section 9.2 hereof.
8
"Loan Party": the Company and every other Person (other than
IFA, any other Purchaser or any other holder of a Note, a Warrant or
the Option) who is a party to this Agreement or any one or more of the
Other Agreements.
"Majority Noteholders": the holders of two-thirds in aggregate
principal amount of the Notes at the relevant time.
"Material Adverse Effect": any effect that (i) is material and
adverse to the financial condition, results of operations, business or
prospects of the Company and/or its Subsidiaries or any Affiliated
Entity or (ii) materially impairs the ability of the Company or any
Affiliated Entity to perform its obligations under this Agreement or
any Other Agreement.
"Modifications": any extension, renewal, substitution,
replacement, restatement, reaffirmation, substitute, supplement,
amendment or modification of any agreement, certificate, document,
instrument or other writing, whether or not contemplated in the
original agreement, document or instrument.
"National Auto Funding": means National Auto Funding
Corporation, a Texas corporation.
"Net Proceeds": all proceeds of Indebtedness received by the
Company after deduction of all fees and expenses paid or to be paid in
connection with the issuance of such Indebtedness.
"Non-Voting Common Stock": common stock of the Company, par
value $0.01 per share, having the attributes required by Section
6.02(o).
"Notes": the Subordinated Secured Senior Notes due 2003, to be
substantially in the form of the note attached hereto as Exhibit B, in
the original, aggregate principal amount of $25,000,000, issued by the
Company to the Purchasers pursuant to this Agreement, together with all
Modifications thereto.
"Note Pledge Agreements": the note pledge agreement, dated as
of the date hereof, granted by the Company and other Loan Parties to
secure the Secured Obligations, pursuant to which such Loan Party has
pledged to the Purchasers certain promissory notes made by such Loan
Party payable to the order of the Company, together with all
Modifications thereto.
"Option": the meaning assigned to that term in Section 2.1
hereof.
"Option Warrants": the meaning assigned to that term in
Section 2.1 hereof.
"Option Securities": the Option Warrants.
9
"Organic Documents": with respect to any Person, its articles
or certificate of incorporation, by-laws, shareholder's agreement,
certificate of partnership, certificate of limited partnership,
partnership agreement, articles of organization, operating agreement,
or similar documents or agreements governing its management and the
rights and privileges of its equity owners, together with all
Modifications thereto.
"Other Agreements": the Notes, the Warrants, the Option, the
Note Pledge Agreement, the Partnership Pledge Agreement, the Stock
Pledge Agreement, the Security Agreement and the Guaranty, together
with all other agreements, instruments and documents from time to time
evidencing or securing the Notes or the transactions contemplated
herein or therein, together with all Modifications thereto.
"Parent": any Person, now or at any time or times hereafter,
owning or controlling (alone or with the Company, any Subsidiary and/or
any other Person) at least a majority of the issued and outstanding
Stock or other ownership interest of the Company or any Subsidiary
(hereinafter defined). For purposes of this definition, "control" shall
have the meaning assigned to this term in the definition of Affiliate
in Section 1.1. Notwithstanding the foregoing, no Person shall be a
Parent which is not a Parent of the Company or a 50.1% (or more) owned
subsidiary (directly or indirectly) of the Company.
"Partnership Pledge Agreement": the partnership interest
pledge agreement, dated as of the date hereof, granted by the Company
and other Loan Parties to secure the Secured Obligations, pursuant to
which such Loan Parties have pledged to the Purchasers certain
partnership interests in the Pledged Entities to secure the Secured
Obligations.
"Permitted Liens": (i) any liens created in connection with
the Senior Debt but only to the extent such Senior Debt is permitted
under the Subordination Agreement; (ii) liens for Charges which are not
yet due and payable or which are expressly permitted pursuant to the
terms hereof, or claims and unfunded liabilities under ERISA not yet
due and payable or which are being contested in good faith; (iii) liens
arising in connection with worker's compensation, unemployment
insurance, old age pensions and social security benefits which are not
overdue or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest any
proceedings commenced for the enforcement of such lien shall have been
duly suspended and such provision for the payment of such lien has been
made on the books of the Company (or the applicable Affiliate) as may
be required by GAAP; (iv) liens incurred in the ordinary course of
business to secure the performance of statutory obligations arising in
connection with progress payments or advance payments due under
contracts with the United States Government or any agency thereof
entered into in the ordinary course of business; (v) any liens securing
Indebtedness of the Company (or any Affiliate) to any Persons in an
aggregate amount less than $200,000; (vi) Charges relating to Assets of
First B and First X; (vii) as to any Affiliate other than the Company
or a Primary Obligor, purchase money liens in connection with the
acquisition of Assets so long as such Liens encumber only the Assets
acquired, (viii) as to any Affiliate
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other than the Company or a Primary Obligor, Liens relating to
Indebtedness incurred in connection with warehousing assets or the
securitization of Assets, so long as such Liens encumber only the
assets warehoused or securitized, (ix) those Liens disclosed on
Schedule 5.1(g), (x) Liens securing the Notes, (xi) Liens only on
property of Secondary Obligors, and (xii) Liens granted pursuant to,
and as security for, the FC Commercial Line of Credit and the FC
Consumer Lending Line of Credit.
"Person": any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or
government (whether national, Federal, state, county, city, municipal
or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
"Pledge Agreements": individually and collectively, the Note
Pledge Agreement, the Stock Pledge Agreement and the Partnership Pledge
Agreement.
"Pledged Entities": those entities whose shareholders,
partners, members or other equity owners have pledged an equity
interest in such entity to secure the Secured Obligations.
"Pledged Notes": those certain promissory notes identified on
Schedule 4.2(b), which have been pledged to the Purchasers pursuant to
the Note Pledge Agreements.
"Pledged Property": any and all other property (real, personal
or intangible) pledged by the Company or any other Loan Party to secure
payment and performance of the Secured Obligations, including but not
limited to: (i) any and all Collateral, as defined in the Security
Agreements; (ii) any and all interests pledged pursuant to the Note
Pledge Agreements; and (iii) any and all interests pledged pursuant to
the Stock Pledge Agreements.
"Primary Obligors": collectively, (i) FC Capital, (ii) FC
Commercial, (iii) FC Servicing and (iv) FC Consumer Lending.
"Purchaser" or "Purchasers": IFA Incorporated, in its capacity
as Purchaser hereunder, and its permitted successors and assigns as
provided herein. For avoidance of doubt, each registered holder of a
Note shall constitute a Purchaser.
"Records": all books, records, computer records, computer
software, ledger cards, programs and other computer materials, customer
and supplier lists, invoices, orders and other property and general
intangibles at any time evidencing or relating to a Person's Assets or
liabilities.
"REO Affiliate": the meaning provided for such term in the
Loan Agreement.
11
"SEC": the Securities and Exchange Commission.
"Secondary Obligors": the meaning provided for such term in
the Loan Agreement.
"Secured Obligations": all of the Company's Liabilities, the
Company's Obligations and all other obligations and liabilities of the
Company or any other Loan Party to the Purchasers under the terms of
this Agreement and the Other Agreements, together with all
Modifications thereof, whether such obligation or liability is direct
or indirect, otherwise secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether for payment or
performance, whether heretofore arising, now existing or hereafter
arising, however evidenced, created, incurred, acquired or owing and
whether now contemplated or hereafter arising. Without limitation of
the foregoing, such liability and obligations include the principal
amount of the Notes, interest, fees, indemnities or expenses under this
Agreement or any Other Agreement. Secured Obligations shall remain
Secured Obligations, notwithstanding any assignment or transfer or any
subsequent assignment or transfer of any of the Secured Obligations or
any interest therein. Notwithstanding the foregoing, the Company's
obligations under the Warrants and the Option shall not be secured by
any collateral at any time when the Company's obligations under this
Agreement and the Notes are no longer secured by collateral.
"Securities": the Initial Securities and the Option
Securities.
"Securities Act": the Securities Act of 1933, as amended.
"Securities Laws": the Securities Act, the Exchange Act and
all other applicable Federal and state securities laws and regulations
promulgated pursuant thereto.
"Security Agreements": the security agreement dated as of the
date hereof executed by the Company, FC Consumer Lending, FC
Commercial, FC Servicing, FC Capital, FC International and FC Holdings
to secure the Secured Obligations, together with all Modifications
thereto.
"Senior Debt": all obligations and liabilities of the Company
to the Lenders under the Loan Agreement.
"Senior Notes": the revolving notes of the Company issued
under the Loan Agreement as in effect on the Closing Date, together
with all Modifications thereto to the extent permitted by the terms of
the Subordination Agreement.
"Stock": all shares, interests, participations or other
equivalents (however designated) of or in a corporation, whether voting
or non-voting, including, but not limited to, common stock, warrants,
preferred stock, convertible debentures and all agreements,
12
instruments and documents convertible, in whole or in part, into any
one or more or all of the foregoing.
"Stock Pledge Agreements": the stock pledge agreement, dated
as of the date hereof, granted by the Company and other Loan Parties to
secure the Secured Obligations, pursuant to which such Loan Party has
pledged to the Purchasers Stock or other equity interests in the
Pledged Entities to secure the Secured Obligations, together with all
Modifications thereto.
"Subordination Agreement": the meaning assigned to such term
in Section 3.1(e) hereof.
"Subsidiary": any Person at least a majority of whose issued
and outstanding Stock or other ownership interests now or at any time
hereafter is owned (directly or indirectly) by the Company, including
without limitation any Affiliated Entity.
"Tangible Net Worth": as determined at any time, the total of
shareholders' equity (including capital (both common and preferred)
stock, additional paid-in capital and retained earnings after deducting
treasury stock) of a Person, less the sum of the total amount of any
intangible assets, which, for purposes of this definition, shall
include, without limitation, general intangibles and, if applicable,
all accounts receivable from any Affiliate of such Person not incurred
in the ordinary course of business or any loan to any director or
officer of any Affiliate of such Person, unamortized deferred charges
and goodwill, all as determined in accordance with GAAP.
"Underlying Common Stock": (i) the Common Stock issued or
issuable upon exercise of the Warrants and (ii) any equity securities
issued or issuable with respect to the securities referred to in clause
(i) above by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or
other reorganization. Any Person who holds a Warrant will be deemed to
be the holder of the Underlying Common Stock obtainable upon exercise
of the Warrant, regardless of any restriction on the exercise of the
Warrant for purposes of the preemptive or other rights specifically
provided for in this Agreement. Notwithstanding the foregoing, a
Warrant shall not entitle the holder thereof to any voting rights or
other rights as a stockholder of the Company.
"Unmatured Default": any event or condition which, with the
passage of time or the giving of notice or both, would constitute an
Event of Default hereunder.
"Voting Common Stock": the meaning set forth in the Recitals
to this Agreement.
"Warrants": the Initial Warrants (substantially in the form of
the warrant attached hereto as Exhibit C) and/or the Option Warrants
(substantially in the form provided for by the Option) and/or any other
Warrants issued by the Company pursuant to, or in connection
13
with, this Agreement, the Option or any other Warrant, in each case
together with all Modifications thereto.
1.2 GAAP. Except as otherwise defined in this Agreement or the Other
Agreements, all accounting terms used herein shall have the meaning ascribed to
that term in accordance with GAAP.
1.3 Company. Whenever the context so requires, the use of "it" in
reference to the Company shall mean the Company as defined above.
1.4 Rules of Construction. In this Agreement, unless a clear contrary
intention appears:
(a) the singular number includes the plural number and vice
versa; reference to any gender includes each other gender;
(b) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(c) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually,
provided that nothing in this clause is intended to authorize any
assignment not otherwise permitted by this Agreement;
(d) reference to any agreement, document or instrument means
such agreement, document or instrument as amended, supplemented or
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof, and reference to any note
includes any note issued pursuant to any Other Agreements in extension
or renewal thereof and in substitution or replacement therefor;
(e) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(f) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(g) with respect to the determination of any period of time,
the word "from" means "from and including" and the word "to" means "to
but excluding;"
(h) reference to any law means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to
time; and
14
(i) the Article and Section headings herein are for
convenience only and shall not affect the construction hereof; and
(j) any requirement herein that a document, agreement, amount
or other item be "satisfactory" or "acceptable" (or words of similar
import) to the Majority Noteholders or to all Noteholders shall be
construed (unless specifically stated otherwise) to require that the
same be satisfactory to the Majority Noteholders or all Noteholders (as
the case may be) in its or their absolute and sole discretion, and any
reference herein to any consent or waiver by the Majority Noteholders
or all Noteholders (and words of similar import) shall be construed
(unless specifically stated otherwise) to entitle the Majority
Noteholders or all Noteholders (as the case may be) to grant or
withhold such consent or waiver in its or their absolute and sole
discretion.
2. ISSUE AND SALE OF SECURITIES
2.1 Authorization and Issuance of the Notes, the Warrants and the
Option. The Company has duly authorized the initial issuance and sale to the
Purchasers of (i) $25,000,000 in aggregate principal amount of Notes (the
"Initial Notes"), (ii) warrants evidencing the Purchasers' rights to acquire an
aggregate of 425,000 shares of Voting Common Stock (the "Initial Warrants"), and
(iii) an option (the "Option" and, together with the Initial Notes and the
Initial Warrants, the "Initial Securities") to acquire the Option Warrants (as
hereafter defined). In addition, the Company has duly authorized the subsequent
issuance to the Purchasers of warrants evidencing the Purchasers' rights to
acquire an aggregate of 1,975,000 shares of Non-Voting Common Stock (the "Option
Warrants") upon exercise of the Option.
2.2 Initial Sale and Purchase. Subject to the terms and conditions and
in reliance upon the representations, warranties and agreements set forth
herein, at the Initial Closing, the Company shall sell to each Purchaser, and
each Purchaser shall purchase from the Company, (i) the amount of Initial Notes
and (ii) the number of Initial Warrants set forth opposite such Purchaser's name
on Exhibit A hereto.
2.3 [Intentionally deleted]
2.4 [Intentionally deleted].
2.5 The Closing. Delivery of and payment for the Initial Securities
(the "Initial Closing" or "Closing") shall be made at the offices of Xxxxxxxx &
Xxxxxx, Ltd., 00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
commencing at 9:00 a.m., local time, on December 20, 1999, or at such other
place or on such other date and at such other time as may be mutually agreeable
to the Company and the Purchasers.
Delivery of the Initial Securities shall be made to the
Purchasers against payment of the full Issue Price, less any amounts payable
pursuant to Section 3.1(h) hereof to the extent then
15
able to be determined by the Purchasers, by wire transfer of immediately
available funds to or at the direction of the Company in the manner agreed to by
the Company and the Purchasers. The Notes shall be issued in such name or names
and in such permitted denomination or denominations as a Purchaser may request
in writing not less than two Business Days before the Closing Date; in the
absence of such a request from a Purchaser, a single Note will be issued in the
Purchaser's name. The Initial Warrants shall be registered in such name or names
as a Purchaser may request in writing not less than two Business Days before the
Closing Date; in the absence of such a request from a Purchaser, a single
Warrant will be registered in the Purchaser's name. The Option shall be issued
in such name or names as a Purchaser may request in writing not less than two
Business Days before the Closing Date; in the absence of such a request from a
Purchaser, a single Option will be issued in IFA's name.
2.6 Payments. All payments to a Purchaser under this Agreement and the
Other Agreements shall be payable in lawful currency of the United States of
America in immediately available funds on or before noon New York time on the
due date at the address or such place or places, or by wire transfer of funds to
such account, as the Purchaser may designate in writing to the Company. Any and
all payments which may be received by or tendered to a Purchaser by the Company
or any other Person at any time or from time to time and which relate to the
Notes held by it shall be applied in the following order of priority: (i) Costs;
(ii) accrued but unpaid interest, premiums and late payment fees; and (iii)
principal.
3. CONDITIONS AND AGREEMENTS
3.1 Conditions to Purchase of Securities. The obligations of each
Purchaser, acting severally and not jointly and as to itself only, to purchase
and pay for the Securities set forth opposite its name on Exhibit A hereto
pursuant to Section 2.2 hereof is subject to the satisfaction prior to or at the
Closing of the following conditions:
(a) Representations True. The representations and warranties
contained in this Agreement and the Other Agreements shall be true and
correct in all material respects at and as of the Closing Date as
though then made, except where such representations and warranties
speak as of a different date and except to the extent of changes caused
by the transactions expressly contemplated or permitted herein. The
representations and warranties of the Company contained in the Loan
Agreement shall be true and correct in all material respects at and as
of the Closing Date, except where such representations and warranties
speak as of a different date.
(b) Corporate Action. All corporate action necessary to
authorize the execution and delivery of this Agreement and each Other
Agreement and the consummation of the transactions contemplated hereby
and thereby shall have been taken by the Company and each Affiliated
Entity.
16
(c) Senior Loans Made. The loans to be made by the Lenders on
the Closing Date under the Loan Agrement shall have been made.
(d) No Litigation. Except as previously disclosed in writing
to the Purchasers and the Lenders, there shall be no litigation
outstanding or instituted or threatened against the Company or any
Affiliated Entity which the Purchaser determines in its sole and
absolute discretion to be material.
(e) Loan Agreement; Subordination Agreement. The Company and
the Lenders shall have entered into the Loan Agreement providing for
loans to the Company in the aggregate original principal amount not
greater than $88,000,000, and the Loan Agreement will be in full force
and effect as of the Closing Date and will not have been amended or
modified. The Lenders, the Company and the Purchasers shall have
entered into a subordination agreement in form and substance
satisfactory to the Purchaser and the Lenders in their sole and
absolute discretion (the "Subordination Agreement").
(f) [Intentionally deleted]
(g) Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents in form and substance
satisfactory to the Purchaser:
(i) one or more Notes (as designated by the Purchaser
pursuant to Section 2.5) sufficient to evidence the Notes to
be issued and sold by the Company and purchased by the
Purchaser, duly completed and executed by the Company;
(ii) one or more Warrants (as designated by the
Purchaser pursuant to Section 2.5) sufficient to evidence the
Warrants to be issued and sold by the Company and purchased by
the Purchaser on the Closing Date, duly completed and executed
by the Company, together with the Option (substantially in the
form of the option attached hereto as Exhibit D), duly
completed and executed by the Company;
(iii) a counterpart of this Agreement duly executed
and delivered by the Company and a counterpart of each Other
Agreement (other than the Notes and the Warrants) duly
executed and delivered by the Company and the applicable
Affiliated Entity, as applicable;
(iv) a certificate of the secretary or the assistant
secretary of the Company and each Affiliated Entity,
certifying the names and true signatures of the officers of
the Company and such Affiliated Entity authorized to sign this
Agreement and the Other Agreements, as applicable, to be
delivered by the Company hereunder;
(v) certificate dated the Closing Date from an
officer of the Company stating that the conditions specified
in Section 3.1(a) through (g) have been fully satisfied;
17
(vi) certified copies of the resolutions duly adopted
by the Company's board of directors authorizing the execution,
delivery and performance of this Agreement and each of the
Other Agreements, instruments and documents contemplated
hereby to which the Company is a party and the consummation of
all transactions contemplated by this Agreement and the Other
Agreements;
(vii) certified copies of the resolutions duly
adopted by the board of directors of each Affiliated Entity
authorizing the execution, delivery and performance of each
Other Agreement to which it is a party and the consummation of
all transactions contemplated by each such Other Agreement;
(viii) certified copies of the Organic Documents of
the Company, each Affiliated Entity and each other Affiliate
of the Company as may be requested by the Purchaser, each as
in effect at the Closing;
(ix) certificates of good standing dated not more
than 10 days prior to the Closing Date for the Company and
each Affiliated Entity issued by their respective
jurisdictions of formation and the jurisdictions listed on
Schedule 5.1(a)(i) and (ii) hereof;
(x) solvency certificates for the Company and each
Affiliated Entity;
(xi) copies of the Loan Agreement and the Senior
Notes, with all exhibits and schedules thereto and all
collateral or related agreements, instruments or documents
entered into or delivered in connection therewith, each as in
effect at the Closing;
(xii) the opinion to the Purchasers, dated the
Closing Date, of Xxxxxx Xxxxx, LLP, counsel to the Company, in
form and substance satisfactory to the Purchaser in its sole
and absolute discretion, with respect to matters which are
customary for transactions of the type contemplated hereby,
including without limitation usury matters and the validity of
the security interests created by the Guarantees, the Note
Pledge Agreements, the Stock Pledge Agreements and the
Security Agreements;
(xiii) the opinion to the Company, dated the Closing
Date, in form and substance satisfactory to the Purchaser in
its sole and absolute discretion, of PriceWaterhouse Coopers
LLP to the effect that there is "substantial authority" within
the meaning of Treasury Regulation 1.6662-4(d) to support the
conclusion that consummation of the transactions contemplated
hereby, including without limitation the exercise of the
Warrants in accordance with their terms (and subject to the
restrictions set forth in Section D of the Third Article of
the Company's Certificate of Incorporation), will not result
in a change in ownership of the Company for purposes of
Section 382 of the Code or other material adverse consequences
to the Company under the Code;
18
(xiv) liability, business interruption and casualty
insurance naming the Purchasers as loss payee (as their
interests may appear);
(xv) the financing statements required to be filed by
the Company and each Affiliated Entity pursuant to any of the
Note Pledge Agreements, the Stock Pledge Agreements and the
Security Agreements;
(xvi) estoppel certificates from each Affiliated
Entity which has issued a Pledged Note; and
(xvii) all consents listed as required on Schedule
5.1(l) shall have been received;
(xviii) the document labeled "Exceptions to
Representations and Warranties" referred to in the
introductory paragraph to Section 5.1 shall have been received
(if the Company intends to deliver any such document);
(xix) such other documents relating to the
transactions contemplated by this Agreement or the Loan
Agreement as the Purchaser or its counsel may reasonably
request.
(h) Purchasers' Fees and Expenses. On the Closing Date, the
Company shall have paid the fees and expenses of the Purchasers payable
by the Company pursuant to Section 8.2 hereof (and the Company hereby
authorizes a Purchaser to deduct from the aggregate purchase price of
the Securities purchased by it all or a portion of such Purchaser's pro
rata portion of all such amounts).
(i) Legal Investment. On the Closing Date, the Purchasers'
purchase of the Securities shall not be prohibited by any applicable
law, rule or regulation of any Governmental Authority (including,
without limitation, Regulations T, U or X of the Board of Governors of
the Federal Reserve System) as a result of the promulgation or
enactment thereof or any changes therein, or change in the
interpretation thereof by any Governmental Authority, subsequent to the
date of this Agreement.
(j) Actions and Documents Satisfactory. All corporate and
other proceedings taken or required to be taken in connection with the
transactions contemplated hereby and by the Other Agreements to be
consummated at or prior to the Closing and all documents incident
thereto will be reasonably satisfactory in form and substance to each
Purchaser and its counsel.
(k) Waiver. Any condition specified in this Section 3.1 may be
waived if consented to by a Purchaser, provided that no such waiver
will be effective against a Purchaser unless it is set forth in a
writing executed by the Purchaser.
19
3.2 Taxes. Any and all payments by the Company hereunder or under the
Other Agreements which are made to or for the benefit of a Purchaser shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings and penalties,
interests and all other liabilities with respect thereto (collectively,
"Taxes"), excluding, taxes imposed on the Purchaser's income or capital and
franchise taxes imposed on it by the jurisdiction under the laws of which it is
organized or any political subdivision thereof (all such nonexcluded Taxes being
hereinafter referred to as "Covered Taxes"). If the Company shall be required by
law to deduct any Covered Taxes from or in respect of any sum payable hereunder
or under any Other Agreements to or for the benefit of a Purchaser, the sum
payable shall be increased as may be necessary so that after making all required
deductions of Covered Taxes (including deductions of Covered Taxes applicable to
additional sums payable under this paragraph), the Purchaser receives an amount
equal to the sum it would have received had no such deductions been made. The
Company shall make such deductions and the Company shall pay the full amount so
deducted to the relevant taxation authority or other authority in accordance
with applicable law. In addition, the Company agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies that
arise at any time or from time to time from any payment made under any and all
Other Agreements or from the execution or delivery by the Company or from the
filing or recording or maintenance of, or otherwise with respect to the exercise
by a Purchaser of its rights under any and all Other Agreements (collectively,
"Other Taxes"). The Company will indemnify each Purchaser for the full amount of
Covered Taxes imposed on or with respect to amounts payable hereunder and Other
Taxes, and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. Payment of this indemnification shall be made
within thirty (30) days from the date a Purchaser provides the Company with a
certificate certifying and setting forth in reasonable detail the calculation
thereof as to the amount and type of such Taxes. Any such certificates submitted
by a Purchaser in good faith to the Company shall, absent manifest error, be
final, conclusive and binding on all parties. The obligations of the Company
under this Section 3.2 shall survive the payment of the Notes and the
termination of this Agreement. Within thirty (30) days after the Company having
received a receipt for payment of Covered Taxes or Other Taxes, the Company
shall furnish to the applicable Purchaser, the original or certified copy of the
receipt evidencing payment thereof.
3.3 Maximum Lawful Rate. The provisions of this Section shall govern
and control over any irreconcilably inconsistent provision contained in this
Agreement, the Other Agreements or in any other document evidencing or securing
the Notes. No Purchaser shall be entitled to receive, collect, or apply as
interest hereon (for purposes of this Section, the word "interest" shall be
deemed to include any sums treated as interest under applicable law governing
matters of usury and unlawful interest) any amount in excess of the Highest
Lawful Rate (as hereinafter defined) and, in the event a Purchaser ever
receives, collects, or applies as interest any such excess, such amount which
would be excessive interest shall be deemed a partial prepayment of principal
and shall be treated hereunder as such; and, if the principal of the Notes is
paid in full, any remaining excess shall forthwith be paid to the Company. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Highest Lawful Rate, the Company and each Purchaser
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as an
20
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) spread the total amount of
interest throughout the entire contemplated term of the Notes, provided, that if
the Note is paid and performed in full prior to the end of the full contemplated
term thereof, and if the interest received for the actual period of existence
hereof exceeds the Highest Lawful Rate, each Purchaser shall refund to the
Company the amount of such excess and, in such event, the Purchaser shall not be
subject to any penalties provided by any laws for contracting for, charging or
receiving interest in excess of the Highest Lawful Rate. "Highest Lawful Rate"
shall mean the maximum rate of interest which the Purchasers are allowed to
contract for, charge, take, reserve or receive under applicable law after taking
into account, to the extent required by applicable law, any and all relevant
payments or charges hereunder.
3.4 Change of Laws. If any Purchaser shall determine at any time after
the date hereof that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof or compliance by a Purchaser with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any such authority has or would have the effect of reducing the
rate of return on the Purchaser's capital as a consequence of its obligations
hereunder to a level below that which the Purchaser could have achieved but for
such adoption, change or compliance (taking into consideration the Purchaser's
policies with respect to capital adequacy) by an amount deemed by such Purchaser
to be material, the Purchaser shall give notice thereof to the Company of such
determination, in which event the Company shall pay to such Purchaser upon
demand such amount or amounts, in addition to the amounts payable under any
other provision of this Agreement or the Other Agreements, as will compensate
such Purchaser for such reduction. Determinations by a Purchaser for purposes of
this Section of the additional amount or amounts required to compensate it with
respect to the foregoing shall be conclusive in the absence of manifest error.
In determining such amount or amounts, a Purchaser may use any reasonable
averaging or attribution methods. Notwithstanding the foregoing, no amounts
shall be payable by the Company to a Purchaser under the terms of this Section
3.4 if the Secured Obligations are paid in full in accordance with their terms
on or before ten (10) days after the date on which a Purchaser shall have
notified the Company that amounts will be due under this Section 3.4.
4. ANCILLARY AGREEMENTS
4.1 Guarantees. The Company shall cause each Guarantor to execute and
deliver to the Purchasers a Guaranty. Schedule 4.1 sets forth a true, accurate
and complete schedule of all Guarantees to be delivered by or on behalf of the
Company to the Purchasers on the Initial Closing Date.
4.2 Note Pledge Agreements. The Company shall execute and deliver to
the Purchasers and shall cause certain Primary Obligors to execute and deliver
to the Purchasers the Note Pledge Agreements. Notwithstanding the foregoing, the
Company shall not be required to pledge or to require any other Person to
pledge: (i) promissory notes made by the Company or any Primary Obligor payable
to the order of an Affiliate which is a general partner of a limited partnership
and
21
which has been made to satisfy the capital adequacy requirements imposed upon
the general partner of a limited partnership under the Code or (ii) those notes
identified on Schedule 4.2(a) (the notes referred to in clauses (i) and (ii) are
collectively referred to as the "Excluded Notes"). Schedule 4.2(b) is a true,
accurate and complete schedule of each Note Pledge Agreement to be delivered by
or on behalf of the Company to the Purchasers on the Initial Closing Date,
setting forth the name of the pledgor thereunder and identifying the Pledged
Notes pledged pursuant thereto, including the maker of the note, the payee of
the note, the date of the note, the face amount of the note and the unpaid
principal balance thereof on the Initial Closing Date. Schedule 4.2(b) shall be
amended from time to time upon the request of Majority Noteholders, provided
that any such future amendment of Schedule 4.2(b) shall not be deemed to amend
or limit any representation or warranty by the Company under this Agreement
relating to any Pledged Note.
4.3 Stock Pledge Agreements. The Company shall execute and deliver to
the Purchasers a Stock Pledge Agreement, pursuant to which the Company shall
pledge to the Purchasers all of the Stock, shares, membership interests,
partnership interests, venture interests and all other equity interests, in any
form whatsoever, of each and every Person in which the Company owns an equity
interest (other than the entities identified on Schedule 4.3(a) (as may be
amended from time to time with the prior written consent of Majority Noteholders
in accordance with Section 5.1(e)(iv)) (the "Excluded Entities"), whether now
existing or hereafter arising. The Company also shall cause each Primary
Obligor, each Secondary Obligor and each other Affiliate, as Majority
Noteholders shall reasonably request, to execute and deliver to the Purchasers a
Stock Pledge Agreement, pursuant to which each such Person shall pledge to the
Purchasers all of the Stock, shares, membership interests, partnership
interests, venture interests and all other equity interests, in any form
whatsoever, of each and every Person in which such Person owns an equity
interest (other than the Excluded Entities), whether now existing or hereafter
arising. Schedule 4.3(b) sets forth a true, accurate and complete list of all
Stock Pledge Agreements to be delivered by or on behalf of the Company to the
Purchasers on the Initial Closing Date, setting forth the name of the pledgor,
the identity of each entity pledged pursuant thereto and a detailed description
of the equity interest pledged pursuant thereto. All shares of Stock to be
pledged pursuant to the Stock Pledge Agreement are represented by stock
certificates; none are uncertificated.
4.4 Security Agreements. The Company, FC Commercial, FC Consumer
Lending, FC Servicing, FC Capital, FC International and FC Holdings shall have
executed and delivered the Security Agreement to the Purchasers.
5. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS
5.1 General Representations and Warranties. Except as set forth in the
Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999
or as disclosed in writing to the Purchasers on the Closing Date in a document
labeled "Exceptions to Representations and Warranties" (the "Closing Date
Exceptions Schedule"), the Company warrants and represents to and covenants with
the Purchasers that:
22
(a) Organization.
(i) The Company is and at all times hereafter shall
be a corporation, duly organized and existing and in good standing
under the laws of the State of Delaware and qualified or licensed to do
business and in good standing in all states in which the laws thereof
require the Company to be so qualified and/or licensed and in which the
failure to so qualify could have a Material Adverse Effect. Schedule
5.1(a)(i) identifies each jurisdiction in which the Company has
qualified or been licensed to do business and describes the nature and
current status of any such qualification or license.
(ii) Each Affiliated Entity is and at all times
hereafter shall be a corporation or a limited partnership, duly
organized and existing and in good standing under the laws of the state
of its organization and qualified or licensed to do business and in
good standing in all states in which the laws thereof require each
Affiliated Entity to be so qualified and/or licensed and in which the
failure to so qualify could have a Material Adverse Effect. Schedule
5.1(a)(ii) identifies each jurisdiction in which each Affiliated Entity
has qualified or been licensed to do business and describes the nature
and current status of any such qualification or license.
(b) Entity Power.
(i) The Company has the right, power and capacity and
is duly authorized and empowered to enter into, execute, deliver and
perform this Agreement and the Other Agreements to which it is a party.
(ii) Each Affiliated Entity has the right, power and
capacity and is duly authorized and empowered to enter into, execute,
deliver and perform those Other Agreements to which it is a party.
(c) Violation of Organizational Documents.
(i) The execution, delivery and/or performance by the
Company of this Agreement and the Other Agreements to which it is a
party do not, by the lapse of time, the giving of notice or otherwise,
constitute a violation of any applicable law or a breach of any
provision contained in the Organic Documents of the Company, or
contained in any agreement, instrument or document to which the Company
is now or hereafter a party or by which it or any of its Assets is or
may become bound.
(ii) The execution, delivery and/or performance by
each Affiliated Entity of the Other Agreements to which it is a party
do not, by the lapse of time, the giving of notice or otherwise,
constitute a violation of any applicable law or a breach of any
provision contained in the Organic Documents of such Affiliated Entity,
or contained in any agreement,
23
instrument or document to which such Affiliated Entity is now or
hereafter a party or by which it or any of its Assets is or may become
bound.
(d) Enforceability.
(i) This Agreement and the Other Agreements to which
the Company is a party are the legal, valid and binding agreements of
the Company, enforceable in accordance with their respective terms,
except as enforcement thereof may be subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law); and
(ii) The Other Agreements to which an Affiliated
Entity is a party are the legal, valid and binding agreements of such
Affiliated Entity, enforceable in accordance with their respective
terms, except as enforcement thereof may be subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law);
(e) Ownership
(i) Schedule 5.1(e) sets forth all classes of stock
of the Company, the shareholders thereof (other than members of the
general public), addresses of each shareholder, number of shares owned
and how the shares are held;
(ii) Schedule 5.1(e) (as may be amended from time to
time) sets forth all classes of stock and/or partnership interests of
each Affiliated Entity, the shareholders and/or portions thereof, and
the addresses, number of shares and/or partnership interests owned and
how the shares are held.
(iii) Schedule 5.1(e) (as may be amended from time to
time) sets forth all options, warrants and other rights to acquire
Stock or other equity interests of the Company, any Affiliated Entity
and any Pledged Entity, the nature of such option, warrant or right and
the conditions for the exercise thereof. Each Purchaser hereby
expressly consents to the issuance of Stock and/or other equity
interests of any Person in accordance with such options, warrants and
rights.
(iv) The Company shall deliver to the Purchasers
notice within (10) Business Days after the Company or any other Loan
Party acquires the Stock, partnership interest or other equity interest
in any Person, after the date hereof. The Company shall also amend
Schedule 5.1(e) and promptly deliver such amended schedule to each
Purchaser. Unless Majority Noteholders elect not to require the Company
or an Affiliated Entity to pledge its equity interest in such Person,
the Company and/or such Affiliated Entity: (A) shall grant
24
to the Purchasers a perfected security interest in its equity interest
in such Person, junior only to that of the Lenders under the Loan
Agreement, (B) shall deliver a Stock Pledge Agreement or such other
pledge agreement in form and substance acceptable to Majority
Noteholders, (C) shall amend the applicable Schedules of the applicable
Stock Pledge Agreement, (D) shall execute and deliver to the Pledged
Entity a notice of lien, (E) shall execute any and all financing
statements required by the Majority Noteholders to perfect any granted
security interest, (F) except as otherwise provided by the
Subordination Agreement, shall deliver the original Stock certificates
or other evidence of ownership to Majority Noteholders (or, if
consented to by the Majority Noteholders, to the Lenders on behalf of
the Purchasers), together with an assignment separate from certificate
therefor, and (G) shall take such other action to effect and perfect
such security interest as the Majority Noteholders shall reasonably
require. In the event Majority Noteholders elect not to require a
pledge of such equity interests, the Company shall amend Schedule 4.3.
(f) Fictitious Names.
(i) Each of the fictitious names, if any, used by the
Company during the five (5) year period preceding the date of this
Agreement is set forth on Schedule 5.1(f) attached hereto (as amended
from time to time) and none of such fictitious names are registered
trademarks or tradenames with the U.S. Patent and Trademark Office,
except as set forth in Schedule 5.1(f);
(ii) Each of the fictitious names, if any, used by
each Affiliated Entity during the five (5) year period preceding the
date of this Agreement is set forth on Schedule 5.1(f) attached hereto
(as amended from time to time), and none of such fictitious names are
registered trademarks or tradenames with the U.S. Patent and Trademark
Office, provided that, variations on the corporate name of Affiliated
Entities in states where used solely for qualifying to do business
therein shall and have been excluded from such schedule, with the
Purchasers' consent and approval.
(g) Title. Schedule 5.1(g) is a true, accurate and complete
list of all Liens relating to the Pledged Property on the date hereof.
At all times following acquisition thereof: (i) First X and First B
shall own fee title to its real estate subject to no liens other than
the Permitted Liens, and (ii) the Company and each Affiliated Entity
shall have good, indefeasible and merchantable title to and ownership
of all of its Assets, free and clear of all Liens, except the Permitted
Liens.
(h) Financial Warranty. The Company: (i) is now paying, and at
all times hereafter shall pay, its debts as they mature, except as set
forth in Schedule 5.1(h) to the Loan Agreement, (ii) now owns, and
shall at all times hereafter own, property which, at a fair valuation,
is greater than the sum of its debt and (iii) now has, and shall at all
times hereafter have, capital sufficient to carry on its business and
transactions and all businesses and transactions in which it is about
to engage. Except as set forth on Schedule 5.1(h), each
25
Affiliated Entity: (i) is each now paying, and at all times hereafter
shall pay, its respective debts as they mature and (ii) each now has,
and shall at all times hereafter have, capital sufficient to carry on
its business and transactions and all businesses and transactions in
which it is about to engage.
(i) Proceedings. Except as set forth on the Closing Date
Exceptions Schedule, there are no actions or proceedings which are
pending or threatened against the Company or any Affiliated Entity
which have had or could reasonably be expected to have a Material
Adverse Effect.
(j) Government Contracts. Except as set forth on Schedule
5.1(j), neither the Company nor any Affiliated Entity has any
government contracts.
(k) Adequate Licenses. The Company and each Affiliated Entity
possesses adequate Assets, licenses, patents, copyrights, trademarks
and tradenames to continue to conduct its business as previously
conducted by it and as contemplated in the foreseeable future, except
such licenses, patents, copyrights, trademarks and trade names the
failure of which to obtain could not be reasonably expected to have a
Material Adverse Effect.
(l) Government Permits; Consents.
(i) The Company and each Affiliated Entity has been
and is in good standing with respect to all governmental permits,
certificates, consents and franchises necessary to continue to conduct
its business as previously conducted prior to the date hereof and to
own or lease and operate its properties as now owned or leased by it.
None of said permits, certificates, consents or franchises contain any
term, provision, condition or limitation more burdensome than such as
are generally applicable to Persons engaged in the same or similar
business as the applicable Loan Party.
(ii) Except for those consents set forth on Schedule
5.1(l), no approval, consent, waiver, order or other authorization of
any Governmental Authority or any other Person (including without
limitation shareholders, partners, members, equity owners, holders of
Indebtedness Instruments or any owner or holder of a Lien upon the
Assets of any one or more of them or any of their Affiliates) is
required by or on behalf of the Company or any Affiliated Entity in
connection with the execution, delivery and performance of this
Agreement and each of the Other Agreements. The Company and each
Affiliated Entity has received the consents described on Schedule
5.1(l) and has delivered a copy thereof to the Purchasers, which
consents are in full force and effect, unmodified and unamended on the
date hereof.
(m) Charge; Restrictions. Neither the Company nor any
Affiliated Entity is a party to (nor are any of its Assets otherwise
subject to) any contract or agreement or subject to any Charge (other
than Charges owed by First X or First B), restriction, judgment, decree
26
or order materially and adversely affecting its business, property,
assets, operations or condition, financial or otherwise, other than ad
valorem taxes not yet due and payable.
(n) Compliance with Laws. Neither the Company nor any
Affiliated Entity is in violation of any applicable statute,
regulation, order or ordinance of the United States of America, of any
state, city, town, municipality, county or of any other jurisdiction,
or of any agency thereof, including the Federal Reserve Board, in any
respect which has, had, or could reasonably be expected to have, a
Material Adverse Effect.
(o) Compliance with Indebtedness Instruments. Other than those
defaults set forth on Schedule 5.1(o) (as said Schedule may be amended
from time to time), neither the Company nor any Affiliated Entity is in
default under any Indebtedness Instrument.
(p) Financials. The Financials heretofore delivered by the
Company or any Affiliated Entity to the Purchasers fairly and
accurately present the Assets, liabilities, financial condition and
results of operations of the Company and any such Affiliated Entity as
of and for the periods ended on the indicated dates and have been
prepared in accordance with GAAP applied on a basis consistently
followed in all material respects throughout the periods involved.
(q) Tax Returns. The Company and each other member of the
Consolidated Group has filed or caused to be filed all tax returns
which are required to be filed, and has paid all Charges shown to be
due and payable on said returns or on any assessments made against it
or any of its property, and all other Charges imposed on it or any of
its properties by any Governmental Authority except for ad valorem
taxes.
(r) No Material Adverse Change. Since September 30, 1999, no
event or circumstance has occurred that has, had or could reasonably be
expected to have a Material Adverse Effect other than as set forth in
the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1999.
(s) No Indebtedness. Except as disclosed in the most recent
Financials heretofore delivered by the Company to the Purchasers and in
Schedule 5.1(h), Schedule 5.1(s), Schedule 5.1(t), Schedule 5.1(u), and
Schedule 6.3(l), none of the Company or any other Loan Party has any
Indebtedness (except for Indebtedness arising in the ordinary course of
its business since the dates reflected in the Financials that is not
Indebtedness for borrowed money), has guaranteed or entered into any
Guaranty Equivalent (other than as a result of the endorsement of any
instrument of items of payment for deposit or collection in the
ordinary course of business or as otherwise expressly permitted
pursuant to the terms hereof) the obligations of any Person.
(t) Affiliate Indebtedness. Attached hereto as Schedule 5.1(t)
(as amended from time to time) is a true, accurate and complete
schedule of all Indebtedness, other than the Pledged Notes and the
Excluded Notes, owing by any one or more of the Company, any
27
Affiliated Entity or any other Affiliate of the Company setting forth:
(i) the date such Indebtedness was incurred; (ii) the original
principal amount thereof and the outstanding principal balance thereof
as of the date hereof; (iii) the interest rate payable thereon; (iv)
whether such Indebtedness is evidenced by a note or other writing and
whether any security has been granted to secure payment thereof; (v)
the payment terms thereof; (vi) the maturity date thereof; and (vii)
whether there has been any notice of default, or to the Company's
knowledge, any default thereunder.
(u) Affiliate Notes. Attached hereto as Schedule 5.1(u) is a
true, accurate and complete schedule of all promissory notes made by
any Affiliate payable to the order of the Company or an Affiliated
Entity, other than the Pledged Notes and the Excluded Notes. If at any
time after the date hereof any Affiliate borrows money or otherwise
incurs Indebtedness from the Company or an Affiliated Entity, the
Company shall immediately (i) give the Purchasers notice thereof, (ii)
deliver a copy of such note to the Majority Noteholders (or, if
consented to by the Majority Noteholders, to the Lenders on behalf of
the Purchasers), (iii) prepare a Schedule 5.1(u)(iii) (as amended from
time to time) setting forth the maker and holder of such note, the
principal amount thereof and the payment terms thereof and (iv) if
requested by Majority Noteholders, cause the holders of such note to
pledge such note to the Purchasers pursuant to a Note Pledge Agreement,
in form and substance acceptable to Majority Noteholders, in their sole
and absolute discretion.
(v) No Liability on the Purchasers. The execution, delivery
and performance by the Company and each other Affiliated Entity of this
Agreement and/or the Other Agreements will not, except to the extent
caused by independent actions of the Purchasers, impose on or subject a
Purchaser to any liability, whether fixed or contingent, in respect of
any Environmental Law relating to the operation of the Company's
business. A Purchaser's exercise of any of the rights or remedies
described in this Agreement or in any of the Other Agreements shall not
constitute a breach of any provision contained in any agreement,
instrument or document concerning the assignment or license of, or the
payment of royalties for, any patents, patent rights, tradenames,
trademarks, trade secrets, know-how, copyrights or any other form of
intellectual property now or at any time or times hereafter protected
as such by any applicable law.
(w) Affiliates. Schedule 5.1(w) attached hereto is a true,
accurate and complete schedule of the Company's Affiliates, together
with a description of the Company's relationship to each such
Affiliate.
(x) Real Property; Environmental Issues. Neither the Company
nor any Affiliated Entity, other than First X and First B, now owns or
at no time in the last five (5) years has owned, any real property.
Neither the Company nor any Affiliated Entity has received a summons,
citation, notice or directive from the Environmental Protection Agency
or any other Governmental Authority concerning any action or omission
resulting in the releasing,
28
or otherwise disposing of hazardous waste or hazardous substances into
the environment with respect to any real property.
(y) SEC Filings. The Company has filed and made available to
the Purchasers each form, registration statement, schedule, report,
proxy statement and document required to be filed by the Company with
the SEC since January 1, 1995 (collectively, the "SEC Reports"). Except
as set forth on Schedule 5.1(y), the SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of
the Securities Laws and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in
the SEC Reports or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. None of the Affiliated Entities is subject to the reporting
requirements of the Exchange Act. Since January 1, 1995, the Company
has made all filings with the SEC in a timely manner as required by law
and no event has occurred that requires an additional filing or any
amendment to a prior filing which has not been made or filed.
(z) Investment Company Act and Public Utility Holding Company
Act. Neither the Company nor any Affiliated Entity nor the entering
into of this Agreement or the Other Agreements, nor the issuance of the
Notes and the Warrants is subject to any of the provisions of the
Investment Company Act of 1940, as amended. Neither the Company nor any
Affiliated Entity is a "holding company" as defined in the Public
Utility Holding Company Act of 1935, as amended, or subject to any
other federal or state statute or regulation limiting its ability to
incur or guarantee Indebtedness for money borrowed.
(aa) Loan Agreement. Concurrently herewith the Company has
entered into the Loan Agreement with the Lenders. Attached hereto as
Schedule 5.1(aa) is a complete and accurate schedule of all material
documents, instruments and agreements executed, delivered or caused to
be delivered by the Company or any other Person to the Lenders to
evidence, guaranty or secure the Senior Debt and which comprise the
Loan Agreement. The Company hereby represents and warrants to the
Purchasers that concurrently herewith the Company has delivered or
caused to be delivered to the Purchasers a true, accurate and complete
copy of the Loan Agreement and that such agreement has not been
amended, modified or supplemented, nor have any of the provisions
thereof been waived. The Loan Agreement has been duly executed and
delivered by the Company and is in full force and effect. Each of the
representations and warranties of the Company contained in the Loan
Agreement is true and correct and the Purchasers shall be entitled to
rely on such representations and warranties with the same force and
effect as if they were set forth in this Agreement in full and made to
the Purchasers directly. The provisions of the Loan Agreement,
including but not limited to all representations, warranties and
covenants of the Company and the Affiliated Entitities which are a
party thereto, are legal, valid and binding obligations of the Company
and such Affiliated Entities, enforceable in accordance with the terms
thereof.
29
(bb) [Intentionally deleted.]
(cc) Status of Securities and Underlying Common Stock. When
delivered to the Purchasers at the Closing against payment therefor as
provided herein, the Securities will be duly authorized and validly
issued and will not be issued in violation of the preemptive rights of
any Person. Shares of Underlying Common Stock issued by the Company
upon exercise of the Warrants in accordance with their terms will be
duly authorized, validly issued and non-assessable at the time of
issuance and will not be issued in violation of the preemptive rights
of any Person.
(dd) Qualification.
(i) Solely by reason of (and without regard to any
other activities of a Purchaser in any state in which Assets
are located) the entering into, performance and enforcement of
this Agreement and the Other Agreements by a Purchaser will
not constitute doing business by the Purchaser in any of such
states or result in any liability of the Purchaser for taxes
or other governmental charges; and qualification by the
Purchaser to do business in such jurisdiction is not necessary
in connection with, and the failure to so qualify will not
affect, the enforcement of, or exercise of any rights or
remedies under, any of such documents.
(ii) No "business activity," "doing business" or
similar report or notice is required to be filed by any
Purchaser in any such jurisdiction in connection with this
Agreement or any Other Agreement or the transactions
contemplated hereby and thereby, and the failure to file any
such report or notice will not affect the enforcement of, or
the exercise of any rights or remedies under, this Agreement
or any of the Loan Documents.
(ee) Disclosure. Neither this Agreement nor any Other
Agreement nor any statement, list, certificate or other document or
information, nor any schedules to this Agreement or any Other
Agreement, delivered or to be delivered to the Purchasers, contains or
will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make statements contained
herein or therein, in light of the circumstances in which they are
made, not misleading. Copies of all documents delivered to a Purchaser
or Purchasers pursuant to Article 5 or any other provision of this
Agreement are true, correct and complete copies thereof and include all
Modifications thereto.
(ff) Assets of Affiliate Entities. No entity listed on
Schedule 5.1(cc) has Assets with a fair market value of greater than
$100,000. The fair market value of all Assets of all the entities
listed on Schedule 5.1(cc), in the aggregate, is less than $500,000.
5.2 Survival of Warranties and Representations. The Company covenants,
warrants and represents to the Purchasers that all representations and
warranties of the Company contained in this
30
Agreement and the Other Agreements shall be true on the date hereof and shall
survive the execution, delivery and acceptance hereof and thereof by the parties
thereto and the closing of the transactions described herein and therein or
related hereto or thereto.
5.3 Exclusion of Harbor Debtors. Notwithstanding anything to the
contrary contained in Section 5.1, none of the representations, warranties,
covenants or agreements set forth in Section 5.1 shall be deemed to be
representations, warranties, covenants or agreements with respect to or by any
Harbor Debtor.
6. COVENANTS AND CONTINUING AGREEMENTS
6.1 Financial Covenants. The Company and all other members of the
Consolidated Group, on a consolidated basis, shall, at all times during the term
hereof, measured quarterly:
(a) maintain a ratio of Indebtedness to Tangible Net Worth
equal to or less than 5.5 to 1 for the period ending September 30, 1999
and a ratio of Indebtedness to Tangible Net Worth equal to or less than
4.5 to 1 for each period thereafter;
(b) maintain a Tangible Net Worth equal to or greater than
$45,000,000 for the period ending September 30, 1999 and for each
period thereafter;
(c) maintain a Tangible Net Worth equal to or greater than
$45,000,000 plus fifty percent (50%) of the cumulative positive net
income for the immediately preceding quarter ( measured at the end of
such period), provided that, in any event, a Tangible Net Worth equal
to or greater than $45,000,000 must always be maintained;
(d) maintain a ratio of EBITDA to interest coverage equal to
1.5 to 1 measured on a trailing three month basis commencing December
31, 1999.
All covenants set forth in this Section 6.1 shall be measured
quarterly as at the end of each fiscal quarter of the Company, upon receipt of
the statements delivered to the Purchasers pursuant to Section 6.2(c)(iii) or
the annual consolidated financial statements delivered in accordance with
Section 6.2(c)(i), if available. In the event that the Company does not deliver
a quarterly statement as and when required by Section 6.2(c)(iii) or an annual
statement as and when required by Section 6.2(c)(i), the Company shall be deemed
to be in default of this Section for purposes of Section 7.1(a).
6.2 Affirmative Covenants. The Company warrants and represents to and
covenants with the Purchasers that the Company shall, and shall cause each
Affiliated Entity to, do all of the following during the term hereof:
(a) Representation and Warranties. Subject to the Company's
right to cure set forth in Section 7.1(e), to the extent any
representation or warranty contained herein refers
31
to an event or state of facts which exists on the date hereof and shall
exist during the term hereof, said representation or warranty shall be
deemed to be an affirmative covenant by the Company to take all
actions, omit to take such actions or cause such actions to be taken
which shall be necessary or desirable to cause such representation or
warranty to be true and accurate at all times during the term hereof.
To the extent any representation, warranty or covenant herein
(including the negative covenants set forth in Section 6.3) relates to
any other Person (including but not limited to any Affiliated Entity or
any Pledged Entity) it shall be deemed to be a covenant of the Company
to cause such Person to comply with or otherwise perform such
representation, warranty or covenant, whether or not the Company has
the legal, corporate or other ability to cause such compliance or
performance.
(b) Corporate Existence. The Company and the Affiliated
Entities shall preserve and maintain their respective corporate
existence, rights, privileges and franchises in the jurisdiction of
their respective incorporation or organization, and qualify and remain
qualified to do business in each other jurisdiction in which such
qualification is necessary in view of their respective business or
operations, except such jurisdictions where failure to qualify would
not have or could not reasonably be expected to have a Material Adverse
Effect.
(c) Records; Reports. The Company shall keep Records and
prepare financial statements and shall cause to be furnished to the
Purchasers the following (all of the foregoing and following which
comprise financial statements are to be kept and prepared in accordance
with GAAP applied on a basis consistent with the Financials unless the
Company's independent certified public accountants concur in any
changes therein and such changes are consistent with then applicable
GAAP).
(i) (a) As soon as available but not later than
ninety (90) days after the close of each fiscal year of the
Company, an audited consolidated balance sheet of the Company
and the other members of the Consolidated Group as at the end
of such year, the related statement of operations for such
year and a reconciliation of capital for such year, all
certified on an unqualified basis by a firm of independent
certified public accountants selected by the Company and
acceptable to Majority Noteholders in their sole and absolute
discretion.
(b) As soon as available but not later than ninety
(90) days after the close of each fiscal year of the Company,
an unaudited consolidating balance sheet of the Company and
the other members of the Consolidated Group as at the end of
such year prepared on a consolidating basis, the related
statements of operations for such year and a reconciliation of
capital for such year, prepared and certified by the chief
financial officer of the Company.
(ii) Concurrently with the delivery of the financial
statements described in Section (i) above for fiscal years
ending after December 31, 1998: (A) a certificate
32
of the aforesaid independent certified public accountants
certifying to the Purchasers that based upon their examination
of the affairs of the Company and the other members of the
Consolidated Group (excluding the Harbor Debtors), performed
in connection with the preparation of said financial
statements, they are not aware of the occurrence or existence
of any condition or event which constitutes an Event of
Default or Unmatured Default, or, if they are aware thereof,
the nature thereof, and (B) a reliance letter executed by an
authorized partner of the aforesaid independent certified
public accountants, in form and substance reasonably
acceptable to Majority Noteholders and acknowledging that the
Purchasers may rely on such financial statements in connection
with this Agreement notwithstanding that the Purchasers are
not in privity with such independent certified public
accountants in connection with such financial statements.
(iii) As soon as available but not later than thirty
(30) days after the end of each calendar month hereafter, a
consolidated and consolidating balance sheet of the Company
and the other members of the Consolidated Group as at the end
of, and the related statement of operations for, the portion
of such Person's fiscal year then elapsed, all certified by
the chief financial officer of such Person to be prepared in
accordance with GAAP and to present fairly the financial
position and results of operations of such Person for such
period.
(iv) Concurrently with delivery to its stockholders
copies of all financial and other information delivered by the
Company to such Persons, including without limitation, its
proxy statements and annual reports to stockholders. Within
two (2) Business Days after delivery to the SEC by the
Company, which in all cases shall be on a timely basis in
accordance with the applicable document and the Securities
Laws, copies of all reports and other filings filed by the
Company with the SEC, including without limitation all reports
on Forms 10-K, 10-Q or 8-K filed under the Exchange Act and
all registration statements filed under the Securities Act.
(v) Concurrently with delivery of the Financials
required pursuant to Sections 6.2(c)(i) and (iii) hereof, a
certificate executed by the President, Treasurer or Chief
Financial Officer of the Company that no Event of Default or
Unmatured Default (or comparable event or default, to the
extent a different term is used in any Indebtedness Instrument
other than this Agreement to describe a like situation or
event) has occurred and is continuing under the terms and
provisions of any Indebtedness Instrument (including but not
limited to compliance with the covenants set forth in Section
6.1) or if an Event of Default or Unmatured Default (or
comparable event or default, however called) has occurred,
setting forth the details of such event and the action which
the Company proposes to take with respect thereto.
33
(vi) Every two weeks, a statement of income and
expense of FC Capital, including a statement of proceeds from
the liquidation of assets, in form and detail reasonably
acceptable to the Majority Noteholders.
(vii) Such other data and information (financial and
otherwise) as a Purchaser, from time to time, reasonably may
request bearing upon or related to the Company's or any
Affiliated Entity's financial condition and/or results of
operations.
(d) Insurance. The Company and the Affiliated Entities, at
their sole cost and expense, shall keep and maintain: (i) policies of
insurance against all hazards and risks ordinarily insured against by
other owners or users of properties in similar business or as
reasonably requested in writing by Majority Noteholders; and (ii)
public liability insurance relating to such Person's ownership and use
of its Assets. All such policies of insurance shall be in form, with
insurers and in such amounts as may be satisfactory to Majority
Noteholders. The Company shall deliver to Majority Noteholders the
original (or certified) copy of each policy of insurance, and evidence
of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an
endorsement, in form and substance acceptable to Majority Noteholders,
showing losses payable to the Purchasers. Such endorsement or an
independent instrument furnished to Majority Noteholders shall provide
that all insurance companies will give Majority Noteholders at least
thirty (30) days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no act or
default of the Company or any other Person shall affect the right of
the Purchasers to recover under such policy or policies of insurance in
case of loss or damage. Upon request by the Majority Noteholders and
upon the occurrence of an Event of Default or Unmatured Default, the
Company hereby directs all insurers under such policies of insurance
(except those of public liability) to pay all proceeds payable
thereunder directly to the Purchasers as their interests shall appear.
Upon request by the Majority Noteholders and upon the occurrence of an
Event of Default or Unmatured Default, the Company irrevocably appoints
Majority Noteholders (and all officers, employees or agents designated
by Majority Noteholders) as the Company's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of the
Company on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance. In the event the Company at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating
thereto, then a Purchaser, without waiving or releasing any of the
Company's Obligations or any of the Company's Liabilities or any Event
of Default or Unmatured Default hereunder, may at any time or times
thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premium and take any
other action with respect thereto which the Purchaser deems advisable.
All sums so disbursed by the Purchasers, including reasonable
attorneys' fees, court costs, expenses and other charges relating
thereto, shall be part of the Company's Liabilities, payable by the
Company to the Purchasers on demand.
34
The Purchasers shall also have been named as an additional insured with
respect to the Company's liability insurance.
(e) Payment of Charges. Other than Charges payable by First X
or First B, the Company and each Affiliated Entity shall pay promptly,
when due, all Charges, and the Company and each Affiliated Entity shall
not permit any Charges to arise or to remain unpaid, and will promptly
discharge the same. In the event the Company or any Affiliated Entity,
at any time or times hereafter, shall fail to pay the Charges or to
obtain such discharges as required herein, the Company shall so advise
the Purchasers thereof in writing. Any one or more Purchasers may,
without waiving or releasing any of the Company's Obligations or any of
the Company's Liabilities or any Event of Default or Unmatured Default
hereunder, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, or obtain such
discharge and take any other action with respect thereto which the
Majority Noteholders deem advisable. All sums so paid by the Purchasers
and any expenses, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be part of the
Company's Liabilities, payable by the Company to the Purchasers on
demand. Notwithstanding the foregoing, the Company or any Affiliated
Entity may permit or suffer Charges to arise and remain unpaid and may
dispute, without prior payment thereof, such Charges, on the conditions
that: (i) the Company or the applicable Affiliated Entity, in good
faith, shall be contesting the same in an appropriate proceeding
diligently pursued; (ii) enforcement thereof against any assets of the
Company or the applicable Affiliated Entity shall be stayed; and (iii)
appropriate reserves therefor shall have been established on the
Records of the Company or the applicable Affiliated Entity in
accordance with GAAP.
(f) Pay Debts. Except as disclosed in Schedule 5.1(h) and
Charges payable by First X and First B, the Company and each Affiliated
Entity shall pay or discharge or otherwise satisfy all Indebtedness at
or before maturity or before the same becomes delinquent, provided that
neither the Company nor any Affiliated Entity shall be required to pay
any Indebtedness while the same is being contested by it in good faith
and by appropriate proceedings so long as the Company or the applicable
Affiliated Entity shall have set aside on its books reserves in
accordance with GAAP with respect thereto and title to any property of
the Company or the applicable Affiliated Entity is not jeopardized.
(g) Compliance with Laws. The Company and each Affiliated
Entity shall comply with all laws, rules, regulations and governmental
orders (federal, state and local), including all Environmental Laws,
having applicability to it or to the business or businesses at any time
conducted by it, where the failure to so comply would have, or could
reasonably be expected to have, a Material Adverse Effect.
(h) Perform Obligations. The Company and each Affiliated
Entity shall duly and punctually pay and perform each of its
obligations under this Agreement and the Other Agreements in accordance
with the terms hereof and thereof.
35
(i) [intentionally deleted]
(j) Payment of Dividends from Subsidiaries. To the extent
necessary to enable it to make payments on the Notes in accordance with
their terms, the Company shall cause dividends to be paid to it by its
Subsidiaries (whether in existence as of the date of issuance of the
Notes or thereafter formed or acquired) in amounts which are sufficient
to enable the Company to satisfy its payment obligations under the
Notes, provided that the Company shall not be required to take any
action which would result in a Subsidiary paying dividends to the
extent not permitted by applicable law and regulation and/or
restrictions existing under agreements in effect on the date of initial
issuance of the Notes if the Company receives an opinion of outside
counsel (in form and substance satisfactory to Majority Noteholders) as
to the existence of the relevant restriction no later than the
applicable interest payment date or the date of maturity of the Notes,
whether by acceleration or otherwise.
(k) Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Notes,
wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of its obligations under the
Notes, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantages of any such law.
(l) Investigation and Confidentiality.
(i) The Company shall permit each Purchaser and its
representatives reasonable access during normal business hours
to its properties and personnel, and shall disclose and make
available to each Purchaser all books, papers and records
relating to the assets, stock ownership, properties,
operations, obligations and liabilities of the Company and its
Subsidiaries, including, but not limited to, all books of
account (including the general ledger), tax records, minute
books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws,
material contracts and agreements, filings with any regulatory
authority, accountants' work papers (other than those that are
the property of its independent outside auditors), litigation
files, loan files, plans affecting employees, and any other
business activities or prospects in which the Purchaser may
have a reasonable interest in connection with an investment in
the Securities or the Underlying Common Stock, provided that
such access shall be reasonably related to the transactions
contemplated hereby and not unduly interfere with normal
operations, and provided further that in the event that any of
the foregoing are in the control of any third party, the
Company shall use its reasonable best efforts to cause such
third party to provide access to such materials to the
Purchaser who shall request the same. In the event that the
Company is prohibited by law from providing
36
any of the access referred to in the preceding sentence to a
Purchaser, it shall use its reasonable best efforts to obtain
promptly waivers thereof so as to permit such access. The
Company shall make the directors, officers, employees and
agents and authorized representatives (including counsel and
independent public accountants) of the Company and its
Subsidiaries available to confer with each Purchaser and its
representatives, provided that such access shall be reasonably
related to the transactions contemplated hereby and not unduly
interfere with normal operations.
(ii) All information furnished to a Purchaser by the
Company previously in connection with the transactions
contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the Company and the Purchaser
covenants, severally and not jointly and as to itself only,
that it shall use its best efforts to keep confidential all
such information and shall not directly or indirectly use such
information for any purpose other than in connection with the
transactions contemplated hereby or any other financial
accommodations that may from time to time be extended by the
Purchaser or any affiliate of the Purchaser to the Company or
any Affiliate thereof. The obligation to keep such information
confidential shall continue for five years from the date
hereof but shall not apply to (i) any information which the
Purchaser can establish by convincing evidence (x) was already
in its possession prior to the disclosure thereof by the
Company; (y) was then generally known to the public; or (z)
became known to the public through no fault of the Purchaser;
or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
(m) Applications.
(i) As soon as practicable after the receipt from any
holder of the Warrants (the "Notice Giver") of notice of an
intent to exercise a number of Warrants sufficient to require
a filing under the HSR Act, but in any event no later than the
tenth Business Day after receipt of such notice, the Company
will (i) prepare and file with the Antitrust Division of the
U.S. Department of Justice (the "DOJ") and the Federal Trade
Commission (the "FTC") the Notification and Report Form
(accompanied by all documentary attachments contemplated
thereby) required by the HSR Act, (ii) upon the request of any
Notice Giver, request early termination of the waiting period
imposed by the HSR Act, (iii) coordinate and cooperate with
the Notice Giver in responding to formal and informal requests
for additional information and documentary material from the
DOJ and the FTC in connection with such filing, (iv) use its
reasonable best efforts to take, or cause to be taken, all
reasonable action and to do, or cause to be done, all things
reasonably necessary and appropriate to permit the issuance to
the Notice Giver of the shares of Common Stock issuable upon
exercise of the Warrants with respect to which any filing is
required under the HSR Act and (v) [intentionally deleted].
The Notice Giver agrees to provide to the Company all
reasonable cooperation in connection with the making
37
of such filings under the HSR Act, provided, however, that
neither the Company nor any such Notice Giver shall be
required in connection with any such filing to enter into any
agreement, or take or refrain from taking any action, as a
condition to obtaining any approval required under the HSR Act
if, in the judgment of such party, such condition could have a
material adverse effect on such party or its business.
(ii) In the event that any other approval, consent or
non-objection need be obtained by the Company, any Primary
Obligor and/or any Secondary Obligor from, or a notice or
other filing need be filed by the Company, any Primary Obligor
and/or any Secondary Obligor with, any Governmental Authority
in connection with (i) the execution, delivery and performance
of this Agreement or any Other Agreement by the Company or any
Primary Obligor and/or any Secondary Obligor (ii) the
Company's issuance of Common Stock upon exercise of the
Warrants, the Company shall take and shall cause the Primary
Obligors and Secondary Obligors to take, as applicable, all
actions reasonably necessary to obtain any such approval,
consent or non-objection or file such notice or other filing
as promptly as practicable, and each Purchaser agrees to
cooperate with the Company in obtaining or filing the same.
The Company shall provide copies of any notice, application or
other document required to be filed pursuant to this Section
6.2(m) (excluding any confidential information) to the
holder(s) seeking to exercise a Warrant or Warrants for review
not less than three Business Days prior to the making of such
filing and shall keep such holder apprised of the status of
such filing and the consideration thereof by the relevant
Governmental Authority.
(n) Rule 144 and Rule 144A Reporting. With a view to making
available to holders of the Securities and the Underlying Common Stock
the benefits of certain rules and regulations of the SEC which may
permit the sale thereof to the public without registration, the Company
agrees at all times to:
(i) make and keep public information available, as
those terms are understood and defined in Rules 144 and 144A
under the Securities Act (or any successors thereto); and
(ii) use its reasonable best efforts to file with the
SEC in a timely manner all documents required to be filed by
the Company under the Securities Laws.
(o) Non-Voting Stock. No later than May 15, 2000, the Company
shall have amended its certificate of incorporation to provide for, in
manner and substance satisfactory to the Majority Noteholders, a single
class of non-voting common stock (and any other provisions required to
be included in such certificate pursuant to the Warrants or the Option)
with such terms, provisons and rights (including as to convertibility)
as shall be satisfactory to the Majority Noteholders.
38
6.3 Negative Covenants. The Company warrants and represents to and
covenants with the Purchasers that neither the Company, nor any Affiliated
Entity, as the case may be, shall, without the prior written consent of Majority
Noteholders, which they may or may not give in their sole and absolute
discretion, concurrently or hereafter do any of the following:
(a) Sell or Encumber Assets. Neither the Company, nor any
Affiliated Entity shall assign, sell or transfer any of its Assets to
any Person, other than in the ordinary course of business, nor permit,
grant, or suffer a Lien upon any of its Assets, except (i) the
Permitted Liens and (ii) Charges payable by First X and First B.
(b) Attachment. Neither the Company nor any Affiliated Entity
shall permit or suffer any levy, attachment or restraint to be made
affecting any of its Assets.
(c) Receiver. Neither the Company nor any Affiliated Entity
shall permit or suffer any receiver, trustee or assignee for the
benefit of creditors, or any other custodian to be appointed to take
possession of all or any of its Assets, other than a custodian pursuant
to a voluntary custodial agreement entered into to perfect a security
interest permitted hereby.
(d) Amend Organic Documents; Business Objectives. Neither the
Company nor any Affiliated Entity shall make any change: (i) in its
Organic Documents or capital structure other than, in the case of the
Company, as required by Section 6.2(o); or (ii) in any of its business
objectives, purposes and operations, including by undertaking
additional business activities. Neither the Company nor any Affiliated
Entity shall engage in any business not of the same general type as
those conducted by it on the date hereof.
(e) Mergers and Acquisitions.
(i) Neither the Company nor any Affiliated Entity
shall merge or consolidate with any Person.
(ii) National Auto Funding shall remain inactive and
(without the Majority Noteholders's consent) will not merge,
consolidate or acquire the Assets of any Person, shall not
commence any new business venture and shall use the proceeds
of any sale or other disposition of its Assets to pay its
Pledged Notes.
(f) Stock Transfers.
(i) Except as contemplated herein and as disclosed in
Schedule 5.1(e), as amended from time to time with the consent
of Majority Noteholders, and except as permitted pursuant to
Section 6.3(f)(ii), neither the Company nor any Affiliated
Entity shall grant any option, warrant or other right to
purchase any equity interest in such Person, without in each
case the prior written consent of Majority Noteholders, which
consent shall not be unreasonably withheld.
39
(ii) Notwithstanding anything to the contrary
contained herein, the Company shall have the right to register
on Form S-3, and publicly offer and sell equity securities of
the Company under the following terms and conditions: (w) the
Company shall deliver notice to the Purchasers, within
twenty-four (24) hours of the filing with the SEC; (x) the
Company shall fully and timely comply with all Securities Laws
and with all terms and provisions of the underwriting
agreement pursuant to which such Securities are offered for
sale; (y) the prospectus and all other selling materials used
by the Company in such offering shall not contain any
misstatement of material fact or omit to state any fact which
would render the statements contained therein false or
misleading; and (z) the Company shall pay the proceeds of such
offering to the Lenders, in accordance with the terms in the
Loan Agreement (if any indebtedness shall then be outstanding
thereunder), and thereafter to the holders of the Notes in
accordance with the terms of this Agreement and the Other
Agreements, provided that nothing contained in this Agreement
shall affect the Company's obligations under the Warrants or
the Option.
(g) Adverse Transactions.
Neither the Company nor any Affiliated Entity shall
enter into any transaction which materially and adversely
affects its ability to perform its obligations under this
Agreement and the Other Agreements or to pay any other
Indebtedness. Neither the Company nor any other Loan Party
shall make any capital contribution, loan or gift to, or
investment in, or enter into any Guaranty Equivalent with
respect to the obligations of, any entity identified on
Schedule 5.1(cc) to the Loan Agreement at any time while any
of the Secured Obligations remain unpaid.
(h) Investments.
(i) Subject to the further limitations set forth in
Section 6.3(h)(ii), (iii) and (iv), after the date hereof,
neither the Company nor any Affiliated Entity shall make any
investment in the securities or obligations of any Person,
except in the ordinary course of business.
(ii) After the date hereof, neither the Company nor
any Affiliated Entity shall invest (either directly or
indirectly through an Affiliate) in: (A) the securities of any
Person organized under the laws of any country or governmental
body outside of the United States (other than commercial paper
and other debt securities of a Lender), (B) in the securities
of any Person which owns assets located outside of the United
States (other than commercial paper and other debt securities
of a Lender), or (C) in any assets located outside of the
United States, provided that nothing contained in this Section
6.3(h)(ii) shall be deemed to prohibit any such investment by
FC International.
40
(iii) After the date hereof, without Lenders' or the
Majority Noteholders' prior written consent, which consent may
be withheld in the Lenders' (or the Majority Shareholders', as
the case may be) sole and exclusive discretion, neither the
Company nor any the Affiliated Entity will invest in any
Person or any asset not specifically contemplated in the
Company's business plan delivered to the Purchasers and dated
October 1999 ( the "October Business Plan"), except with the
prior written consent of Majority Noteholders.
(iv) After the date hereof, FC Financial will only
invest in FC Commercial and/or FC Servicing in a manner
specifically contemplated in the October Business Plan. As
used in Sections 6.3(h)(ii), (iii) and (iv), "invest" shall
include, but not be limited to, (y) contributions to the
capital of a Person and (z) making loans or other financial
accommodations to a Person.
(v) Neither the Company nor any Affiliated Entity or
other Subsidiary of the Company or any Affiliated Entity shall
make any investment in any one or more of the Harbor Debtors
or FC Capital.
(i) Dividends; Payment of Fees, etc. The Company shall not
make any distributions or pay any dividends of property or assets with
respect to its Stock, including, but not limited to, any preferred
stock. Neither the Company nor any Affiliated Entity shall pay any
director's fees or any salaries to any director or shareholder unless
such shareholder or director is directly and actively employed by the
Company or any Affiliated Entity, provided that the Company may
compensate outside directors in an amount not to exceed $20,000 per
director per year.
(j) Fee Agreements. Attached hereto as Schedule 6.3(j) (as
amended from time to time) is a true, accurate and complete schedule of
all Fee Agreements to which the Company or any Affiliated Entity is a
party. The Purchasers hereby expressly consent to the performance by
the Company and said Affiliated Entities of said Fee Agreements, as in
effect on the date hereof. Within ten (10) Business Days after the
Company or any Affiliated Entity has entered into any new Fee Agreement
or shall have modified in any material respect any existing Fee
Agreement, the Company shall give Majority Noteholders notice thereof
and amend Schedule 6.3(j), if applicable, and shall, upon request by
Majority Noteholders, deliver a copy of any new or amended Fee
Agreement to the Purchasers. The Company shall not enter into any other
transactions with any Affiliate, including, without limitation,
agreements for the purchase, sale or exchange of property or the
rendering of any services to or by any Affiliate, or enter into, assume
or suffer to exist any employment, management, administration, advisory
or consulting contract with any Affiliate or, in each of the foregoing
cases, with any officer, director or partner of any Affiliate (or a
spouse or other relative of any of them) unless such transaction (a) is
otherwise not in violation of this Agreement or any other Loan
Document, (b) is in the ordinary course of its business and is upon
fair and reasonable terms no less favorable to it than it would obtain
in a comparable arms-length
41
transaction with a Person not an Affiliate, and (c) the consideration
payable pursuant to such transaction or series of similar transactions
with such Affiliates or its Subsidiaries is not greater than $50,000 in
the aggregate in any one calender year.
(k) Indebtedness. Neither the Company nor any Primary Obligor
shall contract, create, incur, assume or suffer to exist any
Indebtedness, except for (i) the Senior Debt; (ii) Indebtedness
existing on the Initial Closing Date and reflected on the Financials of
the Company delivered on such date; (iii) Indebtedness disclosed on
Schedules 5.1(s), (t) and (u); (iv) unsecured trade payables incurred
in the ordinary course of business; (v) the Indebtedness evidenced by
the Notes; (vi) subordinated Indebtedness permitted to be incurred by
the Company pursuant to the Loan Agreement and this Agreement (by
consent of the Majority Noteholders or otherwise) if the Net Proceeds
thereof are immediately applied in full to redeem Notes (on a pro rata
basis) pursuant to Section III of the Notes and (vi) the FC Commercial
Line of Credit and the FC Consumer Lending Line of Credit, if approved
in writing by Lenders or Majority Noteholders, which approval shall not
be unreasonably withheld.
(l) Loan; Guaranty Debt. Neither the Company nor any Primary
Obligor or Secondary Obligor shall make any loan to any Person except
for Loans made by the Company pursuant to Pledged Notes and except for
the Excluded Notes. Attached hereto as Schedule 6.3(l) is a true,
accurate and complete schedule of all Guaranty Equivalents entered into
by the Company and any Affiliated Entity on the date hereof. Except for
those Guaranty Equivalents disclosed on Schedule 6.3(l), neither the
Company nor any Affiliated Entity shall enter into any Guaranty
Equivalents.
(m) Pay Indebtedness. Except for the Senior Debt or in the
ordinary course of business, neither the Company nor any Affiliated
Entity shall defease, prepay, repay, purchase, redeem or otherwise
acquire any of its Indebtedness for borrowed money other than
Indebtedness evidenced by the Notes.
(n) Issue Power of Attorney. Except pursuant to this Agreement
and the Other Agreements, neither the Company nor any Affiliated Entity
shall issue any power of attorney or other contract or agreement giving
any Person power or control over the day-to-day operations of the
Company's or any Affiliated Entity's business, other than in connection
with Permitted Liens or Indebtedness expressly permitted pursuant to
the terms of this Agreement; provided, however, that FC International
and FC Holdings shall have the right to xxxxx xxxxxx-of-attorney
necessary to consummate transactions outside the United States, in the
ordinary course of its business, to acquire assets in transactions
subject to the following: if the person to whom such power of attorney
is granted is not the chairman or president of FC Commercial or the
senior vice president of FC Commercial (whether or not acting in such
capacity) or Xxxxxx X. Xxxxxx, then the amount of all equity
investments by FC Holdings or FC International in such transaction may
not exceed $3,000,000.
42
(o) Amendment of Credit Agreements. Neither the Company nor
any Affiliated Entity shall amend, modify or extend any note, credit
agreement, security agreement or other document, instrument or
agreement evidencing or securing Indebtedness of such entity, without
in each case the prior written consent of Majority Noteholders, which
consent may be withheld in their sole and absolute discretion; provided
that Borrower may extend existing credit facilities under financial
terms no more onerous than those provided for in the applicable
existing credit facility, including interest rate, costs and fees
payable to the provider of such facility.
(p) Use of Proceeds. The Company shall not use proceeds from
the issuance of the Initial Notes for any purpose other than to pay
Costs and to reduce the outstanding borrowings of the Company to the
Lenders in connection with the execution of the Loan Agreement. No
proceeds from the issuance of the Initial Notes shall be loaned to,
contributed as capital to, used to pay the debts or obligations of or
otherwise expended (either directly or indirectly) by the Company to,
nor shall the Company permit any Subsidiary or other Affiliate (other
than members of the Harbor Debtors) to make loans to, contribute
capital to, pay the debts or obligations of or otherwise expend monies
(either directly or indirectly) to, for the benefit of or on behalf of
any one or more of the Harbor Debtors.
(q) Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Company shall not, and shall not permit any
of its Subsidiaries (whether in existence as of the date of initial
issuance of the Notes or thereafter formed or acquired) to, create,
assume or otherwise cause or suffer to exist or to become effective any
consensual encumbrance or restriction on the ability of any such
Subsidiary to:
(i) pay any dividends or make any other distribution
on its Stock or other equity interests to the Company or any
of its Subsidiaries;
(ii) make payments in respect to any Indebtedness
owed to the Company or any other Subsidiary of the Company; or
(iii) make loans or advances to the Company or any
Subsidiary or to guarantee Indebtedness of the Company or any
other Subsidiary of the Company;
other than, in the case of (i), (ii) and (iii),
(1) restrictions existing under agreements
in effect on the date of initial issuance of the
Notes;
(2) consensual encumbrances or restrictions
binding upon any Person at the time such Person
becomes a Subsidiary of the Company so long as such
encumbrances or restrictions (i) are not created,
incurred or assumed
43
in contemplation of such Person becoming a Subsidiary
and (ii) do not encumber or restrict the Company or
any other Subsidiary of the Company;
(3) restrictions with respect to a
Subsidiary imposed pursuant to an agreement which has
been entered into for the sale or disposition of all
or substantially all the assets (which term may
include the capital stock) of such Subsidiary;
(4) restrictions on the transfer of assets
which are subject to Liens; and
(5) restrictions existing under any
agreement which refinances or replaces any of the
agreements containing the restrictions in clauses (1)
and (2), provided that the terms and conditions of
any such restrictions are not materially less
favorable to the Purchasers than those under the
agreement evidencing or relating to the Indebtedness
refinanced.
(r) Repurchase of Notes. The Company shall not, and shall not
permit any of its Subsidiaries to, purchase any Notes other than
pursuant to a repurchase offer made to each holder pro rata in
accordance with the aggregate principal amount of Notes held by such
holder.
(s) Transactions with Affiliates. Neither the Company nor any
Subsidiary shall enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of any asset or the
rendering of any service, with any Affiliate (other than the Company or
a Subsidiary of the Company) unless such transaction (a) is otherwise
not in violation of this Agreement and the Other Agreements and (b) is
in the ordinary course of its business and is upon fair and reasonable
terms no less favorable to it than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate, provided that
the requirements of this clause (b) shall not apply to any transaction
pursuant to agreements in effect on the date of initial issuance of the
Notes.
(t) Payments for Consent. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of Notes as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Notes
unless such consideration is paid to all holders of Notes that provide
such consent or so waive or agree to amend.
(u) FC Capital Guaranty. The Company shall cause FC Capital,
no later than three Business Days after the aggregate outstanding principal
amounts under the Nomura Facility and the Xxxxxx Facility have been paid in
full, to execute and deliver to the Purchasers a guarantee agreement in respect
of the Company's obligations under this Agreement and the Senior Notes
44
substantially in the form of the Guaranty and otherwise satisfactory to the
Majority Noteholders in form and substance except that FC Capital's guarantee of
the principal amount of the Notes shall not exceed $12,000,000. As used herein:
"Xxxxxx Facility" means that certain Master Agreement Governing the Purchase and
Sale of Mortgage Loans dated as of 3/30/98 between Xxxxxx Commercial Paper Inc.
and FC Capital; and "Nomura Facility" shall mean, individually and collective,
the agreement between FC Capital and Nomura Securities (Bermuda) with respect to
the FC Securitization 1998-1 Retained I/O & Servicing Asset and the agreement
between FC Capital and Nomura Securities (Bermuda) with respect to the FC
Securitization 1998-2 Retained I/O & Servicing Asset.
6.4 Required Notices.
(a) The Company shall notify the Purchasers and amend Schedule
5.1(t) within two Business Days that (i) the Company makes any additional loans
or advances to any Affiliated Entity, whether or not evidenced by a writing
signed by the obligor thereof, to the extent such loans or advances are
permitted by this Agreement, or (ii) the Company receives any payment of
principal on any Pledged Note.
(b) In addition to those notices required elsewhere in this
Agreement, the Company shall notify the Purchasers promptly after obtaining
knowledge of:
(i) except as otherwise previously disclosed to the
Purchasers, any event or occurrence which the Company has determined
has caused a material loss or decline in value of the Company's or any
Affiliated Entity's Assets due to casualty or any other adverse
occurrence and the estimated (or actual, if available) amount of such
loss or decline;
(ii) the institution of any suit or administrative proceeding
which, if determined adversely to the Company or any Affiliated Entity,
could reasonably be expected to have a Material Adverse Effect;
(iii) the Company or any Affiliated Entity becomes subject to
any Charge, Lien, restriction, judgment, decree or order which could
reasonably be expected to have a Material Adverse Effect;
(iv) the commencement of any lockout, strike or walkout
relating to any labor contract to which the Company or any Affiliated
Entity is a party;
(v) except as otherwise previously disclosed to the
Purchasers, any event or occurrence which the Company or any Affiliated
Entity has determined will have or could reasonably be expected to have
a material adverse affect on the ability of any obligor of a Pledged
Note to repay such Pledged Note;
45
(vi) the occurrence of a default by the Company or any
Affiliated Entity under any agreement, document or instrument to which
it is a party which could reasonably be expected to have a Material
Adverse Effect;
(vii) a petition under any section or chapter of the United
States Bankruptcy Code or any similar law or regulation shall be filed
by or against the Company or any Affiliated Entity or any such Person
shall make an assignment for the benefit of its creditors, or any case
or proceeding is filed by or against any such Person for its
dissolution or liquidation;
(viii) the making of an application for the appointment of a
receiver, trustee or custodian for any of the assets of the Company or
any Affiliated Entity, other than voluntary custodial relationships
entered into to perfect security interests;
(ix) as soon as possible and in any event within five (5) days
after the Company shall have obtained knowledge of the occurrence of an
Event of Default or Unmatured Default, the written statement of the
chief financial officer of the Company setting forth the details of
such event and the action which the Company proposes to take with
respect thereto;
(x) the exercise by any holder of an option, warrant or right
to purchase any equity interest in the Company or any Affiliated
Entity, other than the exercise of rights disclosed in Section 5.1(e);
(xi) the breach of the covenants set forth in Section 6.2(i);
and
(xii) any event or occurrence requiring the Company or any
Affiliated Entity to deliver a notice to the Lenders under the Loan
Agreement.
6.5 Year 2000 Compliance.
(a) The computer and management information systems of the
Company and the Affiliated Entities are adequate for the conduct of
their business as presently conducted and as proposed to be conducted
and there are no material requirements for systems integration, upgrade
or replacement, and there are no facilities or software inadequacies
that could reasonably be expected to have a material adverse effect on
the business of the Company and Affiliated Entities.
(b) The Company and the Affiliated Entities are Year 2000
Compliant and shall remain Year 2000 Compliant at all times hereafter.
As used in the preceding sentence, "Year 2000 Compliant" means the
ability of the software and other information processing capabilities
of such Person to correctly interpret and process all data in whatever
form so as to avoid errors that may otherwise occur because of the
inability of software or other information processing capabilities to
recognize accurately the year 2000 or subsequent dates.
46
(c) Any reprogramming required to permit the proper
functioning of the computer and management information systems of the
Company and its Subsidiaries during and following the year 2000 has
been completed and the cost of such reprogramming is not expected to
have a Material Adverse Effect.
7. DEFAULT
7.1 Events of Default. The occurrence of any one of the following
events shall constitute a default ("Event of Default") under this Agreement:
(a) If the Company fails or neglects to perform, keep or
observe any of the Company's Obligations or if the Company fails or
neglects to cause any Affiliated Entity (for any reason whatsoever) to
keep or observe any covenant with respect to such Person set forth
herein or in any Other Agreement (except as otherwise specifically
addressed in this Section 7.1) and the same is not cured within five
(5) days after the earlier of (i) Majority Noteholders give the Company
notice of such default or (ii) the Company obtains knowledge of such
default, provided that a breach of any of the provisions, terms,
conditions or covenants contained in Sections 6.2(d), 6.2(o), 6.3 and
6.4 hereof and Section 3.2(b) and Section 3.3 of the Notes shall
automatically be an Event of Default without any notice or cure period;
(b) If any representation, warranty or material statement,
report or certificate made or delivered by any Loan Party, or any of
its directors, officers, authorized employees or agents, to the
Purchasers pursuant to this Agreement or any Other Agreement (except as
otherwise specifically addressed in this Section 7.1) is not true and
correct and the same is not cured within five (5) days after the
Majority Noteholders give the Company notice of such default; provided
that a breach of any of the provisions, terms, conditions or covenants
contained in Sections 6.2(d), 6.3 and 6.4 hereof and Section 3.2(b) and
Section 3.3 of the Notes shall automatically be an Event of Default
without any notice or cure period;
(c) If the Company fails to pay any of the Secured Obligations
when due and payable or declared due and payable;
(d) If an Event of Default or Unmatured Default (however
called) with respect to the Company shall exist under the terms of any
Indebtedness Instrument (including without limitation the Loan
Agreement) other than this Agreement and the Other Agreements;
(e) Except as provided in any other section of this Section
7.1, if an Event of Default or Unmatured Default (however called) with
respect to any Subsidiary of the Company (other than any one or more of
the Harbor Debtors) shall exist under the terms of any Indebtedness
Instrument and such default is not cured within ten (10) days after the
occurrence thereof, provided that such cure period shall not apply if:
(i) a default occurs by
47
such Subsidiary under the terms of any other Indebtedness Instrument
securing or evidencing a different borrowing or (ii) if any other
Subsidiary defaults under the terms of any Indebtedness Instrument
during such ten (10) day cure period. Notwithstanding the foregoing, if
any two or more such Persons are obligated for the same Indebtedness
and a default occurs thereunder, it shall be deemed to be a default by
a single Person for the purposes of this Section 7.1(e);
(f) If there is a Trigger Event, a Sequential Trigger Event, a
Termination Event, a Default, an Event of Default and/or any other
occurrence having a similar result as any of the foregoing, as
applicable, as defined in and/or under the terms of any one or more of
the agreements listed on Schedule 7.1(f) attached hereto;
(g) If the Company fails or neglects to perform, keep or
observe any of the Company's Obligations or to cause any Affiliated
Entity to keep or observe any representation, warranty or covenant
contained in Section 6.2(e) and the same is not cured within ten (10)
days after the Majority Noteholders give the Company notice of such
default;
(h) If any of the Company's Assets or the assets of any
Affiliated Entity or any portion thereof are attached, seized,
subjected to a writ of distress warrant or are levied upon other than
Charges payable by First X or First B, or come within the possession of
any receiver, trustee, custodian or assignee for the benefit of
creditors, other than a custodian pursuant to a voluntary custodial
agreement entered into to perfect a security interest;
(i) If a petition under any section or chapter of the United
States Bankruptcy Code or any similar law or regulation shall be filed
by the Company or any Affiliated Entity, or if the Company or any
Affiliated Entity shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by the Company or any
Affiliated Entity for its dissolution or liquidation;
(j) If the Company or any Affiliated Entity is enjoined,
restrained or in any way prevented by court order from conducting all
or any material part of its business affairs; or if a petition under
any section or chapter of the United States Bankruptcy Code or any
similar law or regulation is filed against the Company or any
Affiliated Entity and is not discharged for a period of 60 days; or if
any case or proceeding is filed against the Company or any Affiliated
Entity for its dissolution or liquidation;
(k) If an application is made by the Company or any Affiliated
Entity for the appointment of a receiver, trustee or custodian for any
of its assets other than a custodian pursuant to a voluntary custodial
agreement entered into to perfect a security interest;
(l) If an application is made by any Person other than the
Company for the appointment of a receiver, trustee or custodian for any
of the Assets of the Company, any
48
Affiliated Entity or any Pledged Entity (other than the Harbor Debtors)
and such application is not discharged for 60 days;
(m) Except as expressly permitted pursuant to Section 6.2(e),
(i) if a notice of any Charge is filed of record with respect to all or
any of the Company's or any Affiliated Entity's Assets or (ii) if any
Charge becomes a Lien upon any of the Company's or any Affiliated
Entity's Assets;
(n) The occurrence of a default under any agreement,
instrument and/or document executed and delivered by any Guarantor to
the Purchasers, which is not cured within the time, if any, specified
therefor in such agreement, instrument or document, or if this
Agreement or any Other Agreement shall fail to grant to the Purchasers,
as secured parties, the lien or other security interest (if any)
intended to be created thereby or if any Loan Party thereto shall
assert that it is not liable with respect thereto; or if any Guarantor
shall assert that it is not liable as a guarantor or otherwise under
its guarantee agreement executed in connection herewith;
(o) The occurrence of a default under any Other Agreement,
which is not cured within the time, if any, specified therefor in such
Other Agreement;
(p) Except as expressly permitted pursuant to the terms
hereof, if the Company or any Affiliated Entity issues to or transfers
to any Person any Stock of the Company or any Affiliated Entity;
(q) If any final non-appealable judgment for the payment of
money in excess of $100,000 (after giving effect to any amount covered
by insurance as to which the insurer shall not have denied or
questioned its obligation to pay) shall be rendered against the Company
or any Affiliated Entity; or final judgment for the payment of money in
excess of $100,000 shall be rendered against the Company or any
Affiliated Entity and the same shall remain undischarged for a period
of thirty (30) days during which execution shall not be effectively
stayed or diligently contested in good faith by appropriate
proceedings;
(r) If the Company or any ERISA Affiliate (as defined in
Section 8.1(d)) (1) shall effect a complete or partial withdrawal (as
defined in ERISA (as defined in Section 8.1(d)) Sections 4203 or 4205)
from a Multiemployer Plan (as defined in Section 8.1(d)), if such
withdrawal could subject either the Company or any ERISA Affiliate to
liability; (2) shall fail to pay when due an amount that is payable by
it to the PBGC (as defined in Section 8.1(d)) or to an Employee Benefit
Plan (as defined in Section 8.1(d)); (3) has instituted against it by a
fiduciary of any Multiemployer Plan an action to enforce ERISA Section
515 and such proceedings shall not have been dismissed within thirty
(30) days thereafter; (4) has imposed against it any tax under Code
Section 4980B(a); (5) has assessed against it by the Secretary of Labor
a civil penalty with respect to any Employee Benefit Plan under ERISA
Section 502(c) or 502(l); (6) shall apply for a waiver of the minimum
funding standards of
49
the Code; or (7) shall permit any other event or condition to occur or
exist with respect to an Employee Benefit Plan that could subject
either the Company or any ERISA Affiliate to liability;
(s) Except as set forth in Section 7.1(d) or (e), a default by
the Company or any Affiliated Entity shall occur under any agreement,
document or instrument (other than this Agreement or any of the Other
Agreements) now or hereafter existing, to which the Company or any
Affiliated Entity is a party and the effect of such default could
reasonably be expected to have a Material Adverse Effect;
(t) If the Company or any Affiliated Entity dissolves,
liquidates (other than with respect to a Secondary Obligor upon the
disposition of all of its Assets in the ordinary course of its
business) or fails to maintain its corporate existence;
(u) Notwithstanding anything herein to the contrary,
including, but not limited to the terms of Section 7.1(e), if any
lender to the Company or any Affiliated Entity, or to any Subsidiary of
any of the foregoing, (i) accelerates the maturity of any loan to the
Company, any Affiliated Entity or any Subsidiary of any of the
foregoing as a result of the Harbor Proceedings or any default by any
Harbor Debtor to such lender or any other event of default (however
called) arising under the terms of any Indebtedness Instrument to which
any Harbor Debtor is a party or (ii) terminates any agreement to
forbear or waive any default by a Harbor Debtor or any other event of
default (however called) arising under the terms of any Indebtedness
Instrument; or
(v) If any proceeding is commenced against the Company in
which the amount claimed is greater than $1,000,000 and such proceeding
is not dismissed with prejudice with no judgment having been entered
against or other relief granted against the Company within 30 days
after the filing date; or
(w) If, at any time within 30 days after Xxxxx Xxxxxxx is not
employed full-time with the Company or is no longer responsible for the
day-to-day management of the Company, a replacement chosen by the
Company (and reasonably satisfactory to the Majority Noteholders) is
not employed full-time with the Company and responsible for the
Company's day-to-day management.
(x) If, on or before January 5, 2000, the Company has not
provided evidence to the Purchasers, satisfactory to the Majority
Noteholders in their sole discretion, that simultaneously (i) the
available commitment to lend under the FCAR Receivables LLC Retail
Automobile Installment Loan Agreement Financing Facility dated as of
Xxxxx 00, 0000 (xxx "XXXX Warehouse Line") exceeds $40,000,000, or a
substitute line of credit of like amount acceptable to the Majority
Noteholders in their sole discretion is in effect (the "Substitute
Line"), and (ii) the MBIA Warehouse Line, or such Substitute Line, as
applicable, has a stated maturity of no earlier than December 15, 2000.
50
7.2 Remedies Cumulative. All of the Purchaser's rights and remedies
under this Agreement and the Other Agreements are cumulative and non-exclusive.
7.3 Acceleration. Upon the occurrence of an Event of Default, other
than in the case of an Event Default specified in Sections 7.1(h), (i), or (k),
at any time thereafter during the continuance of such Event of Default, the
Majority Noteholders may, by written notice to the Company, declare the Notes to
be forthwith due and payable, whereupon the Notes and all other Secured
Obligations shall become forthwith due and payable both as to unpaid principal
and accrued interest without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Company, anything
contained herein to the contrary notwithstanding. If an Event of Default
specified in Sections 7.1(h), (i), or (k) occurs, the unpaid principal of and
accrued interest on the Notes and all other Secured Obligations shall become and
be immediately due and payable without any declaration or any other act on the
part of the Majority Noteholders or any Purchaser.
7.4 Remedies. Upon the occurrence of an Event of Default and the
continuation thereof, the Majority Noteholders (or the Collateral Agent on
behalf of all Purchasers) in their or its sole and absolute discretion may
exercise any and all rights and remedies that it may have under this Agreement
and the Other Agreements, at law or in equity.
7.5 Injunctive Relief. The Company recognizes that upon the occurrence
of an Event of Default, no remedy of law will provide adequate relief to a
Purchaser, and agrees that a Purchaser shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
7.6 [Intentionally deleted]
7.7 Subordination. This Agreement (including without limitation,
exercise of the rights set forth in Sections 7.3, 7.4 and 7.5 hereof) and the
Notes are subordinated in the right of payment to the prior payment in full of
all principal, premium and interest due on the Senior Debt in accordance with
the Subordination Agreement. In the event of any liquidation, dissolution or
winding up of the Company, receivership, insolvency, bankruptcy or
reorganization, all principal, premium and interest owing on the Senior Debt
shall first be paid in full before any payment is made upon the indebtedness
evidenced by the Notes or any other amounts payable under this Agreement or any
of the Other Agreements.
8. GENERAL
8.1 Compliance with ERISA.
(a) Representations and Warranties. The Company hereby
represents and warrants that:
51
(i) Schedule 8.1 hereto describes the Employee
Benefit Plans to which the Company or any of its ERISA
Affiliates may have obligations;
(ii) each Employee Benefit Plan of the Company or any
of its ERISA Affiliates is in compliance in all material
respects with its terms and with the applicable provisions of
ERISA, the Code and all other statutes and regulations
applicable thereto and each such Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so
qualified, and each trust related to any such Employee Benefit
Plan has been determined to be exempt from federal income tax
under Section 501(a) of the Code;
(iii) neither the Company nor any of its ERISA
Affiliates maintains or contributes to any Employee Benefit
Plan with an actuarial present value of projected benefit
obligations that exceeds the fair market value of net assets
available for such benefits, calculated on the basis of the
actuarial assumptions specified in the most recent actuarial
valuation for such Employee Benefit Plan, and no such Employee
Benefit Plan provides for subsidized early retirement benefits
that could materially adversely affect the funded status of
such Employee Benefit Plan or Employee Benefit Plans in the
event of a reduction in force or plant closing;
(iv) with respect to each Employee Benefit Plan that
is a "defined benefit plan," as defined in Section 3(35) of
ERISA, the assets of each such Employee Benefit Plan are equal
to or greater than the accrued benefits of the participants
and beneficiaries thereunder, as determined pursuant to the
actuarial methods and assumptions utilized by the PBGC in the
event of a plan termination;
(v) neither the Company nor any of its ERISA
Affiliates sponsors, maintains, participates in or contributes
to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA that provides benefits to employees
after termination of employment other than as required by
Section 601 of ERISA; as such, neither the Company nor any of
its ERISA Affiliates are currently or will in the future be
subject to the accounting recognition and disclosure standards
of Statement of Financial Accounting Standards No. 106 (FASB
106);
(vi) neither the Company nor any of its ERISA
Affiliates has breached any of the responsibilities,
obligations, or duties imposed on them by ERISA or the
regulations promulgated thereunder with respect to any
Employee Benefit Plan;
(vii) neither the Company nor any ERISA Affiliate has
(i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made or expects to make a complete
or partial withdrawal under Sections 4203 or 4205 of ERISA
from a Multiemployer Plan;
52
(viii) at the date hereof, the aggregate potential
withdrawal liability payment, as determined in accordance with
Title IV of ERISA, of the Company and any ERISA Affiliates
with respect to all Employee Benefit Plans that are
Multiemployer Plans does not exceed $50,000 and, to the best
of the Company's and its ERISA Affiliate's knowledge, no
Multiemployer Plan is in reorganization or insolvent within
the meaning of Sections 4241 or 4245 of ERISA;
(ix) neither the Company nor any ERISA Affiliate has
failed to make a required installment or any other required
payment under Section 412 of the Code on or before the due
date for such installment or other payment;
(x) neither the Company nor any ERISA Affiliate is
required to provide security to an Employee Benefit Plan under
Section 401(a)(29) of the Code due to an Employee Benefit Plan
amendment that results in an increase in current liability for
the plan year;
(xi) no liability to the PBGC has been, or is
expected by the Company or any ERISA Affiliate to be, incurred
by the Company or any ERISA Affiliate, other than the payment
of premiums, and there are no premium payments that have
became due and which are unpaid;
(xii) no events have occurred in connection with any
Employee Benefit Plan that might constitute grounds for the
termination of any such Employee Benefit Plan by the PBGC or
for the appointment by any United States District Court of a
trustee to administer any such Employee Benefit Plan;
(xiii) no Reportable Event has, in the case of any
Employee Benefit Plan maintained by the Company or an ERISA
Affiliate other than a Multiemployer Plan, occurred and is
continuing, or to the best of the Company's knowledge, has
occurred and is continuing in the case of any such Employee
Benefit Plan that is a Multiemployer Plan;
(xiv) no Employee Benefit Plan maintained by the
Company or an ERISA Affiliate had an Accumulated Funding
Deficiency, whether or not waived, as of the last day of the
most recent fiscal year of such Employee Benefit Plan or, in
the case of any Multiemployer Plan, as of the most recent
fiscal year of such Multiemployer Plan for which the annual
reports of such Multiemployer Plan's actuaries and auditors
have been received; and
(xv) neither the Company nor any ERISA Affiliate has
engaged in a Prohibited Transaction prior to the date hereof,
and the execution, delivery, and carrying out of this
Agreement will not involve any non-exempt Prohibited
Transactions (within the meaning of Part 4 of Subtitle B of
Title I of ERISA) or any
53
transaction in connection with which a tax could be imposed
pursuant to Section 4975 of the Code.
(b) ERISA Reports. The Company shall:
(i) as soon as possible, and in any event within
fifteen (15) Business Days, after the Company or an ERISA
Affiliate knows or has reason to know that, regarding any
Employee Benefit Plan with respect to the Company or an ERISA
Affiliate, a Prohibited Transaction or a Reportable Event has
occurred (whether or not the requirement for notice, if
applicable, of such Reportable Event has been waived by the
PBGC), deliver to each Purchaser a certificate of a
responsible officer of the Company setting forth the details
of such Prohibited Transaction or Reportable Event, the action
that the Company proposes to take with respect thereto, and,
when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor, or the PBGC;
(ii) upon request of a Purchaser made from time to
time, deliver to the Purchaser a copy of the most recent
actuarial report, funding waiver request, and annual report
filed with respect to any Employee Benefit Plan maintained by
the Company or an ERISA Affiliate;
(iii) upon request of a Purchaser made from time to
time, deliver to the Purchaser a copy of any Employee Benefit
Plan sponsored, contributed to, participated in or maintained
by the Company or any ERISA Affiliate; and
(iv) as soon as possible, and in any event within ten
(10) Business Days, after it knows or has reason to know that
any of the following have occurred with respect to any
Employee Benefit Plan maintained, or contributed to, by the
Company or an ERISA Affiliate, deliver to each Purchaser a
certificate of a responsible officer of the Company setting
forth the details of the events described in (a) through (l)
and the action that the Company or any ERISA Affiliate
proposes to take with respect thereto, together with a copy of
any notice or filing from the PBGC or other agency of the
United States government with respect to such of the events
described in (a) through (l): (a) any Employee Benefit Plan
has been terminated; (b) the Plan Sponsor intends to terminate
any Employee Benefit Plan; (c) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate
any such Employee Benefit Plan or to appoint a trustee to
administer such Employee Benefit Plan, or the Company or any
ERISA Affiliate receives a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to
such Multiemployer Plan; (d) the Company or any ERISA
Affiliate withdraws from any Employee Benefit Plan, or notice
of any withdrawal liability is received by the Company or any
ERISA Affiliate; (e) any Employee Benefit Plan has received an
unfavorable determination letter from the Internal Revenue
Service regarding the qualification of the Employee
54
Benefit Plan under Section 401(a) of the Code; (f) the Company
or any ERISA Affiliate fails to make a required installment or
any other required payment under Section 412 of the Code on or
before the due date for such installment or payment or has
applied for a waiver of the minimum funding standard under
Section 412 of the Code; (g) the imposition of any tax under
Code Section 4980B(a) or the assessment by the Secretary of
Labor of a civil penalty under Sections 502(c) or 502(l) of
ERISA; (h) there is a partial or complete withdrawal (as
described in ERISA Section 4203 or 4205) by the Company or any
ERISA Affiliate from a Multiemployer Plan; (i) the Company or
any ERISA Affiliate is in "default" as defined in ERISA
Section 4219(c)(5)) with respect to payments to a
Multiemployer Plan required by reason of its complete or
partial withdrawal from such Employee Benefit Plan; (j) a
Multiemployer Plan is in "reorganization" or is "insolvent"
(as described in Title IV of ERISA) or such Multiemployer Plan
intends to terminate or has terminated under Section 4041A of
ERISA; (k) the institution of a proceeding by a fiduciary of a
Multiemployer Plan against the Company or any ERISA Affiliate
to enforce Section 515 of ERISA; or (1) the Company or any
ERISA Affiliate has increased benefits under any existing
Employee Benefit Plan or commenced contributions to an
Employee Benefit Plan to which the Company or any ERISA
Affiliate was not previously contributing. For purposes of
this Section, the Company shall be deemed to have knowledge of
all facts known by the Plan Administrator of any Employee
Benefit Plan of which the Company or any ERISA Affiliate is
the Plan Sponsor.
(c) Compliance with ERISA. The Company and its ERISA
Affiliates will not (i) establish, maintain, or operate any Employee
Benefit Plan that is not in compliance in all material respects with
the provisions of ERISA, the Code, and all other applicable laws, and
the regulations and interpretations thereunder; (ii) allow to exist any
Accumulated Funding Deficiency with respect to any Employee Benefit
Plan, whether or not waived; (iii) terminate any Employee Benefit Plan
or withdraw or effect a partial or complete withdrawal (as described in
ERISA Section 4203 or 4205) from any Multiemployer Plan, if such
termination or withdrawal could subject the Company or any ERISA
Affiliate to liability; (iv) fail to make any required installment or
any other payment required under Section 412 of the Code on or before
the due date for such installment or other payment; (v) amend any
Employee Benefit Plan so as to result in an increase in current
liability for the plan year such that the Company or any ERISA
Affiliate is required to provide security to such Employee Benefit Plan
under Section 401(a)(29) of the Code; (vi) fail to make any
contribution or payment to any Multiemployer Plan which the Company or
any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan; (vii) enter into any Prohibited
Transaction for which a class exemption is not available or a private
exemption previously has not been obtained from the Department of
Labor; (viii) permit the occurrence of any Reportable Event, or any
other event or condition, which could subject either the Company or any
ERISA Affiliate to liability; or (ix) allow or permit to exist any
other event
55
or condition known or that reasonably should be known to the Company
which event or condition could subject either the Company or any ERISA
Affiliate to liability.
(d) Definitions. For purposes of this Section 8.1, the
following definitions shall apply:
(i) "Accumulated Funding Deficiency" shall have the
meaning assigned to that term in Section 302 of ERISA.
(ii) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(iii) "Employee Benefit Plan" shall mean an employee
benefit plan within the meaning of Section 3(3) of ERISA that
is maintained, sponsored, participated in or contributed to by
the Company or any ERISA Affiliate.
(iv) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, or
any successor thereto.
(v) "ERISA Affiliate" shall mean any corporation,
trade or Business that is, along with the Company, a member of
a controlled group of trades or businesses, or a member of any
group of organizations, within the meaning of Sections 414(b),
(c), (m) or (o) of the Code, and any regulations thereunder.
(vi) "Multiemployer Plan" shall mean any plan
described in Section 3(37) or 4001(a)(3) of ERISA to which
contributions are or have been made by the Company or any
ERISA Affiliate.
(vii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any governmental body succeeding to its
functions.
(viii) "Plan Administrator" shall have the meaning
assigned to it in Section 3(16)(A) of ERISA.
(ix) "Plan Sponsor" shall have the meaning assigned
to it in Section 3(16)(B) of ERISA.
(x) "Prohibited Transaction" shall mean a transaction
that is prohibited under Code Section 4975 or ERISA Section
406 and not exempt under Code Section 4975 or ERISA Section
408.
(xi) "Reportable Event" shall mean (a) an event
described in Section 4043(c), 4068(a), or 4063(a) of ERISA or
in the regulations thereunder, (b) receipt of a notice of
withdrawal liability with respect to a Multiemployer Plan
pursuant to Section 4202
56
of ERISA, (c) an event requiring the Company or any ERISA
Affiliate to provide security for an Employee Benefit Plan
under Code Section 401(a)(29), (d) any failure to make
payments required by Code Section 412(m), (e) the withdrawal
of the Company or any ERISA Affiliate from an Employee Benefit
Plan in which it is a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (f) the institution of
proceedings to terminate an Employee Benefit Plan by the PBGC,
or (g) the filing of a notice to terminate an Employee Benefit
Plan or the treatment of an amendment of an Employee Benefit
Plan as a termination under Section 4041 of ERISA.
8.2 Costs. The Company hereby agrees that it shall reimburse each
Purchaser and the Collateral Agent on demand, as part of the Company's
Obligations, for any and all Costs, and any amount not paid within two weeks
after demand shall bear interest at the Default Rate.
8.3 Statement. Each statement of account by a Purchaser delivered to
the Company relating to the Company's Liabilities shall be presumed correct and
accurate and shall constitute an account stated between the Company and the
Purchaser unless the Purchaser subsequently corrects such statement of its own
volition or, within thirty (30) days after the Company's receipt of said
statement, the Company delivers to the Purchaser, by registered or certified
mail addressed to the Purchaser at the address specified in Section 8.4, written
objection thereto specifying the error or errors, if any, which the Company
asserts are contained in any such statement.
8.4 Notices. Any and all notices given in connection with this
Agreement shall be deemed adequately given only if in writing (which term, for
all purposes of this Agreement and the Other Agreements, shall include telecopy)
and addressed to the party for whom such notices are intended at the address set
forth below. All notices shall be sent by personal delivery, Federal Express or
other over-night messenger service, first class registered or certified mail,
postage prepaid, return receipt requested or by other means at least as fast and
reliable as first class mail. A written notice shall be deemed to have been
given to the recipient party on the earlier of (a) the date it shall be
delivered to the address required by this Agreement; (b) the date delivery shall
have been refused at the address required by this Agreement; or (c) with respect
to notices sent by mail, the date as of which the postal service shall have
indicated such notice to be undeliverable at the address required by this
Agreement. Any and all notices referred to in this Agreement, or which either
party desires to give to the other, shall be addressed as follows:
(i) if to any Purchaser, initially at the address set
forth below its name on Exhibit A hereto, and thereafter at
such other address, notice of which is given in accordance
with this Section 8.4; and
(ii) if to the Company, initially at FirstCity
Financial Corporation, 0000 Xxxxxxxx Xxxxx, X.X. Xxx 0000,
Xxxx, Xxxxx 00000, Attn: Chief Executive Officer, and
thereafter at such other address notice of which is given in
accordance with this Section 8.4.
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8.5 Amendments and Waivers. Except as otherwise expressly provided
herein or in any Other Agreement, this Agreement and the Other Agreements may
not be modified, altered, amended or waived except by an agreement in writing
signed by the Company and Majority Noteholders, provided that no such
modification, alteration, amendment or waiver shall, unless signed by each
holder of a Note affected thereby, (i) reduce the principal of any Note; (ii)
reduce the interest rate payable pursuant to any Note; (iii) postpone the date
fixed for any payment of principal of or interest on any Note, (iv) make any
Note payable in money other than that stated herein and in such Note, (v)
release any guarantor of a Note or release all or substantially all of the
collateral for the Note, (vi) modify the provisions of this Section 8.5 in a
manner materially adverse to the holder of a Note or (vii) change the definition
of "Majority Noteholders".
8.6 No Implied Waiver; Remedies Cumulative. A Purchaser's failure at
any time or times hereafter to require strict performance by the Company of any
provision of this Agreement or any Other Agreement shall not waive, affect or
diminish any right of the Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by the Majority Noteholders or
any Purchaser of an Event of Default or an Unmatured Default by the Company
under this Agreement or any Other Agreement shall not suspend, waive or affect
any other Event of Default or Unmatured Default by the Company under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of the
Company contained in this Agreement or the Other Agreements and no Event of
Default or Unmatured Default by the Company under this Agreement or the Other
Agreements shall be deemed to have been suspended or waived by the Majority
Noteholders or any Purchaser unless such suspension or waiver is by an
instrument in writing signed by the Majority Noteholders or (in the case of any
of the same (if any) which may be suspended or waived by an individual
Purchaser) the relevant Purchaser and directed to the Company specifying such
suspension or waiver.
8.7 Severability. If any provision (in whole or in part) of this
Agreement or the Other Agreements or the application thereof to any person or
circumstance is held invalid or unenforceable, then such provision shall be
deemed modified, restricted, or reformulated to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement or the Other Agreements, as the case may require, and this
Agreement and such Other Agreements shall be construed and enforced to the
maximum extent permitted by law, as if such provision had been originally
incorporated herein as so modified, restricted, or reformulated or as if such
provision had not been originally incorporated herein or therein, as the case
may be. The parties further agree to seek a lawful substitute for any provision
found to be unlawful. If such modification, restriction or reformulation is not
reasonably possible, the remainder of this Agreement and the Other Agreements
and the application of such provision to other persons or circumstances will not
be affected thereby and the provisions of this Agreement and the Other
Agreements shall be severable in any such instance.
8.8 Incorporation of Other Agreements. Except as otherwise provided in
this Agreement and except as otherwise provided in the Other Agreements by
specific reference to the applicable
58
provision of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in the Other Agreements to
which any Purchaser is party, the Majority Noteholders shall have the right to
elect, in their sole and absolute discretion, which provision shall govern and
control. Except to the extent provided to the contrary in this Agreement or in
the Other Agreements to which the Purchasers are party, no termination or
cancellation (regardless of cause or procedure) of this Agreement or the Other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of the Company or a Purchaser in any way or respect
relating to (a) any transaction or event occurring prior to such termination or
cancellation, and/or (b) any of the undertakings, agreements, covenants,
warranties and representations of the Company contained in this Agreement or the
Other Agreements. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
8.9 Acceptance. This Agreement and the Other Agreements are submitted
by the Company to each Purchaser (for the Purchaser's acceptance or rejection
thereof) at the Purchaser's principal place of business as an offer by the
Company to borrow monies from the Purchaser and shall not be binding upon the
Purchaser or become effective until and unless accepted by the Purchaser, in
writing, at said place of business. If so accepted by the Purchaser, this
Agreement and the Other Agreements shall be deemed to have been made at said
place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS,
including, but not limited to, the legality of the interest rate and other
charges, but excluding choice of law provisions and perfection of security
interests, which shall be governed and controlled by the laws of the relevant
jurisdiction.
8.10 Knowledge. As used herein the phrase "to the best of the Company's
knowledge" or words of such import shall mean all knowledge, including, actual
knowledge and knowledge of matters which any reasonable person in such position
knew or should have known, of the respective officers, directors and managers of
the Company.
8.11 Waiver by the Company. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT OR REQUIRED BY LAW, THE COMPANY WAIVES (A) PRESENTMENT, DEMAND AND
PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
NOTES, COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTEES AT ANY TIME HELD BY ANY OF THE PURCHASERS ON WHICH
THE COMPANY MAY IN ANY WAY BE LIABLE; (B) ALL RIGHTS TO NOTICE AND A HEARING
PRIOR TO A PURCHASER'S TAKING POSSESSION OR CONTROL OF, OR TO BANK REPLEVY,
ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING ANY PURCHASER
59
TO EXERCISE ANY OF ITS RESPECTIVE REMEDIES; AND (C) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.
8.12 Governing Law. THIS AGREEMENT HAS BEEN DELIVERED FOR ACCEPTANCE BY
THE PURCHASERS IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF ILLINOIS. TO THE EXTENT PERMITTED BY APPLICABLE LAW
THE COMPANY HEREBY (a) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS OVER ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT; (b)
IRREVOCABLY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT; (c) AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW; AND (d) AGREES NOT TO INSTITUTE ANY LEGAL ACTION
OR PROCEEDING AGAINST THE PURCHASERS OR ANY OF THEIR RESPECTIVE AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED
IN XXXX COUNTY, ILLINOIS. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR A
PURCHASER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR
PURCHASER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR THE
COMPANY'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
8.13 Waiver of Marshalling. All rights of marshalling of assets of the
Company, including any such right with respect to the Pledged Property, are
hereby waived by the Company.
8.14 Limitation by Law. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of any
applicable law.
8.15 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants contained in this Agreement or made in
writing by the Company in connection herewith shall survive the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby, including without limitation repayment of the Secured Obligations. Any
investigation by a Purchaser shall not diminish in any respect whatsoever its
rights to rely on such representations and warranties.
60
8.16 Service of Process. The Company hereby irrevocably appoints and
designates CT Corporation System, Inc., 000 X. XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000 as its true and lawful attorney-in-fact and duly authorized agent for
service of legal process and agrees that service of such process upon such agent
and attorney-in-fact shall constitute personal service of such process upon the
Company.
8.17 Representation by Counsel. The Company hereby represents that it
has been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the Other Agreements; that it has read and fully
understood the terms hereof and thereof; the Company and its counsel have been
afforded an opportunity to review, negotiate and modify the terms of this
Agreement and the Other Agreements, and that it intends to be bound hereby and
thereby. In accordance with the foregoing, the general rule of construction to
the effect that any ambiguities in a contract are to be resolved against the
party drafting the contract shall not be employed in the construction and
interpretation of this Agreement and the Other Agreements.
8.18 Release of the Purchasers. THE COMPANY RELEASES EACH PURCHASER
FROM ANY AND ALL CAUSES OF ACTION OR CLAIMS WHICH THE COMPANY MAY NOW OR
HEREAFTER HAVE FOR ANY ASSERTED LOSS OR DAMAGE TO THE COMPANY CLAIMED TO BE
CAUSED BY OR ARISING FROM ANY ACT OR OMISSION TO ACT ON THE PART OF THE
PURCHASER, ITS OFFICERS, AGENTS OR EMPLOYEES, EXCEPT FOR WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.
8.19 Invalidated Payments. To the extent that a Purchaser receives any
payment on account of the Secured Obligations and any such payment(s) and/or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act, state or
federal law, common law or equitable cause, then, to the extent of such
payment(s) or proceeds received, the Secured Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment(s) and/or proceeds had not been received by the Purchaser and
applied on account of the Secured Obligations.
8.20 Headings. The descriptive headings of the various provisions of
this Agreement and the Other Agreements are inserted for convenience of
reference only and shall not be deemed to affect the meaning or construction of
any of the provisions hereof or thereof.
8.21 Counterparts. This Agreement and the Other Agreements may be
executed in any number of counterparts, and by the different parties hereto and
thereto on the same or separate counterparts, each of which when so executed and
delivered shall be deemed to be an original; all the counterparts for each such
document shall together constitute one and the same agreement.
8.22 Fax Execution. For purposes of negotiating and finalizing this
Agreement and the Other Agreements (including any subsequent Modifications
hereto or thereto), any signed document
61
transmitted by facsimile machine ("FAX") shall be treated in all manner and
respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document. At the request of either party, any FAX document subject to this
Agreement shall be re-executed by both parties in an original form but no such
request shall in any way alter the binding nature of the faxed signature. The
undersigned parties hereby agree that neither shall raise the use of the FAX or
the fact that any signature or document was transmitted or communicated through
the use of a FAX as a defense to the formation of this Agreement or any Other
Agreement.
8.23 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Purchasers, the Company and their respective successors and
assigns (except as otherwise expressly provided herein) and nothing contained
herein shall be deemed to confer upon any Person other than the Company and the
Purchasers and their respective successors and assigns any right to insist on or
to enforce the performance or observance of any of the obligations contained
herein. All conditions to the obligations of the Purchasers hereunder are
imposed solely and exclusively for the benefit of the Purchasers and their
respective successors and assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms and no
other Persons shall under any circumstances be deemed to be a beneficiary of
such conditions.
8.24 Domicile of Note. A Purchaser may make, maintain or transfer the
Notes acquired by it hereunder to, or for the account of, any branch office,
Subsidiary or Affiliate of the Purchaser.
8.25 Entire Agreement. This Agreement and the Other Agreements
constitute the entire agreement of the Company and the Purchasers with respect
to the subject matter hereof and supersede all prior and contemporaneous
negotiations, agreements, understandings and communications. No representation,
understanding, promise or condition concerning the subject matter hereof shall
be binding upon the Purchasers unless expressed herein or therein. No course of
dealing, course or performance, trade usage or parole evidence of any nature,
whether based on actions, omissions or circumstances occurring or existing
heretofore or hereafter, may be used in any way to alter or supplement the terms
hereof.
8.26 Construction.
(a) In this Agreement, unless the context otherwise clearly
requires, references to the plural include the singular, the singular the
plural, and the part the whole; the neuter case includes the masculine and
feminine cases; and "or" is not exclusive. In this Agreement, any references to
property (and similar terms) include an interest in such property (or other item
referred to); "include," "includes," "including" and similar terms are not
limiting; and "hereof," "herein," "hereunder" and similar terms refer to this
Agreement as a whole and not to any particular provision; and "expenses,"
"costs," "out-of-pocket expenses" and similar terms include the charges of
in-house counsel, auditors and other professionals of the relevant Person to the
extent that such amounts are routinely identified and charged under such
Person's cost accounting system. Section and other references in this Agreement
are to this Agreement unless otherwise specified.
62
(b) The Company expressly agrees that for purposes of this
Agreement and each and every Other Agreement: (i) this Agreement and each and
every Other Agreement shall be a "credit agreement" under the Illinois Credit
Agreements Act, 815 ILCS 160/1 et. seq. (the "Act"); (ii) the Act applies to
this transaction including, but not limited to, the execution of this Agreement
and each and every Other Agreement; and (iii) any action on or in any way
related to this Agreement and each and every Other Agreement shall be governed
by the Act.
(c) Whenever a schedule is referred to herein as "attached
hereto" (or like language) and the same information is included on an identical
or substantially identical schedule to the Loan Agreement, said schedule need
not be attached hereto but shall be deemed to refer to the identical or
substantially identical schedule attached to the Loan Agreement on the Closing
Date (as such schedule shall from time to time be amended with the consent of
the Majority Noteholders).
(d) Notwithstanding anything to the contrary contained herein
or in any of the Loan Documents, unless the Company or a Purchaser otherwise
requests with respect to any specific exhibit, exhibits to this Agreement shall
not be required to be attached to the execution or any other copy of this
Agreement, and any references in this Agreement or the other Loan Documents to
such exhibits as "Exhibits hereto," "Exhibits to this Agreement" or words of
similar effect shall be deemed to refer to such document as executed by the
relevant parties and delivered on the Closing Date.
8.27 Successors and Assigns. (a) This Agreement shall be binding upon
and shall inure to the benefit of the Company, the Purchasers, all future
holders of Notes and their respective successors and assigns, provided that the
Company may not sell, assign or transfer this Agreement or the Other Agreements
or any portion thereof, including, without limitation, the Company's rights,
titles, interests, remedies, powers and/or duties hereunder or thereunder. The
Company hereby consents to a Purchaser's sale, assignment, transfer or other
disposition, at any time and from time to time hereafter, of this Agreement or
the Other Agreements, or of any portion thereof or participation therein,
including, without limitation, the Purchaser's rights, titles, interests,
remedies, powers and/or duties; provided that no such sale, assignment, transfer
or other disposition shall be made (at any time when no Event of Default exists)
to a financial institution (other than an Affiliate of IFA) that is a direct
competitor of the Company without the Company's prior written consent. Without
limitation of the foregoing, a Purchaser (and any successive assignee or
transferee) from time to time may assign or otherwise transfer all or any
portion of its rights or obligations under this Agreement and any Other
Agreement (including all or any portion of any commitment to extend credit), or
any Secured Obligations, to any other Person, and such Secured Obligations
(including any Secured Obligations resulting from extension of credit by such
other Person under or in connection with this Agreement and the Other
Agreements) shall be and remain Secured Obligations entitled to the benefit of
this Agreement and the Other Agreements, and to the extent of its interest in
such Secured Obligations such other Person shall be vested with all the benefits
in respect thereof granted to the Purchasers pursuant to this Agreement and the
Other Agreements or otherwise.
(b) References in this Agreement to "Purchasers" or to more
than one Purchaser shall be deemed to refer to the sole Purchaser whenever there
is only one.
63
(c) If there at any time is more than one Purchaser party to
this Agreement or otherwise bound by the provisions of this Agreement, the
obligations of the Purchasers shall be several and not joint and each Purchaser
shall (except in decisions requiring the vote or consent of Majority
Noteholders) be deemed to be acting severally and not jointly and as to itself
only.
(d) The Company authorizes each Purchaser to disclose to any
Person to whom such Purchaser proposes to sell, assign, transfer or other
dispose of said Purchaser's rights (each such Person, a "transferee") under this
Agreement or its Note, in whole or in part, any and all financial and other
information in such Purchaser's possession concerning the Company and its
Affiliates which has been or may be delivered to such Purchaser by or on behalf
of the Company in connection with this Agreement or any other Loan Document or
such Purchaser's credit evaluation of the Company and its Affiliates. Prior to
disclosing such financial information and other information to transferees or
prospective transferees, as applicable, such Purchaser shall require that the
transferee or prospective transferee enter into a confidentiality agreement
pursuant to which such transferee or prospective transferee shall covenant to
keep confidential all such information.
8.28 Texas Language.
(A) THIS WRITTEN AGREEMENT (TOGETHER WITH THE OTHER LOAN
DOCUMENTS) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH
RESPECT TO THE MATTERS COVERED HEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
(B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES HERETO.
8.29 Waiver of Trial by Jury.
(a) TO THE EXTENT PERMITTED BY LAW, THE COMPANY AND THE
PURCHASERS EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER AGREEMENTS OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE COMPANY, ANY OTHER LOAN PARTY, ANY PURCHASER, ANY SUBSEQUENT
HOLDER OF A NOTE OR ANY LENDER IN CONNECTION HEREWITH OR IN CONNECTION WITH ANY
OTHER AGREEMENT. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT FOR THE PURCHASERS TO ACQUIRE THE NOTES.
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(b) The provisions of this Section 8.29 shall also apply with
respect to any disputes between or among any or all of the Purchasers, whether
the Company is a party to such dispute or not.
8.30 Waiver of Claims. The Company hereby acknowledges, agrees and
affirms that it possesses no claims, defenses, offsets, recoupments or
counterclaims of any kind or nature against or with respect to the enforcement
of this Agreement or any Other Agreement or any Modifications hereof or thereof
(collectively, the "Claims"), nor does the Company now have knowledge of any
facts that would or might give rise to any Claims. If facts now exist which
would or could give rise to any Claim against or with respect to the enforcement
of this Agreement or any Other Agreement, the Company hereby unconditionally,
irrevocably and unequivocally waives and fully releases any and all such Claims
as if such Claims were the subject of a lawsuit, adjudicated to final judgment
from which no appeal could be taken and therein dismissed with prejudice.
8.31 No Agency or Partnership.
(a) Each Purchaser hereby acknowledges that, notwithstanding
that certain provisions of this Agreement provide that certain actions may not
be taken without, or that certain actions may only be taken with, the consent of
the Majority Noteholders, none of the Majority Noteholders shall have any
obligation (fiduciary or otherwise) to any Purchaser in taking or not taking (or
as a result of taking or not taking) any such action or giving or not giving (or
as a result of giving or not giving) any such consent.
(b) Without limiting the generality of the foregoing, no
action taken by the Majority Noteholders or any of them shall constitute the
Majority Noteholders or any of them as an agent of any Purchaser, nor shall
anything contained herein be construed to create a partnership between or among
any of the Purchasers or otherwise constitute any Purchaser a partner of any
other Purchaser.
(c) Each Purchaser hereby acknowledges that Bank of Scotland,
an Affiliate of IFA, is a Lender and, as such (among other things), a holder of
Senior Debt.
8.32 Application of Payments. Monies received in payment of the Notes
(by application of collateral proceeds or otherwise) shall (after deducting all
fees, if any, payable to the Collateral Agent in respect thereof and all
unreimbursed expenses of the Collateral Agent if any) be applied to all Notes on
a pro rata basis based on the principal amount of each such Note then
outstanding.
8.33 Assignment of UCCs. If the Senior Debt is at any time paid in full
while any of the Secured Obligations are outstanding, the Company hereby
authorizes and directs (to the extent permitted by applicable law) the Lenders
to assign (to the extent permitted by applicable law) to the Collateral Agent
(or to such other Person designated by the Majority Noteholders) any and all
UCC- 1 and other financing statements that list any Loan Party as a debtor and
the Lenders or any of them
65
as secured party, which financing statement(s) has been filed by such Lender or
Lenders in connection with the Loan Agreement or any document related thereto.
9. INDEMNIFICATION; SET OFF
9.1 Indemnification. THE COMPANY HEREBY AGREES TO REIMBURSE AND
INDEMNIFY EACH PURCHASER AND ITS RESPECTIVE AGENTS, EMPLOYEES AND ASSIGNS
(COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, EXPENSES, OBLIGATIONS, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH
INDEMNIFIED PARTY IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR
JUDICIAL PROCEEDING COMMENCED OR THREATENED, WHETHER OR NOT SUCH INDEMNIFIED
PARTY SHALL BE DESIGNATED A PARTY THERETO) THAT MAY AT ANY TIME BE IMPOSED ON,
ASSERTED AGAINST OR INCURRED BY SUCH INDEMNIFIED PARTY AS A RESULT OF, OR
ARISING OUT OF, OR IN ANY WAY RELATED TO OR BY REASON OF, THIS AGREEMENT OR ANY
OTHER AGREEMENT, ANY TRANSACTION FROM TIME TO TIME CONTEMPLATED HEREBY OR
THEREBY, OR ANY TRANSACTION FINANCED IN WHOLE OR IN PART OR DIRECTLY OR
INDIRECTLY WITH THE PROCEEDS OF ANY NOTE (AND WITHOUT IN ANY WAY LIMITING THE
GENERALITY OF THE FOREGOING, INCLUDING ANY VIOLATION OR BREACH OF ANY
ENVIRONMENTAL LAW OR ANY OTHER LAW BY THE COMPANY OR ANY OTHER LOAN PARTY; ANY
ENVIRONMENTAL CLAIM ARISING OUT OF THE MANAGEMENT, USE, CONTROL, OWNERSHIP OR
OPERATION OF PROPERTY BY ANY OF SUCH PERSONS, INCLUDING ALL ON-SITE AND OFF-SITE
ACTIVITIES INVOLVING HAZARDOUS MATERIALS; ANY GRANT OF PLEDGED PROPERTY; OR ANY
EXERCISE BY A PURCHASER OF ANY OF ITS RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR
ANY OTHER AGREEMENT), BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS,
DAMAGES, EXPENSES, OBLIGATIONS, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS OR
DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH INDEMNIFIED PARTY, AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION. IF AND TO THE EXTENT THAT THE FOREGOING OBLIGATIONS OF THE COMPANY
UNDER THIS SECTION 9.1, OR ANY OTHER INDEMNIFICATION OBLIGATION OF THE COMPANY
HEREUNDER OR UNDER ANY OTHER AGREEMENT, ARE UNENFORCEABLE FOR ANY REASON, THE
COMPANY HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND
SATISFACTION OF SUCH OBLIGATIONS WHICH IS PERMISSIBLE UNDER APPLICABLE LAW.
9.2 Set-Off. The Company hereby agrees that if any Secured Obligation
shall be due and payable (by acceleration or otherwise) after the occurrence of
an Event of Default and during the
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continuation thereof, a Purchaser shall have the right, without notice to the
Company, to set-off against and to appropriate and apply to such Secured
Obligation any obligation of any nature owing to the Company, including but not
limited to all deposits (whether time or demand, general or special,
provisionally credited or finally credited, whether or not evidenced by a
certificate of deposit) now or hereafter maintained by the Company with a
Purchaser. Such right shall be absolute and unconditional in all circumstances
and, without limitation, shall exist whether or not a Purchaser or any other
Person shall have given notice or made any demand to the Company or any other
Person, whether such obligation owed to the Company is contingent, absolute,
matured or unmatured (it being agreed that a Purchaser may deem such obligation
to be then due and payable at the time of such setoff), and regardless of the
existence or adequacy of any collateral, guaranty or any other security, right
or remedy available to a Purchaser or any other Person. The rights provided by
this Section 9.2 are in addition to any other rights of set-off and bankers'
lien and all other rights and remedies which a Purchaser may otherwise have
under this Agreement, any Other Agreement, at law or in equity or otherwise, and
nothing in this Agreement or any Other Agreement or any document, certificate or
agreement related hereto or thereto (the foregoing, including this Agreement and
the
67
Other Agreements, the "Loan Documents") shall be deemed a waiver or prohibition
of or restriction on the rights of set-off or bankers' lien of any such Person.
10. AGENT
10.1 Appointment. The Purchasers hereby irrevocably appoint IFA to act
as their collateral agent (in such capacity, the "Collateral Agent") under the
Guaranties, the Security Agreements and the Pledge Agreement and under any other
Loan Document pursuant to which IFA is designated as acting as collateral agent
and in respect of which IFA has agreed to act in that capacity (each of the
foregoing agreements, a "Collateral Agent Document"). Each Purchaser hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Collateral Agent to take such
action on its behalf under the provisions of the Collateral Agent Documents and
any other instruments and agreements referred to therein and to exercise such
powers thereunder as are specifically delegated to or required of it by the
terms thereof and such other powers as are reasonably incidental thereto. The
Collateral Agent may perform any of its duties under any of the Loan Documents
by or through its agents or employees.
10.2 Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in the Collateral Agent
Documents. Neither the Collateral Agent nor any of its officers, directors,
employees or agents shall be liable to any Bank for any action taken or omitted
by it under any of the Loan Documents, or in connection therewith unless caused
by its or their gross negligence or willful misconduct. Nothing in the Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Loan Documents except as
expressly set forth therein. The duties of the Collateral Agent under the
Collateral Agent Documents shall be mechanical and administrative in nature and
the Collateral Agent shall not have by reason of its duties under the Collateral
Agent Documents a fiduciary relationship in respect of any Purchaser.
10.3 Lack of Reliance. Independently and without reliance on the
Collateral Agent, each Purchaser to the extent it deems appropriate has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Loan Parties in connection with the purchase of its
Note and the continuance of the obligations of the Company thereunder and the
taking or not taking of any action in connection herewith or therewith, (ii) its
own appraisal of the credit worthiness of the Loan Parties and (iii) its own
independent investigation and appraisal of the Pledged Property; and the
Collateral Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Purchaser with any credit or other information
with respect thereto, whether coming into its possession before the date hereof
or at any time or times thereafter. The Collateral Agent shall not be
responsible to any Bank for any recitals, statements, representations or
warranties herein or in any certificate or other document delivered in
connection herewith or for the authorization, execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, or
sufficiency of any of the Loan Documents, the financial condition of the Loan
Parties or the condition of any of the Pledged Property, or be required to make
any inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of any
68
of the Loan Documents, the financial condition of the Loan Parties or the
existence or possible existence of any Event of Default or Unmatured Default.
10.4 Certain Rights. If the Collateral Agent requests instructions from
the Purchasers or Majority Noteholders with respect to any interpretation, act
or action (including failure to act in connection with any Loan Document) the
Collateral Agent shall be entitled to refrain from such act or taking such
actions unless and until it shall have received instructions from the Purchasers
or the Majority Noteholders, as the case may be; and the Collateral Agent shall
not incur liability to any Person by so refraining. Without limiting the
foregoing, no Purchaser shall have any right of action whatsoever against the
Collateral Agent as a result of the Collateral Agent acting or refraining from
acting under any of the Loan Documents in accordance with the instructions of
the Majority Noteholders or all Purchasers if the Collateral Agent determines in
its sole discretion to seek such instructions. The Collateral Agent shall be
fully justified in failing or refusing to take any action under any Loan
Document unless, if it requests, it shall first be indemnified to its
satisfaction by the Purchasers against any and all liability and expense which
may be incurred by it by reason of taking, continuing to take or not taking any
such action.
10.5 Reliance. The Collateral Agent shall be entitled to rely upon any
written notice or any telephone message believed by it to be genuine or correct
and to have been signed, sent or made by the proper Person, and, with respect to
all legal matters pertaining to the Loan Documents and its duties thereunder,
upon advice of counsel selected by it.
10.6 Indemnification. TO THE EXTENT THE COLLATERAL AGENT IS NOT
REIMBURSED OR INDEMNIFIED BY THE COMPANY, THE PURCHASERS WILL REIMBURSE AND/OR
INDEMNIFY THE COLLATERAL AGENT, IN PROPORTION TO THE OUTSTANDING PRINCIPAL
BALANCES OF THEIR NOTES, FOR AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED
OR SUSTAINED BY OR ASSERTED AGAINST THE COLLATERAL AGENT, ACTING PURSUANT HERETO
OR ANY OF THE OTHER LOAN DOCUMENTS IN ITS CAPACITY PROVIDED FOR IN THIS SECTION
10, IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS,
PROVIDED, HOWEVER, THAT NO PURCHASER SHALL BE LIABLE FOR ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE COLLATERAL AGENT'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. The obligations of the Purchasers under this
Section 10 shall survive the termination of this Agreement and the payment in
full of the Notes.
10.7 Collateral Agent, Individually. With respect to any Note issued to
or held by it, the Collateral Agent shall have and may exercise the same rights
and powers hereunder and is subject to the same obligations and liabilities as
and to the extent set forth herein for any other Purchaser or holder of a Note.
The terms "Purchaser" or "holders of Notes" or any similar terms shall, unless
the
69
context clearly otherwise indicates, not exclude the Collateral Agent in its
individual capacity as a Purchaser or holder of a Note. The Collateral Agent may
accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with any Loan Party or any of its Subsidiaries
as if it were not acting pursuant hereto, and may accept fees and other
consideration from any Loan Party or any of its Subsidiaries for services as
Collateral Agent in connection with the Loan Documents and for services
otherwise than as the Collateral Agent without having to account for the same to
the Purchasers.
10.8 Holders of Notes. The Collateral Agent may deem and treat the last
Person identified to it as a holder of Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been received by the Collateral Agent, and any request,
authority or consent of any such Person, who at the time of making such request
or of giving such authority or consent is so deemed by the Collateral Agent to
be the payee of any Note, shall be conclusive and binding on any subsequent
holder, transferee, assignee or payee of such Note or of any Note or Notes
issued in exchange therefor.
10.9 Resignation. The Collateral Agent may resign at any time from the
performance of all its functions and duties as Collateral Agent by giving 30
days prior written notice to the Company and each Purchaser. Such resignation
shall take effect upon the expiration of such 30 day period or upon the earlier
appointment of a successor. In case of the resignation of the Collateral Agent,
the Majority Noteholders may appoint a successor by a written instrument signed
by the Majority Noteholders. Any successor shall execute and deliver to the
Collateral Agent an instrument accepting such appointment, and thereupon such
successor, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the Collateral Agent hereunder
and with like effect as if originally named as "Collateral Agent" herein and
therein, and upon request (and at the expense of the Purchasers), the
predecessor Collateral Agent shall take all actions and execute all documents
necessary to give effect to the foregoing. In the event the Collateral Agent's
resignation becomes effective at a time when no successor has been named, all
powers specifically delegated to the Collateral Agent may be exercised by the
Majority Noteholders and the Majority Noteholders shall be entitled to all
rights of the Collateral Agent hereunder and under the other Loan Documents..
10.10 Reimbursement. Without limiting the provisions of Section 10, the
Purchasers and the Collateral Agent hereby agree that the Collateral Agent shall
not be obligated to make available to any Person any sum which the Collateral
Agent is expecting to receive for the account of that Person until the
Collateral Agent has determined that it has received that sum. The Collateral
Agent may, however, disburse funds prior to determining that the sums which the
Collateral Agent expects to receive have been finally and unconditionally paid
to the Collateral Agent, if the Collateral Agent wishes to do so. If and to the
extent that the Collateral Agent does disburse funds and it later becomes
apparent that the Collateral Agent did not then receive a payment in an amount
equal to the sum paid out, then any Person to whom the Collateral Agent made the
funds available shall, on demand from the Collateral Agent:
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(a) refund the Collateral Agent the sum paid to that Person;
and
(b) reimburse the Collateral Agent for the additional amount
certified by the Collateral Agent as being necessary to indemnify the
Collateral Agent against any funding or other cost, loss, expense or
liability sustained or incurred by the Collateral Agent as a result of
paying out the sums before receiving it.
11.1 Additional Item. Notwithstanding anything to the contrary herein,
Purchasers hereby consent to Company, as sponsor, entering into a Sale and
Servicing Agreement, Servicing Assumption Agreement, Insurance Agreement and
Indemnification Agreement relating to the FirstCity Auto Receivables Trust
1999-2 Asset Backed Notes and Asset Backed Certificates issued in connection
with the securitization described in the Summary of Terms attached as Schedule
9.31 to the Loan Agreement which sets forth the general terms of the
securitization.
As part of and in connection with that consent, Purchasers recognize
that pursuant to the Sale and Servicing Agreement, Servicing Assumption
Agreement, Insurance Agreement and Indemnification Agreement, Company, as
sponsor, will be responsible to purchase any nonconforming contract in the event
that the seller, the servicer, or the related originator fails to repurchase any
contract which is required to be repurchased under Article III of the Sale and
Servicing Agreement and the definitions section of the Sale and Servicing
Agreement and that the Company has additional responsibilities related to
transfer of servicing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
FIRSTCITY FINANCIAL CORPORATION
By:/s/ J. Xxxxx Xxxxx
--------------------------------
J. Xxxxx Xxxxx
Vice President and Treasurer
IFA INCORPORATED, in its individual
capacity as a Purchaser and as Collateral Agent
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: President
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EXHIBIT A
Dollar Amount
Name and Address of Purchasers of Notes No. of Warrants
Initial Option
------- ------
IFA Incorporated $25,000,000 425,000 1,975,000
0000 Xxxxx Xxxxxxx Xx (voting (non-
Xxxxxxxxxx, XX 00000 shares) voting
Attn: President share)
FAX (000) 000-0000
SCHEDULE OF EXHIBITS AND SCHEDULES**
Exhibit A Name and Address of the Purchasers
Exhibit B Form of Note
Exhibit C Form of Warrant
Exhibit D Form of Option
Schedule 1.1(cc) Specific Extraordinary Transactions
Schedule 1.1 (aaaa) Schedule of Secondary Obligors
Schedule 4.1 Schedule of Guarantees
Schedule 4.2(a) Schedule of Excluded Notes
Schedule 4.2(b) Schedule of Note Pledge Agreements and Pledged Notes
Schedule 4.3(a) Schedule of Excluded Entities
Schedule 4.3(b) Schedule of Stock Pledge Agreements
Schedule 4.4 Schedule of Security Agreements
Schedule 5.1(a)(i) Schedule of Jurisdictions in which the Company Has
Qualified to do Business
Schedule 5.1(a)(ii) Schedule of Jurisdictions in which
each Affiliated Entity has qualified to do
business.
Schedule 5.1(e) Schedule of Shareholders, Stock and Options
Schedule 5.1(f) Schedule of Fictitious Names
Schedule 5.1(g) Schedule of Certain Permitted Liens
Schedule 5.1(j) Schedule of Government Contracts
Schedule 5.1(l) Required Consents
Schedule 5.1(o) Defaults
Schedule 5.1(s) Schedule of Other Indebtedness
Schedule 5.1(t) Schedule of Affiliate Indebtedness
Schedule 5.1(u) Affiliate Notes
--------
** Unless otherwise indicated (and as more fully provided in Section 8.26 of
this Agreement), the schedules attached to the Loan Agreement on the
Closing Date which have the same or substantially the same information as
those set forth above shall be deemed to have been attached to this
Agreement on the Closing as the above schedules.
Schedule 5.1(u)(iii) Schedule of Future Affiliate Notes (to be delivered
post-closing as they arise)
Schedule 5.1(w) Schedule of Affiliates
Schedule 6.3(j) Fee Agreements
Schedule 6.3(l) Guaranty Equivalents
Schedule 7.1(f) Cross Default Agreements
Schedule 9.1 ERISA Matters
