UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT of 1934
For the transition period from ____________________ to ________________________
Commission File Number: 0-19599
WORLD ACCEPTANCE CORPORATION
-------------------------------------------------------
(Exact name of registrant as specified in its charter.)
South Carolina 57-0425114
-------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
108 Frederick Street
Greenville, South Carolina 29607
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(864) 298-9800
------------------
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period than the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
X Yes No
------ ------
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date, November 13, 1997.
Common Stock, no par value 18,955,573
- ------------------------------ -----------------
(Class) (Outstanding)
This Filing contains 16 pages.
The Exhibit Index is on page 14.
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
<S> <C> <C>
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30,
1997, and March 31, 1997 3
Consolidated Statements of Operations for the
three-month periods and six-month periods ended
September 30, 1997, and September 30, 1996 4
Consolidated Statements of Shareholders' Equity
for the year ended March 31, 1997, and the six-month
period ended September 30, 1997 5
Consolidated Statements of Cash Flows for the
three-month periods and six-month periods ended
September 30, 1997, and September 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the three-month
periods and six-month periods ended September 30, 1997,
and September 30, 1996 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Securityholders 12
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
</TABLE>
2
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------------- --------------------
<S> <C> <C>
ASSETS
Cash $ 2,283,172 1,486,073
Gross loans receivable 125,929,613 113,439,027
Less:
Unearned interest and fees (27,111,223) (23,899,194)
Allowance for loan losses (7,526,452) (6,283,459)
-------------- --------------
Loans receivable, net 91,291,938 83,256,374
Property and equipment, net 6,713,464 6,102,125
Other assets, net 4,027,419 2,201,757
Intangible assets, net 9,408,176 9,117,033
------------ -------------
$ 113,724,169 102,163,362
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 67,850,000 58,200,000
Other note payable 482,000 482,000
Accounts payable and accrued expenses 3,230,493 4,517,899
---------- -------------
Total liabilities 71,562,493 63,199,899
------------ -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital 704,213 625,592
Retained earnings 41,457,463 38,337,871
------------ -------------
Total shareholders' equity 42,161,676 38,963,463
------------ ------------
$ 113,724,169 102,163,362
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest and fee income $ 18,072,484 16,139,302 35,103,194 31,438,083
Insurance and other income 2,061,042 1,855,274 4,013,963 3,862,959
------------ ------------- ------------ -------------
Total revenues 20,133,526 17,994,576 39,117,157 35,301,042
------------ ------------- ------------ -------------
Expenses:
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
------------ ------------- ------------ -------------
General and administrative expenses:
Personnel 7,839,340 6,756,704 15,808,700 13,562,690
Occupancy and equipment 1,631,073 1,288,542 3,051,372 2,496,150
Data processing 303,639 259,896 599,701 520,961
Advertising 799,801 495,472 1,512,283 1,083,708
Amortization of intangible assets 300,320 697,298 785,793 1,390,741
Other 1,969,101 1,500,250 3,709,214 2,951,248
------------ ------------- ------------ -------------
12,843,274 10,998,162 25,467,063 22,005,498
------------ ------------- ------------ -------------
Interest expense 1,383,406 996,850 2,564,882 1,876,374
------------ ------------- ------------ -------------
Total expenses 17,924,647 15,023,001 34,425,565 29,155,526
------------ ------------- ------------ -------------
Income before income taxes 2,208,879 2,971,575 4,691,592 6,145,516
Income taxes 740,000 1,041,000 1,572,000 2,151,000
------------ ------------- ------------ -------------
Net income $ 1,468,879 1,930,575 3,119,592 3,994,516
============ ============= ============ =============
Earnings per common share:
Primary $ .08 .10 .16 .20
============ ============= ============ =============
Fully diluted $ .08 .10 .16 .20
============ ============= ============ =============
Weighted average common shares outstanding:
Primary 19,202,676 20,084,688 19,176,115 20,448,466
============ ============= ============ =============
Fully diluted 19,202,722 20,084,688 19,196,009 20,448,466
============ ============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Paid-in Retained
Capital Earnings Total
------- ---------- -----
<S> <C> <C> <C>
Balances at March 31, 1996 $ 14,625,136 30,254,532 44,879,668
Proceeds from exercise of stock options (60,000 shares),
including tax benefits of $66,469 259,294 - 259,294
Common stock repurchases (1,810,000 shares) (14,258,838) - (14,258,838)
Net income for the year - 8,083,339 8,083,339
----------- ------------ -----------
Balances at March 31, 1997 625,592 38,337,871 38,963,463
Proceeds from exercise of stock options (19,000 shares),
including tax benefit of $23,204 78,621 - 78,621
Net income for the six months - 3,119,592 3,119,592
----------- ------------ -----------
Balances at September 30, 1997 $ 704,213 41,457,463 42,161,676
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,468,879 1,930,575 3,119,592 3,994,516
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
Amortization of intangible assets 300,320 697,298 785,793 1,390,741
Amortization of loan costs and discounts 31,258 8,210 57,468 16,420
Depreciation 363,649 328,244 718,271 643,434
Change in accounts:
Other assets, net (1,953,420) 156,688 (1,883,130) (404,612)
Accounts payable and accrued expenses 683,769 (933,367) (1,264,202) (1,771,428)
----------- ------------ ------------ ------------
Net cash provided by operating activities 4,592,422 5,215,637 7,927,412 9,142,725
----------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in loans, net (5,844,123) (5,135,788) (9,406,632) (9,393,170)
Net assets acquired from office acquisitions,
primarily loans (4,730,288) (409,021) (5,037,552) (847,941)
Purchases of premises and equipment (813,160) (238,746) (1,314,610) (1,036,536)
Purchases of intangible assets (939,936) (245,999) (1,076,936) (644,333)
----------- ----------- ----------- -----------
Net cash used by investing activities (12,327,507) (6,029,554) (16,835,730) (11,921,980)
----------- ----------- ------------ -----------
Cash flows from financing activities:
Proceeds (repayment) of senior notes payable, net (2,250,000) 4,100,000 (350,000) 12,850,000
Proceeds from senior subordinated notes 10,000,000 - 10,000,000 -
Proceeds from exercise of stock options 17,500 - 55,417 4,380
Repurchase of common stock - (3,158,798) - (10,210,708)
----------- ------------ ------------ -------------
Net cash provided by financing activities 7,767,500 941,202 9,705,417 2,643,672
----------- ----------- ----------- -----------
Increase (decrease) in cash 32,415 127,285 797,099 (135,583)
Cash, beginning of period 2,250,757 1,430,879 1,486,073 1,693,747
----------- ----------- ----------- -----------
Cash, end of period $ 2,283,172 1,558,164 2,283,172 1,558,164
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 899,903 544,200 2,363,686 1,708,161
Cash paid for income taxes 1,979,435 2,770,303 3,678,770 4,260,921
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options 7,786 - 23,204 3,451
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Company at September 30, 1997,
and for the periods then ended were prepared in accordance with the instructions
for Form 10-Q and are unaudited; however, in the opinion of management, all
adjustments (consisting only of items of a normal recurring nature) necessary
for a fair presentation of the financial position at September 30, 1997, and the
results of operations and cash flows for the period then ended, have been
included. The results for the periods ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
These consolidated financial statements do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the Company's audited financial statements and related notes
for the year ended March 31, 1997, included in the Company's 1997 Annual Report
to Shareholders.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
The following is a summary of the changes in the allowance for loan losses
for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 6,433,534 5,230,171 6,283,459 5,006,703
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
Loan losses (3,653,615) (3,024,344) (6,468,264) (5,259,719)
Recoveries 245,802 199,822 498,829 388,946
Allowance on acquired loans 802,764 23,123 818,808 47,177
----------- ---------- ---------- ----------
Balance at end of period $ 7,526,452 5,456,761 7,526,452 5,456,761
=========== ========= ========== =========
</TABLE>
NOTE 3 - PARADATA FINANCIAL SYSTEMS (PARADATA)
The following data for ParaData was included in the Consolidated Statements
of Operations for the periods ended September 30, 1997 and 1996 (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- --------------------
1997 1996 1997 1996
--------- -------- --------- ------
<S> <C> <C> <C> <C>
Sales and system-support $ 463,486 431,925 870,855 938,024
Cost of sales 75,819 90,285 163,832 216,957
---------- ---------- ---------- ----------
Net margin (included in other income) 387,667 341,640 707,023 721,067
---------- ---------- ---------- ----------
General and administrative expenses
Personnel 253,425 250,465 469,285 526,053
Occupancy and equipment 69,011 68,024 135,272 133,759
Advertising 2,575 (1,029) 2,825 3,042
Amortization of intangibles 7,189 7,189 14,378 14,378
Other 38,708 41,921 78,478 91,198
--------- -------- --------- --------
370,908 366,570 700,238 768,430
Net income (loss) before income taxes $ 16,759 (24,930) 6,785 (47,363)
========= ======== ========= ========
</TABLE>
7
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain information derived from the
Company's consolidated statements of operations and balance sheets, as well as
operating data and ratios, for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Average gross loans receivable (1) $ 121,206 106,173 118,042 103,943
Average loans receivable (2) 90,086 83,175 91,811 81,682
Expenses as a % of total revenue:
Provision for loan losses 18.4% 16.8% 16.3% 14.9%
General and administrative 63.8% 61.1% 65.1% 62.3%
Total interest expense 6.9% 5.5% 6.6% 5.3%
Operating margin (3) 17.8% 22.1% 18.6% 22.7%
Return on average assets (annualized) 5.4% 8.3% 5.9% 8.7%
Offices opened or acquired, net 11 9 24 24
Total offices (at period end) 360 306 360 306
</TABLE>
(1) Average gross loans receivable have been determined by averaging month-end
gross loans receivable over the indicated period.
(2) Average loans receivable have been determined by averaging month-end gross
loans receivable less unearned interest and deferred fees over the
indicated period.
(3) Operating margin is computed as total revenues less provision for loan
losses and general and administrative expenses, as a percentage of total
revenues.
Comparison of Three Months Ended September 30, 1997, Versus
Three Months Ended September 30, 1996
Net income amounted to $1,469,000 for the three months ended September 30,
1997, a 23.9% decrease from the $1,931,000 earned during the corresponding
three-month period of the previous year. This decrease resulted from a decrease
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $376,000, or 9.5%, combined with an
increase in interest expense and offset by a decrease in income taxes.
Interest and fee income for the quarter ended September 30, 1997, increased
by $1,933,000, or 12.0%, over the same period of the prior year. This increase
resulted primarily from the $10.9 million increase, or 13.1%, in average loans
receivables over the two corresponding periods. The increase in interest and
fees was less than the increase in average balances outstanding due to a slight
reduction in the overall yield in the loan portfolio. This reduction is due to
lower interest rates charged on larger loans being made in select offices of the
Company. Insurance commissions and other income increased by $206,000, or 11.1%,
when comparing the two quarterly periods. Insurance commissions increased by
8.0%, tracking the growth in loans in those states that allow the sale of credit
insurance. Other income increased by $111,000, or 16.4%, primarily from
increased gross profit from both our ParaData subsidiary, as well as our World
Class Buying Club (WCBC) electronic sales.
8
<PAGE>
9
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Three Months Ended September 30, 1997, Versus
Three Months Ended September 30, 1996, continued
Total revenues amounted to $20.1 million during the quarter ended September
30, 1997, representing an 11.9% increase over the $18.0 million in total
revenues for the same quarter of the prior year. Revenues from the 273 offices
open throughout both three-month periods decreased by approximately 3.9%. At
September 30, 1997, the Company had 360 offices in operation, an increase of 10
offices during the current quarter, and 24 offices since the beginning of the
fiscal year.
The provision for loan losses amounted to $3,698,000 during the quarter
ended September 30, 1997, representing a 22.1% increase over the $3,028,000
during the same quarter of fiscal 1997. This increase resulted from an increase
in the general allowance for loan losses, as well as an increase in loan losses.
Net charge-offs, during the quarter, increased by $606,000, or 21.6%, and as an
annualized percentage of average loans increased from 13.5% for the quarter
ended September 30, 1996, to 14.5% for the most recent quarter. The Company has
seen increased levels of loan losses for the last several quarters, and
management continues to focus attention to reversing this recent trend. Until
delinquencies and charge-offs return to historical levels, the results of
operations of the Company's small loan business will continue to be negatively
affected.
General and administrative expenses for the quarter ended September 30,
1997, increased by $1,845,000, or 16.8%, over the same quarter of fiscal 1996.
This increase resulted primarily from the additional expenses associated with
the 54 net new offices opened or acquired between September 30, 1996, and
September 30, 1997. The Company has also sold or merged with other existing
offices, 19 offices during the same 12 month period. These were offices that had
not grown as expected to a profitable size within a reasonable period of time.
Excluding the expenses associated with ParaData, overall general and
administrative expenses when divided by the average open offices remained level
when comparing the two periods. During the current quarter, the Company
benefited from reduced intangible amortization as a result of a large intangible
asset relating to the 1989 leveraged buyout becoming fully amortized in May
1997. However, excluding both the expenses relating to ParaData, as well as
intangible amortization overall, general and administrative expenses when
divided by average opened offices increased by only 4.3%.
Interest expense increased by $387,000, or 38.8%, when comparing the two
corresponding quarterly periods. This increase resulted primarily from the
increased level of debt, which has grown from $50.6 million at September 30,
1996, to $67.9 million at September 30, 1997. This increase in outstanding debt
resulted from the funding of $4.0 million in common stock repurchases in October
1996, and the funding of several acquisitions completed during the past year.
The effective income tax rate decreased to 33.5% during the quarter ended
September 30, 1997, from 35.0% during the prior year quarter. The current 33.5%
reflects a more accurate annualized rate than the prior year quarter. The actual
tax rate for fiscal 1997 was 32.8%.
Comparison of Six Months Ended September 30, 1997,
Versus Six Months Ended September 30, 1996
For the six-month period ended September 30, 1997, net income amounted to
$3.1 million, a decrease of $875,000, or 21.9%, from the corresponding six-month
period of the prior year. Operating income decreased by $765,000, or 9.5%, over
the two periods. This decrease combined with an increase in interest expense was
offset by a decrease in income taxes.
Total revenues amounted to $39.1 million during the current six-month
period, an increase of $3.8 million, or 10.8%, over the prior-year period. This
increase resulted from an increase in interest and fee income of 11.7% combined
with an increase in insurance and other income of 3.9%. Revenues from the 273
offices open throughout both six-month periods decreased approximately 3.9%.
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Six Months Ended September 30, 1997,
Versus Six Months Ended September 30, 1996, continued
Interest and fee income rose by $3.7 million, or 11.7%, during the two
corresponding six-month periods primarily as a result of increases in loan
balances outstanding. Average loans receivable were $91.8 million during the six
months ended September 30, 1997, representing a 12.4% increase over the average
balances of the prior year. Other income increased by 3.9% due to increased
insurance commissions, as well as increased gross profit from WCBC sales.
The provision for loan losses increased by $1,120,000, or 21.2%, during the
current six-month period when compared to the same period of fiscal 1997. This
increase resulted in an increase in the general reserve for loan losses which is
a function of gross loans outstanding, as well as an increase in loan losses.
Net charge-offs increased by $1,099,000, or 22.6%, when comparing the two
six-month periods. As an annualized percentage of average loans, this
represented an increase to 13.0% during the current six-month period compared to
11.9% for the same period of the prior fiscal year.
General and administrative expenses increased by $3,462,000, or 15.7%,
during the most recent six-month period. As a percentage of total revenues,
these expenses increased from 62.3% during the prior year six-month period to
65.1% during the current period. This increase resulted from the 54 net new
offices opened or acquired during the past year. Excluding the expenses
associated with ParaData, overall general and administrative expenses, when
divided by the average open offices, decreased by 1.0% when comparing the two
six-month periods.
Interest expense increased by approximately $689,000 during the current
six-month period as a result of the increase in the level of debt outstanding
primarily due to the funds used to repurchase the Company's common stock and
complete several key acquisitions during the previous 12 months.
The effective income tax rate decreased to 33.5% during the six months
ended September 30, 1997, from 35.0% for the same period ended September 30,
1996, which reflects a more accurate annualized income tax rate.
Liquidity and Capital Resources
The Company's primary sources of funds are cash flow from operations and
borrowings under its revolving credit agreement. The Company's primary ongoing
cash requirements are funding the opening and operation of new offices, the
overall growth of loans outstanding and the repayment of existing debt.
The Company has a $65.0 million revolving credit agreement, $12.0 million
of senior term notes, and $10.0 million of subordinated notes.
The revolving credit facility expires on September 30, 1999, and bears
interest, at the Company's option, at the agent's prime rate or LIBOR plus
1.60%. At September 30, 1997, the interest rate under the facility was 7.33%,
and the Company's outstanding balance was $45.9 million, leaving $19.1 million
in borrowing availability under existing borrowing base limitations (based on
eligible loans receivable).
The senior term notes provide for interest payments to be made
semi-annually at a fixed rate of 8.5% with annual principal payments of $4.0
million to be made each year (the next payment being due on December 1, 1997).
The subordinated notes provide for interest payments to be made quarterly
at a fixed rate of 10.0%. Annual principal payments of $2.0 million will be due
beginning June 1, 19999, with a final maturity date of June 1, 2004.
Borrowings under the revolving credit agreement, the senior term notes, and
the subordinated notes are secured by a lien on substantially all the tangible
and intangible assets of the Company and its subsidiaries pursuant to various
security agreements.
The Company believes that cash flow from operations and borrowings under
its revolving credit facility will be adequate to fund the principal payment due
under the term notes as well as fund the expected costs of opening and operating
new offices, including funding initial operating losses of new offices, and
funding loans receivable originated by those offices and the Company's other
offices.
10
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Inflation
The Company does not believe that inflation has a material adverse effect
on its financial condition or results of operations. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. While increases in operating costs would adversely affect the Company's
operations, the consumer lending laws of three of the six states in which the
Company currently operates allow indexing of maximum loan amounts to the
Consumer Price Index. These provisions will allow the Company to make larger
loans at existing interest rates, which could offset the effect of inflationary
increases in operating costs.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow
seasonal trends. The Company's highest loan demand occurs each year from October
through December, its third fiscal quarter. Loan demand is generally the lowest
and loan repayment is highest from January to March, its fourth fiscal quarter.
Loan volume and average balances remain relatively level during the remainder of
the year. This seasonal trend causes fluctuations in the Company's cash needs
and quarterly operating performance through corresponding fluctuations in
interest and fee income and insurance commissions earned, since unearned
interest and insurance income are accreted to income on a collection method.
Consequently, operating results for the Company's third fiscal quarter are
significantly lower than in other quarters and operating results for its fourth
fiscal quarter are generally higher than in other quarters.
Legal Proceedings
The Company is a party to certain legal proceedings. See Part II, Item 1.
11
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Georgia subsidiary are named as
co-defendants with a number of other finance companies, jewelry and
furniture retailers, and insurance companies in a consolidated
action, currently pending in U.S. District Court in Alabama under the
caption In re Consolidated "Non-filing Insurance" Fee Litigation
(Multidistrict Litigation Docket No. 1130, U. S. District Court,
Middle District of Alabama, Northern Division). The consolidated
action involves the defendants' non-file insurance practices. The
complaint alleges, among other things, that the defendants' non-file
insurance coverages do not constitute true insurance, and that the
defendants' practices with respect to non-file insurance constitute
alleged federal truth-in-lending, RICO and antitrust violations. The
complaint seeks certification of a nationwide class and seeks to
recover money damages and injunctive relief. The complaint was filed
on April 18, 1995, the Company has filed an answer and the parties
are in the discovery process. The Company has been advised that
certain of the defendants in the case have agreed to settle the
claims made against them by paying money damages to the plaintiffs.
The Company has also been advised that certain of the settling
defendants have agreed to change their non-file insurance practices.
If the Company's non-file insurance practices are found to be
improper, the Company could be required to refund non-file insurance
fees, pay other significant damages to the plaintiffs, and change its
non-file insurance practices going forward and, as a result, the
Company could experience a reduction in future income.
The Company has been named as a defendant in an action, Turner v.
World Acceptance Corp. pending in District Court for the Fourteenth
Judicial District, Tulsa County, Oklahoma (No. CJ-97-1921). The
action was commenced against the company on May 20, 1997, names
numerous other consumer finance companies as defendants, and seeks
certification as a statewide class action. The action alleges that
World and other consumer finance defendants collected excess finance
charges in connection with refinancing certain consumer loans in
Oklahoma and seeks money damages and an injunction against further
collection of such charges. The Company has filed an answer in the
action denying liability, and discovery has not commenced. The
plaintiff's claim is based on a recent opinion of the Oklahoma
Attorney General interpreting a provision of the Oklahoma Consumer
Credit Code with respect to the permitted amount of certain loan
refinance charges in a manner contrary to prior regulatory practice
in Oklahoma. Enforcement of the Oklahoma Attorney General's opinion
has been enjoined, and such action is currently pending before the
Oklahoma Supreme Court. In addition, the State of Oklahoma has
recently enacted legislation to clarify the interpretation of the
disputed provision of the Oklahoma Consumer Credit Code consistent
with prior regulatory practice. World intends to vigorously defend
this action.
From time to time the Company is involved in other routine litigation
relating to claims arising out of its operations in the normal course
of business. The Company believes that it is not presently a party to
any such other pending legal proceedings that would have a material
adverse effect on its financial condition.
Any statement of management's expectation with respect to litigation
may be deemed a forward-looking statement, within the meaning of
Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"), and no assurance can be given that management's expectation
will prove correct, as such expectation is subject to certain risks,
uncertaintities and assumptions based on the preliminary nature of
the actions and the vagaries of litigation generally. Should one or
more of these risks materialize or should underlying assumptions
prove incorrect, the actual outcome of this litigation could differ
materially from management's expectation.
Item 2. Changes in Securities
None. The Company's credit agreements contain certain restrictions on
the payment of cash dividends on its capital stock.
12
<PAGE>
Item 4. Submission of Matters to a Vote of Securityholders
(a) The 1997 Annual Meeting of Shareholders was held on August 6,
1997.
(b) Pursuant to Instruction 3 to Item 4, this paragraph need not be
answered.
(c) At the 1997 Annual Meeting of Shareholders, the following two
matters were voted upon and passed. The tabulation of votes was:
(1) The election of seven Directors to serve until the 1997
Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
VOTES IN FAVOR WITHHOLD AUTHORITY*
-------------- -------------------
IN PERSON AS PROXY IN PERSON AS PROXY
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Ken R. Bramlett, Jr. 15,452,371 292,375
-------------- ------------ ------------- -----------
James R. Gilreath 15,452,371 292,375
-------------- ------------ ------------- -----------
William S. Hummers III 15,418,771 325,975
-------------- ------------- ------------- -----------
A. Alexander McLean III 15,452,371 292,375
-------------- ------------ ------------- -----------
R. Harold Owens 15,452,271 292,475
-------------- ------------ ------------- -----------
Charles D. Walters 15,450,371 294,375
-------------- ------------ ------------- -----------
Charles D. Way 15,452,371 292,375
-------------- ------------ ------------- -----------
</TABLE>
(2) The ratification of the selection of KPMG Peat Marwick as
Independent Auditors:
<TABLE>
<CAPTION>
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS*
-------------- ------------- ------------
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
15,717,110 22,700 4,936
------------- ------------- -------------- ------------- ------------- -----------
</TABLE>
*There were no broker non votes on these routine items.
13
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION, CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Filed
Herewith (*) or
Previous Company
Exhibit Exhibit Registration
Number Description Number No. or Report
- ------ ----------- ------ -------------
<S> <C> <C> <C>
3.1 Second Amended and Restated Articles of Incorporation of the 3.1 1992 10-K
Company
3.2 First Amendment to Second Amended and Restated Articles 3.2 1995 10-K
of Incorporation
3.3 Amended Bylaws of the Company 3.4 33-42879
4.1 Specimen Share Certificate 4.1 33-42879
4.2 Articles 3, 4 and 5 of the Form of Company's Second 3.1, 3.2 1995 10-K
Amended and Restated Articles of Incorporation
4.3 Article II, Section 9 of the Company's Second Amended 3.2 1995 10-K
and Restated Bylaws
4.4 Amended and Restated Revolving Credit Agreement, dated as *
of June 30, 1997, between Harris Trust and Savings Bank,
the Banks signatory thereto from time to time and the Company
4.5 Amended and Restated Note Agreement, dated as of June 30, 1997, *
between Jefferson-Pilot Life Insurance Company and the Company
4.6# Amended and Restated Note Agreement, dated as of June 30, 1997,
between Principal Mutual Life Insurance Company and the Company
4.7 Note Agreement, dated as of June 30, 1997, between Principal *
Mutual Life Insurance Company and the Company re: 10%
Senior Subordinated Secured Notes
4.8 Amended and Restated Security Agreement, Pledge and Indenture *
of Trust, dated as of June 30, 1997, between the Company and
Harris Trust and Savings Bank, as Security Trustee
10.1+ Employment Agreement of Charles D. Walters, effective April 1, 10.1 1994 10-K
1994
10.2+ Employment Agreement of A. Alexander McLean, III, effective 10.2 1994 10-K
April 1, 1994
10.3+ Employment Agreement of R. Harold Owens, effective June 26, 10.3 1995 10-K
1995
14
<PAGE>
10.4 Securityholders' Agreement, dated as of September 19, 1991, 10.5 33-42879
between the Company and certain of its securityholders
10.5+ 1992 Stock Option Plan of the Company 4 33-52166
10.6+ 1994 Stock Option Plan of the Company, as amended 10.6 1995 10-K
10.7+ The Company's Executive Incentive Plan 10.6 1994 10-K
10.8+ The Company's Executive Strategic Incentive Plan 10.8 1995 10-K
10.9+ Amendment No. 1, dated as of April 1, 1996, to the Executive 10.9 1996 10-K
Strategic Incentive Plan
</TABLE>
# Omitted from filing -- substantially identical to immediately preceding
exhibits, except for the parties thereto and the principal amount involved.
+ Management contract or other compensatory plan required to be filed under
Item 14(c) of this report and Item 601 of Regulation S-K.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended September
30, 1997.
15
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD ACCEPTANCE CORPORATION
Dated: November 13, 1997 /s/ C. D. Walters
---------------------
C. D. Walters, Chief Executive Officer
Dated: November 13, 1997 /s/ A. A. McLean III
------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
16
<PAGE>
Amended and Restated
Revolving Credit Agreement
by and among
World Acceptance Corporation,
Harris Trust and Savings Bank,
individually and as Agent
and
the Banks
which are parties hereto
Dated as of June 30, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 1. THE CREDIT 1
Section 1.1. The Revolving Credit 1
SECTION 2. GENERAL PROVISIONS APPLICABLE TO ALL LOANS 2
Section 2.1. Applicable Interest Rates 2
Section 2.2. Minimum Borrowing Amounts 3
Section 2.3. Borrowing Procedures 3
Section 2.4. Interest Periods 4
Section 2.5. Maturity of Loans 5
Section 2.6. Prepayments 5
Section 2.7. Default Rate 6
Section 2.8. The Notes 6
Section 2.9. Commitment Terminations 6
Section 2.10. Funding Indemnity 7
SECTION 3. FEES, EXTENSIONS AND APPLICATIONS 7
Section 3.1. Commitment Fee 7
Section 3.2. Closing Fee 8
Section 3.3. Agent's Fees 8
Section 3.4. Extension of the Commitments. 8
Section 3.5. Place and Application of Payments 9
SECTION 4. THE COLLATERAL AND GUARANTIES 10
Section 4.1. The Collateral 10
Section 4.2. Subsidiary Guaranties. 10
SECTION 5. DEFINITIONS; INTERPRETATION 10
Section 5.1. Definitions 10
Section 5.2. Interpretation 24
SECTION 6. REPRESENTATIONS AND WARRANTIES 25
Section 6.1. Organization and Qualification 25
Section 6.2. Subsidiaries 25
Section 6.3. Corporate Authority and Validity of Obligations 25
Section 6.4. Not an Investment Company 26
Section 6.5. Use of Proceeds; Margin Stock 26
Section 6.6. Financial Reports 26
Section 6.7. No Material Adverse Change 26
Section 6.8. Litigation 26
Section 6.9. Taxes 27
Section 6.10. Approvals 27
Section 6.11. Indebtedness and Liens 27
Section 6.12. ERISA 27
Section 6.13. Material Agreements 28
Section 6.14. Compliance with Laws 28
Section 6.15. Full Disclosure. 29
Section 6.16. No Defaults. 29
Section 6.17. Note Purchase Agreements 29
SECTION 7. CONDITIONS PRECEDENT 29
Section 7.1. Initial Borrowing 29
<PAGE>
Section 7.2. All Loans 30
SECTION 8. COVENANTS 31
Section 8.1. Existence, Etc. 31
Section 8.2. Insurance 31
Section 8.3. Taxes, Claims for Labor and Materials 31
Section 8.4. Compliance with Laws 31
Section 8.5. Maintenance, Etc 32
Section 8.6. Nature of Business 32
Section 8.7. Consolidated Net Worth 32
Section 8.8. Fixed Charge Coverage Ratio; Loan Loss Reserves 32
Section 8.9. Permitted Indebtedness 32
Section 8.10. Limitations on Indebtedness 33
Section 8.11. Limitation on Liens 34
Section 8.12. Dividends, Stock Purchases 35
Section 8.13. Mergers, Consolidations and Sales or Transfers of Assets 36
Section 8.14. Lease-Backs 38
Section 8.15. Guaranties 39
Section 8.16. Limitation on Restrictions 39
Section 8.17. Transactions with Affiliates 39
Section 8.18. Investments 39
Section 8.19. Termination of Pension Plans 40
Section 8.20. Reports and Rights of Inspection 40
SECTION 9. EVENTS OF DEFAULT AND REMEDIES 44
Section 9.1. Events of Default 44
Section 9.2. Notice to Banks 46
Section 9.3. Non-Bankruptcy Defaults 46
Section 9.4. Bankruptcy Defaults 47
Section 9.5. Expenses 47
SECTION 10. CHANGE IN CIRCUMSTANCES 47
Section 10.1. Change of Law 47
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR 48
Section 10.3. Increased Cost and Reduced Return 48
Section 10.4. Lending Offices 49
Section 10.5. Discretion of Bank as to Manner of Funding 49
SECTION 11. THE AGENT 49
Section 11.1. Appointment and Authorization 49
Section 11.2. Agent and Affiliates 50
Section 11.3. Action by Agent 50
Section 11.4. Consultation with Experts 50
Section 11.5. Liability of Agent 50
Section 11.6. Indemnification 51
Section 11.7. Credit Decision 51
Section 11.8. Resignation of the Agent 51
Section 11.9. Payments 51
SECTION 12. MISCELLANEOUS 52
Section 12.1. No Waiver of Rights 52
<PAGE>
Section 12.2. Non-Business Day 52
Section 12.3. Documentary Taxes 52
Section 12.4. Survival of Representations 52
Section 12.5. Survival of Indemnities 53
Section 12.6. Sharing of Set-Off 53
Section 12.7. Notices 53
Section 12.8. Counterparts 54
Section 12.9. Successors and Assigns 54
Section 12.10. Amendments 55
Section 12.11. Non-Reliance on Margin Stock 55
Section 12.12. Fees and Indemnification 55
Section 12.13. Governing Law 56
Section 12.14. Headings 56
Section 12.15. Entire Agreement 56
Section 12.16. Terms of Collateral Documents not Superseded 56
Section 12.17. Submission to Jurisdiction; Waiver of Jury Trial 56
Signature Page 57
Exhibit A -- Revolving Credit Note
Exhibit B-1 -- Permitted Senior Subordinated Debt
Exhibit B-2 -- Permitted Junior Subordinated Debt
Exhibit C -- Borrowing Base Certificate
Schedule 6.2 -- Subsidiaries
Schedule 6.8 -- Pending Litigation
Schedule 6.9 -- Pending Tax Disputes
Schedule 6.11 -- Existing Indebtedness for Borrowed Money
Schedule 8.11 -- Existing Liens
</TABLE>
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
To each of the Banks which are or become parties hereto:
Ladies and Gentlemen:
The undersigned, World Acceptance Corporation, a South Carolina
corporation (the "BORROWER"), refers to that certain Revolving Credit Agreement
dated as December 1, 1992, as amended, currently in effect among the Borrower,
Harris Trust and Savings Bank, as agent, and the banks party thereto (the
"ORIGINAL CREDIT AGREEMENT"). The Borrower hereby requests that the aggregate
commitments available under the Original Credit Agreement be increased, that
certain additional amendments be made to the Original Credit Agreement and, for
the sake of clarity and convenience, that the Original Credit Agreement be
restated in its entirety as so amended. This Amended and Restated Credit
Agreement amends and replaces in its entirety the Original Credit Agreement, and
from the Effective Date all references made to the Original Credit Agreement in
any Loan Document or in any other instrument or document shall, without more, be
deemed to refer to this Amended and Restated Credit Agreement. This Amended and
Restated Credit Agreement shall become effective as of July 3, 1997 (the
"EFFECTIVE DATE"), and supersedes all provisions of the Original Credit
Agreement as of such date, upon the execution of this Amended and Restated
Credit Agreement by each of the parties hereto and the fulfillment of the
conditions precedent contained in Section 7.1 hereof.
.SECTION 1. THE CREDIT;.
.SECTION 1.1. THE REVOLVING CREDIT;. Subject to the terms and
conditions hereof, the Banks agree to extend a revolving credit (the "REVOLVING
CREDIT") to the Borrower in an aggregate principal amount at any one time
outstanding not to exceed the lesser of (i) the Commitments or (ii) the
Available Borrowing Base as then determined and computed, which may be availed
of by the Borrower in its discretion from time to time, be repaid and used
again, to but not including the Termination Date. The Revolving Credit, subject
to all of the terms and conditions hereof, may be utilized by the Borrower in
the form of Domestic Rate Loans or Eurodollar Loans, all as more fully
hereinafter set forth. The maximum amount of the Revolving Credit which each
Bank agrees to extend to the Borrower shall be as set forth opposite its name on
the applicable signature page hereof or as otherwise set forth in the relevant
Assignment Agreement delivered pursuant to Section 12.9 hereof (its "COMMITMENT"
and cumulatively for all the Banks the "COMMITMENTS") (subject to any reductions
thereof pursuant to the terms hereof). The obligations of the Banks hereunder
are several and not joint, and no Bank shall under any circumstances be
obligated to extend credit hereunder in excess of its Commitment. Each Borrowing
of Loans shall be made ratably from the Banks in proportion to their respective
Commitments. On the Effective Date, the Borrower hereby promises to prepay all
Eurodollar Loans outstanding under the Original Credit Agreement (and each Bank
currently a party to the Original Credit Agreement agrees to waive any
compensation otherwise required by Section 2.10 of the Original Credit Agreement
with respect to, and only with respect to, the prepayment of such Eurodollar
Loans currently outstanding under the Original Credit Agreement) and thereafter,
subject to the terms and conditions hereof, there shall be such nonratable
Borrowings of Loans and repayments thereof as shall be necessary so that after
giving effect thereto the Banks each hold their ratable share of all Loans then
outstanding in proportion to their respective Commitments (which Loans shall
initially constitute Domestic Rate Loans).
.SECTION 2. GENERAL PROVISIONS APPLICABLE TO ALL LOANS;.
.SECTION 2.1. APPLICABLE INTEREST RATES;. (a) DOMESTIC RATE LOANS;.
Each Domestic Rate Loan made by a Bank shall bear interest (computed on the
basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is made until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the Domestic Rate from
time to time in effect, payable quarterly in arrears on the last day of each
March, June, September and December in each year (commencing September 30, 1997)
and at maturity (whether by acceleration or otherwise).
"DOMESTIC RATE" means for any day the greater of: (i) the rate of
interest announced by the Agent from time to time as its prime commercial rate,
or equivalent, as in effect on such day (it being understood and agreed that
such rate may not be the Agent's best or lowest rate); (ii) the average (rounded
upwards,
<PAGE>
if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to
the Agent at approximately 10:00 a.m. (Chicago time) (or as soon thereafter as
is practicable) on such day (or, if such day is not a Business Day, on the
immediately preceding Business Day) by two or more Federal funds brokers
selected by the Agent for the sale to the Agent at face value of Federal funds
in an amount equal or comparable to the principal amount owed to the Agent for
which such rate is being determined, plus 1/2 of 1%. Any change in the interest
rate on any Domestic Rate Loan resulting from a change in said Domestic Rate
shall be effective on the date of the relevant change in said Domestic Rate.
(b) EURODOLLAR LOANS. Each Eurodollar Loan made by a Bank shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is made until
maturity (whether by acceleration or otherwise) at a rate per annum equal to the
sum of the applicable Eurodollar Margin plus the Adjusted LIBOR payable on the
last day of the applicable Interest Period and at maturity (whether by
acceleration or otherwise), and, if the applicable Interest Period is longer
than three months, on each day occurring every three months after the date such
Loan is made.
"ADJUSTED LIBOR" means, for any Borrowing of Eurodollar Loans, a rate
per annum determined in accordance with the following formula:
LIBOR
--------------------------------
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage
"LIBOR" means, for each Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate
cannot be determined, the arithmetic average of the rates of interest per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) at which deposits
in U.S. Dollars in immediately available funds are offered to the Agent at 11:00
a.m. (London, England time) 2 Business Days before the beginning of such
Interest Period by 3 or more major banks in the interbank eurodollar market
selected by the Agent for a period equal to such Interest Period and in an
amount equal or comparable to the applicable LIBOR Portion scheduled to be
outstanding from the Agent during such Interest Period. "LIBOR INDEX RATE"
means, for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage point) for
deposits in U.S. Dollars for a period equal to such Interest Period which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
date 2 Business Days before the commencement of such Interest Period. "TELERATE
PAGE 3750" means the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace Page 3750 on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Banker's Association
Interest Settlement Rates for U.S. Dollar deposits).
"EURODOLLAR RESERVE PERCENTAGE" means, for any Borrowing of Eurodollar
Loans, the daily average for the applicable Interest Period of the maximum rate
at which reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D on
"EUROCURRENCY LIABILITIES", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Loans is determined or any category of
extension of credit or other assets that include loans by non-United States
offices of any Bank to United States residents) subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurodollar Loans shall be deemed to be "EUROCURRENCY LIABILITIES" as defined in
Regulation D without benefit of or credit for any prorations, exemptions or
offsets under Regulation D.
"EURODOLLAR MARGIN" means 1.6%.
(c) RATE DETERMINATIONS. The Agent shall determine each interest rate
applicable to the Loans hereunder, and its determination thereof shall be
conclusive and binding except in the case of manifest error.
.SECTION 2.2. MINIMUM BORROWING AMOUNTS;. Each Borrowing of Domestic
Rate Loans shall be in an amount not less than $300,000, or any larger amount
which is an integral multiple of $50,000. Each Borrowing of Eurodollar Loans
shall be in an amount not less than $2,000,000, or any larger amount that is an
integral multiple of $250,000.
.SECTION 2.3. BORROWING PROCEDURES;. (a) NOTICE TO THE AGENT. The
Borrower shall give
<PAGE>
telephonic or telecopy notice to the Agent (which notice shall be irrevocable
once given and, if by telephone, shall be promptly confirmed in writing) by no
later than 11:00 A.M. (Chicago time) (i) on the date at least three (3) Business
Days prior to the date of each requested Borrowing of Eurodollar Loans and (ii)
on the date of any requested Borrowing of Domestic Rate Loans. Each such notice
shall specify the date of the requested Borrowing (which shall be a Business
Day), the amount of the requested Borrowing, the type of Loans to comprise such
Borrowing and, if such Borrowing is to be comprised of Eurodollar Loans, the
Interest Period applicable thereto. The Borrower agrees that the Agent may rely
on any such telephonic or telecopy notice given by any person it in good faith
believes is authorized to request loans on behalf of the Borrower without the
necessity of independent investigation, and, in the event any notice by such
means conflicts with the written confirmation, such notice shall govern if the
Agent has acted in reliance thereon.
(b) NOTICE TO THE BANKS. The Agent shall give prompt (but in any
event by 12:00 Noon (Chicago time)) telephonic or telecopy notice to each of the
Banks of any borrowing request received pursuant to Section 2.3(a) above and, if
such notice requests the Banks to make Eurodollar Loans, the Agent shall give
notice to the Borrower and each of the Banks by like means of the interest rate
applicable thereto (but, if such notice is given by telephone, the Agent shall
confirm such rate in writing) promptly after the Agent has made such
determination.
(c) BORROWER'S FAILURE TO NOTIFY. If the Borrower fails to give
notice pursuant to Section 2.3(a) above of the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurodollar Loans before the last
day of its then current Interest Period within the period required by Section
2.3(a) for a Borrowing of Eurodollar Loans or, whether or not such notice has
been given, a Default or Event of Default then exists and such Borrowing is not
prepaid, such Borrowing shall automatically be converted into a Borrowing of
Domestic Rate Loans.
(d) DISBURSEMENT OF LOANS. Not later than 1:00 p.m. (Chicago time) on
the date of any Borrowing of Loans, each Bank shall make available its Loan in
funds immediately available in Chicago, Illinois at the principal office of the
Agent, except to the extent such Borrowing is a continuation or conversion of
any outstanding principal amount of a Borrowing, in whole or in part, in which
case each Bank shall record on its books or records or on a schedule to the
appropriate Note such continuation or conversion. Subject to Section 7 hereof,
the Agent shall make the proceeds of each advance of a new Borrowing available
to the Borrower at the Agent's principal office in Chicago, Illinois not later
than close of business on the date of such Borrowing.
.SECTION 2.4. INTEREST PERIODS;. As provided in Section 2.3 hereof,
at the time of each request for the Borrowing of Eurodollar Loans hereunder, the
Borrower shall select an Interest Period applicable to such Loans from among the
available options. The term "INTEREST PERIOD" means the period commencing on the
date a Borrowing of Eurodollar Loans is made and ending, the date, as the
Borrower may select, 1, 2, 3 or 6 months thereafter; PROVIDED, HOWEVER, that:
(a) the Borrower may not select an Interest Period that
extends beyond the Termination Date;
(b) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of such
Interest Period shall be extended to the next succeeding Business Day,
PROVIDED THAT if such extension would cause the last day of such
Interest Period to occur in the following calendar month, the last day
of such Interest Period shall be the immediately preceding Business
Day; and
(c) for purposes of determining the Interest Period for a
Borrowing of Eurodollar Loans, a month means a period starting on one
day in a calendar month and ending on the numerically corresponding day
in the next calendar month; PROVIDED, HOWEVER, that if there is no
numerically corresponding day in the month in which such an Interest
Period is to end or if such an Interest Period begins on the last
Business Day of a calendar month, then such Interest Period shall end
on the last Business Day of the calendar month in which such Interest
Period is to end.
.SECTION 2.5. MATURITY OF LOANS;. Each Loan shall mature and become
due and payable by the Borrower on the Termination Date.
.SECTION 2.6. PREPAYMENTS;. (a) VOLUNTARY. The Borrower shall have
the privilege of
<PAGE>
prepaying without premium or penalty and in whole or in part (but, if in part,
then: (i) in an amount not less than $100,000 in the case of Domestic Rate
Loans, and in an amount not less than $500,000 in the case of Eurodollar Loans
and (ii) in an amount such that the minimum amount required for a Borrowing
pursuant to Section 2.2 hereof remains outstanding) any Borrowing of Loans at
any time on any Business Day upon prior notice to the Agent (which shall advise
each Bank thereof promptly thereafter) by no later than 11:00 a.m. (Chicago
time) (x) on the date three (3) Business Days prior to the date of each
prepayment of a Eurodollar Loan and (y) on the date of each prepayment of a
Domestic Rate Loan, such prepayment to be made by the payment of the principal
amount to be prepaid and, in the case of Eurodollar Loans, any compensation
required by Section 2.10 hereof.
(b) MANDATORY. (i) Concurrently with each reduction of the
Commitments (whether voluntarily pursuant to Section 2.9 or otherwise) the
Borrower shall prepay the Notes by the amount, if any, necessary so that the
aggregate outstanding principal balance of the Notes shall not exceed the
Commitments as so reduced, each such prepayment to be made by the payment of the
principal amount to be prepaid, and, in the case of Eurodollar Loans, any
compensation required by Section 2.10 hereof.
(ii) The Borrower covenants and agrees that in the event that the
outstanding principal amount of the Notes shall at any time and for any reason
exceed the Available Borrowing Base as then determined and computed, the
Borrower shall immediately upon the demand of the Agent or the Required Banks
pay over the amount of the excess to the Agent for the account of the Banks as
and for a mandatory prepayment on the Notes together with any compensation
required by Section 2.10 hereof.
(c) REBORROWINGS. Any amount paid or prepaid on the Loans on or
before the Termination Date may, subject to the terms and conditions of this
Agreement, be borrowed, repaid and borrowed again.
.SECTION 2.7. DEFAULT RATE;. If any payment of principal on any Loan
is not made when due (whether by acceleration or otherwise), such Loan shall
bear interest (computed on the basis of a year of 360 days and actual days
elapsed) from the date such payment was due until paid in full, payable on
demand, at a rate per annum equal to:
(a) with respect to any Domestic Rate Loan, the sum of two
percent (2%) PLUS the Domestic Rate from time to time in effect; and
(b) with respect to any Eurodollar Loan, the sum of two
percent (2%) PLUS the rate of interest in effect thereon at the time of
such default until the end of the Interest Period applicable thereto
and, thereafter, at a rate per annum equal to the sum of two percent
(2%) PLUS the Domestic Rate from time to time in effect.
.SECTION 2.8. THE NOTES;. (a) The Loans made to the Borrower by a
Bank shall be evidenced by a promissory note of the Borrower in the form of
Exhibit A hereto. Each such promissory note as the same may from time to time be
amended together with any notes executed in replacement thereof are hereinafter
referred to individually as a "NOTE" and collectively as the "NOTES". Such Note
shall be dated the date of issuance thereof and payable to the order of each
Bank in the principal amount of its Commitment.
(b) Each Bank shall record on its books or records or on a schedule
to the Note held by it the amount of each Loan made by it to the Borrower, the
Interest Period applicable thereto in the case of Eurodollar Loans, all payments
of principal and interest and the principal balance from time to time
outstanding thereon, in respect of any Eurodollar Loan, the interest rate
applicable thereto, and, in respect of any Loan, the type of such Loan; PROVIDED
THAT prior to the transfer of any Note all such amounts shall be recorded on a
schedule to such Note. The record thereof, whether shown on such books or
records of a Bank or on a schedule to any Note, shall be PRIMA FACIE evidence as
to all such amounts; PROVIDED, HOWEVER, that the failure of any Bank to record
any of the foregoing or any error in any such record shall not limit or
otherwise affect the obligation of the Borrower to repay all Loans made to it
hereunder together with accrued interest thereon.
.SECTION 2.9. COMMITMENT TERMINATIONS;. (a) The Borrower shall have
the right at any time and from time to time, upon five (5) Business Days' prior
written notice to the Agent to terminate without premium or penalty, in whole or
in part, the Commitments, any partial termination to be in an amount not less
than $2,000,000 or any larger amount that is an integral multiple of $1,000,000,
and to reduce ratably
<PAGE>
the respective Commitments of each Bank; PROVIDED THAT the Commitments may not
be reduced to an amount less than the aggregate principal amount of Loans then
outstanding.
(b) Upon the Agent's receipt of the proceeds of any sale or
disposition of the Collateral, or any part thereof, applied to the Obligations
pursuant to Section 10.4(c) of the Company Security Agreement or Section 10.4(c)
of the Subsidiary Security Agreement, the Commitments shall automatically and
without notice be ratably reduced (based on the Commitment of each Bank) by the
amount of such proceeds.
(c) Any termination of Commitments pursuant to this Section 2.9 may
not be reinstated.
.SECTION 2.10. FUNDING INDEMNITY;. In the event any Bank shall incur
any loss, cost or expense (including, without limitation, any loss of profit,
and any loss, cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such Bank to fund or
maintain any Eurodollar Loan or the relending or reinvesting of such deposits or
amounts paid or prepaid to such Bank) as a result of:
(a) any payment or prepayment of a Eurodollar Loan on a
date other than the last day of its Interest Period,
(b) any failure (because of a failure to meet the
conditions of Section 7 or otherwise) by the Borrower to borrow a
Eurodollar Loan on the date specified in a notice given pursuant to
Section 2.3 hereof,
(c) any failure by the Borrower to make any payment of
principal on any Eurodollar Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Eurodollar Loan
as a result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such
Bank such amount as will reimburse such Bank for such loss, cost or
expense. If any Bank makes such a claim for compensation, it shall
provide to the Borrower, with a copy to the Agent, a certificate
executed by an officer of such Bank setting forth the amount of
such loss, cost or expense in reasonable detail (including an
explanation of the basis for and the computation of such loss, cost
or expense) and the amounts shown on such certificate shall be
conclusive absent manifest error.
.SECTION 3. FEES, EXTENSIONS AND APPLICATIONS;.
.SECTION 3.1. COMMITMENT FEE;. The Borrower shall pay to the Agent
for the ratable account of the Banks a commitment fee at the rate of
three-eighths of one percent (3/8 of 1%) per annum commencing September 30, 1997
(computed on the basis of a year of 360 days and the actual number of days
elapsed) on the average daily unused portion of the maximum amount of the
Commitments hereunder. Such commitment fee is payable in arrears on the last day
of each March, June, September and December in each year (commencing September
30, 1997) and on the Termination Date, unless the Commitments are terminated in
whole on an earlier date, in which event the fees for the period to the date of
such termination in whole shall be paid on the date of such termination.
.SECTION 3.2. CLOSING FEE;. (a) The Borrower shall pay to the Agent
for the benefit of each Bank which is not a "Bank" under the Original Credit
Agreement, a closing fee in the amount equal to such Bank's Commitment on the
date hereof multiplied by 1/8 of 1% (0.125%). (b) The Borrower shall pay to the
Agent for the benefit of each Bank which is also a "BANK" under the Original
Credit Agreement, a closing fee in the amount equal to such Bank's "Commitment"
on the date hereof multiplied by 1/10th of 1% (0.1%).
.SECTION 3.3. AGENT'S FEES;. The Borrower shall pay to the Agent for
its own account an agent's fee as mutually agreed upon by the Borrower and the
Agent.
.SECTION 3.4. EXTENSION OF THE COMMITMENTS.; The Borrower shall have
the option to request extensions to the Termination Date pursuant to this
Section 3.4. No less than 90 days prior to, but no more than 120 days prior to,
September 30, 1998 (and, if the Termination Date has been extended pursuant to
this Section 3.4, September 30 of each year thereafter), the Borrower may advise
the Agent in writing of the Borrower's desire to extend the Termination Date for
an additional 12 months and the Agent shall promptly notify the Banks of each
such request. If the Borrower makes any such request, each Bank agrees to notify
the Borrower and the Agent within 60 days of such request stating whether such
Bank is declining or
<PAGE>
consenting to any such request, or consenting to such request subject to
specified terms and conditions. In the event that a Bank fails to so notify the
Agent and the Borrower during such period, such Bank shall be deemed to have
refused the requested extension. In the event that each Bank is agreeable to
such extension (it being understood that the Banks may accept or decline such a
request in their sole discretion and on such terms as they may elect), the
Borrower and the Banks shall enter into such documents as the Agent may
reasonably deem necessary or appropriate to reflect such extension, and all
costs and expenses incurred by the Agent in connection therewith (including
attorneys' fees) shall be paid by the Borrower. In the event any Bank declines a
request to extend the Termination Date as provided above, the Borrower shall
have the option to require, at the Borrower's expense, such Bank to assign, at
par plus accrued interest and fees, without recourse all of its interests,
rights and obligations hereunder (including all of its Commitment and the Loans
and other amounts at the time owing to it hereunder and its Note) to another
Bank or to another bank, financial institution or other entity specified by the
Borrower willing to provide such financing, PROVIDED that (i) such assignment
shall not conflict with or violate any law, rule or regulation or order of any
court or other governmental authority, (ii) the Borrower shall have received the
written consent of the Agent to such assignment (which will not be unreasonably
withheld), (iii) the Borrower shall have paid to the assigning Bank all monies
other than such principal, interest and fees accrued and owing hereunder to it,
and (iv) the assignment is entered into in accordance with the requirements of
Section 12.9 hereof.
.SECTION 3.5. PLACE AND APPLICATION OF PAYMENTS;. All payments of
principal of and interest on the Loans and all payments of fees and all other
amounts payable under this Agreement shall be made to the Agent by no later than
1:00 p.m. (Chicago time) at the principal office of the Agent in Chicago,
Illinois (or such other location in the State of Illinois as the Agent may
designate to the Borrower) for the benefit of the Banks. Any payments received
after such time shall be deemed to have been received by the Agent on the next
Business Day. All such payments shall be made in lawful money of the United
States of America, in immediately available funds at the place of payment,
without set-off or counterclaim. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest on Loans
or fees ratably to the Banks and like funds relating to the payment of any other
amount payable to any Bank to such Bank, in each case to be applied in
accordance with the terms of this Agreement.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the indebtedness evidenced by the Notes,
and all proceeds of the Collateral and payments or collections on any guaranties
received, in each instance, by the Agent or any of the Banks after the
occurrence of an Event of Default shall be remitted to the Agent and distributed
as follows:
(a) first, to the payment of any outstanding costs and
expenses incurred by the Security Trustee or the Agent in monitoring,
verifying, protecting, preserving or enforcing the Liens on the
Collateral or in protecting, preserving or enforcing rights under this
Agreement or any other Loan Document, and in any event including all
costs and expenses of a character which the Borrower has agreed to pay
to the Agent and the Security Trustee under Sections 9.5 and 12.12
hereof (such funds to be retained by the Agent or the Security Trustee,
as the case may be for its own account unless it has previously been
reimbursed for such costs and expenses by the Banks, in which event
such amounts shall be remitted to the Banks to reimburse them for
payments therefor made to the Agent or the Security Trustee);
(b) second, to the payment of any outstanding interest or
other fees or amounts due under the Notes or this Agreement other than
for principal, ratably as among the Agent and the Banks in accord with
the amount of such interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes,
pro rata as among the Banks in accord with the then respective unpaid
principal balances thereof;
(d) fourth, to the Agent and the Banks ratably in accord
with the amounts of any other indebtedness, obligations or liabilities
of the Borrower owing to each of them and secured by the Collateral
Documents unless and until all such indebtedness, obligations and
liabilities have been fully paid and satisfied;
(e) fifth, to the Borrower or whoever the Required Banks
reasonably determine to be
<PAGE>
lawfully entitled thereto.
.SECTION 4. THE COLLATERAL AND GUARANTIES;.
.SECTION 4.1. THE COLLATERAL;. The Notes and the other obligations
of the Borrower hereunder and under the other Loan Documents shall be secured by
valid and perfected first priority Liens pursuant to the Company Security
Agreement and the Subsidiary Security Agreement in favor of the Security Trustee
for the benefit of the Banks and the Note Purchasers and the Subordinated Note
Purchasers (with the priority as between such creditors as set forth in such
Collateral Documents) on all of the Borrower's and each of its Restricted
Subsidiaries' (other than the Insurance Subsidiary's) now existing and hereafter
arising or acquired accounts, general intangibles, instruments, documents,
chattel paper, investment property, inventory, equipment and other goods
together with all records and proceeds relating thereto as well as on all
capital stock or other equity interests of each Restricted Subsidiary (other
than the Insurance Subsidiary as to which 65% of the capital stock shall be
subject to such Lien) and all proceeds thereof. The Borrower covenants and
agrees that it will, and will cause each of such Restricted Subsidiaries to,
comply with all terms and conditions of each of the Collateral Documents and
that it will, and will cause each of its Restricted Subsidiaries to, at any time
and from time to time, at the request of the Agent or the Required Banks,
execute and deliver such instruments and documents and do such acts and things
as the Agent or the Required Banks may reasonably request in order to provide
for or protect or perfect the Lien of the Security Trustee in the Collateral.
.SECTION 4.2. SUBSIDIARY GUARANTIES.; Payment of the Notes and the
other obligations of the Borrower hereunder and under the other Loan Documents
shall at all times be guarantied by each of the Restricted Subsidiaries (other
than the Insurance Subsidiary) pursuant to that certain Amended and Restated
Guaranty Agreement dated as of June 30, 1997, issued by the Restricted
Subsidiaries and otherwise in form and substance satisfactory to the Agent and
the Banks (such guaranty agreement as the same may from time to time be amended,
together with any supplements thereto delivered pursuant to the terms thereof is
hereinafter referred to as the "SUBSIDIARY GUARANTY AGREEMENT").
.'SECTION 5. DEFINITIONS; INTERPRETATION';.
.SECTION 5.1. DEFINITIONS;. The following terms when used herein
have the following meanings:
"ADJUSTED LIBOR" is defined in Section 2.1(b) hereof.
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Borrower, (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock (determined by number of shares or by
number of votes) of the Borrower or (iii) 5% or more of the Voting Stock
(determined by number of shares or by number of votes) (or in the case of a
Person which is not a corporation, 5% or more of the equity interest) of which
is beneficially owned or held by the Borrower or a Subsidiary. The term
"control" means 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 Voting Stock, by contract or otherwise.
"AGENT" means Harris Trust and Savings Bank and any successor pursuant
to Section 11.8 hereof.
"AVAILABLE BORROWING BASE" means, as of any time the same is to be
determined, the Borrowing Base less the principal amount then outstanding under
the Note Purchase Agreements.
"BANK" means each bank signatory hereto and each assignee bank or
other financial institution pursuant to Section 12.9(c) hereof.
"BORROWER" means World Acceptance Corporation, a South Carolina
corporation.
"BORROWING" means the total of Loans of a single type made by one or
more Banks to the Borrower on a single date and, with respect to Eurodollar
Loans, for a single Interest Period. Borrowings of Loans are made ratably from
each of the Banks according to their Commitments. A Borrowing is "continued" on
the date a new Interest Period for the same type of Loans commences for such
Borrowing, and is "converted" when such Borrowing is changed from one type of
Loan to another, all as determined in accordance with this Agreement.
"BORROWING BASE" means, as of any time it is to be determined, the sum
of:
(a) the product of 85% multiplied by the remainder of (x)
the then outstanding unpaid amount of Eligible Finance Receivables,
other than Eligible Finance Receivables consisting of
<PAGE>
instruments not in the possession of the Security Trustee MINUS (y) all
unearned finance charges applicable to such Eligible Finance
Receivables; PLUS
(b) the lesser of (i) $15,000,000, (ii) 11.11% of the
product determined in accordance with clause (a) above or (iii) the
product of 50% multiplied by the remainder of (x) the then outstanding
unpaid amount of Eligible Finance Receivables consisting of instruments
not in the possession of the Security Trustee MINUS (y) all unearned
finance charges applicable to such Eligible Finance Receivables.
"BUSINESS DAY" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in Chicago, Illinois and, if the
applicable Business Day relates to the borrowing or payment of a Eurodollar
Loan, on which banks are dealing in United States Dollar deposits in the
interbank market in London, England.
"CAPITALIZED LEASE" means any lease the obligation for Rentals with
respect to which is required to be capitalized on the balance sheet of the
lessee in accordance with GAAP.
"CAPITALIZED RENTALS" of any Person means, as of the date of any
determination thereof, the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be required to be reflected under GAAP as a liability on the balance sheet
of such Person.
"CODE" means the Internal Revenue Code of 1986, as amended and any
successor statute thereto.
"COLLATERAL" means all properties, rights, interests and privileges
from time to time subject to the Liens granted to the Security Trustee for the
benefit of the Banks pursuant to the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Company Security Agreement, the
Subsidiary Security Agreement and all other security agreements, financing
statements and other documents as shall from time to time secure the Notes or
any other Obligations of the Borrower or any Subsidiary hereunder or under any
other Loan Document.
"COMMITMENTS" is defined in Section 1.1 hereof.
"COMPANY SECURITY AGREEMENT" means that certain Amended and Restated
Security Agreement, Pledge and Indenture of Trust dated as of June 30, 1997,
between the Borrower and the Security Trustee which shall be satisfactory to the
Agent and the Banks, as the same may from time to time be amended.
"CONSOLIDATED ADJUSTED NET WORTH" at any date means:
(a) as to any corporation, the amount of capital stock
liability plus (or minus in the case of a deficit) the capital surplus
and earned surplus of the Borrower and its Restricted Subsidiaries on a
consolidated basis, and as to any partnership or limited liability
company, the capital account of the Borrower and its Restricted
Subsidiaries on a consolidated basis; less (without duplication)
(b) the net book value, after deducting any reserves
applicable thereto, of all items of the following character which are
included in the assets of the Borrower and its Restricted Subsidiaries,
to wit:
(i) all real property, fixed assets, unamortized
leasehold improvements and furniture, fixtures and
equipment other than property held for immediate sale,
lease or other liquidation which has been held by the
Borrower or a Restricted Subsidiary for less than 90 days;
(ii) all deferred charges (other than deferred
Federal income taxes and deferred investment tax credits)
and prepaid expenses other than prepaid interest, prepaid
taxes and prepaid insurance premiums;
(iii) treasury stock;
(iv) unamortized debt discount and capitalized
expense and unamortized stock discount and capitalized
expense;
(v) good will, organizational or experimental
expense, patents, trademarks, copyrights, trade names and
other intangibles;
(vi) Minority Interests;
(vii) "direct loan origination costs" as set forth
in FASB 91;
(viii) all Restricted Investments;
(ix) the excess, if any, of (A) net charge-offs of
the Borrower and its Restricted
<PAGE>
Subsidiaries over the twelve-month period ending with such
date over (B) reserves for credit losses of the Borrower
and its Restricted Subsidiaries as at such date; and
(x) any surplus resulting from any write-up in the
book value of assets of the Borrower or any Restricted
Subsidiary subsequent to March 31, 1997.
"CONSOLIDATED NET INCOME" for any period shall mean the gross revenues
of the Borrower and its Restricted Subsidiaries for such period less all
expenses and other proper charges (including taxes on income), determined on a
consolidated basis in accordance with GAAP consistently applied and after
eliminating earnings or losses attributable to outstanding Minority Interests,
but excluding in any event:
(a) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any Person (other than a
Restricted Subsidiary), substantially all the assets of which have been
acquired in any manner, realized by such other Person prior to the date
of such acquisition;
(e) net earnings and losses of any Person (other than a
Restricted Subsidiary) with which the Borrower or a Restricted
Subsidiary shall have consolidated or which shall have merged into or
with the Borrower or a Restricted Subsidiary prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Borrower or any Restricted
Subsidiary has an ownership interest unless such net earnings shall
have actually been received by the Borrower or such Restricted
Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Restricted
Subsidiary (other than the Insurance Subsidiary) which for any reason
is unavailable for payment of dividends to the Borrower or any other
Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities
of the Borrower or any Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period; and
(l) any portion of the net earnings of the Insurance
Subsidiary in excess of $500,000 (on a cumulative basis) which has not
actually been distributed to the Borrower in the form of cash.
"CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the total assets of the Borrower and its Restricted Subsidiaries less
the total liabilities of the Borrower and its Restricted Subsidiaries determined
in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means, as of the date of any
determination thereof, Consolidated Net Worth less intangible assets of the
Borrower and its Restricted Subsidiaries determined in accordance with GAAP.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA.
"DEFAULT" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"DETERMINATION DATE" means the last day of the fiscal quarter of the
Borrower occurring after the date of this Agreement in which the Borrower has
maintained a Consolidated Tangible Net Worth in excess of $42,000,000 at the end
of such fiscal quarter.
<PAGE>
"DOMESTIC RATE" is defined in Section 2.1(a) hereof.
"DOMESTIC RATE LOAN" means a Loan bearing interest at the rate
specified in Section 2.1(a) hereof.
"EBIT" for any period shall mean the sum of (i) Consolidated Net Income
during such period plus (to the extent deducted in determining Consolidated Net
Income), (ii) all provisions for any Federal, state or other income taxes made
by the Borrower and its Restricted Subsidiaries during such period and (iii) all
Interest Charges on all Indebtedness (including the interest component of
Capitalized Rentals) of the Borrower and its Restricted Subsidiaries.
"ELIGIBLE FINANCE RECEIVABLES" means and includes each Finance
Receivable of the Borrower or any Restricted Subsidiary (excluding any Insurance
Subsidiary) that:
(a) is payable in U.S. dollars and is the valid, binding
and legally enforceable obligation of the debtor obligated thereon and
such debtor is not (i) an Affiliate of the Borrower or of any
Restricted Subsidiary, (ii) a shareholder, director, officer or
employee of the Borrower or of any Restricted Subsidiary or of any
Affiliate of the Borrower or any Restricted Subsidiary, (iii) the
United States of America or any department, agency or instrumentality
thereof unless the Borrower or such Restricted Subsidiary has complied
with the Assignment of Claims Act to the satisfaction of the Agent,
(iv) a debtor under any proceeding under the United States Bankruptcy
Code or any other comparable bankruptcy or insolvency law applicable
under the law of any other country or political subdivision thereof, or
(v) an assignor for the benefit of creditors;
(b) is assignable and not evidenced by an instrument or
chattel paper unless the same has been endorsed and delivered to the
Security Trustee (except that, until a Default or Event of Default has
occurred and is continuing and thereafter until otherwise notified by
the Security Trustee pursuant to the Company Security Agreement or the
Subsidiary Security Agreement, as appropriate, the same shall not be
required to be delivered to the Security Trustee if a legend shall have
been placed thereon in accordance with the Company Security Agreement
or the Subsidiary Security Agreement, as appropriate);
(c) is subject to a perfected, first priority Lien pursuant
to the Company Security Agreement or the Subsidiary Security Agreement,
as appropriate, in favor of the Security Trustee for the benefit of the
Banks (except that, in the case of instruments referred to in clause
(b) above, the same need not be perfected until the Security Trustee
requests delivery of the same in accordance with the Company Security
Agreement or the Subsidiary Security Agreement, as appropriate), and is
free and clear of any other Lien other than the Lien in favor of the
Note Purchasers and the Subordinated Note Purchasers and Liens
permitted under Sections 8.11(e) and 8.11(g) of this Agreement;
(d) is net of any credit or allowance given by the Borrower
or such Restricted Subsidiary to such account debtor;
(e) is not subject to any offset, counterclaim or other
defense with respect thereto;
(f) is not owed by an account debtor who is obligated on
accounts owed to the Borrower or such Restricted Subsidiary any portion
of which is unpaid more than 60 days after the contractual due date
(which must be issued in accordance with the Borrower's or such
Restricted Subsidiary's business practices in effect as of the date
hereof) unless the Agent has approved the continued eligibility
thereof; and
(g) is subject to loan and security documentation which
complies in all respects with all applicable federal, state and local
laws, rules and regulations.
"ENVIRONMENTAL LEGAL REQUIREMENT" shall mean any international,
Federal, state or local statute, law, regulation, order, consent decree,
judgment, permit, license, code, covenant, deed restriction, common law, treaty,
convention, ordinance or other requirement relating to public health, safety or
the environment, including without limitation, those relating to releases,
discharges or emissions to air, water, land or ground water, to the withdrawal
or use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, or Hazardous Substances or crude oil, or any fraction thereof, or
to exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any
regulation,
<PAGE>
order, notice or demand issued pursuant to such law, statute or ordinance, in
each case applicable to the property of the Borrower or any of its Subsidiaries
or the operation, construction or modification of any thereof, including,
without limitation, the following: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Hazardous Materials Transportation Act, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976,
the Safe Drinking Water Control Act, the Clean Air Act of 1966, as amended, the
Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of
1977, as amended, the Emergency Planning and Community Right-to-Know Act of
1986, the National Environmental Policy Act of 1975 and the Oil Pollution Act of
1990 and any similar or implementing state law, and any state statute and any
further amendments to these laws, providing for financial responsibility for
cleanup or other actions with respect to the release or threatened release of
Hazardous Substances or crude oil, or any fraction thereof and all rules,
regulations, guidance documents and publication promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"EURODOLLAR LOAN" means a Loan bearing interest at the rate specified
in Section 2.1(b) hereof.
"EURODOLLAR MARGIN" is defined in Section 2.1(b) hereof.
"EURODOLLAR RESERVE PERCENTAGE" is defined in Section 2.1(b) hereof.
"EVENT OF DEFAULT" means any of the events or circumstances specified
in Section 9.1 hereof.
"FINANCE RECEIVABLE" means each Receivable of the Borrower or any
Restricted Subsidiary which arises in the ordinary course of its finance company
business and represents amounts due in respect of loans made by the Borrower or
such Restricted Subsidiary to the debtor obligated thereon.
"FIXED CHARGES" for any period means, on a consolidated basis, the sum
of (i) all Rentals (other than Capitalized Rentals) payable during such period
by the Borrower and its Restricted Subsidiaries, and (ii) all Interest Charges
on all Indebtedness (including the interest component of Capitalized Rentals) of
the Borrower and its Restricted Subsidiaries.
"GAAP" means generally acceptable accounting principles at the time in
the United States.
"GOVERNING DOCUMENTS" shall mean collectively the charter instruments,
by-laws, partnership agreements, operating agreements and other similar
documents prescribing the internal governance of each Restricted Subsidiary.
"GUARANTIES" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for Borrowed Money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for Borrowed
Money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"HAZARDOUS SUBSTANCES" means any hazardous or toxic material, substance
or waste pollutant or contaminant which is regulated as such under any statute,
law, ordinance, rule or regulation of any Federal, regional, state or local
authority having jurisdiction over the property of the Borrower or any
Subsidiary or
<PAGE>
its use, including but not limited to any material, substance or waste which is:
(a) defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. ss.1317), as amended; (b) regulated as a
hazardous waste under Section 1004 of the Federal Resource Conservation and
Recovery Act (42 U.S.C. ss.6901 ET SEQ.), as amended; (c) defined as a hazardous
substance under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, (d) defined or regulated as a
hazardous substance or hazardous waste under any rules or regulations
promulgated under any of the foregoing statutes or (e) petroleum or products
derived therefrom.
"INDEBTEDNESS" of any Person means and includes all obligations of such
Person which in accordance with GAAP should be classified upon a balance sheet
of such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any Lien upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
(iii) obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (iv) Capitalized Rentals (v) all obligations of such Person
on or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed money
and (vi) Guaranties of obligations of others of the character referred to in
this definition.
"INDEBTEDNESS FOR BORROWED MONEY" of any Person means (a) all
Indebtedness of such Person for borrowed money or which has been incurred in
connection with the acquisition of assets, (b) all Capitalized Rentals of such
Person, and (c) all Guaranties by such Person of Indebtedness for Borrowed Money
of others, it being understood that Indebtedness for Borrowed Money shall not
include trade payables in the ordinary course of business.
"INSURANCE SUBSIDIARY" means any one Subsidiary (i) which is organized
under the laws of the British Virgin Islands or such other jurisdiction as shall
be consented to in writing by the Required Banks; (ii) which conducts
substantially all of its business and has substantially all of its assets within
the British Virgin Islands or such other jurisdiction as shall be consented to
in writing by the Required Banks; (iii) of which 100% (by number of votes) of
the Voting Stock (except for directors' qualifying shares) is owned by the
Borrower; and (iv) which is engaged in the business of reinsuring the credit
insurance written by the Subsidiaries of the Borrower.
"INTEREST CHARGES" for any period means all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
"INTEREST PERIOD" is defined in Section 2.4 hereof.
"INVESTMENTS" means all investments, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or Securities or by loan,
advance, capital contribution or otherwise; PROVIDED, HOWEVER, that
"INVESTMENTS" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"JUNIOR SUBORDINATED DEBT" means all unsecured Indebtedness for
Borrowed Money of the Borrower which (i) pursuant to its terms matures on a date
later than the Termination Date or such later date required by the terms of the
Subordinated Note Purchase Agreement to constitute "JUNIOR SUBORDINATED DEBT"
thereunder and (ii) contains or has applicable thereto subordination provisions
substantially in the form set forth in Exhibit B-2 hereto but with appropriate
adjustments therein so as to provide that such Junior Subordinated Debt be
subordinate and junior to all Senior Debt and Senior Subordinated Debt (but not
to any other Indebtedness of the Borrower) rather than only to Senior Debt or
such other provisions as may be approved in writing by the Banks and, to the
extent applicable, the other holders of the Senior Debt and the holders of the
Senior Subordinated Debt (exclusive of any Senior Debt or Senior Subordinated
Debt held by a Subsidiary or other Affiliate).
"LENDING OFFICE" is defined in Section 10.4 hereof.
"LIBOR" is defined in Section 2.1(b) hereof.
<PAGE>
"LIEN" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest arising from a mortgage,
security agreement, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "LIEN" includes
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's, carriers' and other similar encumbrances, affecting Property.
For the purposes of this Agreement, a Person shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes.
"LOAN" means and includes loans made under the Revolving Credit, and
each of them singly, and the term "TYPE" of Loan refers to its status as a
Domestic Rate Loan or Eurodollar Loan.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary
Guaranty Agreement and the Collateral Documents.
"MARGIN STOCK" means "MARGIN STOCK" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
"MINORITY INTERESTS" means any shares of stock, partnership interests,
membership interests or other equity interests of any class of a Restricted
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Borrower and/or one or more of its Restricted Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, by valuing Minority Interests
constituting common stock at the book value of the capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of valuing Minority
Interests in preferred stock, and by valuing Minority Interests constituting
partnership or limited liability company membership interests at the book value
of such interest.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period means the sum
of (i) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income), (ii) all provisions for any Federal,
state or other income taxes made by the Borrower and its Restricted Subsidiaries
during such period and (iii) Fixed Charges of the Borrower and its Restricted
Subsidiaries during such period.
"NOTES" is defined in Section 2.8 hereof.
"NOTE PURCHASE AGREEMENTS" shall mean, collectively, the separate
Amended and Restated Note Agreements, each dated as of June 30, 1997, as amended
from time to time between the Borrower and the respective note purchasers named
therein.
"NOTE PURCHASERS" means the Purchasers as defined in the Note Purchase
Agreements.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all other obligations of
the Borrower or any Subsidiary to the Banks or any Bank or the Agent or the
Security Trustee arising under the Loan Documents.
"OPERATING MARGIN" means, as of the date of any determination thereof,
the sum of the pretax net operating income of the Borrower and its Restricted
Subsidiaries plus amortization of intangible assets of the Borrower and its
Restricted Subsidiaries divided by the total revenue of the Borrower and its
Restricted Subsidiaries, in each case, determined on a consolidated basis in
accordance with GAAP.
"PBGC" is defined in Section 6.12 hereof.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof.
"PLAN" means with respect to the Borrower and each Subsidiary at any
time an employee pension benefit plan which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code and
either (i) is maintained by a member of the Controlled Group for employees
<PAGE>
of a member of the Controlled Group, (ii) is maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions, or (iii) under which a member of the Controlled
Group has any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years or by reason of being deemed a contributing
sponsor under Section 4064 of ERISA.
"PLEDGED COLLATERAL" shall have the meaning as defined in the Company
Security Agreement or the Subsidiary Security Agreement, as the context may
require.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"RECEIVABLE" means all accounts receivable, receivables, contract
rights, controls, instruments, notes, drafts, bills, acceptances, documents,
chattel paper, general intangibles and all other forms of obligations owing to a
Person.
"RENTALS" means, as of the date of any determination thereof, all fixed
payments (including as such all payments which the lessee is obligated to make
to the lessor on termination of the lease or surrender of the Property) payable
by the Borrower or a Restricted Subsidiary, as lessee or sublessee, under a
lease of real or personal property, but shall be exclusive of any amounts
required to be paid by the Borrower or a Restricted Subsidiary (whether or not
designated as rents or additional rents) on account of maintenance, repairs,
insurance, taxes and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of the minimum rents,
if any, required to be paid by the lessee regardless of sales volume or gross
revenues.
"REQUIRED BANKS" means, as of the date of determination thereof, those
Banks holding at least 66 2/3% of the Commitments or, in the event that no
Commitments are outstanding hereunder, those Banks holding at least 66 2/3% in
aggregate principal amount of the Loans outstanding hereunder.
"RESTRICTED INVESTMENTS" means all Investments other than the
Investments permitted by paragraphs (a) through (f), both inclusive, of Section
8.18 hereof.
"RESTRICTED SUBSIDIARY" means the Insurance Subsidiary, if any, and any
other Subsidiary (i) which is organized under the laws of the United States or
any State thereof; (ii) which conducts substantially all of its business and has
substantially all of its assets within the United States; and (iii) of which
100% (by number of votes) of the Voting Stock is owned by the Borrower and/or
one or more Restricted Subsidiaries.
"REVOLVING CREDIT" is defined in Section 1.1 hereof.
"S&P" shall mean Standard & Poor's Ratings Services Group, a division
of The McGraw-Hill Companies, Inc.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SECURITY TRUSTEE" means Harris Trust and Savings Bank, an Illinois
banking corporation, and its successors and assigns under the Company Security
Agreement and the Subsidiary Security Agreement.
"SENIOR DEBT" shall mean (i) the Senior Notes, (ii) the Voyager Note,
(iii) all other Indebtedness for Borrowed Money of the Borrower which is not
expressed to be subordinate or junior to any other Indebtedness of the Borrower
and (iv) all Indebtedness for Borrowed Money of Restricted Subsidiaries (other
than the Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary
Guaranty Agreement).
"SENIOR NOTES" means the Notes and the Senior Secured Notes.
"SENIOR SECURED NOTES" means the Senior Secured Notes due December 1,
1999, issued in the original aggregate principal amount of $20,000,000 pursuant
to the Note Purchase Agreements, as reduced by principal payments thereon, as
such notes may from time to time be amended pursuant to the terms thereof and of
the Note Purchase Agreements, and any notes issued in replacement therefor.
"SENIOR SUBORDINATED DEBT" means (i) the Senior Subordinated Notes and
(ii) all other unsecured Indebtedness for Borrowed Money of the Borrower which
(x) pursuant to its terms matures on a date later than the Termination Date or
such later date required by the terms of the Subordinated Note Purchase
Agreement to constitute "SENIOR SUBORDINATED DEBT" thereunder and (y) contains
or has applicable thereto subordination provisions substantially in the form set
forth in Exhibit B-1 hereto or such other provisions
<PAGE>
as may be approved in writing by the Banks and, to the extent required by the
applicable contract terms, the other holders of the Senior Debt and the holders
of the Senior Subordinated Notes (exclusive of any Senior Debt or any Senior
Subordinated Notes held by a Subsidiary or other Affiliate).
"SENIOR SUBORDINATED NOTES" shall mean the Senior Subordinated Secured
Notes of the Borrower in the aggregate original principal amount of $10,000,000
issued pursuant to the Subordinated Note Purchase Agreement.
"SET-OFF" is defined in Section 12.6 hereof.
"SUBORDINATED NOTE PURCHASE AGREEMENT" means that certain Note
Agreement dated as of June 30, 1997, between the Borrower and Principal Mutual
Life Insurance Company, as the purchaser signatory thereto, as the same may from
time to time be further amended pursuant to the terms thereof.
"SUBORDINATED NOTE PURCHASERS" means the Purchaser(s) as defined in the
Subordinated Note Purchase Agreement.
"SUBSIDIARY" means any corporation or other entity of which more than
fifty percent (50%) of the outstanding Voting Stock or comparable equity
interests (including interests as a limited partner in a limited partnership) is
at the time directly or indirectly owned by the Borrower, by one or more of its
Subsidiaries, or by the Borrower and one or more of its Subsidiaries.
"SUBSIDIARY GUARANTY AGREEMENT" is defined in Section 4.2 hereof.
"SUBSIDIARY SECURITY AGREEMENT" means that certain Amended and Restated
Security Agreement, Pledge, and Indentures of Trust dated as of June 30, 1997,
among each of the Restricted Subsidiaries (other than the Insurance Subsidiary)
and the Security Trustee which shall be satisfactory to the Agent and the Banks,
as the same may from time to time be amended.
"SUBSIDIARY SENIOR SUBORDINATED GUARANTY AGREEMENT" means the Guaranty
Agreement dated as of June 30, 1997, of each Restricted Subsidiary (other than
Insurance Subsidiary) for the benefit of the holders of the Senior Subordinated
Notes and as the same may from time to time be amended pursuant to the terms
thereof.
"TERMINATION DATE" shall mean September 30, 1999, or such later date to
which the Commitments are extended pursuant to Section 3.4 hereof, or such
earlier date on which the Commitments are terminated in whole pursuant to
Sections 2.9, 9.3 or 9.4 hereof.
"TRIGGER DATE" means the last day of the fiscal quarter of the Borrower
occurring after the date of this Agreement in which the Borrower has maintained
(i) a Consolidated Tangible Net Worth in excess of $42,000,000 throughout such
fiscal quarter and (ii) an Operating Margin in excess of 25% throughout the four
consecutive fiscal quarter period ending on such date.
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary which is not a
Restricted Subsidiary.
"VOTING STOCK" means Securities, or other equity interests, of any
class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"VOYAGER NOTE" means the 10% Senior Debenture of the Borrower, dated
October 23, 1989, payable to Voyager Life Insurance Company, without taking into
account any amendment thereof other than any amendment which extends the
maturity date thereof.
"WEINGARTEN LIEN" means the Lien of Weingarten Realty Investors as in
effect on the date of this Agreement and as reflected on the UCC-1 financing
statement filed with the Secretary of State of the State of Texas on August 21,
1989 against World Finance Corporation of Texas under document number 189822 and
continued by the UCC-3 financing statement filed with the Secretary of State of
the State of Texas on July 15, 1994 under document number 685105.
"WELFARE PLAN" means a "WELFARE PLAN," as said term is defined in
Section 3(1) of ERISA.
"WHOLLY-OWNED" means a Subsidiary of which all of the issued and
outstanding shares of stock (other
<PAGE>
than directors' qualifying shares as required by law) or other comparable equity
interests shall be owned by the Borrower and/or one or more of its Wholly-Owned
Subsidiaries.
.SECTION 5.2. INTERPRETATION;. The foregoing definitions shall be
equally applicable to both the singular and plural forms of the terms defined.
All references to times of day herein shall be references to Chicago, Illinois
time unless otherwise specifically provided. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with GAAP.
.SECTION 6. REPRESENTATIONS AND WARRANTIES;.
The Borrower represents and warrants to the Banks as follows:
.SECTION 6.1. ORGANIZATION AND QUALIFICATION;. The Borrower is duly
organized and validly existing in good standing under the laws of the State of
South Carolina, has full and adequate corporate power to carry on its business
as now conducted, is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of its business conducted or the nature of the
Property owned or leased by it makes such licensing or qualification necessary.
.SECTION 6.2. SUBSIDIARIES;. Each Subsidiary is a corporation,
partnership, limited liability company or other entity duly organized and
validly existing in good standing under the laws of the jurisdiction in which it
was incorporated or organized, has full and adequate corporate or other power to
carry on its business as conducted, and is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of its business as now
conducted or proposed to be conducted or the nature of the Property owned or
leased by it makes such licensing or qualification necessary. Schedule 6.2
hereto identifies each Subsidiary of the Borrower as of the date hereof, the
jurisdiction of its organization, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Borrower and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized capital stock or other equity interests and the number of shares
or units of each class issued and outstanding. All of the issued and outstanding
shares of capital stock or other equity interest of each Subsidiary are validly
issued and outstanding and fully paid and nonassessable and all such shares are
owned, beneficially and of record, by the Borrower or the relevant Restricted
Subsidiary, all as set forth on said Schedule 6.2, free of any Lien except for
Lien granted to the Security Trustee under the Company Security Agreement and,
to the extent applicable, Subsidiary Security Agreement and Liens permitted
pursuant to Sections 8.11(e) and 8.11(g) hereof. As of the date hereof, each
Subsidiary is a Restricted Subsidiary. There are no outstanding commitments or
other obligations of any Subsidiary to issue, and no options, warrants or other
rights of any Person to acquire, any shares of any class of capital stock or
other equity interests of any Subsidiary.
.SECTION 6.3. CORPORATE AUTHORITY AND VALIDITY OF OBLIGATIONS;. The
Borrower has full right and authority to enter into the Loan Documents to which
it is a party, to make the borrowings herein provided for, to grant to the
Security Trustee, for the benefit of the Banks, the Liens described in the
Collateral Documents, to issue its Notes and to perform all of its obligations
hereunder and under the other Loan Documents. Each Restricted Subsidiary has
full right and authority to enter into the Loan Documents entered into by it, to
grant to the Security Trustee, for the benefit of the Banks, the Liens described
in the Collateral Documents to which it is a party and to perform all of its
obligations thereunder and under the other Loan Documents. The Loan Documents
delivered by the Borrower, and by each Restricted Subsidiary, have been duly
authorized, executed and delivered by such Person and constitute valid and
binding obligations of such Person enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and to the discretion of the
court before which any proceedings may be brought; and the Loan Documents do
not, nor does the performance or observance by the Borrower or any Restricted
Subsidiary of any of the matters or things herein or therein provided for,
contravene any provision of law or any charter or by-law provision of the
Borrower or any Subsidiary or any covenant, indenture or agreement of or
affecting the Borrower or any Subsidiary or a substantial portion of their
respective
<PAGE>
Properties.
.SECTION 6.4. NOT AN INVESTMENT COMPANY;. Neither the Borrower nor
any Subsidiary is an "INVESTMENT COMPANY" within the meaning of the Investment
Company Act of 1940, as amended.
.'SECTION 6.5. USE OF PROCEEDS; MARGIN STOCK';. The Loans hereunder
shall be used by the Borrower for general working capital purposes. Neither the
Borrower nor any of its Subsidiaries is engaged principally, or as one of its
primary activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock, and neither the Borrower nor any of its
Subsidiaries will use the proceeds of any Loan in a manner that violates any
provision of Regulation U, G or X of the Board of Governors of the Federal
Reserve System.
.SECTION 6.6. FINANCIAL REPORTS;. The consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries as at March 31, 1997, and the
related statements of consolidated earnings, consolidated changes in
shareholders' equity and consolidated cash flows of the Borrower and its
Subsidiaries for the year then ended and accompanying notes thereto, which
financial statements are accompanied by the report of KPMG Peat Marwick,
independent public accountants, have been prepared in accordance with GAAP
applied on a consistent basis and fairly present the consolidated financial
condition of the Borrower and its Subsidiaries as of such dates and the
consolidated results of their operations and cash flows for the periods then
ended.
.SECTION 6.7. NO MATERIAL ADVERSE CHANGE;. Since March 31, 1997,
there has been no change in the condition, financial or otherwise, or business
prospects of the Borrower and its Subsidiaries except changes in the ordinary
course of business, none of which individually or in the aggregate have been
materially adverse.
.SECTION 6.8. LITIGATION;. Except as disclosed on Schedule 6.8
attached hereto, there is no litigation or governmental proceeding pending, nor
to the knowledge of the Borrower threatened, against the Borrower or any
Subsidiary which if adversely determined would (a) impair the validity or
enforceability of, or impair the ability of the Borrower or any Restricted
Subsidiary to perform its obligations under, this Agreement or any other Loan
Document or (b) result in any material adverse change in the financial condition
or Property, business or operations of the Borrower and its Subsidiaries taken
as a whole.
.SECTION 6.9. TAXES;. All tax returns required to be filed by the
Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, and
all taxes, assessments, fees and other governmental charges upon the Borrower or
any Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. The
Borrower does not know of any proposed additional tax assessment against it for
which adequate provision in accordance with GAAP has not been made on its
accounts. The Federal income tax liability of the Borrower and its Subsidiaries
has either been finally determined by the Internal Revenue Service and satisfied
for all taxable years up to and including the taxable year ended December 31,
1993, or the applicable statute of limitations therefor has expired and, except
as disclosed on Schedule 6.9 attached hereto, no material controversy in respect
of additional income taxes due since said date is pending or to the knowledge of
the Borrower threatened. Adequate provisions in accordance with GAAP for taxes
on the books of the Borrower and each Subsidiary have been made for all open
years, and for its current fiscal period.
.SECTION 6.10. APPROVALS;. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, or any approval or consent of the
stockholders of the Borrower or from any other Person, is necessary to the valid
execution, delivery or performance by the Borrower or any Restricted Subsidiary
of this Agreement or any of the other Loan Documents.
.SECTION 6.11. INDEBTEDNESS AND LIENS;. Schedule 6.11 attached
hereto correctly describes all Indebtedness for Borrowed Money of the Borrower
and its Subsidiaries outstanding as of the date hereof. There are no Liens on
any of the Property of the Borrower or any Subsidiary, except those which are
permitted by Section 8.11 of this Agreement.
.SECTION 6.12. ERISA;. The Borrower and each Subsidiary are in
compliance in all material respects with ERISA, to the extent applicable to them
and have received no notice to the contrary from the Pension Benefit Guaranty
Corporation ("PBGC") or any other governmental entity or agency. As of
<PAGE>
December 31, 1996, the liability of the Borrower and its Subsidiaries to PBGC in
respect of Unfunded Vested Liabilities would not have been in excess of $0 if
all employee pension benefit plans maintained by the Borrower and its
Subsidiaries had been terminated as of such date. No condition exists or event
or transaction has occurred with respect to any Plan which could reasonably be
expected to result in the incurrence by the Borrower or any Subsidiary of any
material liability, fine or penalty. Neither the Borrower nor any Subsidiary has
any contingent liability with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in Part 6
of Title I of ERISA and liability for post-retirement medical and life insurance
benefits.
.SECTION 6.13. MATERIAL AGREEMENTS;. Neither the Borrower nor any
Subsidiary is a party to any agreement or instrument or subject to any charter
or other corporate restriction materially and adversely affecting its business,
properties or assets, operations or condition (financial or otherwise). Neither
the Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default might have a material
adverse effect on the business, properties or assets, operations, or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole
or (ii) any agreement or instrument evidencing or governing Indebtedness.
.SECTION 6.14. COMPLIANCE WITH LAWS;. (a) ENVIRONMENTAL. (i) The
business and operation of the Borrower and its Subsidiaries comply in all
respects with all applicable Environmental Legal Requirements, except to the
extent that such noncompliance would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole.
(ii) Neither the Borrower nor any Subsidiary has given, nor should it
give, nor has it received, any notice, letter, citation, order, warning,
complaint, inquiry, claim or demand that: (i) the Borrower or such Subsidiary
has violated, or is about to violate, any federal, state, regional, county or
local environmental, health or safety statute, law, rule, regulation, ordinance,
judgment or order; (ii) there has been a release, or there is a threat of
release, of Hazardous Substances (including, without limitation, petroleum, its
by-products or derivatives, or other hydrocarbons) from the Borrower's or such
Subsidiary's property, facilities, equipment or vehicles; (iii) the Borrower or
such Subsidiary may be or is liable, in whole or in part, for the costs or
cleaning up, remediating or responding to a release of Hazardous Substances
(including, without limitation, petroleum, its by-products or derivatives, or
other hydrocarbons); (iv) any of the Borrower's or such Subsidiary's property or
assets are subject to a Lien in favor of any governmental entity for any
liability, costs or damages, under any federal, state or local environmental
law, rule or regulation arising from, or costs incurred by such governmental
entity in response to, a release of a Hazardous Substance (including, without
limitation, petroleum, its by-products or derivatives, or other hydrocarbons),
except to the extent that such violation, release, liability or Lien could not
have a material adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of the Borrower and its Subsidiaries taken
as a whole.
(b) OTHER LAWS. The Borrower and its Subsidiaries are in compliance
with all other federal, state and local laws, rules and regulations applicable
to or pertaining to the Properties or business operations of the Borrower or any
Subsidiary (including without limitation all applicable state consumer credit
and protection laws, the Federal Fair Credit Reporting Act, the Federal Truth In
Lending Act, the Federal Fair Debt Collection Practices Act, laws regulating
shall loan companies, the Occupational Safety and Health Act of 1970 and the
Americans with Disabilities Act of 1990), non-compliance with which could have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole.
.SECTION 6.15. FULL DISCLOSURE.; The financial statements referred
to in Section 6.6 do not, nor do the written statements or information, if any,
furnished by the Borrower to any Bank in connection with the negotiation of or
its participation in this Agreement contain any untrue statement of a material
fact or omit a material fact necessary to make the material statements contained
therein not misleading.
.SECTION 6.16. NO DEFAULTS.; No Default or Event of Default has
occurred and is continuing.
.SECTION 6.17. NOTE PURCHASE AGREEMENTS;. All representations and
warranties of the Borrower
<PAGE>
set forth in the Note Purchase Agreements and the Subsidiary Note Purchase
Agreement are true and correct.
.SECTION 7. CONDITIONS PRECEDENT;.
The obligation of the Banks to make any Loan or any other financial
accommodation hereunder shall be subject to the following conditions precedent
to the satisfaction of the Agent and the Required Banks:
.SECTION 7.1. INITIAL BORROWING;. Prior to the making of the initial
Borrowing hereunder:
(a) The Agent shall have received for each Bank the
favorable written opinions of Robinson, Bradshaw & Hinson, P.A.,
counsel to the Borrower and World Finance Corporation of South
Carolina, WFC of South Carolina, Inc., World Acceptance Corporation of
Alabama, World Acceptance Corporation of Missouri, World Finance
Corporation of Illinois and World Finance Corporation of New Mexico and
of local counsel to World Finance Corporation of Georgia, World Finance
Corporation of Louisiana, World Acceptance Corporation of Oklahoma,
Inc., World Finance Corporation of Tennessee, World Finance Corporation
of Texas and WFC Limited Partnership, in form and substance
satisfactory to the Required Banks;
(b) The Agent shall have received for each Bank (i)
certified copies of resolutions of the Board of Directors of the
Borrower and of each Restricted Subsidiary authorizing the execution
and delivery of this Agreement and the other Loan Documents to which it
is a party, indicating the authorized signers of this Agreement and the
other Loan Documents and all other documents relating thereto, the
persons authorized to request Borrowings hereunder and to select the
interest rate options with respect thereto and the specimen signatures
of such signers, and (ii) one original certificate of good standing
(with copies for each Bank) certified by the appropriate governmental
officer in the jurisdiction of the Borrower's and each Restricted
Subsidiaries' incorporation and each state in which it is authorized to
do business as a foreign corporation;
(c) The Agent shall have received for the Banks this
Agreement, the Notes, the Subsidiary Guaranty Agreement and the
Collateral Documents, together with any financing statements requested
by the Agent in connection therewith;
(d) The Agent shall have received for the Banks copies
(executed or certified, as may be appropriate) of all legal documents
or proceedings taken in connection with the execution and delivery of
this Agreement and the other Loan Documents; and
(f) The Agent shall have received for the account of the
Banks a borrowing base certificate in the form attached hereto as
Exhibit C showing the computation of the Available Borrowing Base as of
the close of business on May 31, 1997.
(g) All conditions precedent under Section 4 of the Note
Purchase Agreements and under Section 4 of the Subordinated Note
Purchase Agreement shall have been satisfied or waived by the Note
Purchasers or Subordinated Note Purchasers, as the case may be.
.SECTION 7.2. ALL LOANS;. As of the time of the making of each
advance of a new Borrowing (including the initial Borrowing):
(a) The Agent shall have received for each Bank the Notes
of the Borrower and the notice required by Section 2.3 hereof;
(b) Each of the representations and warranties of the
Borrower set forth in Section 6 hereof shall be true and correct in all
material respects as of said time, except to the extent that any such
representation or warranty relates solely to an earlier date;
(c) The Borrower and its Restricted Subsidiaries shall be
in full compliance with all of the terms and conditions hereof and of
the other Loan Documents, and no Default or Event of Default shall have
occurred and be continuing or would occur as a result of making such
Borrowing;
(d) After giving effect to the Borrowing the aggregate
principal amount of all Loans hereunder shall not exceed the lesser of
(i) the Available Borrowing Base or (ii) Commitments; and
(e) Such Borrowing shall not violate any order, judgment or
decree of any court or other authority or any provision of law or
regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System)
as then in effect. Each request for a Borrowing hereunder shall be
deemed to be a representation and warranty by the Borrower on the date
of such Borrowing as to the facts specified in this Section 7.2.
<PAGE>
.SECTION 8. COVENANTS;.
. SECTION 8.1. EXISTENCE, ETC.; The Borrower will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its legal existence and all licenses and permits necessary to
the proper conduct of its business, PROVIDED that the foregoing shall not
prevent any transaction permitted by Section 8.13 hereof.
.SECTION 8.2. INSURANCE;. The Borrower will maintain, and will cause
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers accorded a rating of A or better by A.M. Best Company, Inc.
(the "BEST RATING") at the time of the issuance of any such policy and in such
forms and amounts and against such risks as are customary for corporations of
established reputation engaged in the same or a similar business and owning and
operating similar properties with each such policy requiring renewal of such
policy at intervals of no greater than one year from the date of issuance or
renewal thereof; PROVIDED, HOWEVER, that if during the term of any such
insurance policy the rating accorded any insurer shall be less than a Best
Rating of A, the Borrower will, on the date of renewal of any such policy (or,
if such change in rating shall occur within 90 days prior to such renewal date,
within 90 days of the date of such change in rating), obtain such insurance
policy from an insurer accorded a Best Rating of A or better.
.SECTION 8.3. TAXES, CLAIMS FOR LABOR AND MATERIALS;. The Borrower
will promptly pay and discharge, and will cause each Subsidiary promptly to pay
and discharge, all taxes, assessments and governmental charges or levies imposed
upon the Borrower or such Subsidiary, respectively, or upon or in respect of all
or any part of the property or business of the Borrower or such Subsidiary
(including, but not limited to the Collateral), all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
property of the Borrower or such Subsidiary (including, but not limited to the
Collateral); PROVIDED the Borrower or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Borrower or such Subsidiary or any material interference
with the use thereof by the Borrower or such Subsidiary, and (ii) the Borrower
or such Subsidiary shall set aside on its books reserves adequate in accordance
with GAAP with respect thereto.
.SECTION 8.4. COMPLIANCE WITH LAWS;. The Borrower will promptly
comply, and will cause each Subsidiary to comply, with all laws, ordinances or
governmental rules and regulations to which it is subject, including without
limitation, ERISA and all Environmental Legal Requirements the violation of
which could, individually or in the aggregate, materially and adversely affect
the properties (including the Collateral), business, prospects, profits or
condition of the Borrower and its Subsidiaries or could, individually or in the
aggregate, result in any lien or charge upon any property of the Borrower or any
Subsidiary.
.SECTION 8.5. MAINTENANCE, ETC;. The Borrower will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties which are used or useful in the conduct of its business
(whether owned in fee or a leasehold interest) in good repair and working order
(ordinary wear and tear excepted) and from time to time will make all necessary
repairs, replacements, renewals and additions so that at all times the
efficiency thereof shall be maintained.
.SECTION 8.6. NATURE OF BUSINESS;. Neither the Borrower nor any
Restricted Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Borrower and its Restricted Subsidiaries (including, but not
limited to, the Insurance Subsidiary) would be substantially changed from the
general nature of the business engaged in by the Borrower and its Restricted
Subsidiaries on the date of this Agreement
.SECTION 8.7. CONSOLIDATED NET WORTH;. The Borrower will at all
times keep and maintain Consolidated Net Worth at an amount not less than the
Minimum Net Worth.
For purposes of this Section 8.7, "MINIMUM NET WORTH" (i) for the
fiscal quarter of the Borrower ending March 31, 1997, shall be $38,000,000 and
(ii) for each fiscal quarter thereafter shall be the sum of the Minimum Net
Worth for the immediately preceding fiscal quarter plus 50% of Consolidated Net
Income for such fiscal quarter (but without deduction in the case of any deficit
in Consolidated Net Income for such
<PAGE>
fiscal quarter).
.'SECTION 8.8. FIXED CHARGE COVERAGE RATIO; LOAN LOSS RESERVES';. The
Borrower will at the end of each fiscal quarter have a ratio of Net Income
Available for Fixed Charges to Fixed Charges for each period of four consecutive
fiscal quarters then ending at not less than 1.5 to 1. As of the end of each
fiscal quarter, the Borrower's provision for loan losses for the four fiscal
quarters then ending shall equal or exceed the net loan charge off for the
corresponding period.
.SECTION 8.9. PERMITTED INDEBTEDNESS;. The Borrower will not, and
will not permit any Restricted Subsidiary to, incur, create, issue, assume or
permit to exist any Indebtedness for Borrowed Money other than:
(a) Senior Debt;
(b) Senior Subordinated Debt; and
(c) Junior Subordinated Debt.
.SECTION 8.10. LIMITATIONS ON INDEBTEDNESS;. (a) The Borrower will
not at any time permit:
(i) The aggregate unpaid principal amount of Senior Debt,
on a consolidated basis, to exceed 400% of the sum of (A) Consolidated
Adjusted Net Worth, (B) the aggregate unpaid principal amount of Junior
Subordinated Debt, and (C) the aggregate unpaid principal amount of
Senior Subordinated Debt;
(ii) The sum of (A) the aggregate unpaid principal amount
of Senior Subordinated Debt, and (B) the aggregate unpaid principal
amount of Junior Subordinated Debt to exceed 125% of Consolidated
Adjusted Net Worth; or
(iii) The aggregate unpaid principal amount of Junior
Subordinated Debt to exceed 50% of Consolidated Adjusted Net Worth; or
(iv) The aggregate amount of unused credit then available
from the Banks under this Agreement or otherwise from banks and trust
companies under firmly committed lines of credit from a lending group
of not fewer than two lenders to be less than the sum of the (A)
aggregate outstanding amount of its commercial paper and (B) payments
of principal then scheduled to become due during the eight-month period
then commencing on all Indebtedness for Borrowed Money of the Borrower
and its Restricted Subsidiaries (excluding obligations under the Notes
and this Agreement).
(b) The Borrower will not permit, (i) at any time on or before the
Trigger Date, the ratio of Indebtedness for Borrowed Money of the Borrower and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth to exceed 4.5 to
1 for any month; PROVIDED that the ratio of Indebtedness for Borrowed Money of
the Borrower and its Restricted Subsidiaries to Consolidated Adjusted Net Worth
may exceed 4.5 to 1 for no more than 4 months of any consecutive 12-month period
so long as such ratio does not exceed 5.5 to 1 at any such time, and (ii) at any
time after the Trigger Date, the ratio of Indebtedness for Borrowed Money of the
Borrower and its Restricted Subsidiaries to Consolidated Adjusted Net Worth to
exceed 5.5 to 1 for any month; PROVIDED that the ratio of Indebtedness for
Borrowed Money of the Borrower and its Restricted Subsidiaries to Consolidated
Adjusted Net Worth may exceed 5.5 to 1 for no more than 4 months of any
consecutive 12-month period so long as such ratio does not exceed 6.5 to 1.
(c) The Borrower will not create, assume, or incur or otherwise become
liable in respect of any Senior Subordinated Debt (other than the Senior
Subordinated Notes) or Junior Subordinated Debt unless such Senior Subordinated
Debt or Junior Subordinated Debt shall have a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to Maturity of the
Senior Subordinated Notes. For purposes of this Section 8.10, "WEIGHTED AVERAGE
LIFE TO MATURITY" of the principal amount of any Indebtedness of the Borrower
shall mean, as of the time of any determination thereof, the number of years
obtained by dividing the then Remaining Dollar-years of such Indebtedness by the
then outstanding principal amount of such Indebtedness; and the "REMAINING
DOLLAR-YEARS" of any Indebtedness means at any time the amount obtained by (a)
multiplying the amount of each then remaining installment, sinking fund, serial
maturity or other required principal payment, including payment at final
maturity, by the number of years (calculated to the nearest one-twelfth) which
will elapse between the time in question and the making of that payment and (b)
totaling all of the products obtained in (a).
<PAGE>
(d) The Borrower will not permit any Restricted Subsidiary to create,
assume or incur, or otherwise be or become liable in respect of any Indebtedness
for Borrowed Money (other than the Subsidiary Senior Subordinated Guaranty
Agreement and the Subsidiary Guaranty Agreement) to any Person (other than to
the Borrower or another Restricted Subsidiary) in an aggregate amount for all
Restricted Subsidiaries in excess of $1,000,000 at any time outstanding.
.SECTION 8.11. LIMITATION ON LIENS;. The Borrower will not, and will
not permit any Restricted Subsidiary to, create, assume or suffer to exist any
Lien upon any of its Property (including, but not limited to, the Collateral),
whether now owned or hereafter acquired; PROVIDED, HOWEVER, that the foregoing
restrition and limitation shall not apply to the following Liens:
(a) Liens created under the Collateral Documents;
(b) Liens existing as of the date hereof and reflected on
Schedule 8.11 hereto;
(c) Liens existing on property at the time acquired by the
Borrower or any Restricted Subsidiary thereof or existing on the
property of a corporation at the time it becomes a Restricted
Subsidiary, or placed upon property within 120 days after the date of
acquisition thereof by the Borrower or any Restricted Subsidiary to
secure a portion of the purchase price thereof, but only if (i) such
Lien shall attach solely to the property acquired, purchased or
constructed and (ii) such Lien does not exceed the lesser of the fair
market value or cost of such property;
(d) Liens constituting renewals, extensions or refundings
of Liens permitted by clause (b) or (c) above, PROVIDED that the
principal amount of the Indebtedness secured by any such new Lien does
not exceed the principal amount of the Indebtedness being renewed,
extended or refunded at the time of renewal, extension or refunding
thereof and that such new Lien attaches only to the same property
theretofore subject to such earlier Lien;
(e) Liens securing taxes, assessments or governmental
charges or levies, or the claims or demands of materialmen, mechanics,
carriers, workmen, repairmen, warehousemen, landlords and other like
persons, PROVIDED that payment thereof is not at the time required by
Section 8.3 hereof;
(f) other Liens incidental to the conduct of its business
or the ownership of its property and assets when not incurred in
connection with the borrowing of money or the obtaining of advances of
credit, and which do not in the aggregate materially detract from the
value of its property or assets, or materially impair the use thereof
in the operation of its business;
(g) attachment, judgment and other similar Liens arising in
connection with court proceedings, PROVIDED that (i) execution or other
enforcement of such Liens is effectively stayed, (ii) the claims
secured thereby are being actively contested in good faith by
appropriate proceedings, (iii) adequate reserves in conformity with
GAAP have been provided on the books of the Borrower or such Restricted
Subsidiary and (iv) the aggregate amount of the liabilities of the
Borrower and all Restricted Subsidiaries so secured, including interest
and penalties thereon, shall not be in excess of $100,000 at any one
time outstanding; and
(h) Liens on property of a Restricted Subsidiary of the
Borrower to secure obligations of such Restricted Subsidiary to the
Borrower or to another Restricted Subsidiary.
.SECTION 8.12. DIVIDENDS, STOCK PURCHASES;. The Borrower will not
except as hereinafter provided:
(a) Declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class
or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net cash
proceeds to the Borrower from the substantially concurrent issue or
sale of other shares of capital stock of the Borrower or warrants,
rights or options to purchase or acquire any shares of its capital
stock); or
(c) Make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of its capital
stock; or
<PAGE>
(d) Make any payment of principal, interest or premium on
any Senior Subordinated Debt or Junior Subordinated Debt other than any
regularly scheduled payment of principal or interest on the Senior
Subordinated Debt or the Junior Subordinated Debt; (such declarations
or payments of dividends, purchases, redemptions or retirements of
capital stock and warrants, rights or options, and all such other
distributions and such payments on Senior Subordinated Debt and Junior
Subordinated Debt being herein collectively called "RESTRICTED
PAYMENTS"), if, after giving effect thereto, (i) a Default or Event of
Default has occurred and is continuing or (ii) the aggregate amount of
Restricted Payments made during the period from and after March 31,
1997 to and including the date of the making of the Restricted Payment
in question, would exceed the sum of (x) the net cash proceeds received
by the Borrower from the issuance or sale subsequent to March 31, 1997
of shares of common stock of the Borrower or warrants, rights or
options to purchase or acquire any shares of its common stock, plus (y)
at all times after the Determination Date, 50% of Consolidated Net
Income for the period commencing on the day immediately succeeding the
Determination Date and ending on the date of the making of the
Restricted Payment in question, computed on a cumulative basis for said
entire period (or if such Consolidated Net Income is a deficit figure,
then minus 100% of such deficit); PROVIDED that at all times after the
Determination Date and after giving effect to such Restricted Payment,
Consolidated Tangible Net Worth exceeds $42,000,000.
For the purposes of this Section 8.12 the amount of any
Restricted Payment declared, paid or distributed in property of the
Borrower shall be deemed to be the greater of the book value or fair
market value (as determined in good faith by the Board of Directors of
the Borrower) of such property at the time of the making of the
Restricted Payment in question.
The Borrower will not declare any dividend which
constitutes a Restricted Payment payable more than 60 days after the
date of declaration thereof.
.SECTION 8.13. MERGERS, CONSOLIDATIONS AND SALES OR
TRANSFERS OF ASSETS;. (a) The Borrower will not, and will not permit
any Restricted Subsidiary to, enter into any transaction of merger or
consolidation or transfer, sell, assign, lease, or otherwise dispose of
all or a substantial part of its properties or assets to any Person,
except that:
(1) any Restricted Subsidiary may merge or consolidate with
or into the Borrower or any other Restricted Subsidiary (other than the
Insurance Subsidiary) so long as in any merger or consolidation
involving the Borrower, the Borrower shall be the surviving or
continuing corporation;
(2) the Borrower may merge or consolidate with any other
corporation PROVIDED that (i) the Borrower shall be the surviving and
continuing corporation; and (ii) at the time of such consolidation or
merger and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing;
(3) any Restricted Subsidiary may sell or convey all or
substantially all of its assets to the Borrower or to another
Restricted Subsidiary (other than the Insurance Subsidiary); and
(4) the Borrower or any Restricted Subsidiary may sell all
or a substantial part of the assets of the Borrower and its Restricted
Subsidiaries pursuant to, and in compliance with, Section 10.4 of the
Company Security Agreement and Section 10.4 of the Subsidiary Security
Agreement.
(b) The Borrower will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class or any partnership interest, membership
interest or other equity interest of any type (including for the purposes of
this Section 8.13, any warrants, rights or options to purchase or otherwise
acquire any such equity interest or other Securities exchangeable for or
convertible into any such equity interest) of such Restricted Subsidiary to any
Person other than the Borrower or a Restricted Subsidiary (other than the
Insurance Subsidiary), except for the purpose of qualifying directors.
(c) The Borrower will not sell, transfer, or otherwise dispose of any
shares of stock, partnership interest, membership interest or other equity
interest in any Restricted Subsidiary (except (i) to qualify directors and (ii)
the pledge of the Pledged Collateral under the Company Security Agreement and
any transfer or sale thereof pursuant to, and in compliance with, Section 10.4
of the Company Security Agreement) or any Indebtedness of any Restricted
Subsidiary, and will not permit any Restricted Subsidiary
<PAGE>
to sell, transfer or otherwise dispose of (except (i) to the Borrower or a
Restricted Subsidiary or (ii) the pledge of the Pledged Collateral under the
Subsidiary Security Agreement and any transfer or sale thereof pursuant to, and
in compliance with, Section 10.4 of the Subsidiary Security Agreement) any such
shares of stock, partnership interest, membership interest or other equity
interest or any Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or
disposition, all such interests and all Indebtedness of such Restricted
Subsidiary at the time owned by the Borrower and by every other
Restricted Subsidiary shall be sold, transferred or disposed of as an
entirety;
(2) the Board of Directors of the Borrower shall have
determined, as evidenced by a resolution thereof, that the retention of
such interest and Indebtedness is no longer in the best interests of
the Borrower or the holders of the Notes;
(3) such interest and Indebtedness is sold, transferred or
otherwise disposed of to a Person, for a cash consideration and on
terms reasonably deemed by the Board of Directors to be adequate and
satisfactory;
(4) the Restricted Subsidiary being disposed of shall not
have any continuing investment in the Borrower or any other Restricted
Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the Borrower
and its Restricted Subsidiaries.
(d) As used in this Section 8.13, in the case of the sale, lease or
other disposition of any assets, such assets shall be deemed to be a
"substantial part" of the assets of the Borrower and its Restricted Subsidiaries
if (x) such assets, together with all other assets (i) sold, leased or otherwise
disposed of by the Borrower and its Restricted Subsidiaries or (ii) subject to
any waiver or supplemental agreement of the Company Security Agreement or the
Subsidiary Security Agreement without the consent of the holders of at least a
majority of the then outstanding principal amount of the Senior Subordinated
Notes or, if such waiver or supplemental agreement is described in clauses (B),
(C), (E) or (F) of Section 9.2(a) of the Company Security Agreement or the
Subsidiary Security Agreement, without the consent of all of the holders of the
Senior Subordinated Notes, in each case, during the period of 12 months ending
with the date of such sale, lease or disposition, contributed more than 15% of
EBIT of the Borrower and its Restricted Subsidiaries determined as of the end of
the fiscal year immediately preceding such sale or disposition, (y) the book
value of such assets, when added to the book value of all other assets of the
Borrower and its Restricted Subsidiaries (i) sold or otherwise disposed of by
the Borrower and its Restricted Subsidiaries or (ii) subject to any waiver or
supplemental agreement of the Company Security Agreement or the Subsidiary
Security Agreement without the consent of the holders of at least a majority of
the then outstanding principal amount of the Senior Subordinated Notes or, if
such waiver or supplemental agreement is described in clauses (B), (C), (E) or
(F) of Section 9.2(a) of the Company Security Agreement or the Subsidiary
Security Agreement, without the consent of all of the holders of the Senior
Subordinated Notes, in each case, during the period of 12 months ending with the
date of such sale or disposition, exceeds 10% of the book value of all
Receivables determined as of the end of the fiscal year immediately preceding
such sale or disposition, or (z) the book value of such assets, when added to
the book value of all other assets of the Borrower and its Restricted
Subsidiaries (i) sold or otherwise disposed of by the Borrower and its
Restricted Subsidiaries or (ii) subject to any waiver or supplemental agreement
of the Company Security Agreement or the Subsidiary Security Agreement without
the consent of the holders of at least a majority of the then outstanding
principal amount of the Senior Subordinated Notes or, if such waiver or
supplemental agreement is described in clauses (B), (C), (E) or (F) of Section
9.2(a) of the Company Security Agreement or the Subsidiary Security Agreement,
without the consent of all of the holders of the Senior Subordinated Notes, in
each case, during the entire period commencing on April 1, 1997, and ending with
the date of such sale or disposition, exceeds 25% of the book value of all
Receivables determined as of the end of the fiscal year immediately preceding
such sale or disposition.
(e) Nothing in this Section 8.13 shall prohibit the Borrower from
transferring, selling, assigning, leasing, subleasing or otherwise disposing of
an insubstantial part of its properties or assets, excluding Receivables of the
Borrower and its Restricted Subsidiaries, to any Person from time to time, in
the ordinary
<PAGE>
course.
.SECTION 8.14. LEASE-BACKS;. The Borrower will not, and will not
permit any Restricted Subsidiary to, enter into any arrangements, directly or
indirectly, with any Person, whereby the Borrower or any Restricted Subsidiary
shall sell or transfer any Property, whether now owned or hereafter acquired,
used or useful in their respective businesses in connection with the rental or
lease of the Property so sold or transferred or of other Property which the
Borrower or any Restricted Subsidiary intends to use for substantially the same
purpose or purposes as the Property so sold or transferred.
.SECTION 8.15. GUARANTIES;. The Borrower will not and will not
permit any Restricted Subsidiary to become or be liable in respect of any
Guaranty except: (i) Guaranties of the Borrower which are limited in amount to a
stated maximum dollar exposure and are permitted under Section 8.10; (ii) the
Subsidiary Senior Subordinated Guaranty Agreement; and (iii) the Subsidiary
Guaranty Agreement.
.SECTION 8.16. LIMITATION ON RESTRICTIONS;. Except as provided
herein, the Borrower shall not and shall not permit any of its Restricted
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to: (1) pay dividends or make any
other distribution on any of such Restricted Subsidiary's capital stock or other
equity interests owned by the Borrower or any Restricted Subsidiary of the
Borrower; (2) pay any indebtedness owed to the Borrower or any other Restricted
Subsidiary; (3) make loans or advances to the Borrower or any other Restricted
Subsidiary; or (4) transfer any of its property or assets to the Borrower or any
other Restricted Subsidiary. The Borrower shall not enter into any indenture,
instrument, or other agreement for Indebtedness for Borrowed Money which
contains, or amend any terms of any such indenture, instrument, or agreement
which would result in any such indenture, instrument, or agreement having,
covenants or defaults more burdensome on the Borrower or any Restricted
Subsidiary than the covenants and defaults provided for in this Agreement and
the other Loan Documents.
.SECTION 8.17. TRANSACTIONS WITH AFFILIATES;. The Borrower will not,
and will not permit any Restricted Subsidiary to, enter into or be a party to,
any transaction or arrangement with any Affiliate (including without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Borrower's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Restricted Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
.SECTION 8.18. INVESTMENTS;. The Borrower will not, and will not
permit any Restricted Subsidiary to make any Investment except:
(a) Investments in obligations of the United States of
America (or any agency thereof for which the full faith and credit of
the United States of America is pledged for the repayment of principal
and interest thereof) maturing in twelve months or less from the date
of acquisition thereof;
(b) certificates of deposit of any banking institution with
combined capital and surplus of at least $500,000,000, maturing in
twelve months or less from the date of acquisition thereof which, at
the time of acquisition by the Borrower or any Restricted Subsidiary,
is accorded the rating of A or better by S&P and A2 or better by
Moody's, or if S&P and/or Moody's is no longer rating any such
certificates of deposit, then an equivalent rating by any other
nationally recognized credit rating agency of similar standing;
(c) Loans, advances and extensions of credit to or for the
benefit of consumer/borrowers in the ordinary course of business in
accordance with Section 8.6 hereof;
(d) Investments by the Borrower or any Restricted
Subsidiary in and to any other Restricted Subsidiary PROVIDED, HOWEVER,
Investments by the Borrower or any Restricted Subsidiary in and to the
Insurance Subsidiary shall not exceed $500,000 in the aggregate;
(e) Investments in commercial paper maturing in 270 days or
less from the date of issuance thereof which, at the time of
acquisition by the Borrower or any Restricted Subsidiary, is accorded
the rating of P1 or better by S&P and A1 or better by Moody's, or if
S&P and/or Moody's is no longer rating any such commercial paper, then
an equivalent rating by any other nationally recognized credit rating
agency of similar standing; or
<PAGE>
(f) other Investments (in addition to those permitted in
clauses (a) through (e) above) PROVIDED that the aggregate amount of
all such Investments shall not at any time exceed 10% of Consolidated
Adjusted Net Worth.
.SECTION 8.19. TERMINATION OF PENSION PLANS;. The Borrower will not
and will not permit any Subsidiary to withdraw from any Multiemployer Plan or
permit any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as described in
Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any
Property of the Borrower or any Subsidiary pursuant to Section 4068 of ERISA.
.SECTION 8.20. REPORTS AND RIGHTS OF INSPECTION;. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries will be made of all dealings or transactions
of or in relation to the business and affairs of the Borrower or such
Subsidiary, in accordance with GAAP consistently maintained (except for changes
disclosed in the financial statements furnished to the Banks pursuant to this
Section 8.20 and concurred in by the independent public accountants referred to
in paragraph (b) hereof), and will furnish to each holder of a Note and the
Security Trustee (in duplicate if so specified below or otherwise requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, a copy of:
(1) consolidated and consolidating balance sheets
of the Borrower and its Restricted Subsidiaries as of the
close of such quarter and, in the case of the consolidated
balance sheets, setting forth in comparative form the
amount for the corresponding period of the preceding fiscal
year,
(2) consolidated and consolidating statements of
income and retained earnings of the Borrower and its
Restricted Subsidiaries for the portion of the fiscal year
ending with such quarter and, in the case of the
consolidated statements of income and retained earnings,
setting forth in comparative form the amount for the
corresponding period of the preceding fiscal year,
(3) consolidated and consolidating statements of
changes in financial position of the Borrower and its
Restricted Subsidiaries for the portion of the fiscal year
ending with such quarter and, in the case of the
consolidated statements of changes in financial position,
setting forth in comparative form the amount for the
corresponding period of the preceding fiscal year, and
(4) consolidated and consolidating statements of
cash flows of the Borrower and its Restricted Subsidiaries
for the portion of the fiscal year ending with such quarter
and, in the case of the consolidated statements of cash
flows, setting forth in comparative form the consolidated
figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and certified as
complete and correct, by an authorized financial officer of
the Borrower;
(b) ANNUAL STATEMENTS. As soon as available and in any
event within 90 days after the close of each fiscal year of the
Borrower, a copy of:
(1) consolidated and consolidating balance sheets
of the Borrower and its Restricted Subsidiaries as of the
close of such fiscal year,
(2) consolidated and consolidating statements of
income and retained earnings and changes in financial
position of the Borrower and its Restricted Subsidiaries
for such fiscal year, and
(3) consolidated and consolidating statements of
changes in cash flows of the Borrower and its Restricted
Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion,
unqualified as to scope limitations imposed by the Borrower and otherwise
without qualification except as therein noted, thereon of a firm of independent
public accountants of recognized national standing selected by the Borrower to
the effect that the consolidated financial statements have been prepared in
accordance with GAAP consistently
<PAGE>
applied (except for noted changes in application in which such accountants
concur) and present fairly the financial condition of the Borrower and its
Restricted Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy
of each interim or special audit made by independent accountants of the
books of the Borrower or any Restricted Subsidiary and any management
letter received from such accountants and the Borrower's response, if
any, to such management letter;
(d) SEC AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice, proxy
statement or statement of additional information sent by the Borrower
to stockholders generally and of each regular or periodic report, and
any registration statement or prospectus filed by the Borrower or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which the Borrower or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Borrower or any of its Subsidiaries;
(e) REQUESTED INFORMATION. With reasonable promptness, such
other data and information as any holder of any Note or the Security
Trustee may reasonably request;
(f) OFFICERS' CERTIFICATES. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Borrower stating that he has reviewed the provisions of
this Agreement and setting forth: (i) the information and computations
(in sufficient detail) required in order to determine whether the
Borrower was in compliance with the requirements of Sections 8.7
through Sections 8.18, both inclusive, at the end of the period covered
by the financial statements then being furnished, and (ii) whether, to
the best of such officer's knowledge, there existed as of the date of
such financial statements and whether, to the best of such officer's
knowledge, there exists on the date of the certificate or existed at
any time during the period covered by such financial statements any
Default or Event of Default and, if any such condition or event exists
on the date of the certificate, specifying the nature and period of
existence thereof and the action the Borrower is taking and proposes to
take with respect thereto;
(g) ACCOUNTANT'S CERTIFICATES. Within the period provided
in paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further, whether in making
their audit, such accountants have become aware of any Default or Event
of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence
thereof;
(h) UNRESTRICTED SUBSIDIARIES. Within the respective
periods provided in paragraph (b) above, financial statements of the
character and for the dates and periods as in said paragraph (b)
provided covering each Unrestricted Subsidiary (or groups of
Unrestricted Subsidiaries on a consolidated basis);
(i) LOAN LOSS RESERVE REPORT. On or before the twenty-fifth
day of every month, a loan loss reserve report with respect to the
Borrower and its Restricted Subsidiaries for the immediately preceding
month in form and substance reasonably satisfactory to the Required
Banks;
(j) LOAN CHARGE-OFF RECOVERY REPORT. On or before the
twenty-fifth day of every month, a loan charge-off recovery report with
respect to the Borrower and its Restricted Subsidiaries for the prior
month in form and substance reasonably satisfactory to the Required
Banks;
(k) BORROWING BASE CERTIFICATE. On or before the
twenty-fifth day of every month, a Borrowing Base Certificate
substantially in the form attached hereto as Exhibit C calculated as of
the last day of the immediately preceding month; and
(l) ANNUAL BUDGET. As soon as available, and in any event
within 90 days after the close of each fiscal year of the Borrower, a
copy of the Borrower's consolidated annual budget for
<PAGE>
the current fiscal year, such annual budget to show the Borrower's
projected consolidated revenues, expenses, and balance sheet on
month-by-month basis, such annual budget to be in reasonable detail
prepared by the Borrower and in form reasonably satisfactory to the
Required Banks.
Without limiting the foregoing, the Borrower will permit each Bank and the
Security Trustee (or such Persons as any Bank or the Security Trustee may
designate) to visit and inspect, any of the properties of the Borrower or any
Subsidiary, to inspect any other Collateral, to examine all their books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Borrower authorizes said accountants to discuss with such
Persons the finances and affairs of the Borrower and its Subsidiaries) all at
such reasonable times and as often as may be reasonably requested. Any
visitation, inspection or discussion shall be at the sole cost and expense of
the Borrower; PROVIDED, HOWEVER, that prior to the occurrence of a Default or
Event of Default, the Borrower shall bear such costs and expenses not more
frequently than once every semi-annual fiscal period.
.SECTION 9. EVENTS OF DEFAULT AND REMEDIES;.
.SECTION 9.1. EVENTS OF DEFAULT;. Any one or more of the following
shall constitute an Event of Default:
(a) Default shall occur in the payment of interest on any
Note or any other sums (other than for principal on the Note) required
to be paid pursuant to this Agreement or any other Loan Document when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any required
prepayment of principal on any of the Notes when due; or
(c) Default shall occur in the making of any other payment
of the principal of any Note thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of
any covenant or agreement contained in Sections 8.7 through 8.18
hereof, both inclusive; or
(e) The Borrower shall, without the prior written consent
of the Required Banks, make any voluntary prepayment, or enter into any
amendment changing any payment due dates, on the notes of the Borrower
issued pursuant to any Note Purchase Agreement or the Subordinated Note
Purchase Agreement, or enter into any amendment increasing the interest
rate otherwise payable on the notes of the Borrower issued pursuant to
the Subordinated Note Purchase Agreement, or shall make any voluntary
prepayment on any Senior Subordinated Debt or on any Junior
Subordinated Debt except as permitted by this Agreement; or
(f) Default shall occur in the observance or performance of
any other provision of this Agreement or any other Loan Document which
is not remedied within 30 days after the earlier to occur of (i) the
date on which such failure shall first become known to any officer of
the Borrower or (ii) the date on which notice thereof is given to the
Borrower; or
(g) An "Event of Default" shall occur under any Note
Purchase Agreement or the Subordinated Note Purchase Agreement or under
any other indenture, instrument, or agreement setting forth the terms
and conditions applicable to any Senior Subordinated Debt or Junior
Subordinated Debt; or
(h) Default shall occur under any interest rate or currency
protection agreement entered into by the Borrower or any Subsidiary
with any bank or other financial institution; or
(i) Default shall be made in the payment when due (whether
by lapse of time, by declaration, by call for redemption or otherwise)
of the principal of or interest or premium on any Indebtedness for
Borrowed Money in excess of $1,000,000 (other than the Notes, the
Senior Secured Notes of the Borrower issued pursuant to the Note
Purchase Agreements, and the Senior Subordinated Notes of the Borrower
issued pursuant to the Subordinated Note Purchase Agreement) of the
Borrower or any Subsidiary, individually or in the aggregate, and such
default shall continue beyond the period of grace, if any, allowed with
respect thereto; or
<PAGE>
(j) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which any
Indebtedness for Borrowed Money in excess of $1,000,000 of the Borrower
or any Subsidiary (other than this Agreement, the Note Purchase
Agreements, the Subordinated Note Purchase Agreement, the Subsidiary
Senior Subordinated Guaranty Agreements or the Subsidiary Guaranty
Agreements), individually or in the aggregate, may be issued and such
default or event shall continue for a period of time sufficient to
permit the acceleration of the maturity of any Indebtedness for
Borrowed Money of the Borrower or any Subsidiary outstanding
thereunder; or
(k) Any representation or warranty made by the Borrower or
any Restricted Subsidiary herein or in any other Loan Document or made
by the Borrower or any Restricted Subsidiary in any statement or
certificate furnished by the Borrower or any Restricted Subsidiary in
connection with the execution and delivery of the Notes or furnished by
the Borrower or any Restricted Subsidiary pursuant hereto or pursuant
to any other Loan Document is untrue in any material respect as of the
date of the issuance or making thereof; or
(l) The Subsidiary Guaranty Agreement shall be held by a
court of competent jurisdiction to be invalid or unenforceable in whole
or in part in any respect or shall otherwise cease to be in full force
and effect or the Borrower or any Restricted Subsidiary takes any
action for the purpose of repudiating or rescinding any Loan Document
or the obligations of the Borrower or any Restricted Subsidiary,
respectively, thereunder or the Borrower or any Restricted Subsidiary
declares that the obligations of the Borrower or any Restricted
Subsidiary under any Loan Document are unenforceable; or
(m) The Collateral Documents shall cease to be in full
force and effect, or shall cease to give the Security Trustee the Liens
purported to be created thereby or, in the reasonable judgment of the
Required Banks, the practical realization of the benefits of the Liens
purported to be created thereby; or
(n) Final judgment or judgments for the payment of money
aggregating in excess of $100,000 is or are outstanding against the
Borrower or any Subsidiary or against any property or assets of either
and any one of such judgments has remained unpaid, unvacated, unbonded
or unstayed by appeal or otherwise for a period of 30 days from the
date of its entry; or
(o) The Borrower or any member of its Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess
of $100,000 which it shall have become liable to pay to the PBGC or to
a Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans having aggregate Unfunded Vested Liabilities in excess of
$100,000 (collectively, a "MATERIAL PLAN") shall be filed under Title
IV of ERISA by the Borrower or any other member of its Controlled
Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary of any
Material Plan against the Borrower or any member of its Controlled
Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within 30 days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or
(p) A custodian, trustee or receiver is appointed for the
Borrower or any Subsidiary or for the major part of the property of
either and is not discharged within 45 days after such appointment; or
(q) The Borrower or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Borrower or any
Subsidiary causes or suffers an order for relief to be entered with
respect to it under applicable Federal bankruptcy law or applies for or
consents to the appointment of a custodian, trustee or receiver for the
Borrower or such Subsidiary or for the major part of the property of
either; or
(r) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other
<PAGE>
proceedings for relief under any bankruptcy or similar law or
laws for the relief of debtors, are instituted by or against the
Borrower or any Subsidiary and, if instituted against the Borrower
or any Subsidiary, are consented to or are not dismissed within 60
days after such institution.
.SECTION 9.2. NOTICE TO BANKS;. When any Default or Event of Default
described in the foregoing Section 9.1 has occurred, or if any Bank or the
holder of any other evidence of Indebtedness of the Borrower gives any notice or
takes any other action with respect to a claimed default, the Borrower agrees to
give notice within three business days (except as otherwise specifically
provided herein) of such event to all Banks, such notice to be in writing and
sent by registered or certified mail or by telegram.
.SECTION 9.3. NON-BANKRUPTCY DEFAULTS;. When any Event of Default
other than those described in Sections (p), (q) or (r) of Section 9.1 hereof has
occurred and is continuing, the Agent shall, if so directed by the Required
Banks, by notice to the Borrower, take either or both of the following actions:
(a) terminate the remaining Commitments of the Banks
hereunder on the date stated in such notice (which may be the date
thereof); and
(b) declare the principal of and the accrued interest on
all outstanding Notes of the Borrower to be forthwith due and payable
and thereupon all of said Notes, including both principal and interest,
shall be and become immediately due and payable together with all other
amounts payable under this Agreement and the other Loan Documents
without further demand, presentment, protest or notice of any kind.
The Agent, after giving notice to the Borrower pursuant to this Section 9.3,
shall also promptly send a copy of such notice to the other Banks, but the
failure to do so shall not impair or annul the effect of such notice.
.SECTION 9.4. BANKRUPTCY DEFAULTS;. When any Event of Default
described in Sections (p), (q) or (r) of Section 9.1 hereof has occurred and is
continuing, then all outstanding Notes, both for principal and interest, shall
immediately become due and payable together with all other amounts payable under
this Agreement and the other Loan Documents without presentment, demand, protest
or notice of any kind, and the obligation of the Banks to extend further credit
pursuant to any of the terms hereof shall immediately terminate.
.SECTION 9.5.EXPENSES;. The Borrower agrees to pay to the Agent and
each Bank, or any other holder of any Note outstanding hereunder, all costs and
expenses incurred or paid by the Agent and such Bank or any such holder,
including reasonable attorneys' fees and court costs, in connection with any
Default or Event of Default by the Borrower hereunder or in connection with the
enforcement of any of the terms hereof or of the other Loan Documents.
.SECTION 10. CHANGE IN CIRCUMSTANCES;.
.SECTION 10.1. CHANGE OF LAW;. Notwithstanding any other provisions
of this Agreement or any Note, if at any time after the date hereof any change
in applicable law or regulation or in the interpretation thereof makes it
unlawful for any Bank to make or continue to maintain Eurodollar Loans or to
give effect to its obligations as contemplated hereby, such Bank shall promptly
give notice thereof to the Borrower, with a copy to the Agent, and such Bank's
obligations to make or maintain Eurodollar Loans under this Agreement shall
terminate and shall not revive until it is no longer unlawful for such Bank to
make or maintain Eurodollar Loans. The Borrower shall prepay on demand the
outstanding principal amount of any such affected Eurodollar Loans, together
with all interest accrued thereon and all other amounts then due and payable to
such Bank under this Agreement; PROVIDED, HOWEVER, subject to all of the terms
and conditions of this Agreement, the Borrower may then elect to borrow the
principal amount of the affected Eurodollar Loan from such Bank by means of a
Domestic Rate Loan from such Bank that shall not be made ratably by the Banks
but only from such affected Bank.
.SECTION 10.2. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN,
OR INADEQUACY OF, LIBOR;. If on or prior to the first day of any Interest Period
for any Borrowing of Eurodollar Loans:
(a) the Agent advises the Borrower that deposits in United
States Dollars (in the applicable amounts) are not being offered to it
in the off-shore U.S. Dollar interbank market for such Interest Period,
or
(b) Banks having 51% or more of the aggregate amount of the
Commitments advise the Agent that LIBOR as determined by the Agent will
not adequately and fairly reflect the cost to
<PAGE>
such Banks of funding their Eurodollar Loans for such Interest Period,
then the Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks to
make Eurodollar Loans shall be suspended.
.SECTION 10.3. INCREASED COST AND REDUCED RETURN;. (a) If on or
after the date hereof the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Eurodollar Loans, its
Notes or its obligation to make Eurodollar Loans, or shall change the
basis of taxation of payments to any Bank (or its Lending Office) of
the principal of or interest on its Eurodollar Loans or any other
amounts due under this Agreement in respect of its Eurodollar Loans or
its obligation to make Eurodollar Loans (except for changes in the rate
of tax on the overall net income of such Bank or its Lending Office
imposed by the jurisdiction in which such Bank's principal executive
office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Eurodollar Loans any
such requirement included in an applicable Eurodollar Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office) or shall impose on
any Bank (or its Lending Office) or on the interbank market any other
condition affecting its Eurodollar Loans, its Notes or its obligation
to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed reasonably and in good faith by such Bank to be material, then,
within fifteen (15) days after demand by such Bank (with a copy to the Agent),
the Borrower shall be obligated to pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost or reduction
(computed commencing on the effective date of any event mentioned herein). Each
Bank agrees to use its best efforts to give the Borrower notice of the
occurrence of any event mentioned herein.
(b) If after the date hereof any Bank shall have determined that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital, or on the capital of any corporation controlling such
Bank, as a consequence of its obligations hereunder to a level below that which
such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within fifteen (15) days after demand by such Bank (with a copy to the
Agent), the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
.SECTION 10.4. LENDING OFFICES;. Each Bank may, at its option, elect
to make its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "LENDING OFFICE") for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a notice to the Borrower and
the Agent.
.SECTION 10.5. DISCRETION OF BANK AS TO MANNER OF FUNDING;.
Notwithstanding any other provision of this Agreement, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement
<PAGE>
all determinations hereunder shall be made as if each Bank had actually funded
and maintained each Eurodollar Loan through the purchase of deposits in the
interbank market having a maturity corresponding to such Loan's Interest Period
and bearing an interest rate equal to LIBOR for such Interest Period.
.SECTION 11. THE AGENT;.
.SECTION 11.1. APPOINTMENT AND AUTHORIZATION;. Each Bank hereby
irrevocably appoints Harris Trust and Savings Bank its Agent under this
Agreement and the other Loan Documents and hereby authorizes the Agent to take
such action as Agent and on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
.SECTION 11.2. AGENT AND AFFILIATES;. The Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any other
Bank and may exercise or refrain from exercising the same as though it were not
an Agent, and the Agent and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it were not an Agent hereunder and
thereunder.
.SECTION 11.3. ACTION BY AGENT;. The Agent shall in all cases be
fully justified in failing or refusing to act hereunder and under the other Loan
Documents unless the Agent shall be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. In all cases in which this
Agreement does not require the Agent to take certain actions, the Agent shall be
fully justified in using its discretion in failing to take or in taking any
action hereunder or under the other Loan Documents. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Event of Default, except as expressly provided in Section
9.3. The Agent shall be acting as an independent contractor hereunder and
nothing herein shall be deemed to impose on the Agent any fiduciary obligations
to the Banks or the Borrower.
.SECTION 11.4. CONSULTATION WITH EXPERTS;. The Agent may consult
with legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or experts
.SECTION 11.5. LIABILITY OF AGENT;. No Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the request of
the Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder or any other Loan Document; (ii) the
performance or observance of any of the covenants or agreements of the Borrower
or any Subsidiary in any Loan Document; (iii) the satisfaction of any condition
specified in Section 7, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the
Notes, any other Loan Document or any other instrument or writing furnished in
connection herewith or of the collectibility of the Obligations or the value,
worth, priority, or perfection of the Collateral or the Liens provided for by
the Loan Documents. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, request or statement (whether
written or oral) or other documents believed by it to be genuine or to be signed
by the proper party or parties and, in the case of legal matters, in relying on
the advice of counsel (including counsel for the Borrower). The Agent need not
verify the worth or existence of the Collateral and may rely exclusively on
reports of the Borrower in computing the Available Borrowing Base. The Agent may
treat the Banks that are named herein as the holders of the Notes and the
indebtedness contemplated herein.
.SECTION 11.6. INDEMNIFICATION;. Each Bank shall, ratably in
accordance with its Commitments (or, if the Commitments have been terminated in
whole, ratably in accordance with its outstanding Loans), indemnify the Agent
(to the extent not reimbursed by the Borrower) against any cost, expense
(including reasonable counsels' fees and disbursements), claim, demand, action,
loss, obligation, damages, penalties, judgments, suits or liability (except such
as result from the Agent's gross negligence or willful misconduct)
<PAGE>
that the Agent may suffer or incur in connection with this Agreement or any
other Loan Document or any action taken or omitted by the Agent hereunder or
thereunder.
.SECTION 11.7. CREDIT DECISION;. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement or any other Loan Document.
.c.2.SECTION 11.8. RESIGNATION OF THE AGENT;. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may, with the
prior written consent of the Borrower (such consent not to be unreasonably
withheld), resign at any time by giving written notice thereof to the Banks and
the Borrower. Upon any such resignation of the Agent, the Required Banks shall
have the right to appoint, with the consent of the Borrower (such consent not to
be unreasonably withheld), a successor Agent. If no successor Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $200,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 11 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
.SECTION 11.9. PAYMENTS;. Unless the Agent shall have been notified
by a Bank prior to the date on which such Bank is scheduled to make payment to
the Agent of the proceeds of a Loan (which notice shall be effective upon
receipt) that such Bank does not intend to make such payment, the Agent may
assume that such Bank has made such payment when due and the Agent may in
reliance upon such assumption (but shall not be required to) make available to
the Borrower the proceeds of the Loan to be made by such Bank and, if any Bank
has not in fact made such payment to the Agent, such Bank shall, on demand, pay
to the Agent the amount made available to the Borrower attributable to such Bank
together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Borrower and ending
on (but excluding) the date such Bank pays such amount to the Agent at a rate
per annum equal to the Federal Funds Rate (as hereinafter defined). If such
amount is not received from such Bank by the Agent immediately upon demand, the
Borrower will, on demand, repay to the Agent the proceeds of the Loan
attributable to such Bank with interest thereon at a rate per annum equal to the
interest rate applicable to the relevant Loan, but without such payment being
considered a payment or prepayment of a Loan, so that the Borrower will have no
liability under Section 2.10 hereof with respect to such payment. "FEDERAL FUNDS
RATE" shall mean the rate determined by the Agent to be the average (rounded
upwards, if necessary, to the next higher 1/100 of 1%) of the rates per annum
quoted to the Agent at approximately 10:00 A.M. (Chicago time) (or as soon
thereafter as is practicable) on such date (or, if such day is not a Business
Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Agent for the sale to the Agent at face value of Federal
Funds in an amount equal or comparable to the principal amount owed to the Agent
for which such rate is being determined hereof.
.SECTION 12. MISCELLANEOUS;.
.SECTION 12.1. NO WAIVER OF RIGHTS;. No delay or failure on the part
of the Agent or any Bank or on the part of the holder or holders of any Note in
the exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise thereof
preclude any other or further exercise of any other power or right. The rights
and remedies hereunder of the Agent and the Banks and of the holder or holders
of any Notes are cumulative to, and not exclusive of, any rights or remedies
which any of them would otherwise have.
.SECTION 12.2. NON-BUSINESS DAY;. If any payment hereunder becomes
due and payable on a day
<PAGE>
which is not a Business Day, the due date of such payment shall be extended to
the next succeeding Business Day on which date such payment shall be due and
payable. In the case of any payment of principal falling due on a day which is
not a Business Day, interest on such principal amount shall continue to accrue
during such extension at the rate per annum then in effect, which accrued amount
shall be due and payable on the next scheduled date for the payment of interest.
.SECTION 12.3. DOCUMENTARY TAXES;. The Borrower agrees that it will
pay any documentary, stamp or similar taxes payable in respect to this Agreement
or any other Loan Document, including interest and penalties, in the event any
such taxes are assessed irrespective of when such assessment is made and whether
or not any credit is then in use or available hereunder.
.SECTION 12.4. SURVIVAL OF REPRESENTATIONS;. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and of the Notes, and shall
continue in full force and effect with respect to the date as of which they were
made as long as any credit is in use or available hereunder.
.SECTION 12.5. SURVIVAL OF INDEMNITIES;. All indemnities and all
other provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.10 and Section 10.3 hereof, shall survive the termination
of this Agreement and the payment of the Loans and the Notes.
.SECTION 12.6. SHARING OF SET-OFF;. Each Bank agrees with each other
Bank a party hereto that if on or after the date of the occurrence of an Event
of Default and the acceleration of the maturity of the Notes pursuant to Section
9.3 or 9.4 hereof such Bank shall receive and retain any payment, whether by
set-off or application of deposit balances or otherwise ("SET-OFF"), on any of
the Obligations outstanding under this Agreement in excess of its ratable share
of payments on all Obligations then outstanding to the Banks, then such Bank
shall purchase for cash at face value, but without recourse, ratably from each
of the other Banks such amount of the Obligations held by each such other Bank
(or interest therein) as shall be necessary to cause such Bank to share such
excess payment ratably with all the other Banks; PROVIDED, HOWEVER, that if any
such purchase is made by any Bank, and if such excess payment or part thereof is
thereafter recovered from such purchasing Bank, the related purchases from the
other Banks shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest. Each Bank's
ratable share of any such Set-off shall be determined by the proportion that the
aggregate amount of Loans then due and payable to such Bank bears to the total
aggregate amount of the Loans then due and payable to all the Banks.
.SECTION 12.7. NOTICES;. Except as otherwise specified herein, all
notices hereunder shall be in writing (including cable or telecopy) and shall be
given to the relevant party at its address or telecopier number set forth below,
in the case of the Borrower, or on the appropriate signature page hereof, in the
case of the Banks and the Agent, or such other address or telecopier number as
such party may hereafter specify by notice to the Agent and the Borrower, given
by United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice and
its receipt. Notices hereunder to the Borrower shall be addressed to:
World Acceptance Corporation
108 Frederick Street
Greenville, South Carolina 29607-2532
Attention: Chief Financial Officer
Telephone: (803) 277-4570
Telecopy: (803) 277-1440
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; PROVIDED THAT any notice given pursuant
to Section 2 hereof shall be effective only upon receipt.
.SECTION 12.8. COUNTERPARTS;. This Agreement may be executed in any
number of counterparts,
<PAGE>
and by the different parties on different counterparts, each of which when
executed shall be deemed an original but all such counterparts taken together
shall constitute one and the same instrument.
.SECTION 12.9. SUCCESSORS AND ASSIGNS;. (a) GENERAL. This Agreement
shall be binding upon the Borrower and its successors and assigns, and shall
inure to the benefit of each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any Note; PROVIDED,
HOWEVER, that the Borrower may not assign any of its rights or obligations
hereunder without the written consent of all of the Banks.
(b) PARTICIPATIONS. Each Bank shall have the right, without the consent
of the Borrower, at its own cost to grant participations in the Loans made
and/or Commitments held by such Bank to one or more financial institutions at
any time and from time to time; PROVIDED, HOWEVER, that (i) such participations
shall be in a minimum amount of $5,000,000, (ii) no such participation shall
relieve any Bank of any of its obligations under this Agreement, (iii) the
participant financial institutions shall be entitled to the benefits of Sections
2.10 and 10.3 hereof but shall not be entitled to any greater payment under any
of such Sections than the Bank granting such participation would have been
entitled to receive with respect to the rights transferred and (iv) the
Borrower, the Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with this Agreement and such Bank shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans and to approve any amendment, modification or waiver of this Agreement or
any other Loan Document, PROVIDED THAT such participation agreement may provide
that such Bank will not agree to any amendment, modification or waiver of this
Agreement or any other Loan Document without the consent of such participant,
that would reduce the amount of or postpone the date for payment of any
principal of or interest on any Loan hereunder.
(c) ASSIGNMENTS. Each Bank may, from time to time, with the consent of
the Agent (which will not be unreasonably withheld) and upon notice to the
Borrower, assign to other financial institutions part (but in no event less than
$10,000,000) of the indebtedness evidenced by the Notes then owned by it
together with an equivalent proportion of its obligation to make Loans hereunder
pursuant to written agreements executed by the assignor, the assignee and the
Borrower, which agreements shall specify in each instance the portion of the
indebtedness evidenced by the Notes which is to be assigned to each such
assignee and the portion of the Commitments of the assignor to be assumed by it
(the "ASSIGNMENT AGREEMENTS"). Upon the execution of each Assignment Agreement
by the assignor, the assignee and the Borrower (i) such assignee shall thereupon
become a "BANK" for all purposes of this Agreement with Commitments in the
amounts set forth in such Assignment Agreement and with all the rights, powers
and obligations afforded a Bank hereunder, (ii) the assignor shall have no
further liability for funding the portion of its Commitments assumed by such
other Bank and no other liability hereunder and (iii) the address for notices to
such Bank shall be as specified in the Assignment Agreement executed by it.
Concurrently with the execution and delivery of such Assignment Agreement, and,
upon return to the Borrower of the outstanding Notes of the assignor, the
Borrower shall execute and deliver Notes to the assignee Bank in the amount of
its Commitments and new Notes to the assignor Bank in the amount of its
Commitments after giving effect to the reduction occasioned by such assignment,
all such Notes to constitute "NOTES" for all purposes of this Agreement.
.SECTION 12.10. AMENDMENTS;. Any provision of this Agreement or the
Notes may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by (a) the Borrower, (b) the Required Banks, and (c) if
the rights or duties of the Agent are affected thereby, the Agent, as
applicable; provided that:
(i) no amendment or waiver pursuant to this Section shall
(A) increase any Commitment of any Bank without the consent of such
Bank, (B) release any substantial part of the Collateral or any
Subsidiary Guaranty Agreement or (C) reduce the amount of or postpone
the date for payment of any principal of or interest on any Loan or of
any fee payable hereunder without the consent of the Bank to which such
payment is owing or which has committed to make such Loan or other
credit hereunder; and
(ii) no amendment or waiver pursuant to this Section shall,
unless signed by each Bank, change the provisions of this Section, the
definition of Required Banks or Termination Date,
or the provisions of Section 9.4, or affect the number of Banks
required to take any action hereunder.
.SECTION 12.11. NON-RELIANCE ON MARGIN STOCK;. Each of the Banks
represents to the Agent and to each of the other Banks that it in good faith is
not relying upon any Margin Stock as collateral in the extension or maintenance
of the credit provided for in this Agreement.
.SECTION 12.12. FEES AND INDEMNIFICATION;. (a) The Borrower agrees
to pay the reasonable fees and disbursements of counsel to the Agent, in
connection with the preparation and execution of this Agreement and the other
Loan Documents, and any amendment, waiver or consent related hereto, whether or
not the transactions contemplated herein are consummated.
(b) The Borrower further agrees to indemnify the Agent and each Bank,
their respective directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitations, all reasonable expenses of litigation or preparation therefor
whether or not the Agent or any Bank is a party thereto) which any of them may
pay or incur arising out of or relating to this Agreement, any other Loan
Document, the transactions contemplated hereby or thereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder, other than those which arise from the gross negligence or willful
misconduct of the party claiming indemnification. The obligations of the
Borrower under this Section shall survive the termination of this Agreement.
.SECTION 12.13. GOVERNING LAW;. This Agreement and the Notes, and
the rights and duties of the parties hereto and thereto, shall be construed and
determined in accordance with the laws of the State of Illinois, without regard
to the internal laws thereof with respect to conflicts of law.
.SECTION 12.14. HEADINGS;. Section headings used in this Agreement
are for reference only and shall not affect the construction of this Agreement.
.SECTION 12.15. ENTIRE AGREEMENT;. This Agreement constitutes the
entire understanding of the parties hereto with respect to the subject matter
hereof and any prior or contemporaneous agreements, whether written or oral,
with respect thereto are superseded hereby.
.SECTION 12.16. TERMS OF COLLATERAL DOCUMENTS NOT SUPERSEDED;.
Nothing contained herein shall be deemed or construed to permit any act or
omission which is prohibited by the terms of any Collateral Document, the
covenants and agreements contained herein being in addition to and not in
substitution for the covenants and agreements contained in the Collateral
Documents.
.'SECTION 12.17. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL';.
The Borrower hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Northern District of Illinois and of any Illinois
State court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE BORROWER, THE AGENT AND EACH BANK HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
[SIGNATURE PAGES TO FOLLOW]
<PAGE>
Upon execution hereof by all the parties, this Agreement shall be a
contract among the parties for the purposes hereinabove set forth.
Dated as of June 30, 1997.
.c4.Signature Page;WORLD ACCEPTANCE
CORPORATION
By /s/ A. Alexander McLean III
Its Executive Vice President/Chief
Financial Officer
A. Alexander McLean III
(Type or Print Name)
Accepted and Agreed to as of the day and year last above written.
<TABLE>
<S> <C>
Address and Amount of Commitments:
111 West Monroe Street HARRIS TRUST AND SAVINGS BANK, in its
Chicago, Illinois 60690 individual capacity as a Bank and as Agent
Attention: Mr. Jerome P. Crokin
Telecopy: (312) 765-8382 By /s/ Jerome P. Crokin
Telephone: (312) 461-6557 Its Vice President
Commitment: $25,000,000
Lending Offices:
Domestic Rate Loans: 111 West Monroe Street
Chicago, Illinois
Eurodollar Loans: 111 West Monroe Street
Chicago, Illinois
</TABLE>
<PAGE>
<TABLE>
<S> <C>
One First National Plaza THE FIRST NATIONAL BANK OF CHICAGO
Chicago, Illinois 60670-0084
Attention: Craig Goldsmith
Telecopy: (312) 732-6222 By /s/ Craig Goldsmith
Telephone: (312) 732-2822 Its Assistant Vice President
Commitment: $25,000,000
Lending Offices:
Domestic Rate Loans: One First National Plaza
Chicago, Illinois 60670-0084
Eurodollar Loans: One First National Plaza
Chicago, Illinois 60670-0084
</TABLE>
<PAGE>
<TABLE>
<S> <C>
135 South LaSalle Street LASALLE NATIONAL BANK
Chicago, Illinois 60603
Attention: Ben Schreiner
Telecopy: (312) 904-2903 By /s/ Ben Schreiner
Telephone: (312) 904-7379 Its Loan Officer
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans: 135 South LaSalle Street
Chicago, Illinois 60603
Eurodollar Loans: 135 South LaSalle Street
Chicago, Illinois 60603
</TABLE>
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
U.S. $______________, 1997
FOR VALUE RECEIVED, the undersigned, WORLD ACCEPTANCE CORPORATION, a
South Carolina corporation (the "BORROWER"), promises to pay to the order of
_______________________________________________ (the "BANK") on the Termination
Date of the hereinafter defined Credit Agreement, at the principal office of
Harris Trust and Savings Bank in Chicago, Illinois, in immediately available
funds, the principal sum of __________________________________________________
Dollars ($_________________) or, if less, the aggregate unpaid principal amount
of all Loans made by the Bank to the Borrower under its Commitment pursuant to
the Credit Agreement and with each such Loan to mature and become payable as
provided in the Credit Agreement, together with interest on the principal amount
of each such Loan from time to time outstanding hereunder at the rates, and
payable in the manner and on the dates, specified in the Credit Agreement.
The Bank shall record on its books or records or on a schedule attached
to this Note, each Loan made by it pursuant to its Commitment, together with all
payments of principal and interest and the principal balances from time to time
outstanding hereon, whether the Loan is a Domestic Rate Loan or a Eurodollar
Loan and the interest rate and, in the case of a Eurodollar Loan, the Interest
Period applicable thereto, provided that prior to the transfer of this Note all
such amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on the schedule to this Note,
shall be PRIMA FACIE evidence of the same, provided, however, that the failure
of the Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of the Borrower to repay all Loans
made to it under the Revolving Credit pursuant to the Credit Agreement together
with accrued interest thereon.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of June 30 1997, among the Borrower, Harris Trust and
Savings Bank, as Agent, and others (such Credit Agreement as the same may from
time to time be amended being referred to as the "CREDIT AGREEMENT") and payment
hereof is secured by the Loan Documents, and this Note and the holder hereof are
entitled to all the benefits provided for thereby or referred to therein, to
which Credit Agreement and Loan Documents reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the laws of the State
of Illinois.
Prepayments may be made hereon, certain prepayments are required to be
made hereon and this Note may be declared due prior to the expressed maturity
hereof, all in the events, on the terms and in the manner as provided for in the
Credit Agreement and Collateral Documents.
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
WORLD ACCEPTANCE CORPORATION
ATTEST: By
Its
- -------------------------------
Its __________________ Secretary
<PAGE>
EXHIBIT B-1
PERMITTED SENIOR SUBORDINATED DEBT
SUBORDINATION PROVISIONS APPLICABLE TO
SENIOR SUBORDINATED DEBT
AND JUNIOR SUBORDINATED DEBT
The indebtedness evidenced by the subordinated notes or related thereto
and any renewals or extensions thereof (the "SUBORDINATED INDEBTEDNESS") shall
at all times be wholly subordinate and junior in right of payment to any and all
indebtedness of the Borrower and the Restricted Subsidiaries [here insert
description of indebtedness to which Subordinated Indebtedness is subordinate
which in all events must include all indebtedness, obligations and liabilities
of the Borrower and the Restricted Subsidiaries under the Revolving Credit
Agreement, the Note Purchase Agreements, the Subsidiary Guaranty Agreement, the
Senior Notes and the Company Security Agreement and the Subsidiary Security
Agreement as each relates to the Senior Notes and, with respect to Senior
Subordinated Debt under the Subordinated Note Purchase Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement, the Senior Subordinated Notes and the
Company Security Agreement and the Subsidiary Security Agreement as each relates
to the Senior Subordinated Notes (the "SENIOR INDEBTEDNESS") in the manner and
with the force and effect hereinafter set forth:
1. So long as any Senior Indebtedness shall remain outstanding and
unpaid, no payment either of principal, interest or premium (notwithstanding the
expressed maturity or any time for the payment of principal of, interest or
premium on any Subordinated Indebtedness) shall be made on Subordinated
Indebtedness except with the prior written consent of all of the holders of the
Notes and the holders of the Subordinated Indebtedness will take no steps,
whether by suit or otherwise to compel or enforce the collection of Subordinated
Indebtedness, nor will the holders of the Subordinated Indebtedness use
Subordinated Indebtedness by way of counterclaim, setoff, recoupment or
otherwise so as to diminish, discharge or otherwise satisfy in whole or in part
any indebtedness or liability of the holders of the Subordinated Indebtedness to
the Borrower, whether now existing or hereafter arising and howsoever evidenced,
PROVIDED, HOWEVER, that the Borrower may pay interest on Subordinated
Indebtedness accrued to and payable on the date of any such payment so long as
(i) the Borrower shall not be in default in the payment of principal of,
interest or premium on Senior Indebtedness, (ii) the Borrower has not received
written notice from any holder of the Senior Indebtedness that some other
default has occurred and is continuing under any promissory note or agreement
pertaining to Senior Indebtedness or any collateral security therefor, and (iii)
none of the events hereinafter set forth in paragraph numbered 2 hereof has
occurred.
2. In the event of any distribution, dividend, or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the assets of the Borrower or of the proceeds thereof to the
creditors of the Borrower or upon any indebtedness of the Borrower, occurring by
reason of the liquidation, dissolution, or other winding up of the Borrower, or
by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Borrower or involving its property, no dividend, payment, distribution or
application shall be made, and the holders of the Subordinated Indebtedness
shall not be entitled to receive or retain any payment, dividend, distribution,
or application on or in respect of the Subordinated Indebtedness, unless and
until all of the Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, payment,
<PAGE>
distribution or application otherwise payable in respect of Subordinated
Indebtedness shall be paid and applied on Senior Indebtedness until such Senior
Indebtedness has been fully paid and satisfied.
3. The holders of Senior Indebtedness need not at any time give the
holders of the Subordinated Indebtedness notice of any kind of the creation or
existence of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of Senior
Indebtedness may at any time from time to time, without the consent of or notice
to the holders of Subordinated Indebtedness, without incurring responsibility to
the holders of the Subordinated Indebtedness, and without impairing or releasing
the obligation of the undersigned under this agreement (i) renew, refund or
extend the maturity of any Senior Indebtedness, or any part thereof, or
otherwise revise, amend or alter the terms and conditions thereof, (ii) sell,
exchange, release or otherwise deal with any property by whomsoever at any time
pledged, mortgaged or otherwise hypothecated or subjected to a lien to secure
any Senior Indebtedness, and (iii) exercise or refrain from exercising any
rights against the Borrower and others, including the holders of the
Subordinated Indebtedness.
4. The holders of the Subordinated Indebtedness will not sell, assign
or otherwise transfer any Subordinated Indebtedness, or any part thereof, except
subject to and in accordance with the terms hereof and upon the agreement of the
transferee or assignee to abide by and be bound by the terms hereof.
5. The holders of the Subordinated Indebtedness undertake and agree for
the benefit of each holder of Senior Indebtedness to execute, verify, deliver
and file any proofs of claim which any holder of Senior Indebtedness may at any
time require in order to prove and realize upon any rights or claims pertaining
to the Subordinated Indebtedness to effectuate the full benefit of the
subordination contained herein; and upon failure of the holder of any
Subordinated Indebtedness so to do, any such holder of Senior Indebtedness shall
be deemed to be irrevocably appointed the agent and attorney-in-fact of the
holder of such Subordinated Indebtedness to execute, verify, deliver and file
any such proofs of claim.
6. No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Borrower or the holders of
Senior Indebtedness, or by any noncompliance by the Borrower with any of the
terms, provisions and covenants applicable to the Subordinated Indebtedness,
regardless of any knowledge thereof that any such holder of Senior Indebtedness
may have or be otherwise charged with.
7. The Borrower agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that any Subordinated Indebtedness is declared
due and payable before its expressed maturity because of the occurrence of a
default hereunder, (i) the Borrower will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior
2
<PAGE>
Indebtedness shall forthwith become immediately due and payable upon demand,
regardless of the expressed maturity thereof.
8. These subordination provisions shall be continuing and binding until
written notice of its discontinuance shall be actually received by the holders
of the Subordinated Indebtedness, and also shall continue to remain in full
force and effect until all Senior Indebtedness created or existing prior to the
receipt of such notice shall have been fully paid and satisfied.
<PAGE>
EXHIBIT B-2
PERMITTED JUNIOR SUBORDINATED DEBT
SUBORDINATION PROVISIONS APPLICABLE TO
SENIOR SUBORDINATED DEBT
AND JUNIOR SUBORDINATED DEBT
The indebtedness evidenced by the subordinated notes or related thereto
and any renewals or extensions thereof (the "SUBORDINATED INDEBTEDNESS") shall
at all times be wholly subordinate and junior in right of payment to any and all
indebtedness of the Borrower and the Restricted Subsidiaries [here insert
description of indebtedness to which Subordinated Indebtedness is subordinate
which in all events must include all indebtedness, obligations and liabilities
of the Borrower and the Restricted Subsidiaries under the Revolving Credit
Agreement, the Note Purchase Agreements, the Subsidiary Guaranty Agreement, the
Senior Notes and the Company Security Agreement and the Subsidiary Security
Agreement as each relates to the Senior Notes and, with respect to Senior
Subordinated Debt under the Subordinated Note Purchase Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement, the Senior Subordinated Notes and the
Company Security Agreement and the Subsidiary Security Agreement as each relates
to the Senior Subordinated Notes (the "SENIOR INDEBTEDNESS") in the manner and
with the force and effect hereinafter set forth:
1. So long as any Senior Indebtedness shall remain outstanding and
unpaid, no payment either of principal, interest or premium (notwithstanding the
expressed maturity or any time for the payment of principal of, interest or
premium on any Subordinated Indebtedness) shall be made on Subordinated
Indebtedness except with the prior written consent of all of the holders of the
Notes and the holders of the Subordinated Indebtedness will take no steps,
whether by suit or otherwise to compel or enforce the collection of Subordinated
Indebtedness, nor will the holders of the Subordinated Indebtedness use
Subordinated Indebtedness by way of counterclaim, setoff, recoupment or
otherwise so as to diminish, discharge or otherwise satisfy in whole or in part
any indebtedness or liability of the holders of the Subordinated Indebtedness to
the Borrower, whether now existing or hereafter arising and howsoever evidenced,
PROVIDED, HOWEVER, that the Borrower may pay interest on Subordinated
Indebtedness accrued to and payable on the date of any such payment so long as
(i) the Borrower shall not be in default in the payment of principal of,
interest or premium on Senior Indebtedness, (ii) the Borrower has not received
written notice from any holder of the Senior Indebtedness that some other
default has occurred and is continuing under any promissory note or agreement
pertaining to Senior Indebtedness or any collateral security therefor, and (iii)
none of the events hereinafter set forth in paragraph numbered 2 hereof has
occurred.
2. In the event of any distribution, dividend, or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the assets of the Borrower or of the proceeds thereof to the
creditors of the Borrower or upon any indebtedness of the Borrower, occurring by
reason of the liquidation, dissolution, or other winding up of the Borrower, or
by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Borrower or involving its property, no dividend, payment, distribution or
application shall be made, and the holders of the Subordinated Indebtedness
shall not be entitled to receive or retain any payment, dividend, distribution,
or application on or in respect of the Subordinated Indebtedness, unless and
until all of the Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, payment,
<PAGE>
distribution or application otherwise payable in respect of Subordinated
Indebtedness shall be paid and applied on Senior Indebtedness until such Senior
Indebtedness has been fully paid and satisfied.
3. The holders of Senior Indebtedness need not at any time give the
holders of the Subordinated Indebtedness notice of any kind of the creation or
existence of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of Senior
Indebtedness may at any time from time to time, without the consent of or notice
to the holders of Subordinated Indebtedness, without incurring responsibility to
the holders of the Subordinated Indebtedness, and without impairing or releasing
the obligation of the undersigned under this agreement (i) renew, refund or
extend the maturity of any Senior Indebtedness, or any part thereof, or
otherwise revise, amend or alter the terms and conditions thereof, (ii) sell,
exchange, release or otherwise deal with any property by whomsoever at any time
pledged, mortgaged or otherwise hypothecated or subjected to a lien to secure
any Senior Indebtedness, and (iii) exercise or refrain from exercising any
rights against the Borrower and others, including the holders of the
Subordinated Indebtedness.
4. The holders of the Subordinated Indebtedness will not sell, assign
or otherwise transfer any Subordinated Indebtedness, or any part thereof, except
subject to and in accordance with the terms hereof and upon the agreement of the
transferee or assignee to abide by and be bound by the terms hereof.
5. The holders of the Subordinated Indebtedness undertake and agree for
the benefit of each holder of Senior Indebtedness to execute, verify, deliver
and file any proofs of claim which any holder of Senior Indebtedness may at any
time require in order to prove and realize upon any rights or claims pertaining
to the Subordinated Indebtedness to effectuate the full benefit of the
subordination contained herein; and upon failure of the holder of any
Subordinated Indebtedness so to do, any such holder of Senior Indebtedness shall
be deemed to be irrevocably appointed the agent and attorney-in-fact of the
holder of such Subordinated Indebtedness to execute, verify, deliver and file
any such proofs of claim.
6. No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Borrower or the holders of
Senior Indebtedness, or by any noncompliance by the Borrower with any of the
terms, provisions and covenants applicable to the Subordinated Indebtedness,
regardless of any knowledge thereof that any such holder of Senior Indebtedness
may have or be otherwise charged with.
7. The Borrower agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that any Subordinated Indebtedness is declared
due and payable before its expressed maturity because of the occurrence of a
default hereunder, (i) the Borrower will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior
2
<PAGE>
Indebtedness shall forthwith become immediately due and payable upon demand,
regardless of the expressed maturity thereof.
8. These subordination provisions shall be continuing and binding until
written notice of its discontinuance shall be actually received by the holders
of the Subordinated Indebtedness, and also shall continue to remain in full
force and effect until all Senior Indebtedness created or existing prior to the
receipt of such notice shall have been fully paid and satisfied.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
BORROWING BASE CERTIFICATE
WORLD ACCEPTANCE CORPORATION
AND RESTRICTED SUBSIDIARIES
AS OF _______________, ____
Total
Company Unsecured Secured
<C> <C>
1. Gross Finance Receivables $ $ $
------------ ------------ ------------
2. Less Credits/Allowances $ $ $
------------ ------------ ------------
3. Net Finance Receivables $ $ $
------------ ------------ ------------
Ineligibles:
Affiliate Receivables $ $ $
------------ ------------ ------------
Shareholder/Employee Receivables $ $ $
------------
------------ ------------
Government Receivables $ $ $
------------ ------------ ------------
Bankruptcy $ $ $
------------ ------------ ------------
Subject to claims, offsets or defenses $ $ $
------------ ------------ ------------
60 days past due $ $ $
------------ ------------ ------------
5. Eligible Finance Receivables $ $ $
------------ ------------ ------------
6. Unearned Finance Charges $ $ $
------------ ------------ ------------
7. Eligible Finance Receivables, Net $ $ $
------------ ------------ ------------
8. Borrowing Base
(a) 85% of Secured Eligible Receivables $
------------
(b) Lesser of:
(i) $15,000,000 $
------------
(ii) 11.11% of (a) above $
------------
(iii) 50% of Eligible Unsecured, Net $
------------
Lesser $
------------
9. Total Borrowing Base (a+b) $
------------
10. Current Maximum $
------------
11. Current Outstanding Balance of Term Notes
$
------------
12. Available Borrowing Base $
------------
13. Current Outstanding Balance of Revolving Credit
$
------------
14. Current Availability $
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 6.2
TO REVOLVING CREDIT AGREEMENT
SUBSIDIARIES
JURISDICTION OF
ORGANIZATION
NAME OWNER % OWNERSHIP
<S> <C>
WAC Insurance Company, Ltd. British Virgin Islands World Acceptance 65%
Corporation (WAC)
WFC of South Carolina, Inc. South Carolina WAC 100%
WFC Limited Partnership Texas World Finance Corporation 1% general partner
of South Carolina
World Acceptance 99% limited partner
Corporation of Oklahoma,
Inc.
World Acceptance Alabama WAC 100%
Corporation of Alabama
World Acceptance Missouri WAC 100%
Corporation of Missouri
World Acceptance Oklahoma World Finance Corporation 100%
Corporation of Oklahoma, of Texas
Inc.
World Finance Corporation Georgia WAC 100%
of Georgia
World Finance Corporation Illinois WAC 100%
of Illinois
World Finance Corporation Louisiana WAC 100%
of Louisiana
World Finance Corporation New Mexico WAC 100%
of New Mexico
World Finance Corporation South Carolina WAC 100%
of South Carolina
World Finance Corporation Tennessee WAC 100%
of Tennessee
World Finance Corporation Texas WAC 100%
of Texas
</TABLE>
<PAGE>
SCHEDULE 6.8
TO REVOLVING CREDIT AGREEMENT
Pending Litigation
(1) World Acceptance Corporation and World Finance Corporation of Georgia are
named as co-defendants with 46 other finance companies, merchants and insurance
companies in a class action lawsuit, JORDAN, ET AL. V. AVCO FINANCIAL SERVICES,
INC., ET AL., (Case No. 96-CL-1557N, MDL No. 1130, U.S. District Court, Middle
District of Alabama), that challenges the defendants' practices with respect to
non-filing insurance. The action was filed on April 18, 1995, in U.S. District
Court for the Middle District of Georgia, in Columbus, Georgia, and by order
dated October 11, 1996 was consolidated for pre-trial proceedings before Judge
U.W. Clemon of the U.S. District Court for the Middle District of Alabama by the
Judicial Panel on Multidistrict Litigation. Non-filing insurance is a product
that lenders can purchase as an alternative to filing UCC-1 financing statements
to perfect the lenders' security interest in borrowers' collateral. Borrowers
are charged a fee representing the amount of the non-filing insurance premium.
In the JORDAN action, the plaintiffs have alleged that non-filing insurance is
not true, legitimate insurance and that non-filing fees charged to borrowers are
not being disclosed properly under the federal Truth-in-Lending Act. The
plaintiffs also have alleged violations of RICO and the federal antitrust laws.
The plaintiffs originally asserted state law claims for breach of contract,
conversion and fraud, but subsequently dismissed those claims without prejudice.
The plaintiffs seek damages, permanent injunctive relief, and attorneys' fees.
If the Company's non-filing insurance practices are found to be unlawful, the
Company could be required to refund non-filing insurance fees, pay other damages
to the plaintiffs, and change its non-filing insurance practices going forward.
World has denied that its non-filing practices are unlawful and is
defending the case vigorously. Discovery in the case is ongoing, and pursuant to
court order, will continue through March 1998. On June 23, 1997, Judge Clemon
issued a Class Certification Order that certified a nationwide class of
plaintiffs who, on or after April 18, 1991, were charged a non-filing insurance
fee. The order applies only to the liability aspects of the case.
(2) The Company has been named as a defendant in an action, Turner v. World
Acceptance Corp., pending in District Court for the Fourteenth Judicial
District, Tulsa County, Oklahoma (No. CJ-97-1921). The action was commenced
against the Company on May 20, 1997, names numerous other consumer finance
companies as defendants, and seeks certification as a statewide class action.
The action alleges that World and other consumer finance defendants collected
excess finance charges in connection with refinancing certain consumer finance
loans in Oklahoma and seeks money damages and an injunction against further
collection of such charges. The Company has filed an answer in the action
denying liability, and discovery has not commenced. The plaintiff's claim is
based on a recent opinion of the Oklahoma Attorney General interpreting a
provision of the Oklahoma Consumer Credit Code with respect to
<PAGE>
the permitted amount of certain loan refinance charges in a manner contrary to
prior regulatory practice in Oklahoma. Enforcement of the Oklahoma Attorney
General's opinion has been enjoined, and such action is currently pending before
the Oklahoma Supreme Court. In addition, the State of Oklahoma has recently
enacted legislation to clarify the interpretation of the disputed provision of
the Oklahoma Consumer Credit Code consistent with prior regulatory practice.
World intends to vigorously defend this action.
<PAGE>
SCHEDULE 6.9
TO REVOLVING CREDIT AGREEMENT
Taxes
The Internal Revenue Service has issued a preliminary determination
that WAC Insurance Company, Ltd. is not engaged in a bona fide reinsurance
business and thus, that its earnings are not excludable from the taxable
earnings of World Acceptance Corporation and its subsidiaries. World Acceptance
Corporation is appealing this matter.
<PAGE>
SCHEDULE 6.11
TO REVOLVING CREDIT AGREEMENT
Existing Indebtedness for Borrowed Money
CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE REVOLVING
CREDIT AGREEMENT UNLESS OTHERWISE INDICATED.
Indebtedness of World Acceptance Corporation ("World") evidenced by this
Revolving Credit Agreement, the Senior Note Purchase Agreements, the
Subordinated Note Agreement and all notes issued pursuant to the above-listed
agreements.
Indebtedness of each of World Finance Corporation of Alabama, World Finance
Corporation of Georgia, World Finance Corporation of Illinois, World Finance
Corporation of Louisiana, World Acceptance Corporation of Missouri, World
Finance Corporation of New Mexico, World Acceptance Corporation of Oklahoma,
Inc., World Finance Corporation of South Carolina, WFC of South Carolina, Inc.,
World Finance Corporation of Tennessee, World Finance Corporation of Texas and
WFC Limited Partnership, under the Subsidiary Senior Guaranty Agreement, the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement.
Indebtedness evidenced by World's 10 Percent Senior Debenture in the principal
amount of $482,000, payable to Voyager Life Insurance Company.
Indebtedness evidenced by World Finance Corporation of Georgia's 8% Subordinated
Promissory Note(s) in the principal amount of $9,924,000, payable to World
Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of Louisiana's 8%
Subordinated Promissory Note(s) in the principal amount of $3,158,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Acceptance Corporation of Oklahoma's 8%
Subordinated Promissory Note(s) in the principal amount of $5,220,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of South Carolina's 8%
Subordinated Promissory Note(s) in the principal amount of $23,894,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by WFC of South Carolina, Inc.'s 8% Subordinated
Promissory Note(s) in the principal amount of $295,000, payable to World Finance
Corporation of Texas.
<PAGE>
Indebtedness evidenced by World Finance Corporation of Tennessee's 8%
Subordinated Promissory Note(s) in the principal amount of $4,268,000, payable
to World Finance Corporation of Texas.
<PAGE>
SCHEDULE 8.11
TO REVOLVING CREDIT AGREEMENT
Existing Liens
Lien of Weingarten Realty Investors on certain property of World Finance
Corporation of Texas, evidenced by UCC-1 financing statement No. 189822, filed
August 21, 1989 in the Office of the Texas Secretary of State and continued by
UCC-3 continuation statement No. 685105, filed July 15, 1994 in the Office of
the Texas Secretary of State.
Liens consisting of immaterial utility easements and similar immaterial
encumbrances on the real property of World Acceptance Corporation located at 108
Frederick Street, Greenville, South Carolina 29607. See Schedule B to owner's
title policy attached.
<PAGE>
WORLD ACCEPTANCE CORPORATION
AMENDED AND RESTATED NOTE AGREEMENT
Dated as of June 30, 1997
Re: $20,000,000 8.5% Senior Secured Notes Due December 1, 1999
<PAGE>
Table of Contents
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT..........................................3
Section 1.1. Description of Notes.......................................................3
Section 1.2. Security for the Notes.....................................................3
Section 1.3. Commitment, Closing Date...................................................4
Section 1.4. Other Agreements...........................................................4
SECTION 2. PREPAYMENT OF NOTES..........................................................4
Section 2.1. Required Prepayments.......................................................4
Section 2.2. Optional Prepayment With Premium...........................................4
Section 2.3. Notice of Prepayments......................................................5
Section 2.4. Allocation of Prepayments..................................................5
Section 2.5. Direct Payment.............................................................5
SECTION 3. REPRESENTATIONS..............................................................6
Section 3.1. Representations of the Company.............................................6
Section 3.2. Representations of the Purchaser...........................................6
SECTION 4. CLOSING CONDITIONS.........................................................6
Section 4.1. Conditions.................................................................6
Section 4.2. Waiver of Conditions.......................................................7
SECTION 5. COMPANY COVENANTS............................................................8
Section 5.1. Existence, Etc.............................................................8
Section 5.2. Insurance..................................................................8
Section 5.3. Taxes, Claims for Labor and Materials......................................8
Section 5.4. Compliance with Laws.......................................................9
Section 5.5. Maintenance, Etc...........................................................9
Section 5.6. Nature of Business.........................................................9
Section 5.7. Consolidated Net Worth.....................................................9
Section 5.8. Fixed Charge Coverage Ratio................................................9
Section 5.9. Permitted Indebtedness.....................................................9
Section 5.10. Limitations on Indebtedness...............................................10
Section 5.11. Limitation on Liens.......................................................11
Section 5.12. Dividends, Stock Purchases................................................12
Section 5.13. Mergers, Consolidations and Sales or Transfers of Assets..................13
Section 5.14. Lease-Backs...............................................................15
Section 5.15. Guaranties................................................................15
Section 5.16. Repurchase of Notes.......................................................16
Section 5.17. Transactions with Affiliates..............................................16
Section 5.18. Investments...............................................................16
Section 5.19. Termination of Pension Plans..............................................17
Section 5.20. Reports and Rights of Inspection..........................................17
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.....................................20
Section 6.1. Events of Default.........................................................20
Section 6.2. Notice to Holders.........................................................23
Section 6.3. Acceleration of Maturities................................................23
Section 6.4. Rescission of Acceleration................................................23
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS............................................24
Section 7.1. Consent Required..........................................................24
Section 7.2. Effect of Amendment or Waiver.............................................24
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS....................................24
Section 8.1. Definitions...............................................................24
<PAGE>
Section 8.2. Accounting Principles.....................................................36
Section 8.3. Directly or Indirectly....................................................36
SECTION 9. MISCELLANEOUS...............................................................37
Section 9.1. Registered Notes..........................................................37
Section 9.2. Exchange of Notes.........................................................37
Section 9.3. Loss, Theft, Etc. of Notes................................................37
Section 9.4. Expenses, Stamp Tax Indemnity.............................................38
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative.........................39
Section 9.6. Notices...................................................................39
Section 9.7. Successors and Assigns....................................................39
Section 9.8. Survival of Covenants and Representations.................................39
Section 9.9. Severability..............................................................40
Section 9.10. Governing Law.............................................................40
Section 9.11. Captions..................................................................40
Signatures......................................................................................41
<PAGE>
</TABLE>
ATTACHMENTS TO PURCHASE AGREEMENT:
<TABLE>
<S> <C> <C>
Schedule I -- Name and Address of Purchasers
Schedule II -- Description of Liens
Exhibit A -- Form of 8.5% Amended and Restated Senior Secured Notes due December
1, 1999
Exhibit B -- Form of Security Agreement, Pledge and the Indenture of Trust
Exhibit C -- Representations and Warranties of the Company
Exhibit D -- Description of Special Counsel's Closing Opinion
Exhibit E -- Description of Closing Opinion of Counsel to the Company, World
Finance Corporation of South Carolina, WFC of South Carolina, Inc., World
Acceptance Corporation of Alabama, World Acceptance Corporation of
Missouri, World Finance Corporation of Illinois and World Finance
Corporation of New Mexico
Exhibit F -- Description of Closing Opinion of Counsel to the
Restricted Subsidiaries (other than World Finance Corporation
of South Carolina, WFC of South Carolina, Inc., World
Acceptance Corporation of Alabama, World Acceptance
Corporation of Missouri, World Finance Corporation of Illinois
and World Finance Corporation of New Mexico)
Exhibit G -- Form of Subordination Provisions
Exhibit H -- Form of Borrowing Base Certificate
</TABLE>
<PAGE>
WORLD ACCEPTANCE CORPORATION
108 FREDERICK STREET GREENVILLE, SOUTH CAROLINA 29607-2532
AMENDED AND RESTATED NOTE AGREEMENT
Re: $20,000,000 8.5% Senior Secured Notes
Due December 1, 1999
---------------------------------
<PAGE>
Dated as of June 30, 1997
To the Purchaser Named in Schedule I
Hereto Which is a Signatory to this
Agreement
Ladies and Gentlemen:
RECITALS
A. World Acceptance Corporation, a South Carolina corporation (the
"COMPANY") has previously entered into those certain separate Note Agreements
each dated as of December 1, 1992, as amended (the "ORIGINAL NOTE AGREEMENTS")
with the purchasers named in Schedule I thereto providing for the issuance and
sale by the Company of its $20,000,000 principal amount 8.5% Senior Secured
Notes due December 1, 1999 (the "ORIGINAL NOTES").
B. The Company also entered into that certain Revolving Credit
Agreement dated as of December 1, 1992, as amended (the "ORIGINAL REVOLVING
CREDIT AGREEMENT") with Harris Trust and Savings Bank, as agent and the other
banks which are signatories thereto providing for borrowings in an original
aggregate principal amount of $20,000,000 (the borrowings, whether or not
evidenced by promissory notes, being hereinafter referred to as the "ORIGINAL
REVOLVING CREDIT NOTES"). The Original Notes and the Original Revolving Credit
Notes are hereinafter collectively referred to as the "ORIGINAL SENIOR NOTES."
C. The Company also entered into that certain Security Agreement,
Pledge and Indenture of Trust dated as of December 1, 1992, as amended (the
"ORIGINAL COMPANY SECURITY AGREEMENT") with Harris Trust and Savings Bank, an
Illinois banking corporation, as security trustee (the "SECURITY TRUSTEE")
whereby the Company granted to the Security Trustee, INTER ALIA, for the benefit
of the holders of the Original Senior Notes, all of its right, title and
interest in the Collateral (as defined therein) as security for the Original
Senior Notes.
D. As a condition to the issuance of the Original Senior Notes,
World Finance Corporation of South Carolina, World Finance Corporation of
Georgia, World Finance Corporation of Texas, World Finance Corporation of
Oklahoma, Inc. and World Finance Corporation of Louisiana entered into (i) those
separate Guaranty Agreements each dated as of December 1, 1992, as amended or
amended and restated, as the case may be (the "ORIGINAL GUARANTIES") and (ii)
those separate Security Agreements and Indentures of Trust each dated as of
December 1, 1992, as amended or amended and restated, as the case may be (the
"ORIGINAL SUBSIDIARY SECURITY AGREEMENTS").
E. Pursuant to Section 3.29 of Original Company Security Agreement,
(i) World Acceptance Corporation of Alabama entered into that certain Guaranty
Agreement and that certain Security Agreement and Indenture of Trust, each dated
as of July 11, 1994, (ii) World Acceptance Corporation of Missouri entered into
that certain Guaranty Agreement and that certain Security Agreement and
Indenture of Trust, each dated as of April 2, 1993, (iii) World Finance
Corporation of Tennessee entered into that certain Guaranty Agreement and that
certain Security Agreement and Indenture of Trust, each dated as of April 2,
1993, (iv) WFC Limited Partnership entered into that certain Guaranty Agreement
and that certain Security Agreement and Indenture of Trust, each dated as of
July 1, 1995, (v) WFC of South Carolina, Inc. entered into that certain Guaranty
Agreement and that certain Security Agreement and Indenture of Trust, each dated
as of September 1, 1995, (vi) World Finance Corporation of Illinois entered into
that certain Guaranty Agreement and that certain Security Agreement and
Indenture of Trust, each dated as of March 14, 1996 and (vii) World Finance
Corporation of New Mexico entered into that certain Guaranty Agreement dated as
of January 31, 1997 and that certain Security Agreement and Indenture of Trust,
dated as of May 31,
<PAGE>
1997. The above-mentioned Guaranty Agreements, as amended or amended and
restated, as the case may be, are hereinafter collectively referred to as the
"ADDITIONAL GUARANTIES" and the above-mentioned Security Agreements and
Indentures of Trust, as amended or amended and restated, as the case may be, are
hereinafter collectively referred to as the "ADDITIONAL SUBSIDIARY SECURITY
AGREEMENTS".
F. The Company desires to amend and restate the Original Note
Agreements and the Original Notes in order to modify the terms, conditions and
covenants of the Original Note Agreements and the Original Notes, as more
particularly set forth herein and therein.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Purchasers named on Schedule I hereto agree as
follows:
1. The foregoing recitals are true and correct and are incorporated
herein by this reference as if fully set forth at length.
2. That in lieu of the terms, conditions, covenants and agreements set
forth in the Original Note Agreements, the following terms, conditions,
covenants and agreements shall apply and each Original Note Agreement is amended
and restated to read in its entirety as follows:
.'SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT';.
.SECTION 1.1. DESCRIPTION OF NOTES;. The Company has authorized the
issue and sale of $20,000,000 aggregate original principal amount of its 8.5%
Senior Secured Notes (as the same may from time to time be amended pursuant to
the terms hereof and thereof and any notes executed in replacement thereof, the
"NOTES") dated the date of issue, bearing interest from such date at the rate of
8.5% per annum (computed on the basis of a 360-day year of twelve 30-day
months), payable semiannually on the first day of each June and December in each
year (commencing June 1, 1993) and at maturity and bearing interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest at the rate of 10.5% per annum after maturity, whether
by acceleration or otherwise, until paid, expressed to mature on December 1,
1999, and in substantially the form attached hereto as Exhibit A. The Notes are
not subject to prepayment or redemption at the option of the Company prior to
their expressed maturity dates except on the terms and conditions and in the
amounts and with the premium, if any, set forth in SS.2 of this Agreement. The
term "NOTES" as used herein shall include each Note delivered pursuant to this
Agreement and the separate agreement with the other purchaser named in Schedule
1. You and the other purchaser named in Schedule 1 are hereinafter sometimes
referred to as the "PURCHASERS".
.SECTION 1.2. SECURITY FOR THE NOTES;. (a) The Notes will be
secured, PARI PASSU with the indebtedness under the Revolving Credit Agreement,
by (i) the Amended and Restated Security Agreement, Pledge and Indenture of
Trust dated as of June 30, 1997 between the Company and the Security Trustee,
substantially in the form attached hereto as Exhibit B and as the same may from
time to time be amended, restated, modified, supplemented or waived pursuant to
the terms thereof (the "COMPANY SECURITY AGREEMENT"), which amends and restates
the Original Company Security Agreement and (ii) the Amended and Restated
Security Agreement, Pledge and Indenture of Trust dated as of June 30, 1997
between each Restricted Subsidiary (other than the Insurance Subsidiary) and the
Security Trustee, substantially in the form attached as Exhibit A to the Company
Security Agreement, as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof (the "SUBSIDIARY
SECURITY AGREEMENT"), which amends and restates the Original Subsidiary Security
Agreements and the Additional Subsidiary Agreements.
(b) The Notes will also be secured by an absolute and unconditional
guarantee of all principal, interest and premium, if any, on the Notes and of
all of the covenants of the Company contained in this Agreement and the Company
Security Agreement under and pursuant to that certain Amended and Restated
Guaranty Agreement dated as of June 30, 1997 of each Restricted Subsidiary,
substantially in the form attached as Exhibit B to the Company Security
Agreement, as the same may from time to time be amended, restated, modified,
supplemented or waived pursuant to the terms thereof (the "SUBSIDIARY SENIOR
GUARANTY AGREEMENT"), which amends and restates the Original Guaranties and
Additional Guaranties.
.SECTION 1.3. COMMITMENT, CLOSING DATE;. Subject to the terms and
conditions hereof and on
<PAGE>
the basis of the representations and warranties set forth herein, in the Company
Security Agreement and in the Subsidiary Security Agreement, the Company and you
agree that the Company will execute and deliver to you Notes in the principal
amount set forth opposite your name on Schedule I hereto (which principal amount
is the then currently outstanding principal amount of the Notes held by you) in
exchange for the Original Notes on the Closing Date hereinafter mentioned.
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against delivery and
surrender of the Original Notes at 10:00 A.M., Chicago time, on July 3, 1997 or
such earlier date as the Company shall specify by not less than five business
days' prior written notice to you (the "CLOSING DATE"). The Notes delivered to
you on the Closing Date will be delivered to you in the form of a single
registered Note in the currently outstanding principal amount of your Original
Note (unless different denominations are specified by you), registered in your
name or in the name of such nominee as you may specify and in substantially the
form attached hereto as Exhibit A, all as you may specify at any time prior to
the date fixed for delivery.
.SECTION 1.4. OTHER AGREEMENTS;. Simultaneously with the execution
and delivery of this Agreement, the Company is entering into the other agreement
identical hereto (except as to the name of the purchaser which is a signatory
thereto) with the other Purchaser under which such other Purchaser agrees to
exchange its Original Notes for Notes in the principal amount set opposite such
Purchaser's name in Schedule I (which principal amount is the then currently
outstanding principal amount of the Original Notes), and your obligation and the
obligations of the Company hereunder are subject to the execution and delivery
of the similar agreement by the other Purchaser. This Agreement and said similar
agreement with the other Purchaser are herein collectively referred to as the
"AGREEMENTS". The obligations of each Purchaser shall be several and not joint
and no Purchaser shall be liable or responsible for the acts of any other
Purchaser.
.SECTION 2. PREPAYMENT OF NOTES;.
.SECTION 2.1. REQUIRED PREPAYMENTS;. The Company agrees that on the
first day of December in each year commencing December 1, 1995 and ending
December 1, 1998 it will prepay and apply and there shall become due and payable
on the principal indebtedness evidenced by the Notes an amount equal to the
lesser of (i) $4,000,000 or (ii) the principal amount of the Notes then
outstanding. The entire remaining, then outstanding principal amount of the
Notes shall become due on December 1, 1999. No premium shall be payable in
connection with any required prepayment made pursuant to this SS.2.1. For
purposes of this SS.2.1, any prepayment of less than all of the outstanding
Notes pursuant to SS.2.2 hereof shall be deemed to be applied first to the
amount of principal scheduled to remain unpaid on December 1, 1999 and then to
the remaining scheduled principal payments in inverse chronological order.
.SECTION 2.2. OPTIONAL PREPAYMENT WITH PREMIUM;. Upon compliance
with SS.2.3, the Company shall have the privilege, at any time and from time to
time, of prepaying the outstanding Notes, either in whole or in part (but if in
part then in a minimum principal amount of $1,000,000) by payment of the
principal amount of the Notes, or portion thereof to be prepaid, and accrued
interest thereon to the date of such prepayment, together with an additional
amount equal to the Make-Whole Amount with respect to such principal amount then
to be prepaid, determined as of five business days prior to the date of such
prepayment pursuant to this SS.2.2.
.SECTION 2.3. NOTICE OF PREPAYMENTS;. The Company will give notice
of any prepayment of the Notes pursuant to SS.2.2 to each holder thereof
(whether or not such holder's Notes are being prepaid) not less than 30 days nor
more than 60 days before the date fixed for such optional prepayment specifying
(i) such date, (ii) the section of this Agreement under which the prepayment is
to be made, (iii) the principal amount of the holder's Notes to be prepaid on
such date, (iv) whether a premium is payable, (v) the date when such premium
will be calculated, and (vi) the accrued interest applicable to the prepayment.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes specified in such notice, together with the premium, if any, and accrued
interest thereon shall become due and payable on the prepayment date. Not later
than two (2) business days prior to the prepayment date the Company shall
provide each holder of a Note written notice of the amount of the premium
payable in connection with such prepayment and, whether or not any premium is
payable, together with a reasonably detailed computation thereof.
<PAGE>
.SECTION 2.4. ALLOCATION OF PREPAYMENTS;. All partial prepayments of
the Notes pursuant to SS.2.1, SS.2.2, the Company Security Agreement or the
Subsidiary Security Agreement shall be applied on all outstanding Notes ratably
in accordance with the unpaid principal amounts thereof.
.SECTION 2.5. DIRECT PAYMENT;. Notwithstanding anything to the
contrary in this Agreement or the Notes, in the case of any Note owned by you or
your nominee or owned by any subsequent Institutional Holder who has given
written notice to the Company requesting that the provisions of this SS.2.5
shall apply, the Company will promptly and punctually pay when due the principal
thereof and premium, if any, and interest thereon, without any presentment
thereof directly to you or such subsequent Institutional Holder at the address
specified for you in Schedule I or at such other address as you or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account is designated for you on Schedule I hereto or
in any written notice to the Company from you or any such subsequent
Institutional Holder, the Company will make such payments in immediately
available funds to such bank account, marked for attention as indicated, or in
such other manner or to such other account in any bank in the United States as
you or any such subsequent Institutional Holder may from time to time direct in
writing. The Company shall cause all payments made by bank wire transfer to be
transmitted by the initiating bank not later than 10:00 a.m., Chicago time, on
the date such payment is due.
.SECTION 3. REPRESENTATIONS;.
.SECTION 3.1. REPRESENTATIONS OF THE COMPANY;. The Company
represents and warrants that all representations set forth in Exhibit C are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
.SECTION 3.2. REPRESENTATIONS OF THE PURCHASER;. You represent, and
in entering into this Agreement the Company understands, that you are acquiring
the Notes for the purpose of investment and not with a view to the resale or
distribution thereof, and that you have no present intention of selling,
negotiating or otherwise disposing of the Notes; it being understood, however,
that the disposition of your property shall (i) at all times be and remain
within your control and (ii) be in compliance with SS.9.2
.C.SECTION 4. CLOSING CONDITIONS;.
.SECTION 4.1. CONDITIONS;. Your obligation to exchange the Original
Notes for the Notes on the Closing Date shall be subject to the performance by
the Company of its agreements hereunder which by the terms hereof are to be
performed at or prior to the time of delivery of the Notes and to the following
further conditions precedent:
(a) EXECUTION AND DELIVERY OF SECURITY DOCUMENTS. The Company
Security Agreement and the Subsidiary Security Agreement shall have been
executed and delivered by the Company, each Restricted Subsidiary existing on
the Closing Date and the Security Trustee, as the case may be, and financing
statements or other notices with respect to the Company Security Agreement and
the Subsidiary Security Agreement, shall have been recorded or filed in all
public offices, and all other steps deemed necessary by you shall have been
taken, in order to perfect the security interests granted by the Company
Security Agreement and the Subsidiary Security Agreement.
(b) GUARANTY AGREEMENT. You shall have received the Guaranty
Agreement of each Restricted Subsidiary dated as of the date hereof and
substantially in the form attached as Exhibit B to the Company Security
Agreement.
(c) STOCK CERTIFICATES. You shall have received evidence reasonably
satisfactory to you that the Security Trustee has in its possession certificates
representing all of the capital stock of the Restricted Subsidiaries and stock
powers executed by the Company in blank attached to such certificates and such
other documents or instruments as may be necessary or appropriate to pledge and
assign to the Security Trustee under the Company Security Agreement all of the
capital stock of the Restricted Subsidiaries.
(d) LIEN SEARCHES. You shall have received the results of a search
of all filings made against the Company and its Subsidiaries under the Uniform
Commercial Code as in effect in any relevant state, indicating that the
Collateral is free and clear of any Lien except the Liens of the Company
Security Agreement and the Subsidiary Security Agreement, the Weingarten Lien
and
<PAGE>
Liens of the type described in clauses (b), (e) and (f) of SS.5.11.
(e) CLOSING CERTIFICATE. You shall have received a certificate
dated the Closing Date, signed by the President or a Vice President of the
Company, the truth and accuracy of which shall be a condition to your obligation
to exchange your Original Notes for the Notes and to the effect that (1) the
representations and warranties of the Company and each Restricted Subsidiary set
forth in Exhibit C hereto and in the Company Security Agreement, the Subsidiary
Security Agreement and the Subsidiary Senior Guaranty Agreement are true and
correct in all respects on and with respect to the Closing Date, (ii) the
Company and each Restricted Subsidiary have each performed all of its
obligations hereunder and under the Company Security Agreement, the Subsidiary
Security Agreement and the Subsidiary Senior Guaranty Agreement which are to be
performed on or prior to the Closing Date and (iii) no Default or Event of
Default has occurred and is continuing.
(f) LEGAL OPINIONS. You shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction, from
Robinson, Bradshaw & Hinson, P.A., counsel for the Company, World Finance
Corporation of South Carolina, WFC of South Carolina, Inc., World Acceptance
Corporation of Alabama, World Acceptance Corporation of Missouri, World Finance
Corporation of Illinois and World Finance Corporation of New Mexico, from Abbot,
Murphy & Harvey, P.C., counsel for World Finance Corporation of Georgia, from
Comegys, Lawrence, Jones, Odom & Spruiell, counsel for World Finance Corporation
of Louisiana, from Crowe & Dunlevy, Luttrell, Pendarvis & Rawlinson, counsel for
World Acceptance Corporation of Oklahoma, Inc., from Sam Kelley, Esq., counsel
for World Finance Corporation of Texas and WFC Limited Partnership, and from
Dance, Dance & Lane, counsel for World Finance Corporation of Tennessee, their
respective opinions dated the Closing Date, in form and substance satisfactory
to you, and covering the matters set forth in Exhibits D, E and F, respectively,
hereto.
(g) RELATED TRANSACTIONS. The Company and each Restricted
Subsidiary, as the case may be, shall have consummated the execution and
delivery of the other Agreement, the Revolving Credit Agreement, the Senior
Subordinated Note Agreement and the Subsidiary Senior Subordinated Guaranty
Agreement.
(h) SATISFACTORY PROCEEDINGS. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to you and your special counsel, and you shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
.SECTION 4.2. WAIVER OF CONDITIONS;. If on the Closing Date the
Company fails to tender to you the Notes to be issued to you on such date or if
the conditions specified in SS.4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in SS.4.1 havE not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole discretion determine. Nothing in this SS.4.2
shall operate tO relieve the Company of any of its obligations hereunder or to
waive any of your rights against the Company. .SECTION 5. COMPANY COVENANTS;.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
.SECTION 5.1. EXISTENCE, ETC.; The Company will preserve and keep in
force and effect, and will cause each Subsidiary to preserve and keep in force
and effect, its legal existence and all licenses and permits necessary to the
proper conduct of its business, provided that the foregoing shall not prevent
any transaction permitted by SS.5.13.
.SECTION 5.2. INSURANCE;. The Company will maintain, and will cause
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers accorded a rating of "A" or better by A.M. Best Company, Inc.
(the "BEST RATING") at the time of the issuance of any such policy and in such
forms and amounts and against such risks as are customary for corporations of
established reputation engaged in the same or a similar business and owning and
operating similar properties with each such policy requiring renewal of such
policy at intervals of no greater than one year from the date of issuance or
renewal
<PAGE>
thereof; PROVIDED, HOWEVER, that if, during the term of any such insurance
policy, the rating accorded the insurer shall be less than a Best Rating of "A",
the Company will, on the date of renewal of any such policy (or, if such change
in rating shall occur within 90 days prior to such renewal date, within 90 days
of the date of such change in rating), obtain such insurance policy from an
insurer accorded a Best Rating of "A" or better.
.SECTION 5.3. TAXES, CLAIMS FOR LABOR AND MATERIALS;. The Company
will promptly pay and discharge, and will cause each Subsidiary promptly to pay
and discharge, all taxes, assessments and governmental charges or levies imposed
upon the Company or such Subsidiary, respectively, or upon or in respect of all
or any part of the property or business of the Company or such Subsidiary
(including, but not limited to the Collateral), all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
property of the Company or such Subsidiary (including, but not limited to the
Collateral); PROVIDED the Company or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books, reserves adequate in accordance with
GAAP with respect thereto.
.SECTION 5.4. COMPLIANCE WITH LAWS;. The Company will promptly
comply and will cause each Subsidiary to comply with all laws, ordinances or
governmental rules and regulations to which it is subject, including without
limitation, the Employee Retirement Income Security Act of 1974 and all
Environmental Legal Requirements the violation of which could, individually or
in the aggregate, materially and adversely affect the properties (including the
Collateral), business, prospects, profits or condition of the Company and its
Subsidiaries or could, individually or in the aggregate, result in any lien or
charge upon any property of the Company or any Subsidiary.
.SECTION 5.5. MAINTENANCE, ETC;. The Company will maintain, preserve
and keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order (ordinary
wear and tear excepted) and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
.SECTION 5.6. NATURE OF BUSINESS;. Neither the Company nor any
Restricted Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Company and its Restricted Subsidiaries (including, but not
limited to, the Insurance Subsidiary) would be substantially changed from the
general nature of the business engaged in by the Company and its Restricted
Subsidiaries on the date of this Agreement.
.SECTION 5.7. CONSOLIDATED NET WORTH;. The Company will at all times
keep and maintain Consolidated Net Worth at an amount not less than the Minimum
Net Worth.
For purposes of this SS.5.7, "MINIMUM NET WORTH" (i) for the fiscal
quarter of thE Company ending March 31, 1997, shall be $38,000,000 and (ii) for
each fiscal quarter thereafter shall be the sum of the Minimum Net Worth for the
immediately preceding fiscal quarter plus 50% of Consolidated Net Income for
such fiscal quarter (but without deduction in the case of any deficit in
Consolidated Net Income for such fiscal quarter).
.SECTION 5.8. FIXED CHARGE COVERAGE RATIO;. The Company will at the
end of each fiscal quarter have a ratio of Net Income Available for Fixed
Charges to Fixed Charges for each period of four consecutive fiscal quarters
then ending at not less than 1.5 to 1. As of the end of each fiscal quarter, the
Company's provision for loan losses for the four fiscal quarters then ending
shall equal or exceed the net loan charge off for the corresponding period.
.SECTION 5.9. PERMITTED INDEBTEDNESS;. The Company will not and will
not permit any Restricted Subsidiary to incur, create, issue, assume or permit
to exist any Indebtedness for Borrowed Money other than:
(a) Senior Debt;
<PAGE>
(b) Senior Subordinated Debt; and
(c) Junior Subordinated Debt.
.SECTION 5.10. LIMITATIONS ON INDEBTEDNESS;. (a) The Company
will not at any time permit
(i) The aggregate unpaid principal amount of Senior Debt, on a
consolidated basis, to exceed 400% of the sum of (A) Consolidated Adjusted Net
Worth, (B) the aggregate unpaid principal amount of Junior Subordinated Debt,
and (C) the aggregate unpaid principal amount of Senior Subordinated Debt; or
(ii) The sum of (A) the aggregate unpaid principal amount of Senior
Subordinated Debt and (B) the aggregate unpaid principal amount of Junior
Subordinated Debt to exceed 125% of Consolidated Adjusted Net Worth; or
(iii) The aggregate unpaid principal amount of Junior Subordinated
Debt to exceed 50% of Consolidated Adjusted Net Worth; or
(iv) The aggregate amount of unused credit then available from banks
and trust companies under firmly committed lines of credit from a lending group
of not fewer than two banks to be less than the sum of the (A) aggregate
outstanding amount of its commercial paper and (B) payments of principal then
scheduled to become due during the eight-month period then commencing on all
Indebtedness for Borrowed Money of the Company and its Restricted Subsidiaries
(excluding obligations under the Revolving Credit Notes and the Revolving Credit
Agreement).
(b) The Company will not permit, (i) at any time on or before the
Trigger Date, the ratio of Indebtedness for Borrowed Money of the Company and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth to exceed 4.5 to
1 for any month; PROVIDED that the ratio of Indebtedness for Borrowed Money of
the Company and its Restricted Subsidiaries to Consolidated Adjusted Net Worth
may exceed 4.5 to 1 for no more than 4 months of any consecutive 12-month period
so long as such ratio does not exceed 5.5 to 1, and (ii) at any time after the
Trigger Date, the ratio of Indebtedness for Borrowed Money of the Company and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth to exceed 5.5 to
1 for any month; PROVIDED that the ratio of Indebtedness for Borrowed Money of
the Company and its Restricted Subsidiaries to Consolidated Adjusted Net Worth
may exceed 5.5 to 1 for no more than 4 months of any consecutive 12-month period
so long as such ratio does not exceed 6.5 to 1.
(c) The Company will not create, assume, or incur or otherwise become
liable in respect of any Senior Subordinated Debt (other than the Senior
Subordinated Notes) or Junior Subordinated Debt unless such Senior Subordinated
Debt or Junior Subordinated Debt shall have a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to Maturity of the
Senior Subordinated Notes. For purposes of this SS.5.10(C), "WEIGHTED AVERAGE
LIFE TO MATURITY" of the principal amount of the Notes or any other Indebtedness
of the Company shall mean, as of the time of any determination thereof, the
number of years obtained by dividing the then Remaining Dollar-years of such
Indebtedness by the then outstanding principal amount of such Indebtedness; and
the "REMAINING DOLLAR-YEARS" of any Indebtedness means at any time the amount
obtained by (a) multiplying the amount of each then remaining installment,
sinking fund, serial maturity or other required principal payment, including
payment at final maturity, by the number of years (calculated to the nearest
one-twelfth) which will elapse between the time in question and the making of
that payment and (b) totaling all of the products obtained in (a).
(d) The Company will not permit any Restricted Subsidiary to create,
assume or incur, or otherwise be or become liable in respect of any Indebtedness
for Borrowed Money (other than the Subsidiary Senior Guaranty Agreement and the
Subsidiary Senior Subordinated Guaranty Agreement) to any Person (other than to
the Company or another Restricted Subsidiary) in an aggregate amount for all
Restricted Subsidiaries in excess of $1,000,000 at any time outstanding.
.SECTION 5.11. LIMITATION ON LIENS;. The Company will not, and will
not permit any Restricted Subsidiary to create, assume or suffer to exist any
Lien upon any of its property or assets (including, but not limited to, the
Collateral), whether now owned or hereafter acquired; PROVIDED, HOWEVER, that
the foregoing restriction and limitation shall not apply to the following Liens:
(a) Liens created under the Company Security Agreement and under
the Subsidiary Security Agreement;
<PAGE>
(b) Liens existing as of the date hereof and reflected on Schedule
II hereto;
(c) Liens existing on property at the time acquired by the Company
or any Restricted Subsidiary thereof or existing on the property of a
corporation at the time it becomes a Restricted Subsidiary, or placed upon
property within 120 days after the date of acquisition thereof by the Company or
any Restricted Subsidiary to secure a portion of the purchase price thereof, but
only if (i) such Lien shall attach solely to the property acquired, purchased or
constructed and (ii) such Lien does not exceed the lesser of the fair market
value or cost of such property;
(d) Liens constituting renewals, extensions or refundings of Liens
permitted by clause (b) or (c) above, PROVIDED that the principal amount of the
Indebtedness secured by any such new Lien does not exceed the principal amount
of the Indebtedness being renewed, extended or refunded at the time of renewal,
extension or refunding thereof and that such new Lien attaches only to the same
property theretofore subject to such earlier Lien;
(e) Liens securing taxes, assessments or governmental charges or
levies, or the claims or demands of materialmen, mechanics, carriers, workmen,
repairmen, warehousemen, landlords and other like persons, PROVIDED that payment
thereof is not at the time required by SS.5.3;
(f) other Liens incidental to the conduct of its business or the
ownership of its property and assets when not incurred in connection with the
borrowing of money or the obtaining of advances of credit, and which do not in
the aggregate materially detract from the value of its property or assets, or
materially impair the use thereof in the operation of its business;
(g) attachment, judgment and other similar Liens arising in
connection with court proceedings, PROVIDED that (i) execution or other
enforcement of such Liens is effectively stayed, (ii) the claims secured thereby
are being actively contested in good faith by appropriate proceedings, (iii)
adequate reserves in conformity with GAAP have been provided on the books of the
Company or such Restricted Subsidiary and (iv) the aggregate amount of the
liabilities of the Company and all Restricted Subsidiaries so secured, including
interest and penalties thereon, shall not be in excess of $100,000 at any one
time outstanding; and
(h) Liens on property of a Restricted Subsidiary of the Company to
secure obligations of such Restricted Subsidiary to the Company or another
Restricted Subsidiary.
.SECTION 5.12. DIVIDENDS, STOCK PURCHASES;. The Company will not
except as hereinafter provided:
(a) Declare or pay any dividends, either in cash or property, on
any shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the Company); or
(b) Directly or indirectly, or through any Subsidiary, purchase,
redeem or retire any shares of its capital stock of any class or any warrants,
rights or options to purchase or acquire any shares of its capital stock (other
than in exchange for or out of the net cash proceeds to the Company from the
substantially concurrent issue or sale of other shares of capital stock of the
Company or warrants, rights or options to purchase or acquire any shares of its
capital stock); or
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock; or
(d) Make any payment of principal, interest or premium on any
Senior Subordinated Debt or Junior Subordinated Debt other than any regularly
scheduled payment of principal or interest on such Senior Subordinated Debt or
Junior Subordinated Debt; (such declarations or payments of dividends,
purchases, redemptions or retirements of capital stock and warrants, rights or
options, and all such other distributions and such payments on Senior
Subordinated Debt and Junior Subordinated Debt being herein collectively called
"RESTRICTED PAYMENTS"), if, after giving effect thereto (i) a Default or Event
of Default has occurred and is continuing or (ii) the aggregate amount of
Restricted Payments made during the period from and after March 31, 1997, to and
including the date of the making of the Restricted Payment in question, would
exceed the sum of (x) the net cash proceeds received by the Company from the
issuance or sale subsequent to March 31, 1997 of shares of common stock of the
Company or warrants, rights or options to purchase or acquire any shares of its
common stock,
<PAGE>
plus (y) at all times after the Determination Date, 50% of Consolidated Net
Income for the period commencing on the day immediately succeeding the
Determination Date and ending on the date of the making of the Restricted
Payment in question, computed on a cumulative basis for said entire period (or
if such Consolidated Net Income is a deficit figure, then minus 100% of such
deficit); PROVIDED that at all times after the Determination Date and after
giving effect to such Restricted Payment, Consolidated Tangible Net Worth
exceeds $42,000,000.
For the purposes of this SS.5.12 the amount of any Restricted Payment
declared, paid oR distributed in property of the Company shall be deemed to be
the greater of the book value or fair market value (as determined in good faith
by the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of declaration
thereof.
.SECTION 5.13. MERGERS, CONSOLIDATIONS AND SALES OR TRANSFERS OF
ASSETS;. (a) The Company will not, and will not permit any Restricted Subsidiary
to enter into any transaction of merger or consolidation or transfer, sell,
assign, lease, or otherwise dispose of all or a substantial part of its
properties or assets to any Person, except that:
(1) any Restricted Subsidiary may merge or consolidate with or into
the Company or any other Restricted Subsidiary (other than the Insurance
Subsidiary) so long as in any merger or consolidation involving the Company, the
Company shall be the surviving or continuing corporation;
(2) the Company may merge or consolidate with any other corporation
PROVIDED that (i) the Company shall be the surviving and continuing corporation;
and (ii) at the time of such consolidation or merger and after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing;
(3) any Restricted Subsidiary may sell or convey all or
substantially all of its assets to the Company or to another Restricted
Subsidiary (other than the Insurance Subsidiary); and
(4) the Company or any Restricted Subsidiary may sell all or a
substantial part of the assets of the Company and its Restricted Subsidiaries
pursuant to and in compliance with Section 10.4 of the Company Security
Agreement or Section 10.4 of the Subsidiary Security Agreement.
(b) The Company will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class or any partnership interest, membership
interest or other equity interest of any type (including for the purposes of
this SS.5.13, any warrants, rights or optionS to purchase or otherwise acquire
any such equity interest or other Securities exchangeable for or convertible
into any such equity interest) of such Restricted Subsidiary to any Person other
than the Company or a Restricted Subsidiary (other than the Insurance
Subsidiary), except for the purpose of qualifying directors.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock, partnership interest, membership interest or other equity
interest in any Restricted Subsidiary (except (i) to qualify directors and (ii)
the pledge of the Pledged Collateral under the Company Security Agreement and
any transfer or sale thereof pursuant to and in compliance with Section 10.4 of
the Company Security Agreement) or any Indebtedness of any Restricted
Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or
otherwise dispose of (except (i) to the Company or a Restricted Subsidiary or
(ii) the pledge of the Pledged Collateral under the Subsidiary Security
Agreement and any transfer or sale thereof pursuant to and in compliance with
Section 10.4 of the Subsidiary Security Agreement) any such shares of stock,
partnership interest, membership interest or other equity interest or any
Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all such
interests and all Indebtedness of such Restricted Subsidiary at the time owned
by the Company and by every other Restricted Subsidiary shall be sold,
transferred or disposed of as an entirety;
(2) the Board of Directors of the Company shall have determined, as
evidenced by a resolution thereof, that the retention of such interest and
Indebtedness is no longer in the best interests of the Company or the holders of
the Notes;
<PAGE>
(3) such interest and Indebtedness is sold, transferred or otherwise
disposed of to a Person, for a cash consideration and on terms reasonably deemed
by the Board of Directors to be adequate and satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Restricted Subsidiary not
being simultaneously disposed of; and
(5) such sale or other disposition does not involve a substantial
part (as hereinafter defined) of the assets of the Company and its Restricted
Subsidiaries.
(d) As used in this SS.5.13, in the case of the sale, lease or other
disposition oF any assets, such assets shall be deemed to be a "substantial
part" of the assets of the Company and its Restricted Subsidiaries if (x) such
assets, together with all other assets (i) sold, leased or otherwise disposed of
by the Company and its Restricted Subsidiaries or (ii) subject to any waiver of
or supplemental agreement to the Company Security Agreement or the Subsidiary
Security Agreement without the consent of the holders of at least a majority of
the then outstanding principal amount of the Notes or, if such waiver or
supplemental agreement is described in clauses (B), (C), (E) or (F) of Section
9.2(a) of the Company Security Agreement or the Subsidiary Security Agreement,
without the consent of all of the holders of the Notes, in each case, during the
period of 12 months ending with the date of such sale, lease or disposition,
contributed more than 15% of EBIT of the Company and its Restricted Subsidiaries
determined as of the end of the fiscal year immediately preceding such sale or
disposition, (y) the book value of such assets, when added to the book value of
all other assets of the Company and its Restricted Subsidiaries (i) sold or
otherwise disposed of by the Company and its Restricted Subsidiaries or (ii)
subject to any waiver of or supplemental agreement to the Company Security
Agreement or the Subsidiary Security Agreement without the consent of the
holders of at least a majority of the then outstanding principal amount of the
Notes or, if such waiver or supplemental agreement is described in clauses (B),
(C), (E) or (F) of Section 9.2(a) of the Company Security Agreement or the
Subsidiary Security Agreement, without the consent of all of the holders of the
Notes, in each case, during the period of 12 months ending with the date of such
sale or disposition, exceeds 10% of the book value of all Receivables of the
Company and its Restricted Subsidiaries determined on a consolidated basis as of
the end of the fiscal year immediately preceding such sale or disposition, or
(z) the book value of such assets, when added to the book value of all other
assets of the Copany and its Restricted Subsidiaries (i) sold or otherwise
disposed of by the Company and its Restricted Subsidiaries or (ii) subject to
any waiver of or supplemental agreement to the Company Security Agreement or the
Subsidiary Security Agreement without the consent of the holders of at least a
majority of the then outstanding principal amount of the Notes or, if such
waiver or supplemental agreement is described in clauses (B), (C), (E) or (F) of
Section 9.2(a) of the Company Security Agreement or the Subsidiary Security
Agreement, without the consent of all of the holders of the Notes, in each case,
during the entire period commencing on April 1, 1997 and ending with the date of
such sale or disposition, exceeds 25% of the book value of all Receivables of
the Company and its Restricted Subsidiaries determined on a consolidated basis
as of the end of the fiscal year immediately preceding such sale or disposition.
(e) Nothing in this SS.5.13 shall prohibit the Company from
transferring, selling, assigning, leasing, subleasing or otherwise disposing of
an insubstantial part of its properties or assets, excluding Receivables of the
Company and its Restricted Subsidiaries, to any Person from time to time, in the
ordinary course.
.SECTION 5.14. LEASE-BACKS;. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any arrangements, directly or
indirectly, with any Person, whereby the Company or any Restricted Subsidiary
shall sell or transfer any property, whether now owned or hereafter acquired,
used or useful in their respective businesses in connection with the rental or
lease of the property so sold or transferred or of other property which the
Company or any Restricted Subsidiary intends to use for substantially the same
purpose or purposes as the property so sold or transferred.
.SECTION 5.15. GUARANTIES;. The Company will not and will not permit
any Restricted Subsidiary to become or be liable in respect of any Guaranty
except: (i) Guaranties of the Company which are limited in amount to a stated
maximum dollar exposure and are permitted under SS.5.10; (ii) the Subsidiary
Senior Subordinated Guaranty Agreement; and (iii) the Subsidiary Senior Guaranty
Agreement.
<PAGE>
.SECTION 5.16. REPURCHASE OF NOTES;. Neither the Company nor any
Restricted Subsidiary or other Affiliate, directly or indirectly, may repurchase
or make any offer to repurchase any Notes unless the offer has been made to
repurchase Notes, PRO RATA, from all holders of the Notes at the same time and
upon the same terms. In case the Company repurchases any Notes, such Notes shall
thereafter be cancelled and no Notes shall be issued in substitution therefor.
Without limiting the foregoing, upon the repurchase or other acquisition of any
Notes by the Company, any Restricted Subsidiary or any other Affiliate, such
Notes shall no longer be outstanding for purposes of any section of this
Agreement relating to the taking by the holders of the Notes of any actions with
respect hereto. If, notwithstanding the provisions of this SS.5.16, the Company
purchases or acquires less than all of the Notes, thE amount of the payment
required at maturity of the Notes and each prepayment of the Notes required to
be made pursuant to SS.2.1 shall be reduced in the proportion that the principaL
amount of such purchase or other acquisition bears to the unpaid principal
amount of the Notes immediately prior to such purchase or other acquisition
(after giving effect to any prepayment made pursuant to SS.2.1 on the date of
such prepayment, purchase or other acquisition).
.SECTION 5.17. TRANSACTIONS WITH AFFILIATES;. The Company will not,
and will not permit any Restricted Subsidiary to, enter into or be a party to,
any transaction or arrangement with any Affiliate (including without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
.SECTION 5.18. INVESTMENTS;. The Company will not, and will not
permit any Restricted Subsidiary to make any Investment except:
(a) Investments in obligations of the United States of America (or
any agency thereof for which the full faith and credit of the United States of
America is pledged for the repayment of principal and interest thereof) maturing
in twelve months or less from the date of acquisition thereof;
(b) certificates of deposit of any banking institution with
combined capital and surplus of at least $500,000,000, maturing in twelve months
or less from the date of acquisition thereof which, at the time of acquisition
by the Company or any Restricted Subsidiary, is accorded the rating of A or
better by S&P and A2 or better by Moody's, or if S&P and/or Moody's is no longer
rating any such certificates of deposit, then an equivalent rating by any other
nationally recognized credit rating agency of similar standing;
(c) loans, advances and extensions of credit to or for the benefit
of consumer/borrowers in the ordinary course of business in accordance with
SS.5.6;
(d) Investments by the Company or any Restricted Subsidiary in and
to any other Restricted Subsidiary PROVIDED, HOWEVER, Investments by the Company
in and to the Insurance Subsidiary shall not exceed $500,000 in the aggregate;
(e) Investments in commercial paper maturing in 270 days or less
from the date of issuance thereof which, at the time of acquisition by the
Company or any Restricted Subsidiary, is accorded the rating of P1 or better by
S&P and A1 or better by Moody's, or if S&P and/or Moody's is no longer rating
any such commercial paper, then an equivalent rating by any other nationally
recognized credit rating agency of similar standing; or
(f) other Investments (in addition to those permitted in clauses
(a) through (e) above) PROVIDED that the aggregate amount of all such
Investments shall not at any time exceed 10% of Consolidated Adjusted Net Worth.
.SECTION 5.19. TERMINATION OF PENSION PLANS;. The Company will not
and will not permit any Subsidiary to withdraw from any Multiemployer Plan or
permit any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as described in
Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any
property of the Company or any Subsidiary pursuant to Section 4068 of ERISA.
.SECTION 5.20. REPORTS AND RIGHTS OF INSPECTION;. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries will be made of
<PAGE>
all dealings or transactions of or in relation to the business and affairs of
the Company or such Subsidiary, in accordance with GAAP consistently maintained
(except for changes disclosed in the financial statements furnished to you
pursuant to this SS.5.20 and concurred in by the independent public accountants
referred to in SS.5.20(B) hereoF), and will furnish to each holder of a Note and
the Security Trustee (in duplicate if so specified below or otherwise
requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the last)
of each fiscal year, a copy of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such quarter and, in the case of
the consolidated balance sheets, setting forth in comparative form the amount
for the corresponding period of the preceding fiscal year,
(2) consolidated and consolidating statements of income and retained
earnings of the Company and its Restricted Subsidiaries for the portion of the
fiscal year ending with such quarter and, in the case of the consolidated
statements of income and retained earnings, setting forth in comparative form
the amount for the corresponding period of the preceding fiscal year,
(3) consolidated and consolidating statements of changes in financial
position of the Company and its Restricted Subsidiaries for the portion of the
fiscal year ending with such quarter and, in the case of the consolidated
statements of changes in financial position, setting forth in comparative form
the amount for the corresponding period of the preceding fiscal year, and
(4) consolidated and consolidating statements of cash flows of the
Company and its Restricted Subsidiaries for the portion of the fiscal year
ending with such quarter and, in the case of the consolidated statements of cash
flows, setting forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct, by an
authorized financial officer of the Company;
(b) ANNUAL STATEMENTS. As soon as available and in any event within
90 days after the close of each fiscal year of the Company, a copy of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such fiscal year,
(2) consolidated and consolidating statements of income and retained
earnings and changes in financial position of the Company and its Restricted
Subsidiaries for such fiscal year, and
(3) consolidated and consolidating statements of changes in cash
flows of the Company and its Restricted Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion,
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, thereon of a firm of independent public
accountants of recognized national standing selected by the Company to the
effect that the consolidated financial statements have been prepared in
accordance with GAAP consistently applied (except for noted changes in
application in which such accountants concur) and present fairly the financial
condition of the Company and its Restricted Subsidiaries and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards and
accordingly, includes such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of the
Company or any Restricted Subsidiary and any management letter received from
such accountants and the Company's response, if any, to such management letter;
(d) SEC AND OTHER REPORTS. Promptly upon their becoming available,
one copy of each
<PAGE>
financial statement, report, notice, proxy statement or statement of additional
information sent by the Company to stockholders generally and of each regular or
periodic report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the Securities and
Exchange Commission or any successor agency, and copies of any orders in any
proceedings to which the Company or any of its Subsidiaries is a party, issued
by any governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries;
(e) REQUESTED INFORMATION. With reasonable promptness, such other
data and information as any holder of any Note or the Security Trustee may
reasonably request;
(f) OFFICERS' CERTIFICATES. Within the periods provided in paragraphs
(a) and (b) above, a certificate of an authorized financial officer of the
Company stating that he has reviewed the provisions of this Agreement and
setting forth: (i) the information and computations (in sufficient detail)
required in order to determine whether the Company was in compliance with the
requirements of SS.5.7 through SS.5.18, inclusive, at the end of the perIod
covered by the financial statements then being furnished, and (ii) whether, to
the best of his knowledge, there existed as of the date of such financial
statements and whether, to the best of his knowledge, there exists on the date
of the certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such condition
or event exists on the date of the certificate, specifying the nature and period
of existence thereof and the action the Company is taking and proposes to take
with respect thereto;
(g) ACCOUNTANT'S CERTIFICATES. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion with
respect to such financial statements, stating that they have reviewed this
Agreement and stating further, whether in making their audit, such accountants
have become aware of any Default or Event of Default under any of the terms or
provisions of this Agreement insofar as any such terms or provisions pertain to
or involve accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence thereof;
(h) UNRESTRICTED SUBSIDIARIES. Within the respective periods provided
in paragraph (b) above, financial statements of the character and for the dates
and periods as in said paragraph (b) provided covering each Unrestricted
Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis);
(i) LOAN LOSS RESERVE REPORT. On or before the twenty-fifth day of
every month, a loan loss reserve report with respect to the Company and its
Restricted Subsidiaries for the immediately preceding month in form and
substance reasonably satisfactory to the holders of the Notes;
(j) LOAN CHARGE-OFF RECOVERY REPORT. On or before the twenty-fifth
day of every month, a loan charge-off recovery report with respect to the
Company and its Restricted Subsidiaries for the prior month in form and
substance reasonably satisfactory to the holders of the Notes; and
(k) BORROWING BASE CERTIFICATE. On or before the twenty-fifth day
of every month, a Borrowing Base Certificate substantially in the form attached
hereto as Exhibit H calculated as of the last day of the immediately preceding
month. Without limiting the foregoing, the Company will permit each holder of a
Note and the Security Trustee (or such Persons as any holder or the Security
Trustee may designate) to visit and inspect, any of the properties of the
Company or any Subsidiary, to inspect any other Collateral, to examine all their
books of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with such
Persons the finances and affairs of the Company and its Subsidiaries) all at
such reasonable times and as often as may be reasonably requested. Any
visitation, inspection or discussion shall be at the sole cost and expense of
the Company; PROVIDED, HOWEVER, that prior to the occurrence of a Default or
Event of Default, the Company shall bear such costs and expenses not more
frequently than once every semi-annual fiscal period.
.SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR;.
<PAGE>
.SECTION 6.1. EVENTS OF DEFAULT;. Any one or more of the
following shall constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more than
five days; or
(b) Default shall occur in the making of any required prepayment on
any of the Notes as provided in SS.2.1; or
(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in SS.5.7 through SS.5.19; or
(e) Default shall occur in the observance or performance of any
provision of this Agreement, the Company Security Agreement, the Subsidiary
Security Agreement or the Subsidiary Senior Guaranty Agreement which is not
remedied within 30 days after the earlier to occur of (i) the date on which such
failure shall first become known to any officer of the Company or (ii) the date
on which notice thereof is given to the Company; or
(f) An "Event of Default" shall occur under the Revolving Credit
Agreement (other than an Event of Default covered by clause (m) of this SS.6.1)
or the Senior SubordinateD Note Agreement; or
(g) Default shall occur under any interest rate or currency
protection agreement entered into by the Company or any Restricted Subsidiary
with any bank or other financial institution; or
(h) Default shall be made in the payment when due (whether by lapse
of time, by declaration, by call for redemption or otherwise) of the principal
of or interest or premium on any Indebtedness for Borrowed Money in excess of
$1,000,000 (other than the Senior Notes or the Senior Subordinated Notes) of the
Company or any Restricted Subsidiary, individually or in the aggregate, and such
default shall continue beyond the period of grace, if any, allowed with respect
thereto; or
(i) Default or the happening of any event shall occur under any
indenture, agreement, or other instrument under which any Indebtedness for
Borrowed Money in excess of $1,000,000 of the Company or any Restricted
Subsidiary (other than the Agreements, the Senior Subordinated Note Agreement,
the Revolving Credit Agreement, the Subsidiary Senior Guaranty Agreement or the
Subsidiary Senior Subordinated Guaranty Agreement), individually or in the
aggregate, may be issued and such default or event shall continue for a period
of time sufficient to permit the acceleration of the maturity of any
Indebtedness for Borrowed Money of the Company or any Restricted Subsidiary
outstanding thereunder; or
(j) Any representation or warranty made by the Company or any
Restricted Subsidiary herein, in the Company Security Agreement, the Subsidiary
Security Agreement, the Subsidiary Senior Guaranty Agreement or made by the
Company or any Restricted Subsidiary in any statement or certificate furnished
by the Company or any Restricted Subsidiary in connection with the consummation
of the issuance and delivery of the Notes or furnished by the Company or any
Restricted Subsidiary pursuant hereto or pursuant to the Company Security
Agreement, the Subsidiary Security Agreement or the Subsidiary Senior Guaranty
Agreement, is untrue in any material respect as of the date of the issuance or
making thereof; or
(k) The Subsidiary Senior Guaranty Agreement shall be held by a
court of competent jurisdiction to be invalid or unenforceable in whole or in
part in any respect or shall otherwise cease to be in full force and effect or
the Company or any Restricted Subsidiary takes any action for the purpose of
repudiating or rescinding the Subsidiary Senior Guaranty Agreement in whole or
in part or the obligations of any Restricted Subsidiary, respectively,
thereunder or the Company or any Restricted Subsidiary declares that the
obligations of any Restricted Subsidiary under the Subsidiary Senior Guaranty
Agreement are unenforceable in whole or in part; or
<PAGE>
(l) The Company Security Agreement or the Subsidiary Security
Agreement shall cease to be in full force and effect, or shall cease to give the
Security Trustee the Liens purported to be created thereby or, in the reasonable
judgment of the holders of the Notes, the practical realization of the benefits
of the Liens and security interest purported to be created thereby; or
(m) The Company shall for any reason fail to make any required
prepayment of the Revolving Credit Notes pursuant to Section 2.6(b)(ii) of the
Revolving Credit Agreement within one day after such prepayment becomes due; or
(n) Final judgment or judgments for the payment of money
aggregating in excess of $100,000 is or are outstanding against the Company or
any Restricted Subsidiary or against any property or assets of either and any
one of such judgments has remained unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of 30 days from the date of its entry; or
(o) A custodian, trustee or receiver is appointed for the Company
or any Restricted Subsidiary or for the major part of the property of either and
is not discharged within 45 days after such appointment; or
(p) The Company or any Restricted Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Restricted
Subsidiary causes or suffers an order for relief to be entered with respect to
it under applicable Federal bankruptcy law or applies for or consents to the
appointment of a custodian, trustee or receiver for the Company or such
Restricted Subsidiary or for the major part of the property of either; or
(q) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against the Company or
any Restricted Subsidiary and, if instituted against the Company or any
Restricted Subsidiary, are consented to or are not dismissed within 60 days
after such institution; or
(r) The Company or any ERISA Affiliate shall fail to pay when due
an amount or amounts aggregating in excess of $100,000 which it shall have
become liable to pay to the Pension Benefit Guaranty Corporation (the "PBGC") or
to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or
Plans having aggregate Unfunded Vested Liabilities in excess of $100,000
(collectively, a "MATERIAL PLAN") shall be filed under Title IV of ERISA by the
Company or any ERISA Affiliate, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any Material Plan
or a proceeding shall be instituted by a fiduciary of any Material Plan against
the Company or any ERISA Affiliate to enforce Section 515 or 4219(c)(5) of ERISA
and such proceeding shall not have been dismissed within 30 days thereafter; or
a condition shall exist by reason of which the PBGC would be entitled to obtain
a decree adjudicating that any Material Plan must be terminated.
.SECTION 6.2. NOTICE TO HOLDERS;. When any Default or Event of
Default described in the foregoing SS.6.1 has occurred, or if the holder of any
Note or of any other evidence oF Indebtedness of the Company gives any notice or
takes any other action with respect to a claimed default, the Company agrees to
give notice within three business days (except as otherwise specifically
provided herein) of such event to all holders of the Notes then outstanding,
such notice to be in writing and sent by registered or certified mail or by
telegram.
.SECTION 6.3. ACCELERATION OF MATURITIES;. When any Event of Default
described in paragraph (a), (b) or (c) of SS.6.1 has happened and is continuing,
any holder of any NotE may, and when any Event of Default described in
paragraphs (d) through (n), inclusive, or (r) of said SS.6.1 has happened and is
continuing, the holder or holders of at least a majority oF the principal amount
of Notes at the time outstanding may, by notice in writing sent by personal
delivery, prepaid overnight mail or courier service or registered or certified
mail to the Company, declare the entire principal and all interest accrued on
all Notes to be, and all Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event
<PAGE>
of Default described in paragraphs (o), (p) or (q) of SS.6.1 has occurred, then
all outstandinG Notes shall immediately become due and payable without
presentment, demand or notice of any kind. Upon the Notes becoming due and
payable as a result of any Event of Default as aforesaid, the Company will
forthwith pay to the holders of the Notes the entire principal and interest
accrued on the Notes and, to the extent permitted by law, liquidated damages for
the loss of the bargain evidenced hereby in an amount equal to the Make-Whole
Amount. No course of dealing on the part of any holder of a Note and no delay or
failure on the part of any holder of a Note to exercise any right shall operate
as a waiver of such right or otherwise prejudice such holder's rights, powers
and remedies. The Company further agrees, to the extent permitted by law, to pay
to the holder or holders of the Notes all costs and expenses incurred by them in
the collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
.SECTION 6.4. RESCISSION OF ACCELERATION;. The provisions of SS.6.3
are subject tO the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (n), inclusive, or (r) of SS.6.1, the holders of aT least a majority in
aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, PROVIDED that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes, this Agreement, the Company Security
Agreement, the Subsidiary Security Agreement or the Subsidiary Senior Guaranty
Agreement;
(b) all arrears of interest upon, premium and principal payable in
respect of all of the Notes and all other sums payable under the Notes and under
this Agreement, the Company Security Agreement, the Subsidiary Security
Agreement and the Subsidiary Senior Guaranty Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under SS.6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to SS.7.1;
and PROVIDED FURTHER, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
.SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS;.
.SECTION 7.1. CONSENT REQUIRED;. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holders of at least 76% in aggregate principal
amount of outstanding Notes; PROVIDED that without the written consent of the
holders of all of the Notes then outstanding, no such waiver, modification,
alteration or amendment shall be effective (i) which will change the time of
payment (including any prepayment required by SS.2.1) of the principal of or the
interest on any Note or change thE principal amount thereof or change the rate
of interest thereon, (ii) which will change any of the provisions with respect
to optional prepayments or (iii) which will change the percentage of holders of
the Notes required to (A) consent to any such amendment, alteration, waiver or
modification or any of the provisions of this SS.7 or (B) accelerate the Notes
or rescind thE acceleration of the Notes pursuant to SS.6.
.SECTION 7.2. EFFECT OF AMENDMENT OR WAIVER;. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
.'SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS';.
.SECTION 8.1. DEFINITIONS;. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
<PAGE>
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock (determined by number of shares or number
of votes) of the Company or (iii) 5% or more of the Voting Stock (determined by
number of shares or number of votes) (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by the Company or a Subsidiary. The term "CONTROL" means 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 Voting
Stock, by contract or otherwise.
"AGENT" shall mean Harris Trust and Savings Bank and its permitted
successors and assigns, in each case in its capacity as agent for the Banks
under the Revolving Credit Agreement.
"BANKS" shall mean Harris Trust and Savings Bank, The First National
Bank of Chicago, LaSalle National Bank and the other banks or financial
institutions that are or become a party to the Revolving Credit Agreement.
"CAPITALIZED LEASE" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"CAPITALIZED RENTALS" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be required to be reflected under GAAP as a liability on a consolidated
balance sheet of such Person.
"CLOSING DATE" shall have the meaning as defined in SS.1.3.
"COLLATERAL" shall have the meaning as defined in the Company Security
Agreement and the Subsidiary Security Agreement.
"COMPANY SECURITY AGREEMENT" shall have the meaning as defined in
SS.1.2.
"CONSOLIDATED ADJUSTED NET WORTH" at any date means:
(a) as to any corporation, the amount of capital stock liability plus
(or minus in the case of a deficit) the capital surplus and earned surplus of
the Company and its Restricted Subsidiaries on a consolidated basis, and as to
any partnership or limited liability company, the capital account of the Company
and its Restricted Subsidiaries on a consolidated basis; less (without
duplication)
(b) the net book value, after deducting any reserves applicable
thereto, of all items of the following character which are included in the
assets of the Company and its Restricted Subsidiaries, to wit:
(i) all real property, fixed assets, unamortized leasehold
improvements and furniture, fixtures and equipment other than property held for
immediate sale, lease or other liquidation which has been held by the Company or
a Restricted Subsidiary for less than 90 days;
(ii) all deferred charges (other than deferred Federal income taxes
and deferred investment tax credits) and prepaid expenses other than prepaid
interest, prepaid taxes and prepaid insurance premiums;
(iii) treasury stock;
(iv) unamortized debt discount and capitalized expense and unamortized
stock discount and capitalized expense;
(v) good will, organizational or experimental expense, patents,
trademarks, copyrights, trade names and other intangibles;
(vi) Minority Interests;
(vii) "direct loan origination costs" as set forth in FASB 91; (viii)
all Restricted Investments;
(ix) the excess, if any, of (A) net charge-offs of the Company and its
Restricted Subsidiaries over the twelve-month period ending with such date over
(B) reserves for credit losses of the Company and its Restricted Subsidiaries as
at such date; and
(x) any surplus resulting from any write-up in the book value of
assets of the Company or any Restricted Subsidiary subsequent to March 31, 1997.
<PAGE>
"CONSOLIDATED NET INCOME" for any period shall mean the gross revenues
of the Company and its Restricted Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis in accordance with GAAP consistently applied and after
eliminating earnings or losses attributable to outstanding Minority Interests,
but excluding in any event:
(a) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued
prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any Person (other than a Restricted
Subsidiary), substantially all the assets of which have been acquired in any
manner, realized by such other Person prior to the date of such acquisition;
(e) net earnings and losses of any Person (other than a Restricted
Subsidiary) with which the Company or a Restricted Subsidiary shall have
consolidated or which shall have merged into or with the Company or a Restricted
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an ownership
interest unless such net earnings shall have actually been received by the
Company or such Restricted Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Restricted Subsidiary
(other than the Insurance Subsidiary) which for any reason is unavailable for
payment of dividends to the Company or any other Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or write-up
of assets; (i) any deferred or other credit representing any excess
of the equity in any
Subsidiary at the date of acquisition thereof over the amount invested in such
Subsidiary; (j) any gain arising from the acquisition of any
Securities of the Company or any
Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the extent
that provision for such contingency reserve shall have been made from income
arising during such period; and
(l) any portion of the net earnings of the Insurance Subsidiary in
excess of $500,000 (on a cumulative basis) which has not actually been
distributed to the Company in the form of cash.
"CONSOLIDATED NET WORTH" shall mean as of the date of any determination
thereof the total assets of the Company and its Restricted Subsidiaries less the
total liabilities of the Company and its Restricted Subsidiaries determined in
accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean as of the date of any
determination thereof Consolidated Net Worth less intangible assets of the
Company and its Restricted Subsidiaries determined in accordance with GAAP.
"DEFAULT" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"DETERMINATION DATE" shall mean the last day of the fiscal quarter of
the Company occurring after the Closing Date in which the Company has maintained
a Consolidated Tangible Net Worth in excess of $42,000,000 at the end of such
fiscal quarter.
"EBIT" for any period shall mean the sum of (i) Consolidated Net Income
during such period plus (to the extent deducted in determining Consolidated Net
Income), (ii) all provisions for any Federal, state or other income taxes made
by the Company and its Restricted Subsidiaries during such period and (iii) all
Interest Charges on all Indebtedness (including the interest component of
Capitalized Rentals) of the Company and its Restricted Subsidiaries.
"ENVIRONMENTAL LEGAL REQUIREMENT" shall mean any international,
Federal, state or local statute, law, regulation, order, consent decree,
judgment, permit, license, code, covenant, deed restriction, common law,
<PAGE>
treaty, convention, ordinance or other requirement relating to public health,
safety or the environment, including without limitation, those relating to
releases, discharges or emissions to air, water, land or ground water, to the
withdrawal or use of groundwater, to the use and handling of polychlorinated
biphenyls or asbestos, to the disposal, treatment, storage or management of
hazardous or solid waste, or Hazardous Substances or crude oil, or any fraction
thereof, or to exposure to toxic or hazardous materials, to the handling,
transportation, discharge or release of gaseous or liquid Hazardous Substances
and any regulation, order, notice or demand issued pursuant to such law, statute
or ordinance, in each case applicable to the property of the Company or any of
its Subsidiaries or the operation, construction or modification of any thereof,
including without limitation the following: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous
and Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act,
as amended, the Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1976, the Safe Drinking Water Control Act, the Clean Air Act of
1966, as amended, the Toxic Substances Control Act of 1976, the Occupational
Safety and Health Act of 1977, as amended, the Emergency Planning and Community
Right-to-Know Act of 1986, the National Environmental Policy Act of 1975 and the
Oil Pollution Act of 1990 and any similar or implementing state law, and any
state statute and any further amendments to these laws, providing for financial
responsibility for cleanup or other actions with respect to the release or
threatened release of Hazardous Substances or crude oil, or any fraction thereof
and all rules, regulations, guidance documents and publication promulgated
thereunder.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections to ERISA shall be construed to also refer to any successor sections.
"ERISA AFFILIATE" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"EVENT OF DEFAULT" shall have the meaning as defined in SS.6.1.
"FIXED CHARGES" for any period shall mean on a consolidated basis the
sum of (i) all Rentals (other than Capitalized Rentals) payable during such
period by the Company and its Restricted Subsidiaries, and (ii) all Interest
Charges on all Indebtedness (including the interest component of Capitalized
Rentals) of the Company and its Restricted Subsidiaries.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"GUARANTIES" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for Borrowed Money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for Borrowed
Money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"HAZARDOUS SUBSTANCES" shall mean any hazardous or toxic material,
substance or waste pollutant
<PAGE>
or contaminant which is regulated as such under any statute, law, ordinance,
rule or regulation of any Federal, regional, state or local authority having
jurisdiction over the property of the Company or any Subsidiary or its use,
including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. ss.1317), as amended; (b) regulated as A
hazardous waste under Section 1004 of the Federal Resource Conservation and
Recovery Act (42 U.S.C. ss.6901 ET SEQ.), as amended; (c) defined as a hazardous
substance under Section 101 oF the Comprehensive Environmental Response,
Compensation and Liability Act, as amended (d) defined or regulated as a
hazardous substance or hazardous waste under any rules or regulations
promulgated under any of the foregoing statutes or (e) petroleum or products
derived therefrom.
"INDEBTEDNESS" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all (i) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (ii)
obligations secured by any Lien upon property or assets owned by such Person,
even though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) Capitalized Rentals, (v) all obligations
of such Person on or with respect to letters of credit, bankers' acceptances and
other extensions of credit whether or not representing obligations for borrowed
money and (vi) Guaranties of obligations of others of the character referred to
in this definition.
"INDEBTEDNESS FOR BORROWED MONEY" of any Person shall mean (a) all
Indebtedness of such Person for borrowed money or which has been incurred in
connection with the acquisition of assets, (b) all Capitalized Rentals of such
Person, and (c) all Guaranties by such Person of Indebtedness for Borrowed Money
of others, it being understood that Indebtedness for Borrowed Money shall not
include trade payables in the ordinary course of business.
"INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings
and loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution.
"INSURANCE SUBSIDIARY" shall mean any one Subsidiary (i) which is
organized under the laws of the British Virgin Islands or such other
jurisdiction as shall be consented to in writing by the holders of the Notes;
(ii) which conducts substantially all of its business and has substantially all
of its assets within the British Virgin Islands or such other jurisdiction as
shall be consented to in writing by the holders of the Notes; (iii) of which
100% (by number of votes) (other than directors' qualifying shares) of the
Voting Stock is owned by the Company; and (iv) which is engaged in the business
of reinsuring the credit insurance written by the Subsidiaries.
"INTEREST CHARGES" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
"INVESTMENTS" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; PROVIDED, HOWEVER, that
"INVESTMENTS" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"JUNIOR SUBORDINATED DEBT" shall mean all unsecured Indebtedness for
Borrowed Money of the Company which (i) pursuant to its terms matures on a date
later than the stated maturity date of the Notes and the Senior Subordinated
Notes and (ii) contains or has applicable thereto subordination provisions
substantially in the form set forth in Exhibit G hereto but with appropriate
adjustments therein so as to provide that such Junior Subordinated Debt be
subordinate and junior to all Senior Debt and Senior Subordinated Debt (but not
to any other Indebtedness of the Company) rather than only to Senior Debt or
such other provisions as may be approved in writing by the holders of all of the
outstanding Notes, Revolving Credit Notes and Senior Subordinated Notes
(exclusive of any Notes, Revolving Credit Notes or
<PAGE>
Senior Subordinated Notes held by a Subsidiary or other Affiliate).
"LIEN" shall mean any interest in property securing an obligation owed
to a Person, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest arising from a
mortgage, security agreement, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"LIEN" includes reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar title
exceptions and encumbrances, including but not limited to mechanics',
materialmen's, warehousemen's, carriers' and other similar encumbrances,
affecting property. For the purposes of this Agreement, a Person shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"MAKE-WHOLE AMOUNT" as at any date a payment thereof is due (the
"PAYMENT DATE") in connection with a payment or prepayment of any Notes shall
mean the excess of (a) the present value as at the payment date of the Prepaid
Cash Flows, discounted quarterly at an annual rate which is equal to the
Reinvestment Rate plus .50%, over (b) the aggregate principal amount of such
Notes then to be paid or prepaid. The Make-Whole Amount shall in no event be
less than zero. For purposes of any determination of the Make-Whole Amount:
"PREPAID CASH FLOWS" shall mean, for each date on which a payment of
principal or interest, or both, is scheduled to become due on the Notes, an
amount determined by subtracting (i) the amount of such payment scheduled to
become due on such date after giving effect to any prepayment pursuant to SS.2.1
on the date as to which the determination is being made and thE application of
such prepayment from (ii) the amount of such payment which would have become due
on such date but for such prepayment.
"REINVESTMENT RATE" shall mean the asked yield to maturity of the
United States Treasury obligations with a maturity (as compiled by and published
on Telerate Page 5 or its successor not more than five business days immediately
preceding the payment date) most nearly equal to the remaining Weighted Average
Life to Maturity of the Prepaid Cash Flows as at the payment date. If such rate
shall not have been so published, the Reinvestment Rate in respect of such
payment date shall mean the mean of the yields to maturity of United States
Treasury obligations (as compiled by and published in the United States Federal
Reserve Bulletin or its successor publication for each of the two weeks
immediately preceding the payment date) with a constant maturity most nearly
equal to the Weighted Average Life to Maturity of the Prepaid Cash Flows as at
the payment date. If no maturity exactly corresponding to such remaining
Weighted Average Life shall appear therein, yields for the next longer and the
next shorter published maturities shall be calculated pursuant to the foregoing
sentence and the Reinvestment Rate shall be interpolated from such yields on a
straight-line basis (rounding to the nearest month). If such rates shall not
have been so published, the Reinvestment Rate in respect of such determination
date shall be calculated pursuant to the next preceding sentence on the basis of
the arithmetic mean of the arithmetic means of the secondary market ask rates,
as of approximately 3:30 P.M., New York City time, on the last business days of
each of the two weeks preceding the payment date, for the actively traded U.S.
Treasury security or securities with a maturity or maturities most closely
corresponding to the remaining Weighted Average Life to Maturity, as reported by
three primary United States Government securities dealers in New York City of
national standing selected in good faith by the Company.
"WEIGHTED AVERAGE LIFE TO MATURITY" with respect to the Prepaid Cash
Flows means, as at the payment date for the determination of the Reinvestment
Rate, the number of years obtained by dividing the then Remaining Dollar-years
of such Prepaid Cash Flows by the principal amount of the prepayment. The term
"REMAINING DOLLAR-YEARS" of the Prepaid Cash Flows means the product obtained by
(i) multiplying (A) the principal portion of each Prepaid Cash Flow (including
payment at final maturity), by (B) the number of years (calculated to the
nearest one-twelfth) between the time of determination and the date of such
Prepaid Cash Flow, and (ii) totaling all the products obtained in the
computations described in clause (i).
<PAGE>
"MATERIAL PLAN" shall have the meaning as defined in SS.6.1.
"MAXIMUM PRINCIPAL AMOUNT" shall mean the sum of (i) $65,000,000, plus
(ii) any principal amount in excess thereof agreed to in writing by the holders
of the Notes, plus (iii) any principal amount in excess thereof; PROVIDED, that,
at the time of any increase in the amount of the commitment of the Banks under
the Revolving Credit Agreement, the Agent shall have received a certificate or
certificates of the Chief Financial Officer of the Company and an authorized
officer of each holder of the Notes, in each case, certifying that on the date
of such increase and after giving effect thereto and, in the case of clause (B)
below, after giving effect to the treatment of the maximum aggregate amount of
the commitment as so increased as having been incurred as Indebtedness for
Borrowed Money on the last day of the calendar month then most recently ended
and, in the case of any certificate delivered by any holder of the Notes, to the
knowledge of such holder, (A) there does not exist any Default or Event of
Default under clauses (a), (b), (c), (n), (o), (p) or (q) of SS.6.1 as in effect
on thE Closing Date or under SS.5.7, SS.5.8, SS.5.9, SS.5.10, SS.5.11 (but only
to the extent such DEfault or Event of Default under SS.5.11 relates to a Lien
on property of the Company or any RestricteD Subsidiary with a fair market value
in excess of $1,000,000), SS.5.12, SS.5.13 or SS.5.18 As in effect on the
Closing Date and (B) the ratio of Indebtedness for Borrowed Money (as defined on
the Closing Date) of the Company and its Restricted Subsidiaries to Consolidated
Adjusted Net Worth (as defined on the Closing Date) for the calendar month then
most recently ended does not exceed 6.5 to 1.
"MINORITY INTERESTS" shall mean any shares of stock, partnership
interests, membership interests or other equity interests of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, by valuing Minority Interests
constituting common stock at the book value of the capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of valuing Minority
Interests in preferred stock, and by valuing Minority Interests constituting
partnership or limited liability company membership interests at the book value
of such interest.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the
sum of (i) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (ii) all provisions for any
Federal, state or other income taxes made by the Company and its Restricted
Subsidiaries during such period and (iii) Fixed Charges of the Company and its
Restricted Subsidiaries during such period.
"NOTES" shall have the meaning as defined in SS.1.1.
"OPERATING MARGIN" shall mean as of the date of any determination
thereof the sum of the pretax net operating income of the Company and its
Restricted Subsidiaries plus amortization of intangible assets of the Company
and its Restricted Subsidiaries divided by the total revenues of the Company and
its Restricted Subsidiaries, in each case, determined on a consolidated basis in
accordance with GAAP.
"PBGC" shall have the meaning as defined in SS.6.1.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government agency
or political subdivision thereof.
"PLAN" means a "pension plan" as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"PLEDGED COLLATERAL" shall have the meaning as defined in the Company
Security Agreement or in the Subsidiary Security Agreement, as the context may
require.
"PURCHASER" shall have the meaning as defined in SS.1.1.
"RECEIVABLES" shall mean all accounts receivable, receivables, contract
rights, controls, instruments, notes, drafts, bills, acceptances, documents,
chattel paper, general intangibles and other forms of obligations owing to a
Person.
"RENTALS" shall mean and include as of the date of any determination
thereof all fixed payments
<PAGE>
(including as such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real
or personal property, but shall be exclusive of any amounts required to be paid
by the Company or a Restricted Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"REPORTABLE EVENT" shall have the same meaning as in ERISA.
"RESTRICTED INVESTMENTS" shall mean all Investments other than the
Investments permitted by paragraphs (a) through (f), both inclusive, of SS.5.18.
"RESTRICTED SUBSIDIARY" shall mean the Insurance Subsidiary, if any,
and any other Subsidiary (i) which is organized under the laws of the United
States or any State thereof; (ii) which conducts substantially all of its
business and has substantially all of its assets within the United States; and
(iii) of which 100% (by number of votes) of the Voting Stock is owned by the
Company and/or one or more Restricted Subsidiaries.
"REVOLVING CREDIT AGREEMENT" shall mean that certain Amended and
Restated Revolving Credit Agreement dated as of June 30, 1997 among the Company,
the Agent and the Banks, as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof.
"REVOLVING CREDIT NOTES" shall mean the borrowings pursuant to the
Revolving Credit Agreement, whether or not such borrowings are evidenced by
promissory notes and as the same may from time to time be amended or restated
pursuant to the terms thereof and any notes executed in replacement thereof, in
a maximum aggregate principal amount of borrowings at any one time outstanding
not to exceed the Maximum Principal Amount.
"S&P" shall mean Standard & Poor's Ratings Services Group, a division
of The McGraw-Hill Companies, Inc.
"SECURITY" shall have the same meaning as in Section 2(a) (1) of the
Securities Act of 1933, as amended.
"SECURITY TRUSTEE" shall mean Harris Trust and Savings Bank, an
Illinois banking corporation, and its successors and assigns under the Company
Security Agreement and the Subsidiary Security Agreement.
"SENIOR DEBT" shall mean (i) the Senior Notes, (ii) the Voyager Note,
(iii) all other Indebtedness for Borrowed Money of the Company which is not
expressed to be subordinate or junior to any other Indebtedness of the Company
and (iv) all Indebtedness for Borrowed Money of Restricted Subsidiaries (other
than the Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary
Senior Guaranty Agreement).
"SENIOR INDEBTEDNESS" shall have the meaning as defined in SS.9.
"SENIOR NOTES" shall mean the Notes and the Revolving Credit Notes
"SENIOR SUBORDINATED NOTE AGREEMENT" shall mean the Note Agreement
dated as of June 30, 1997 between the Company and the note purchaser named
therein, as the same may be amended, restated, modified, supplemented or waived
pursuant to the terms thereof.
"SENIOR SUBORDINATED DEBT" shall mean (i) the Senior Subordinated Notes
and (ii) all other unsecured Indebtedness for Borrowed Money of the Company
which (A) pursuant to its terms matures on a date later than the stated maturity
date of the Senior Notes and (B) contains or has applicable thereto
subordination provisions substantially in the form set forth in Exhibit G hereto
or such other provisions as may be approved in writing by the holders of all of
the outstanding Notes, Revolving Credit Notes and Senior Subordinated Notes
(exclusive of any Notes, Revolving Credit Notes and Senior Subordinated Notes
held by a Subsidiary or other Affiliate).
"SENIOR SUBORDINATED NOTES" shall mean the Senior Subordinated Secured
Notes due June 30, 2004 issued pursuant to the Senior Subordinated Note
Agreement, as such Notes may from time to time be amended or restated pursuant
to the terms thereof and of the Senior Subordinated Note Agreement and any notes
executed in replacement thereof.
The term "SUBSIDIARY" shall mean, as to any particular parent
corporation, any corporation, partnership, limited liability company or other
entity of which more than 50% (by number of votes or other
<PAGE>
similar decision-making authority) of the Voting Stock shall be owned by such
parent corporation and/or one or more corporations, partnerships, limited
liability companies or other entities which are themselves subsidiaries of such
parent corporation. The term "SUBSIDIARY" shall mean a subsidiary, directly or
indirectly, of the Company.
"SUBSIDIARY SENIOR GUARANTY AGREEMENT" shall have the meaning set
forth in SS.1.2.
"SUBSIDIARY SENIOR SUBORDINATED GUARANTY AGREEMENT" shall mean that
certain Amended and Restated Guaranty Agreement dated as of June 30, 1997 of
each Restricted Subsidiary (other than the Insurance Subsidiary) for the benefit
of the holders of the Senior Subordinated Notes, as the same may from time to
time be amended, restated, modified, supplemented or waived pursuant to the
terms thereof.
"SUBSIDIARY SECURITY AGREEMENT" shall have the meaning as defined in
SS.1.2.
"TRIGGER DATE" shall mean the last day of the fiscal quarter of the
Company occurring after the Closing Date in which the Company has maintained (i)
a Consolidated Tangible Net Worth in excess of $42,000,000 throughout such
fiscal quarter and (ii) an Operating Margin in excess of 25% for the four
consecutive fiscal quarter period ending on such date.
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Company or any ERISA Affiliate to the
PBGC or the Plan under Title IV of ERISA.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary which is
not a Restricted Subsidiary.
"UNSECURED RECEIVABLES" shall have the meaning as defined in the
Subsidiary Security Agreement.
"VOTING STOCK" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"VOYAGER NOTE" shall mean the 10% Senior Debenture of the Company,
dated October 23, 1989, payable to Voyager Life Insurance Company, without
taking into account any amendment thereof other than any amendment which extends
the maturity date thereof.
"WEINGARTEN LIEN" shall mean the Lien of Weingarten Realty Investors as
in effect on the Closing Date and as reflected on the UCC-1 financing statement
filed with the Secretary of State of the State of Texas on August 21, 1989
against World Finance Corporation of Texas under document number 189822 and
continued by the UCC-3 financing statement filed with the Secretary of State of
the State of Texas on July 15, 1994 under document number 685105.
.SECTION 8.2. ACCOUNTING PRINCIPLES;. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
.SECTION 8.3. DIRECTLY OR INDIRECTLY;. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
.SECTION 9. MISCELLANEOUS;.
.SECTION 9.1. REGISTERED NOTES;. The Company shall cause to be kept
at its principal office a register for the registration and transfer of the
Notes (hereinafter called the "NOTE REGISTER"), and the Company will register or
transfer or cause to be registered or transferred, as hereinafter provided and
under such reasonable regulations as it may prescribe, any Note issued pursuant
to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall
be deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal,
<PAGE>
premium, if any, and interest on any registered Note shall be made to or upon
the written order of such registered holder
.SECTION 9.2. EXCHANGE OF NOTES;. At any time, and from time to
time, upon not less than ten days' notice to that effect given by the holder of
any Note initially delivered or of any Note substituted therefor pursuant to
SS.9.1, this SS.9.2 or SS.9.3, and, upon surrendEr of such Note at its office,
the Company will deliver in exchange therefor, without expense to the holder,
except as set forth below, Notes for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, in the denomination of
the lesser of the then outstanding principal amount of the Note so surrendered
or $1,000,000 or any amount in excess thereof as such holder shall specify, in
each such case, dated as of the date to which interest has been paid on the Note
so surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, payable to such Person or Persons,
or order, as may be designated by such holder, and otherwise of the same form
and tenor as the Notes so surrendered for exchange. The Company may require the
payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
.SECTION 9.3. LOSS, THEFT, ETC. OF NOTES;. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation upon
surrender and cancellation of the Note, the Company will make and deliver
without expense to the holder thereof, a new Note, of like tenor, in lieu of
such lost, stolen, destroyed or mutilated Note. If you or any subsequent
Institutional Holder is the owner of any such lost, stolen or destroyed Note,
then the affidavit of an authorized officer of such owner, setting forth the
fact of loss, theft or destruction and of its ownership of the Note at the time
of such loss, theft or destruction shall be accepted as satisfactory evidence
thereof and no further indemnity shall be required as a condition to the
execution and delivery of a new Note other than the unsecured written agreement
of such owner to indemnify the Company.
.SECTION 9.4. EXPENSES, STAMP TAX INDEMNITY;. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement, the Company Security Agreement, the
Subsidiary Security Agreement and the Subsidiary Senior Guaranty Agreement and
the transactions contemplated hereby and thereby, including but not limited to:
(a) the cost of reproducing this Agreement, the Company Security
Agreement, the Subsidiary Security Agreement, the Subsidiary Senior Guaranty
Agreement and the Notes;
(b) the reasonable fees and disbursements of Chapman and Cutler,
your special counsel;
(c) the reasonable fees and disbursements of the local counsels
listed in SS.4.1(F);
(d) all reasonable fees, costs and other expenses of the Security
Trustee, as trustee under the Company Security Agreement and the Subsidiary
Security Agreement;
(e) all recording and filing fees and stamp taxes in connection
with the recordation or filing and re-recordation or re-filing of the Company
Security Agreement and the Subsidiary Security Agreement and financing and
continuation statements and other notices of either thereof necessary to
maintain the first perfected lien on the Collateral under the Company Security
Agreement and the Subsidiary Security Agreement;
(f) the cost of conducting all reasonable Uniform Commercial Code
and tax lien searches; and
(g) all fees, expenses and disbursements of the Security Trustee
and the holders of the Notes (including without limitation, reasonable
attorneys' fees and court costs) relating to any supplemental indentures,
amendments, waivers or consents pursuant to the provisions of this Agreement,
the Company Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Senior Guaranty Agreement or the Notes (whether or not the same is
actually executed or delivered), including without limitation, the fees,
expenses and disbursements of the holders of the Notes following the occurrence
and during the continuance of a Default or an Event of Default or
<PAGE>
in connection with any supplemental indenture, amendment, waiver or consent
resulting from any work-out, restructuring or similar proceeding relating to the
performance or non-performance by the Company or any Restricted Subsidiary of
its obligations under the provisions of this Agreement, the Company Security
Agreement, the Subsidiary Security Agreement, the Subsidiary Senior Guaranty
Agreement or the Notes as the result of any potential Default or Event of
Default or incurred in connection with the enforcement of rights hereunder or
under the Company Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Senior Guaranty Agreement or the Notes as a result of any potential
Default or Event of Default, whether or not a lawsuit is filed in connection
therewith.
Except as set forth in SS.9.2, the Company also agrees that it will pay
and save yoU harmless against any and all liability with respect to stamp and
other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement, the
Company Security Agreement, the Subsidiary Security Agreement, the Subsidiary
Senior Guaranty Agreement or the Notes, whether or not any Notes are then
outstanding. Except as set forth in SS.9.2, the Company agrees to protect and
indemnify yoU against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement.
.'SECTION 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE';.
No delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to and are not exclusive of any rights or
remedies any such holder would otherwise have.
.SECTION 9.6. NOTICES;. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed by personal delivery,
prepaid overnight mail or courier service or registered or certified mail, in
each case, addressed to you at your address appearing on Schedule I to this
Agreement or such other address as you or the subsequent holder of any Note
initially issued to you, may designate to the Company in writing, and if to the
Company, delivered or mailed by personal delivery, prepaid overnight mail or
courier service or registered or certified mail to the Company at 108 Frederick
Street, Greenville, South Carolina 29607-2532, Attention: Chief Financial
Officer or to such other address as the Company may in writing designate to you
or to a subsequent holder of the Note initially issued to you.
.SECTION 9.7. SUCCESSORS AND ASSIGNS;. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
.SECTION 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS;. All
covenants, representations and warranties made by the Company and the Restricted
Subsidiaries herein, in the Company Security Agreement, the Subsidiary Security
Agreement, and the Subsidiary Senior Guaranty Agreement and in any certificates
delivered pursuant hereto, whether or not in connection with the Closing Date,
shall survive the closing and the delivery of this Agreement and the Notes.
.SECTION 9.9. SEVERABILITY;. Should any part of this Agreement for
any reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts, or portion which may, for any reason, be
hereafter declared invalid.
.SECTION 9.10. GOVERNING LAW;. THIS AGREEMENT AND THE NOTES ISSUED
AND SOLD HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH SOUTH
CAROLINA LAW.
.SECTION 9.11. CAPTIONS;. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
<PAGE>
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
WORLD ACCEPTANCE CORPORATION
By /s/ A. Alexander McLean, III
Its Executive Vice President
<PAGE>
Accepted as of June 30, 1997.
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By /S/ [SIGNATURE ILLEGIBLE]
Its Second Vice President
<PAGE>
SCHEDULE I (TO NOTE AGREEMENT)
<TABLE>
<CAPTION>
<S> <C>
NAME AND ADDRESSES OF PURCHASERS CURRENTLY OUTSTANDING
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY PRINCIPAL AMOUNT OF ORIGINAL NOTES
$9,000,000
</TABLE>
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Securities,
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "World
Acceptance Corporation, 8.5% Senior Secured Note due December 1, 1999, Bond No.
1-B-24450, principal, premium or interest") to:
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
for credit to Principal Mutual Life Insurance Company
Account No. 014752
OBI PFGSE (S) B24450() World Acceptance Corp. Senior
Secured Notes due 1999
Notices
All notices with respect to payments to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting & Treasury
Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8213
<PAGE>
All other notices and communications to be addressed
as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 42 0127290
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NAME AND ADDRESSES OF PURCHASERS CURRENTLY OUTSTANDING
JEFFERSON-PILOT LIFE INSURANCE COMPANY PRINCIPAL AMOUNT OF ORIGINAL NOTES
$3,000,000
</TABLE>
P. O. Box 21008
Greensboro, North Carolina 27420
Attention: Securities Administration - 3630
Telefacsimile: (910) 691-3025
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "World
Acceptance Corporation, 8.5% Senior Secured Note due December 1, 1999, PPN
981420 A@ 1, principal, interest or premium") to:
Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
ABA #021 000 018 BNF: IOC566
Attention: P&I Department
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment, to be addressed to:
Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
P. O. Box 19266
Newark, NJ 07195
Attention: P&I Department
with duplicate notice to Jefferson-Pilot Life
Insurance Company at the address first provided above.
All notices and communications other than those in
respect to payments to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 56-0359860
<PAGE>
Schedule II to Senior Subordinated
Note Agreement dated June 30, 1997
Description of Liens
Lien of Weingarten Realty Investors on certain property of World Finance
Corporation of Texas, evidenced by UCC-1 financing statement No. 189822, filed
August 21, 1989 in the Office of the Texas Secretary of State and continued by
UCC-3 continuation statement No. 685105, filed July 15, 1994 in the Office of
the Texas Secretary of State.
Liens consisting of immaterial utility easements and similar immaterial
encumbrances on the real property of World Acceptance Corporation located at 108
Frederick Street, Greenville, South Carolina 29607. See Schedule B to owner's
title policy attached.
<PAGE>
EXHIBIT A (TO NOTE AGREEMENT)
WORLD ACCEPTANCE CORPORATION
8.5% Senior Secured Note
Due December 1, 1999
No. R - 19__
________________,
$
WORLD ACCEPTANCE CORPORATION, a South Carolina corporation (the
"COMPANY"), for value received, hereby promises to pay to
or registered assigns
on the first day of December, 1999
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 8.5% per annum from the date hereof until maturity, payable semiannually
on the first of each June and December in each year commencing June 1, 1993, and
at maturity. The Company agrees to pay interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any,
and (to the extent legally enforceable) on any overdue installment of interest,
at the rate of 10.5% per annum after maturity, whether by acceleration or
otherwise, until paid. Both the principal hereof, premium and interest hereon
are payable at the principal office of the Company in Greenville, South Carolina
in coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts.
This Note is one of the 8.5% Senior Secured Notes due December 1, 1999
(the "NOTES") of the Company in the original aggregate principal amount of
$20,000,000 issued or to be issued under and pursuant to the terms and
provisions of the separate Amended and Restated Note Agreements dated as of June
30, 1997, as the same may from time to time be amended pursuant to the terms
thereof (the "NOTE Agreements"), entered into by the Company with the original
purchasers therein referred to and this Note and the holder hereof are entitled
equally and ratably with the holders of all other Notes outstanding under the
Note Agreements to all the benefits and security provided for thereby or
referred to therein. Reference is hereby made to the Note Agreements for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreements and the Company Security
Agreement (as hereinafter defined).
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreements.
The Notes and the Revolving Credit Notes (as such term is defined in
the Company Security Agreement) are equally and ratably secured by the Amended
and Restated Security Agreement, Pledge and Indenture of Trust dated as of June
30, 1997 between the Company and Harris Trust and Savings Bank, as security
trustee (the "SECURITY TRUSTEE"), as the same may from time to time be
<PAGE>
amended, restated, modified, supplemented or waived pursuant to the terms
thereof (the "COMPANY SECURITY AGREEMENT") and by the Amended and Restated
Security Agreement, Pledge and Indenture of Trust dated as of June 30, 1997
between each Restricted Subsidiary and the Security Trustee, as the same may
from time to time be amended, restated, modified, supplemented or waived
pursuant to the terms thereof (the "SUBSIDIARY SECURITY AGREEMENT"), to which
Company Security Agreement, Subsidiary Security Agreement and all security
agreements supplementary thereto, reference is hereby made for the statement
thereof, including a description of the collateral, the nature and extent of the
security and the rights of the holder or holders of the Notes and of the
Security Trustee in respect thereof. The obligations of the Company under the
Notes, the Revolving Credit Notes, the Note Agreements, Revolving Credit
Agreements and the Company Security Agreement are guaranteed pursuant to that
certain Amended and Restated Guaranty Agreement dated as of June 30, 1997 of
each Restricted Subsidiary, as the same may from time to time be amended,
modified, supplemented, or waived pursuant to the terms thereof.
<PAGE>
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
WORLD ACCEPTANCE CORPORATION
By
Its
<PAGE>
[EXHIBIT B - FORM OF AMENDED AND RESTATED SECURITY AGREEMENT, PLEDGE AND
INDENTURE OF TRUST OMITTED]
EXHIBIT C (TO NOTE AGREEMENT)
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. SUBSIDIARIES. Annex A attached hereto states the name of each of the
Company's Subsidiaries existing on the Closing Date, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company and/or
its Subsidiaries. Those Subsidiaries listed in Section 1 of said Annex A
constitute Restricted Subsidiaries on the Closing Date. The Company has good and
marketable title to all of the shares of the stock, partnership interest,
membership interest or other applicable equity interest of each Subsidiary, free
and clear in each case of any Lien other than the Lien of the Company Security
Agreement and the Subsidiary Security Agreement. All such shares, partnership
interests, membership interests and other equity interests have been duly
authorized and validly issued and are fully paid and non-assessable.
2. ORGANIZATION AND AUTHORITY. The Company, and each Subsidiary,
(a) is a corporation, partnership, limited liability company or other
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization;
(b) has all requisite corporate or other applicable power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation, partnership, limited liability company or other entity in
each jurisdiction where the nature of the business conducted or the nature of
the property owned or leased by it makes such licensing or qualification
necessary.
3. FINANCIAL STATEMENTS. (a) The consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of March 31 in each of the
years 1993 to 1997, both inclusive, and the statements of income and retained
earnings and of cash flows for the fiscal year ended on said date accompanied by
a report thereon containing an opinion unqualified as to scope limitations
imposed by the Company and otherwise without qualification except as therein
noted, by KPMG Peat Marwick, were prepared in accordance with GAAP consistently
applied except as therein noted, are correct and complete in all material
respects and present fairly the financial position of the Company and its
Subsidiaries as of such date and the results of their operations for such
period.
(b) Since March 31, 1997, there has been no change in the condition,
financial or otherwise, of the Company and its Subsidiaries as shown on the
consolidated balance sheet as of such date except changes in the ordinary course
of business, none of which individually or in the aggregate have been materially
adverse.
4. INDEBTEDNESS. Annex B attached hereto correctly describes all
Indebtedness for Borrowed Money of the Company and its Restricted Subsidiaries
outstanding on the Closing Date.
5. FULL DISCLOSURE. Neither the financial statements referred to in
paragraph 3 hereof, nor the Agreements, the Company Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Senior Guaranty Agreement nor any
other written statement furnished by the Company or any Restricted Subsidiary to
you in connection with the negotiation of the sale of the Original Notes or the
exchange of the Original Notes for the Notes, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact peculiar to the Company or
its Subsidiaries which the Company has not disclosed to you in writing which,
individually or in the aggregate, materially affects adversely or, so far as the
Company can now foresee, will materially affect adversely the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company and its Subsidiaries.
6. PENDING LITIGATION. Except for the litigation described on Annex
C attached hereto, there are no proceedings pending or, to the knowledge of the
Company threatened, against the Company or any Subsidiary in any court or before
any governmental authority or arbitration board or tribunal which involve the
possibility of, individually or in the aggregate, materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Company and its Subsidiaries.
<PAGE>
7. TITLE TO PROPERTIES. The Company and each Subsidiary has good and
marketable title in fee simple (or its equivalent under applicable law) to all
the real property and has good title to all the other property (including, but
not limited to, the Collateral) it purports to own, including that reflected in
the most recent balance sheet referred to in paragraph 3 except as sold or
otherwise disposed of in the ordinary course of business and except for liens
disclosed in notes to the financial statements referred to in paragraph 3 hereof
or otherwise permitted by the Agreements, the Company Security Agreement or the
Subsidiary Security Agreement.
8. PATENTS AND TRADEMARKS. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks, copyright,
licenses and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any known conflict with the
rights of others which failure to own or possess or which conflict would,
individually or in the aggregate, materially and adversely affect the
properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries.
9. SALE IS LEGAL AND AUTHORIZED. The sale of the Original Notes, the
exchange of the Original Notes for the Notes and compliance by the Company with
all of the provisions of the Agreement, the Notes and the Company Security
Agreement--
(a) are within the corporate powers of the Company and, on and as of
the Closing Date, have been duly authorized by proper corporate action on the
part of the Company;
(b) assuming the accuracy of the Purchasers representations contained
in SS.3.2, will not violate any provisions of any law;
(c) will not violate any order of any court or governmental authority
or agency and will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under the Articles
of Incorporation or By-laws of the Company or any indenture or other agreement
or instrument to which the Company is a party or by which it may be bound or
result in the imposition of any liens or encumbrances on any property of the
Company; and
(d) have been duly authorized on and as of the Closing Date by all
necessary corporate action on the part of the Company, have been duly executed
on the Closing Date by authorized officers of the Company and delivered on the
Closing Date and constitute the legal, valid and binding contracts and
agreements of the Company enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and to the discretion of the
court before which any proceedings may be brought.
10. NO DEFAULTS. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness for Borrowed Money and is not in default under any
instrument or instruments or agreements under and subject to which any
Indebtedness for Borrowed Money has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
11. GOVERNMENTAL CONSENT. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company and each
Restricted Subsidiary of the Agreements, the Company Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Senior Guaranty Agreement or the
Notes, as the case may be, or compliance by the Company and each Restricted
Subsidiary with any of the provisions of the Agreements, the Company Security
Agreement, the Subsidiary Security Agreement, the Subsidiary Senior Guaranty
Agreement or the Notes, as the case may be.
12. TAXES. As of the Closing Date, except as disclosed on Annex D
attached hereto, all tax returns required to be filed by the Company or any
Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. The
Company does not know of any proposed additional tax assessment against it
<PAGE>
for which adequate provision in accordance with GAAP has not been made on its
accounts. The Federal income tax liability of the Company and its Subsidiaries
has been fully paid and satisfied for all taxable years up to and including the
taxable year ended December 31, 1993 and no material controversy in respect of
additional income taxes due since said date is pending or to the knowledge of
the Company threatened, except as disclosed on Annex D attached hereto. The
provisions for taxes on the books of the Company and each Subsidiary are
adequate in accordance with GAAP for all open years, and for its current fiscal
period.
13. USE OF PROCEEDS. The net proceeds from the sale of the Notes were
used to provide additional working capital and for other corporate purposes.
None of the transactions contemplated in the Agreements, the Company Security
Agreement, the Subsidiary Security Agreement or the Subsidiary Senior Guaranty
Agreement (including, without limitation thereof, the use of proceeds from the
issuance of the Notes) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulation issued pursuant
thereto, including, without limitation, Regulations G, T and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the
Company nor any Subsidiary owns or intends to carry or purchase any "MARGIN
STOCK" within the meaning of said Regulation G. None of the proceeds from the
sale of the Notes were or will be used to purchase, or refinance any borrowing,
the proceeds of which were used to purchase any "security" within the meaning of
the Securities Exchange Act of 1934, as amended.
14. PRIVATE OFFERING. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer any of the Notes or any
similar Security or has solicited or will solicit an offer to acquire any of the
Notes or any similar Security from or has otherwise approached or negotiated or
will approach or negotiate in respect of the Notes or any similar Security with
any Person other than you and the other purchaser, each of whom was offered a
portion of the Notes at private sale for investment. Neither the Company,
directly or indirectly, nor any agent on its behalf has offered or will offer
the Notes or any similar Security or has solicited or will solicit an offer to
acquire the Notes or any similar Security from any Person so as to bring the
issuance and sale of the Notes within the provisions of Section 5 of the
Securities Act of 1933, as amended.
15. ERISA. The consummation of the transactions provided for in the
Agreements and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended. Each Plan complies in all material respects with all applicable
statutes and governmental rules and regulations, and (a) no Reportable Event has
occurred and is continuing with respect to any Plan, (b) neither the Company nor
any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or
instituted steps to do so, in each case, for which there is any withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of ERISA), and (c)
no steps have been instituted to terminate any Plan. No condition exists or
event or transaction has occurred in connection with any Plan which,
individually or in the aggregate, could result in the incurrence by the Company
or any ERISA Affiliate of any material liability, fine or penalty. No Plan
maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "ACCUMULATED FUNDING DEFICIENCY" as defined in
Section 302 of ERISA nor does the present value of all benefits vested under all
Plans exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"WELFARE BENEFIT PLAN" (as such term is defined in ERISA) except as has been
disclosed to the Purchaser.
16. COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary (a)
is in violation of any law, ordinance, franchise, governmental rule or
regulation to which it is subject; or (b) has failed to obtain any license,
permit, franchise or other governmental authorization necessary to the ownership
of its property (including, but not limited to, the Collateral) or to the
conduct of its business, which violation or failure to obtain would,
individually or in the aggregate, materially adversely affect the business,
prospects, profits, properties or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or impair the ability of the
Company or any Restricted Subsidiary to perform its obligations contained in the
Agreements, the Company Security Agreement, the Subsidiary Security Agreement,
the Subsidiary Senior Guaranty Agreement or the Notes, as the case may be.
Neither the Company nor any Subsidiary is in
<PAGE>
default with respect to any order of any court or governmental authority or
arbitration board or tribunal.
17. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company is not in
violation of any applicable Environmental Legal Requirement which violation
could, individually or in the aggregate, have a material adverse effect on the
business, prospects, profits, properties or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole. The Company does not know
of any liability or class of liability of the Company or any Subsidiary under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601 ET SEQ.), or the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 ET SEQ.).
18. PERFECTION OF SECURITY INTEREST. On and as of the Closing Date,
financing statements or other notices with respect to the Company Security
Agreement and the Subsidiary Security Agreement have been filed for record or
recorded in all the public offices wherein such filing or recordation is
necessary to perfect the lien and security interest of the Security Trustee in
the Collateral under the Company Security Agreement and the Subsidiary Security
Agreement as against creditors of and purchasers from the Company and each
Restricted Subsidiary, and the Company Security Agreement and the Subsidiary
Security Agreement have created valid and perfected first priority liens on, and
security interests in, the right, title and interest of the Company and each
Restricted Subsidiary in and to the Collateral (other than the Unsecured
Receivables); PROVIDED, that during the existence of a Default or Event of
Default, the Company has agreed to deliver, or cause to be delivered, to the
Security Trustee possession of promissory notes evidencing the Unsecured
Receivables in order to create valid and perfected first priority liens on the
Unsecured Receivables), effective as against creditors of and purchasers from
the Company and each Restricted Subsidiary other than the Weingarten Lien.
19. COMPLIANCE BY RESTRICTED Subsidiaries. Compliance by each
Restricted Subsidiary with all of the provisions of the Subsidiary Security
Agreement and the Subsidiary Senior Guaranty Agreement--
(a) is within the corporate or other applicable powers of
such Restricted Subsidiary;
(b) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or constitute a
default under the charter, by-laws, certificate of limited partnership,
partnership agreement, articles of organization, operating agreement or other
applicable governing documents of such Restricted Subsidiary or any indenture or
other agreement or instrument to which such Restricted Subsidiary is a party or
by which it may be bound or result in the imposition of any Liens or
encumbrances on any property of such Restricted Subsidiary (other than as
contemplated by such Subsidiary Security Agreement); and
(c) has been duly authorized by proper corporate or other proper
action on the part of such Restricted Subsidiary (other than such action as has
already been taken, no action by the stockholders or other equity holders of
such Restricted Subsidiary being required by law, by the charter, by-laws,
certificate of limited partnership, partnership agreement, articles of
organization, operating agreement or other applicable governing documents of
such Restricted Subsidiary or otherwise), executed and delivered by such
Restricted Subsidiary and the Subsidiary Security Agreement and the Subsidiary
Senior Guaranty Agreement constitute the legal, valid and binding obligations,
contracts and agreements of such Restricted Subsidiary enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law) and to the discretion of the court before which any
proceedings may be brought.
<PAGE>
ANNEX A TO EXHIBIT C
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF PERCENTAGE OF VOTING STOCK OWNED BY THE COMPANY AND
INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
World Acceptance Corporation of Alabama Alabama 100% (World Acceptance Corporation)
World Finance Corporation of Georgia Georgia 100% (World Acceptance Corporation)
World Finance Corporation of Illinois Illinois 100% (World Acceptance Corporation)
WFC Limited Partnership Texas 99% L.P. Interest (World Acceptance Corporation of
Oklahoma, Inc.)
1% G.P. Interest (WFC of South Carolina, Inc.)
World Finance Corporation of Louisiana Louisiana 100% (World Acceptance Corporation)
World Acceptance Corporation of Missouri Missouri 100% (World Acceptance Corporation)
World Finance Corporation of New Mexico New Mexico 100% (World Acceptance Corporation)
World Acceptance Corporation of Oklahoma, Inc. Oklahoma 100% (World Finance Corporation of Texas)
World Finance Corporation of South Carolina South Carolina 100% (World Acceptance Corporation)
WFC of South Carolina, Inc. South Carolina 100% (World Acceptance Corporation)
World Finance Corporation of Tennessee Tennessee 100% (World Acceptance Corporation)
World Finance Corporation of Texas Texas 100% (World Acceptance Corporation)
WAC Insurance Company, Ltd. British Virgin Islands 65% (World Acceptance Corporation)
</TABLE>
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
None
<PAGE>
DESCRIPTION OF INDEBTEDNESS FOR BORROWED MONEY
Annex B to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Description of Indebtedness for Borrowed Money
CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE NOTE AGREEMENT
UNLESS OTHERWISE INDICATED.
Indebtedness of World Acceptance Corporation ("World") evidenced by this Senior
Note Agreement, the separate Senior Note Agreement with the other purchaser
named in Schedule I hereto, the Revolving Credit Agreement, the Subordinated
Note Agreement and all Notes issued pursuant to the above-listed agreements.
Indebtedness of each of World Finance Corporation of Alabama, World Finance
Corporation of Georgia, World Finance Corporation of Illinois, World Finance
Corporation of Louisiana, World Acceptance Corporation of Missouri, World
Finance Corporation of New Mexico, World Acceptance Corporation of Oklahoma,
Inc., World Finance Corporation of South Carolina, WFC of South Carolina, Inc.,
World Finance Corporation of Tennessee, World Finance Corporation of Texas and
WFC Limited Partnership, under the Subsidiary Senior Guaranty Agreement, the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement.
Indebtedness evidenced by World's 10 Percent Senior Debenture in the principal
amount of $482,000, payable to Voyager Life Insurance Company.
Indebtedness evidenced by World Finance Corporation of Georgia's 8% Subordinated
Promissory Note(s) in the principal amount of $9,924,000, payable to World
Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of Louisiana's 8%
Subordinated Promissory Note(s) in the principal amount of $3,158,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Acceptance Corporation of Oklahoma's 8%
Subordinated Promissory Note(s) in the principal amount of $5,220,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of South Carolina's 8%
Subordinated Promissory Note(s) in the principal amount of $23,894,000, payable
to World Finance Corporation of Texas.
<PAGE>
Indebtedness evidenced by WFC of South Carolina, Inc.'s 8% Subordinated
Promissory Note(s) in the principal amount of $295,000, payable to World Finance
Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of Tennessee's 8%
Subordinated Promissory Note(s) in the principal amount of $4,268,000, payable
to World Finance Corporation of Texas.
ANNEX B
(to Exhibit C)
<PAGE>
ANNEX C TO EXHIBIT C
LITIGATION
Annex C to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Litigation
(1) World Acceptance Corporation and World Finance Corporation of Georgia are
named as co-defendants with 46 other finance companies, merchants and insurance
companies in a class action lawsuit, JORDAN, ET AL. V. AVCO FINANCIAL SERVICES,
INC., ET AL., (Case No. 96-CL-1557N, MDL No. 1130, U.S. District Court, Middle
District of Alabama), that challenges the defendants' practices with respect to
non-filing insurance. The action was filed on April 18, 1995, in U.S. District
Court for the Middle District of Georgia, in Columbus, Georgia, and by order
dated October 11, 1996 was consolidated for pre-trial proceedings before Judge
U.W. Clemon of the U.S. District Court for the Middle District of Alabama by the
Judicial Panel on Multidistrict Litigation. Non-filing insurance is a product
that lenders can purchase as an alternative to filing UCC-1 financing statements
to perfect the lenders' security interest in borrowers' collateral. Borrowers
are charged a fee representing the amount of the non-filing insurance premium.
In the JORDAN action, the plaintiffs have alleged that non-filing insurance is
not true, legitimate insurance and that non-filing fees charged to borrowers are
not being disclosed properly under the federal Truth-in-Lending Act. The
plaintiffs also have alleged violations of RICO and the federal antitrust laws.
The plaintiffs originally asserted state law claims for breach of contract,
conversion and fraud, but subsequently dismissed those claims without prejudice.
The plaintiffs seek damages, permanent injunctive relief, and attorneys' fees.
If the Company's non-filing insurance practices are found to be unlawful, the
Company could be required to refund non-filing insurance fees, pay other damages
to the plaintiffs, and change its non-filing insurance practices going forward.
World has denied that its non-filing practices are unlawful and is
defending the case vigorously. Discovery in the case is ongoing, and pursuant to
court order, will continue through March 1998. On June 23, 1997, Judge Clemon
issued a Class Certification Order that certified a nationwide class of
plaintiffs who, on or after April 18, 1991, were charged a non-filing insurance
fee. The order applies only to the liability aspects of the case.
(2) The Company has been named as a defendant in an action, Turner v. World
Acceptance Corp., pending in District Court for the Fourteenth Judicial
District, Tulsa County, Oklahoma (No. CJ-97-1921). The action was commenced
against the Company on May 20, 1997, names numerous other consumer finance
companies as defendants, and seeks certification as a statewide class action.
The action alleges that World and other consumer finance defendants collected
excess finance charges in connection with refinancing certain consumer finance
loans in Oklahoma and seeks money damages and an injunction against further
collection of such charges. The Company has filed an answer in the action
denying liability, and discovery has not commenced. The plaintiff's claim is
based on a recent opinion of the Oklahoma Attorney General interpreting a
provision of the Oklahoma Consumer Credit Code with respect to the permitted
amount of certain loan refinance charges in a manner contrary to prior
regulatory practice in Oklahoma. Enforcement of the Oklahoma Attorney General's
opinion has been enjoined, and such action is currently pending before the
Oklahoma Supreme Court. In addition, the State of Oklahoma has recently enacted
legislation to clarify the interpretation of the disputed provision of the
Oklahoma Consumer Credit Code consistent with prior regulatory practice. World
intends to vigorously defend this action.
ANNEX C
(to Exhibit C)
<PAGE>
Annex D to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Taxes
The Internal Revenue Service has issued a preliminary determination
that WAC Insurance Company, Ltd. is not engaged in a bona fide reinsurance
business and thus, that its earnings are not excludable from the taxable
earnings of World Acceptance Corporation and its subsidiaries. World Acceptance
Corporation is appealing this matter.
ANNEX D
(to Exhibit C)
<PAGE>
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to
the Purchasers, called for by SS.4.1 of the Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory
in form and substance to the Purchaser and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of South Carolina and has the corporate
power and the corporate authority to execute and deliver the Agreements and the
Company Security Agreement and to issue the Notes.
2. Each Restricted Subsidiary is a corporation or partnership, as
the case may be, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, as the case may be, has the power
and the authority to execute and deliver the Subsidiary Security Agreement and
Subsidiary Senior Guaranty Agreement.
3. The Agreements and the Company Security Agreement have been duly
authorized by all necessary corporate action on the part of the Company, have
been duly executed and delivered by the Company and constitute the legal, valid
and binding contracts and agreements of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
5. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized by all necessary corporate or
partnership, as the case may be, action on the part of each Restricted
Subsidiary and have been duly executed and delivered by each Restricted
Subsidiary.
6. The Security Trustee is an Illinois banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to enter into and perform its
obligations under the Company Security Agreement and the Subsidiary Security
Agreement.
7. The Company Security Agreement and the Subsidiary Security
Agreement have been duly authorized, executed and delivered by the Security
Trustee and constitute the legal, valid and binding contracts and agreements of
the Security Trustee enforceable against the Security Trustee in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
8. The execution and delivery of the Company Security Agreement and
the Subsidiary Security Agreement and compliance by the Security Trustee with
all of the provisions thereof does not and will not contravene any law of the
State of Illinois governing the banking or trust powers of the Security Trustee,
or any order of any court or governmental authority or agency applicable to or
binding on the Security Trustee or its charter or its by-laws.
9. No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution and delivery by the Security Trustee of the Company Security
Agreement and the Subsidiary Security Agreement.
10. Stock certificates representing the Pledged Shares have been
delivered to the Security Trustee by the Company. No filing or recording in any
public office is necessary in order to perfect the security interest in the
Pledged Shares granted by the Company to the Security Trustee under the Company
Security Agreement.
11. Arrangements satisfactory to us have been made for the filing of
each of the
<PAGE>
financing statements described in Schedule I hereto in the public offices in the
states referred to in Schedule I with respect to such financing statement. No
other filing or recording in any public office in such state is necessary to
perfect the security interest of the Security Trustee under the Company Security
Agreement and the Subsidiary Security Agreement in the interest of the Company
and each Restricted Subsidiary in the Collateral specifically described in the
Company Security Agreement and the Subsidiary Security Agreement as to which a
security interest may be perfected by the filing of financing statements, other
than a security interest in fixtures.
No opinion is expressed as to the enforceability of the Subsidiary
Senior Guaranty Agreement or the Subsidiary Security Agreement. We have
previously advised you that there is no clear legal precedent as to whether the
obligations of any particular Restricted Subsidiary under the Subsidiary Senior
Guaranty Agreement or the Subsidiary Security Agreement may be avoidable as a
fraudulent transfer under Section 548 of the Bankruptcy Code or may be subject
to attack in an action brought pursuant to state fraudulent conveyance statutes
by a trustee in bankruptcy of such Restricted Subsidiary or by third-party
creditors.
No opinion is expressed as to the title of the Company or any
Restricted Subsidiary to the Collateral described in the Company Security
Agreement and the Subsidiary Security Agreement or as to the priority of the
security interest of the Security Trustee under the Company Security Agreement
and the Subsidiary Security Agreement in the Collateral described therein.
Section 36-9-308 of the Uniform Commercial Code of the State of South Carolina,
Section 9.308 of the Uniform Commercial Code of the State of Texas, Section
10:9-308 of the Uniform Commercial Code of the State of Louisiana, Section
11-9-308 of the Uniform Commercial Code of the State of Georgia, Section 9-308
of the Uniform Commercial Code of the State of Oklahoma, Section 9-308 of the
Uniform Commercial Code of the State of Illinois, Section 400.9-308 of the
Uniform Commercial Code of the State of Missouri, Section 47-9-308 of the
Uniform Commercial Code of the State of Tennessee, Section 7-9-308 of the
Uniform Commercial Code of the State of Alabama and Section 55-9-308 of the
Uniform Commercial Code of the State of New Mexico provide that a purchaser of
chattel paper who gives new value and takes possession of it in the ordinary
course of its business has priority over a security interest in chattel paper
which is perfected by the filing of a financing statement if such purchaser acts
without knowledge that the chattel paper is subject to a security interest.
Section 4.3 of the Company Security Agreement and the Subsidiary Security
Agreement requires that the Company and each Restricted Subsidiary place on each
document, instrument, chattel paper and other writing evidencing its Receivables
created on or after the Closing Date the legend described in said Section. No
opinion is expressed as to the perfection of the security interest of the
Company Security Agreement and the Subsidiary Security Agreement against any
fixtures or any other Collateral (other than the Pledged Shares) of a character
against which a security interest cannot be perfected b filing under the
applicable Uniform Commercial Code.
Your attention is directed to the Uniform Commercial Code, as adopted
in each of the jurisdictions listed in Schedule I hereto. In general, the
Uniform Commercial Code as in effect in most jurisdictions provides that a filed
financing statement which does not state a maturity date or which states a
maturity date of more than five years is effective only for a period of five
years from the date of filing unless within six months prior to the expiration
of said period a continuation statement is filed in the same office or offices
in which the original statement was filed. The continuation statement must be
signed by the secured party, identify the original statement by file number and
state that the original statement is still effective. Upon the timely filing of
a continuation statement, the effectiveness of the original financing statement
is continued for five years after the last date to which the original statement
was effective. Succeeding continuation statements may be filed in the same
manner to continue the effectiveness of the original statement.
We have also examined the opinions of Robinson, Bradshaw & Hinson,
P.A., counsel for the Company, World Finance Corporation of South Carolina, WFC
of South Carolina, Inc., World Acceptance Corporation of Alabama, World
Acceptance Corporation of Missouri, World Finance Corporation of Illinois and
World Finance Corporation of New Mexico, from Abbot, Murphy & Harvey, P.C.,
counsel for World Finance Corporation of Georgia, from Comegys, Lawrence, Jones,
Odom & Spruiell, counsel for World Finance Corporation of Louisiana, from Crowe
& Dunlevy, Luttrell, Pendarvis & Rawlinson, counsel for World Acceptance
Corporation of Oklahoma, Inc., from Dance, Dance & Lane, counsel for World
Finance
<PAGE>
Corporation of Tennessee, and from Sam Kelley, Esq., counsel for World
Finance Corporation of Texas and WFC Limited Partnership, each delivered on the
date hereof responsive to the requirements of Section 4.1(f) of the Agreements,
signed copies of which, dated the date hereof, are delivered to you herewith.
Said opinions are satisfactory in scope and form and we believe that you are
justified in relying thereon.
Respectfully submitted,
<PAGE>
EXHIBIT E-1 (TO NOTE AGREEMENT)
DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY, WORLD FINANCE
CORPORATION OF SOUTH CAROLINA, WFC OF SOUTH CAROLINA, INC., WORLD ACCEPTANCE
CORPORATION OF ALABAMA, WORLD ACCEPTANCE CORPORATION OF MISSOURI, WORLD FINANCE
CORPORATION OF ILLINOIS AND WORLD FINANCE CORPORATION OF NEW MEXICO
The closing opinion of Robinson, Bradshaw & Hinson, P.C., counsel for
the Company, World Finance Corporation of South Carolina ("WORLD-SC"), WFC of
South Carolina, Inc. ("WFC-SC"), World Acceptance Corporation of Alabama
("WORLD-AL"), World Acceptance Corporation of Missouri ("WORLD-MO"), World
Finance Corporation of Illinois ("WORLD-IL") and World Finance Corporation of
New Mexico ("WORLD-NM"), which is called for by SS.4.1 of the Agreements, shall
be dated the Closing Date and addressed to the Purchasers, shall be satisfactory
in scope and form to the Purchasers and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of South Carolina, has the
corporate power and authority to execute and perform the Agreements and the
Company Security Agreement and to issue the Notes and is duly qualified and is
in good standing as a foreign corporation in each jurisdiction in which, to our
knowledge, the character of the properties owned or leased by it or the nature
of the business transacted by it makes such qualification necessary.
2. World-SC is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of South Carolina, has the
corporate power and authority to execute and perform the Subsidiary Security
Agreement and the Subsidiary Senior Guaranty Agreement and is duly qualified and
is in good standing in each jurisdiction in which, to our knowledge, the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
3. WFC-SC is a corporation duly organized, validly existing and in
good standing under the laws of the State of South Carolina, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement and is duly licensed or qualified and
is in good standing in each jurisdiction in which, to our knowledge, the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary.
4. World-AL is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Alabama, has the corporate power
and authority to execute and perform the Subsidiary Security Agreement and the
Subsidiary Senior Guaranty Agreement and is duly qualified and is in good
standing in each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such qualification necessary.
5. World-MO is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Missouri, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement and is duly qualified and is in good
standing in each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such qualification necessary.
6. World-IL is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Illinois, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement and is duly qualified and is in good
standing in each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such qualification necessary.
7. World-NM is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of New Mexico, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement and is
<PAGE>
duly qualified and is in good standing in each jurisdiction in which, to our
knowledge, the character of the properties owned or leased by it or the nature
of the business transacted by it makes such qualification necessary.
8. The Company is the sole record owner of all of the outstanding
capital stock of each Restricted Subsidiary existing as of the Closing Date
(other than (x) WFC Limited Partnership, of which WFC-SC (a wholly-owned
subsidiary of the Company) is a 1% general partner and World Acceptance
Corporation of Oklahoma, Inc. (a wholly-owned subsidiary of the Company) is a
99% limited partner, (y) World Acceptance Corporation of Oklahoma, Inc., which
is wholly owned by World Finance Corporation of Texas (a wholly-owned subsidiary
of the Company) and (z) WAC Insurance Company, Ltd., of which 65% is owned by
the Company). All of the outstanding shares of capital stock of each of
World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM have been duly
authorized and validly issued, and are fully paid and non-assessable.
9. The Agreements, the Company Security Agreement and the Notes have
been duly authorized by all necessary corporate action on the part of the
Company, have been duly executed and delivered by the Company and constitute the
legal, valid and binding contracts and agreements of the Company, enforceable in
accordance with their terms, except as such enforceability may be affected by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, or general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law) and to the discretion of the court before
which any proceeding may be brought.
10. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized by all necessary corporate action
on the part of World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM, have
been duly executed and delivered by World-SC, WFC-SC, World-AL, World-MO,
World-IL and World-NM and constitute the legal, valid and binding contracts and
agreements of World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM,
enforceable in accordance with their terms, except as such enforceability may be
affected by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally, or general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and to the discretion of the
court before which any proceeding may be brought.
11. Assuming the due authorization, execution and delivery of the
Subsidiary Security Agreement and the Subsidiary Senior Guaranty Agreement by
World Finance Corporation of Georgia, World Finance Corporation of Louisiana,
World Acceptance Corporation of Oklahoma, Inc., World Finance Corporation of
Tennessee, World Finance Corporation of Texas and WFC Limited Partnership, each
of the Subsidiary Senior Guaranty Agreement and the Subsidiary Security
Agreement constitute the legal, valid and binding contracts and agreements of
each Restricted Subsidiary, respectively, enforceable in accordance with its
terms, except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law) and to the discretion of the court before which any proceeding
may be brought.
12. The issuance of the Notes and the execution, delivery and
performance by the Company of the Agreements and the Company Security Agreement
do not violate any law, regulation, order or decree of any court or governmental
instrumentality, or conflict with, or result in any breach of any of, the
provisions of, or constitute a default under, or result in the creation or
imposition of any lien or encumbrance upon any of the property of the Company
pursuant to, the provisions of the Articles of Incorporation or Bylaws of the
Company or, the Material Agreements. For purposes of this opinion letter,
"MATERIAL AGREEMENTS" mean all agreements and instruments attached as exhibits
to the Company's Registration Statement No. 33-42879 and the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996.
13. The execution, delivery and performance by World-SC, WFC-SC,
World-AL,
<PAGE>
World-MO, World-IL and World-NM of the Subsidiary Senior Guaranty Agreement and
the Subsidiary Security Agreement do not violate any law, regulation, order or
decree of any court or governmental instrumentality and the execution, delivery
and performance by each Restricted Subsidiary of the Subsidiary Senior Guaranty
Agreement and the Subsidiary Security Agreement do not conflict with or result
in any breach of any of the provisions of or constitute a default under or
result in the creation or imposition of any lien or encumbrance upon any of the
property of such Restricted Subsidiary pursuant to the provisions of the
articles of incorporation, bylaws or other organizational documents of such
Restricted Subsidiary or the Material Agreements.
14. Except for the filings referred to in paragraphs 22 and 23 below,
no approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any governmental body, federal, state or
local, is necessary in connection with the execution, delivery and performance
by the Company, World-SC, WFC-SC, World-AL, World-MO, World-IL or World-NM of
the Agreements, the Company Security Agreement, the Subsidiary Security
Agreement or the Subsidiary Senior Guaranty Agreement.
15. Except as disclosed on Annex C to Exhibit C to the Agreement,
there are no proceedings pending or, to our knowledge, threatened against the
Company or any Restricted Subsidiary in any court or before any governmental
authority or arbitration board or tribunal, an adverse determination in which
could, individually or in the aggregate, materially and adversely affect the
properties, business or condition (financial or otherwise) of the Company or
such Restricted Subsidiary, as the case may be, and to our knowledge, neither
the Company nor any such Restricted Subsidiary is in default with respect to any
order of any court or governmental authority or arbitration board or tribunal.
16. With respect to each Receivable of World-SC and WFC-SC, assuming
that World-SC and WFC-SC each uses a written document to evidence such
Receivable, and assuming each such written document evidences a monetary
obligation of the account debtor and a grant by such account debtor to World-SC
or WFC-SC, as the case may be, of a security interest in specific goods, the
documents evidencing such Receivable constitute chattel paper within the meaning
of the Uniform Commercial Code of the State of South Carolina.
17. Upon delivery to the Security Trustee by the Company of stock
certificates representing the Pledged Shares, the Security Trustee shall have a
perfected security interest in the
Pledged Shares.
18. Assuming that (i) the financing statements in the form attached
hereto as Schedule 1 have been accepted for filing and properly indexed in the
Office of the Secretary of State of South Carolina and the Register of Mesne
Conveyances of the County of Greenville, South Carolina, (ii) value has been
given by the Banks and purchaser to the Company and each Restricted Subsidiary,
and (iii) the Company and each Restricted Subsidiary have rights in the
collateral described on such financing statements, the security interests
created by the Company Security Agreement and the Subsidiary Security Agreement
in the collateral described therein constitute valid perfected security
interests in such types of collateral as to which a security interest may be
perfected by filing financing statements under the Uniform Commercial Code of
the State of South Carolina.
19. Section 36-9-308 of the Uniform Commercial Code of the State of
South Carolina provides that a purchaser of chattel paper who gives new value
and takes possession of it in the ordinary course of its business has priority
over a security interest in chattel paper which is perfected by the filing of a
financing statement if such purchaser acts without knowledge that the chattel
paper is subject to a security interest. Assuming World-SC and WFC-SC place on
each document, instrument, chattel paper and other writing evidencing its
Receivables the legend described in Section 4.3(c) of the Subsidiary Security
Agreement and assuming that the assumptions set forth in paragraphs 16 and 18 of
this opinion are true, nothing has come to our attention to lead us to believe
that, under Section 36-9-308 of the Uniform Commercial Code of the State of
South Carolina, the security interests of the Security Trustee in World-SC's and
WFC-SC's Receivables would not be prior to the rights of a purchaser of such
Receivables who thereafter gives new value
<PAGE>
and takes possession thereof in the ordinary course of such purchaser's
business.
The opinions expressed above are subject to the effect of legal and
equitable doctrines and procedures (including the requirement that the Agent,
the Banks, the purchasers and the Security Trustee act in good faith) that may
limit the enforceability of any particular remedy, covenant or other provision
in the Loan Documents. In our opinion, however, the effect of such legal and
equitable doctrines and procedures will not prevent the practical realization of
the rights provided for in the Loan Documents. Specifically, but without
limiting the generality of the foregoing, no opinion is expressed as to
provisions, if any, contained in the Loan Documents that (a) purport to excuse a
party for liability for its own acts in contradiction of public policy, (b)
purport to make void any act done in contravention thereof, (c) relate to the
effect of laws or regulations that may be enacted in the future, (d) require
waivers or amendments to be made only in writing, (e) purport to effect waivers
of constitutional or statutory rights or the effect of applicable laws, or (f)
purport to preserve or maintain the obligation or liability of the Company or
the Restricted Subsidiaries despite the unenforceability of the Notes due to
illegality.
This opinion is subject to the following further assumptions and
qualifications:
a. We express no opinion as to the effectiveness of any of the
provisions of the Loan Documents whereby any legal or equitable rights are
purportedly waived.
b. We express no opinion as to the enforceability of provisions
relating to self help or evidentiary standards by which the Loan Documents are
to be construed.
c. We express no opinion as to the enforceability of any provision
of the Loan Documents whereby the Company or any Restricted Subsidiary appoints
the Agent, the Banks, the purchasers or the Security Trustee or other parties as
attorney-in-fact.
d. We express no opinion with regard to any provisions of the Loan
Documents whereby the Company or any Restricted Subsidiary purports to indemnify
the Agent, any of the Banks, the purchasers or the Security Trustee against its
own negligence or misconduct.
e. We express no opinion with regard to any choice of law provisions
in the Subsidiary Security Agreement and Subsidiary Senior Guaranty Agreement.
Nothing has come to our attention, however, to lead us to believe that a South
Carolina court, if properly presented with the question, would not enforce the
choice of law provisions contained in such agreements.
f. No opinion is expressed with respect to the validity or existence
of any security interest in fixtures.
g. In rendering the opinions in paragraph 8 relating to the ownership
by the Company of the capital stock of the Restricted Subsidiaries, we have
relied solely upon the stock transfer ledgers of the Restricted Subsidiaries as
certified by their respective officers and certain statements of objective fact
certified to us by officers of the Restricted Subsidiaries.
h. In rendering the opinions set forth in paragraph 15, we have
relied solely on a review of the litigation log and telephone complaint log of
the Company, World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM as
certified by an officer of the Company as of the date hereof and discussions
with officers of the Company about the matters contained therein.
i. In rendering the opinions set forth in paragraph 20, we have
relied, as to factual matters, solely on the representations of the Purchaser
under the Agreements.
j. We express no opinion as to whether any consents or
authorizations of third parties may be required under the Code of Laws of South
Carolina pursuant to Chapter 29 of Title 34 of the Consumer Finance Law, the
Consumer Protection Code or The Insurance Law as a condition precedent to, or in
connection with, (i) the ability of the Security Trustee to foreclose on and
transfer title to or vote the Pledged Stock; or (ii) the ability of the Security
Trustee to foreclose on and take possession of or sell a substantial portion of
the assets of the Company, World-SC or WFC-SC where such foreclosure, possession
or sale may be deemed to involve an acquisition or transfer of control or
management of the Company, World-SC or WFC-SC, or where such foreclosure,
possession or sale may involve a transfer of licenses granted to the Company,
World-SC or WFC-SC under the foregoing laws.
k. As to factual matters related to the subject matter of this
opinion letter, we have
<PAGE>
relied on the representations of the Company, World-SC, WFC-SC, World-AL,
World-MO, World-IL and World-NM in the Agreements, the Company Security
Agreement, Subsidiary Senior Guaranty Agreement and Subsidiary Security
Agreement and on certificates of officers of the Company, World-SC, WFC-SC,
World-AL, World-MO, World-IL and World-NM.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for any other purposes, nor may it be relied
upon by any other person (other than your special counsel, Chapman and Cutler,
and any subsequent holder of a Note) for any purpose, without our prior written
consent.
Sincerely yours,
ROBINSON, BRADSHAW & HINSON, P.A.
Karen A. Gledhill
<PAGE>
EXHIBIT F-1 (TO NOTE AGREEMENT)
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Abbot, Murphy & Harvey, P.C., counsel
for World Finance Corporation of Georgia (the "COMPANY"), which is called for by
SS.4.1 of the Agreements, shall be dated the Closing Date and addressed to the
Purchasers, shall be satisfactory in scope and form to the Purchasers and shall
be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Georgia, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement, and is duly licensed or qualified and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such licensing or qualification necessary.
2. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable.
3. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized by all necessary corporate action
on the part of the Company, have been duly executed and delivered by the Company
and constitute the legal, valid and binding contracts and agreements of the
Company, enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, or general principles of equity (regardless of whether the
application of such principles is considered in a proceeding equity or at law)
and to the discretion of the court at which any proceeding may be brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Guaranty Agreement and the Subsidiary Security Agreement do
not violate any law, regulation, order or decree of any court or governmental
instrumentality or conflict with the Articles of Incorporation or Bylaws of the
Company.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by the Company of the Subsidiary Security Agreement and the
Subsidiary Senior Guaranty
Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to the Company of a security interest in specific
goods, the documents evidencing such Receivable constitute chattel paper within
the meaning of the Uniform Commercial Code of the State of Georgia.
7. All Financing Statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interests of the Security Trustee in the Collateral under the
Subsidiary Security Agreement as against creditors of and purchasers from the
Company and the liens and security interests created by the Subsidiary Security
Agreement in the Collateral described therein constitute valid perfected liens
on and security interests in the right, title and interest of the Company in and
to the Collateral, effective as against creditors of and purchasers from the
Company.
8. Assuming the Company complies with Section 4.3(c) of the
Subsidiary Security Agreement and assuming that the assumptions set forth in
paragraph 6 of this opinion are true, the security interests of the Security
Trustee in the Company's Receivables created on or after the Closing Date will
be prior to the right of any purchaser of such Receivables who thereafter gives
new value and takes possession thereof in the ordinary course of such
purchaser's business.
Very truly yours,
ABBOT, MURPHY AND HARVEY, P.C.
<PAGE>
By
Fred K. Harvey, Jr.
FKH:fs
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Comegys, Lawrence, Jones, Odom & Spruiell,
counsel for World Finance Corporation of Louisiana (the "COMPANY"), which is
called for by SS.4.1 of the Agreements, shall be dated the Closing Date and
addressed to the Purchasers, shall be satisfactory in scope and form to the
Purchasers and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of State of Louisiana, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement, and is duly qualified or licensed and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such qualification or licensing necessary.
2. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable.
3. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized by all necessary corporate action
on the part of the Company, have been duly executed and delivered by the Company
and constitute the legal, valid and binding contracts and agreements of the
Company, enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, or general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at
law) and to the discretion of the court before which any proceeding may be
brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Guaranty Agreement and the Subsidiary Security Agreement do
not violate any law, regulation, order or decree of any court or governmental
instrumentality or conflict with the Articles of Incorporation or Bylaws of the
Company.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by the Company of the Subsidiary Security Agreement and the
Subsidiary Senior Guaranty Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence each of such Receivable, and
assuming each such written document evidences a monetary obligation of the
account debtor and a grant by such account debtor to the Company of a security
interest in specific goods, the documents evidencing such Receivable constitute
chattel paper within the meaning of the Uniform Commercial Code of the State of
Louisiana.
7. All financing statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interest of the Security Trustee in the Collateral under the
Subsidiary Security Agreement as against creditors of and purchasers from the
Company and the liens and security interests created by the Subsidiary Security
Agreement in the Collateral constitute valid perfected liens on and security
interests in the right, title and interest of the Company in and to the
Collateral effective as against creditors or and purchasers from the Company.
8. Assuming the Company complies with Section 4.3(c) of the
Subsidiary Security Agreement and assuming that the assumptions set forth in
paragraph 6 of this opinion are true, the security interests of the Security
Trustee in the Company's Receivables will be prior to the rights of any
purchaser of such Receivables who thereafter gives new value and takes
possession thereof in the ordinary course of such purchaser's business.
We are licensed to practice law only in the State of Louisiana and we
express no opinion with respect to the effect of any laws other than the laws of
the State of Louisiana and those of the United States as are relative to the
operations of the Company in the State of Louisiana. This opinion is issued to
you and your assignees for value, and is not to be relied upon by anyone else
other than your special counsel and subsequent holders of the Notes.
<PAGE>
COMEGYS, LAWRENCE, JONES, ODOM &
SPRUIELL
By
William M. Comegys, III
WMCIII/sdw
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Crowe & Dunlevy, Luttrell, Pendarvis &
Rawlinson, counsel for World Acceptance Corporation of Oklahoma, Inc. (the
"COMPANY"), which is called for by SS.4.1 of the Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in scope and
form to the Purchasers and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Oklahoma and has the
corporate power and authority to execute and perform the Subsidiary Security
Agreement and the Subsidiary Senior Guaranty Agreement.
2. The outstanding shares of common stock of the Company, $1.00 par
value, have been duly authorized and validly issued and are fully paid and
nonassessable.
3. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized by all necessary corporate action
on the part of the Company, have been duly executed and delivered by the Company
and constitute the legal, valid and binding contracts and agreements of the
Company, enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, or general principles of equity (regardless of whether the
application of such principles is considered in a proceeding equity or at law)
and to the discretion of the court before which any proceeding may be brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Guaranty Agreement and the Subsidiary Security Agreement do
not violate any law, regulation, order or decree of any court or governmental
instrumentality or conflict with the Articles of Incorporation or Bylaws of the
Company.
5. Under current applicable Oklahoma law, no approval, consent or
withholding of objection on the part of, or filing, registration or
qualification with, any Oklahoma state or local governmental body, is necessary
in connection with the execution, delivery and performance by the Company of the
Subsidiary Security Agreement and the Subsidiary Senior Guaranty Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to the Company of a security interest in specific
goods, the documents evidencing such Receivable constitute chattel paper within
the meaning of the Uniform Commercial Code of the State of Oklahoma.
7. All financing statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interest of the Security Trustee in the Collateral as against
creditors of and purchasers from the Company. The liens and security interests
created by the Subsidiary Security Agreement in the Collateral constitute valid
perfected liens on and security interests in the right, title and interest of
the Company in and to the Collateral effective as against creditors and
purchasers from the Company, assuming the Company complies with Section 4.3(c)
of the Subsidiary Security Agreement.
8. Assuming the Company places on each document, instrument, chattel
paper and other writing evidencing its Receivable the legend described in
Section 4.3(c) of the Subsidiary Security Agreement to which it is a party and
assuming that the assumptions set forth in paragraphs 6 and 7 of this opinion
are true, then according to the official comments to Section 9-308 of the
Oklahoma Uniform Commercial Code, the security interests of the Security Trustee
in the Company's Receivables will be prior to the rights of a purchaser of such
Receivables who thereafter gives new value and takes possession thereof in the
ordinary course of such purchaser's business.
The opinions expressed above are subject to the effect of legal and
equitable doctrines and procedures (including the requirement that the Agent,
the Banks, the Noteholders and the Security Trustee act in good faith) that may
limit the enforceability of any particular remedy, covenant or other provision
of the Subsidiary Security Agreement or the Subsidiary Senior Guaranty
Agreement. Specifically without limiting the generality of the foregoing, no
opinion is expressed as to provisions, if any, contained in the Subsidiary
Security Agreement or the Subsidiary Senior Guaranty Agreement that (a) purport
to excuse a
<PAGE>
party for liability for its own acts that may be contrary to public
policy, (b) purport to make void any act done in contravention thereof, (c)
purport to authorize a party to act in its own discretion, (d) relate to the
effect of laws or regulations that may be enacted in the future, (e) require
waivers or amendments to be made all in writing, (f) purport to effect waivers
of constitutional or statutory rights or the effect of applicable laws or (g)
purport to preserve or maintain the obligation or liability of the borrower or
the liability of the Company despite the unenforceability of the Notes due to
illegality or impossibility of performance.
9. This opinion is further subject to the following qualifications
and exceptions:
A. We are licensed to practice law only in the State of Oklahoma and
we express no opinion with respect to the effect of any laws other than the laws
of Oklahoma and those of the United States.
B. We do not opine on any state or federal securities laws which may
be applicable to the Transaction or the compliance of such Transaction with any
state or federal securities laws.
C. We do not opine on any federal banking laws which may be
applicable to the Transaction.
D. We do not opine on any state or federal taxation laws which may
be applicable to the Transaction.
E. We do not opine on the qualification, authority to do business or
good standing of the Company in any jurisdiction other than the State of
Oklahoma.
F. We express no opinion as to whether any consents or
authorizations of third parties may be required under the Uniform Consumer
Credit Code and the State Insurance Code, as a condition precedent to or in
connection with (i) the ability of the Security Trustee to foreclose on and
transfer title to the pledged stock or the Collateral described in the
Subsidiary Security Agreement; or (ii) the ability of the Security Trustee to
foreclose and take possession of or sell a substantial portion of the assets of
the Company or to collect the Receivables of the Company.
G. We do not opine on the compliance of the Company with any state
or federal laws relating to labor or employment.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for any other purposes, nor may it be relied
upon by any other person (other than your special counsel and subsequent holders
of the Notes) for any purpose without our prior written consent.
Very truly yours,
CROWE & DUNLEVY, LUTTRELL, PENDARVIS
& RAWLINSON
MSR:sdb
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Samuel L. Kelley, Esq., counsel for World
Finance Corporation of Texas (the "WFC-TEXAS"), and WFC Limited Partnership
("WFC-LP") which is called for by SS.4.1 of the Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in scope and
form to the Purchasers and shall be to the effect that:
1. WFC-Texas is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, has
the corporate power and authority to execute and perform the Subsidiary Security
Agreement and the Subsidiary Senior Guaranty Agreement, and is duly qualified or
licensed and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it makes such qualification or licensing necessary.
2. WFC-LP is a limited partnership, duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has the
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement, and is duly qualified or licensed and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business transacted by it
makes such qualifications or licensing necessary.
3. All of the outstanding shares of capital stock of WFC-Texas have
been duly authorized and validly issued and are fully paid and non-assessable.
4. All of the outstanding partnership interests of WFC-LP have been
duly authorized and validly issued and are fully paid and non-assessable.
5. The Subsidiary Senior Guaranty Agreement and the Subsidiary
Security Agreement have been duly authorized, executed and delivered by
WFC-Texas and WFC-LP and constitute the legal, valid, and binding contracts and
agreements of WFC-Texas and WFC-LP, enforceable in accordance with their terms,
except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditor's rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law) and to the discretion of the court before which any proceeding
may be brought.
6. The execution, delivery and performance by WFC-Texas and WFC-LP
of the Subsidiary Senior Guaranty Agreement and the Subsidiary Security
Agreement do not violate any law, regulation, order or decree of any court or
governmental instrumentality.
7. Except for the filing of UCC-3 financing statements with the
Texas Secretary of State as to WFC-LP and except for the filing of UCC-3
financing statements with the Texas Secretary of State with respect to
WFC-Texas, no approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by WFC-Texas or WFC-LP of the Subsidiary Security Agreement or the
Subsidiary Senior Guaranty Agreement.
8. With respect to each Secured Receivable (as defined in the
Subsidiary Security Agreement) of WFC-Texas and WFC-LP, assuming that WFC-Texas
and WFC-LP use a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to WFC-Texas or WFC-LP, as the case may be, of a
security interest in specific goods, the documents evidencing such Receivable
constitute chattel paper within the meaning of the Uniform Commercial Code of
the State of Texas.
9. Assuming that (i) financing statements in the forms attached
hereto as Schedule 1 have been accepted for filing and properly indexed in the
Office of the Secretary of State of Texas and the appropriate recording fees and
taxes paid thereon, (ii) value has been given by the Banks and Purchaser (as
defined in the Subsidiary Security Agreement) to WFC-LP and by the Banks and the
Purchaser (as defined in the Subsidiary Security Agreement) to WFC-Texas, and
(iii) WFC-LP and WFC-Texas each has rights in the collateral described on such
respective financing statements applicable to it, the security interest created
by the Subsidiary Security Agreement in the collateral described therein (other
than the Unsecured Receivables (as defined in the Subsidiary Security
Agreement), of WFC-LP or WFC-Texas, as the case may be; PROVIDED that during the
existence of a Default or Event of Default, the Company has agreed to deliver to
the Security
<PAGE>
Trustee possession of promissory notes evidencing the Unsecured Receivables and
such delivery shall create a valid and perfected lien on, and security interest
in, the Unsecured Receivables) constitutes a valid perfected security interest
in such types of collateral as to which a security interest may be perfected by
filing in such offices under the Uniform Commercial Code of the State of Texas.
10. Section 9-308 of the Uniform Commercial Code of the State of Texas
provides that a purchaser of chattel paper who gives new value and takes
possession of it in the ordinary course of its business has priority over a
security interest in chattel paper which is perfected by the filing of a
financing statement if such purchaser acts without knowledge that the chattel
paper is subject to a security interest. Assuming WFC-Texas and WFC-LP place on
each document, instrument, chattel paper, and other writing evidencing its
Secured Receivables the legend described in Section 4.3(c) of the Subsidiary
Security Agreement and assuming that the assumptions set forth in paragraphs 6
and 7 of this opinion are true, nothing has come to my attention to lead me to
believe that, under Section 9-308 of the Uniform Commercial Code of the State of
Texas, the security interests of the Security Trustee in Secured Receivables of
WFC-Texas and WFC-LP would not be prior to the right of a purchaser of such
Receivables who thereafter gives new value and takes possession thereof in the
ordinary course of such purchaser's business.
12. Assuming possession by the Security Trustee of the certificates
evidencing the capital stock of World Acceptance Corporation of Oklahoma, Inc.,
an Oklahoma corporation, together with duly executed blank stock powers for the
transfer of such stock, and the promissory notes evidencing the intercompany
receivables referred to in clause (a) of the definition of "Pledged Collateral"
set forth in the Subsidiary Security Agreement, together with duly executed
blank assignments for the transfer of such notes in the form contained in such
notes, the Security Trustee will have a perfected security interest in the
Pledged Shares and such promissory notes pursuant to the Subsidiary Security
Agreement.
I am licensed to practice law only in the state of Texas, and the
opinions expressed in this letter relate only to the laws of Texas and federal
laws as they are applicable within Texas.
Sincerely,
Sam Kelley
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Dance, Dance & Lane, counsel for World Finance
Corporation of Tennessee (the "COMPANY"), which is called for by SS.4.1 of the
Agreements, shall be dated the Closing Date and addressed to the Purchasers,
shall be satisfactory in scope and form to the Purchasers and shall be to the
effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Tennessee, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Guaranty Agreement (collectively, the "LOAN DOCUMENTS").
2. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable.
3. The Loan Documents have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding contracts
and agreements of the Company enforceable in accordance with their terms, except
as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, inadequate or failure of
consideration, applicable regulatory law affecting the Receivables, or other
similar laws and proceedings affecting creditors' rights generally, or general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and to the discretion of the
court before which any proceeding may be brought, and to the laws of the State
of South Carolina.
4. Subject to all of the provisions of paragraph 3, the execution,
delivery and performance by the Company of the Loan Documents do not violate any
law or regulation or conflict with the provisions of its Charter or Bylaws.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with any state or local governmental
body is necessary in connection with the execution, delivery and performance by
the Company of the Loan Documents.
6. Assuming that the Company uses written documents to evidence its
Receivables, and assuming each such written document evidences a monetary
obligation of the account debtor and a grant by such account debtor to the
Company of a security interest in specific goods, the documents evidencing all
of the Company's Receivables constitute chattel paper within the meaning of the
Uniform Commercial Code of the State of Tennessee.
7. Assuming that (i) the financing statements and amendments thereto
in the form attached hereto as Schedule 1 are accepted by, filed and properly
indexed in, the Office of the Secretary of State of Tennessee and the
appropriate recording fees and taxes paid thereon, (ii) new value/consideration
has been and will be given by the Banks and Purchaser to the Company and (iii)
the Company has rights in the collateral described in such financing statements,
the security interests created by the Subsidiary Security Agreement in the
collateral described therein constitute valid perfected security interests in
such types of collateral as to which a security interest may be perfected by
filing in such offices under the Uniform Commercial Code of the State of
Tennessee.
8. All recording, filing and other taxes, fees and charges to
enforce the liens created by the Subsidiary Security Agreement to the extent of
[$1,400,000.00] in maximum principal indebtedness have been paid, and no
penalties, fines or additional taxes, fees or charges may be assessed with
respect to the liens created by the Subsidiary Security Agreement or by the
enforcement of the Subsidiary Senior Guaranty Agreement unless and until the
Security Trustee attempts to enforce such lien of the Subsidiary Security
Agreement for amounts greater than the maximum principal indebtedness so stated.
The maximum principal indebtedness as herein stated may be increased without
penalty at any time, before or within sixty (60) days after an increase occurs
(and at any time after such 60-day period, upon the payment of applicable
penalties and applicable taxes) upon the filing of amendments to the financing
statements on file with the Tennessee Secretary of State declaring the increase
in maximum principal indebtedness and payment of the tax on the amount of the
increase plus filing fees.
<PAGE>
9. Section 47-9-308 of the Uniform Commercial Code of the State of
Tennessee provides that a purchaser of chattel paper who gives new value and
takes possession of it in the ordinary course of its business has priority over
a security interest in chattel paper which is perfected by the filing of a
financing statement if such purchaser acts without knowledge that the chattel
paper is subject to a security interest. Assuming the Company places on each
document, instrument, chattel paper and other writing evidencing its Receivables
the legend (legend) described in Section 4.3(c) of the Subsidiary Security
Agreement and assuming that the assumptions set forth in paragraphs 6 and 7 of
this opinion are true, nothing has come to our attention to lead us to believe
that, under Section 47-9-308 of the Uniform Commercial Code of the State of
Tennessee, the security interests of the Security Trustee in the Company's
Receivables would not be prior to the rights of a purchaser of such Receivables
who after the legend is placed therein and with knowledge of the interest of the
Security Trustee, gives new value and takes possession thereof in the ordinary
course of such purchaser's business.
10. A Tennessee Court, if properly presented with the question, would
enforce the choice of law provisions in, and not apply the Tennessee Usury Laws
to, the Subsidiary Security Agreement, the Subsidiary Senior Guaranty Agreement,
the Agreements or the Notes.
11. Notwithstanding paragraph 4.1(c) Subsidiary Security Agreement,
the Tennessee Industrial Loan and Thrift Companies Act requires, in certain
instances, that unearned finance charges and insurance premiums, which are
included in the Receivables, be refunded.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for other purposes, nor may it be relied
upon by any other person (other than your special counsel Chapman and Cutler and
any subsequent holder of a Note) for any purpose, without our prior written
consent.
DANCE, DANCE & LANE
By
Richard Dance
<PAGE>
EXHIBIT G (TO NOTE AGREEMENT)
SUBORDINATION PROVISIONS APPLICABLE TO
SENIOR SUBORDINATED DEBT AND
JUNIOR SUBORDINATED DEBT
The indebtedness evidenced by the subordinated notes or related thereto and any
renewals or extensions thereof (the "SUBORDINATED INDEBTEDNESS") shall at all
times be wholly subordinate and junior in right of payment to any and all
indebtedness of the Company and the Restricted Subsidiaries [here insert
description of indebtedness to which Subordinated Indebtedness is subordinate
which in all events must include all indebtedness, obligations and liabilities
of the Company and the Restricted Subsidiaries under the Revolving Credit
Agreement, the Note Agreements, the Subsidiary Senior Guaranty Agreement, the
Senior Notes and the Company Security Agreement and the Subsidiary Security
Agreement as each relates to the Senior Notes and, with respect to Senior
Subordinated Debt under the Agreement, the Subsidiary Senior Subordinated
Guaranty Agreement, the Senior Subordinated Notes and the Company Security
Agreement and the Subsidiary Security Agreement as each relates to the Notes
(the "SENIOR INDEBTEDNESS") in the manner and with the force and effect
hereinafter set forth:
1. So long as any Senior Indebtedness shall remain outstanding and
unpaid, no payment either of principal, interest or premium (notwithstanding the
expressed maturity or any time for the payment of principal of, interest or
premium on any Subordinated Indebtedness) shall be made on Subordinated
Indebtedness except with the prior written consent of all of the holders of the
Notes and the holders of the Subordinated Indebtedness will take no steps,
whether by suit or otherwise to compel or enforce the collection of Subordinated
Indebtedness, nor will the holders of the Subordinated Indebtedness use
Subordinated Indebtedness by way of counterclaim, setoff, recoupment or
otherwise so as to diminish, discharge or otherwise satisfy in whole or in part
any indebtedness or liability of the holders of the Subordinated Indebtedness to
the Company, whether now existing or hereafter arising and howsoever evidenced,
PROVIDED, HOWEVER, that the Company may pay interest on Subordinated
Indebtedness accrued to and payable on the date of any such payment so long as
(i) the Company shall not be in default in the payment of principal of, interest
or premium on Senior Indebtedness, (ii) the Company has not received written
notice from any holder of the Senior Indebtedness that some other default has
occurred and is continuing under any promissory note or agreement pertaining to
Senior Indebtedness or any collateral security therefor, and (iii) none of the
events hereinafter set forth in paragraph numbered 2 hereof has occurred.
2. In the event of any distribution, dividend, or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of the Company or of the proceeds thereof to
the creditors of the Company or upon any indebtedness of the Company, occurring
by reason of the liquidation, dissolution, or other winding up of the Company,
or by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Company or involving its property, no dividend, payment, distribution or
application shall be made, and the holders of the Subordinated Indebtedness
shall not be entitled to receive or retain any payment, dividend, distribution,
or application on or in respect of the Subordinated Indebtedness, unless and
until all of the Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, payment, distribution or
application otherwise payable in respect of Subordinated Indebtedness shall be
paid and applied on Senior Indebtedness until such Senior Indebtedness has been
fully paid and satisfied.
3. The holders of Senior Indebtedness need not at any time give the
holders of the Subordinated Indebtedness notice of any kind of the creation or
existence of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of Senior
Indebtedness may at any time from time to time, without the consent of or notice
to the holders of Subordinated Indebtedness, without incurring responsibility to
the holders of the Subordinated Indebtedness, and without impairing or releasing
the obligation of the undersigned under this agreement (i) renew, refund or
extend the maturity of any Senior Indebtedness, or any part thereof, or
otherwise revise, amend or alter the terms and conditions thereof, (ii) sell,
exchange, release or otherwise deal with any property by whomsoever at any time
pledged, mortgaged or otherwise hypothecated or subjected to a lien to secure
any Senior
<PAGE>
Indebtedness, and (iii) exercise or refrain from exercising any rights against
the Company and others, including the holders of the Subordinated Indebtedness.
4. The holders of the Subordinated Indebtedness will not sell,
assign or otherwise transfer any Subordinated Indebtedness, or any part thereof,
except subject to and in accordance with the terms hereof and upon the agreement
of the transferee or assignee to abide by and be bound by the terms hereof.
5. The holders of the Subordinated Indebtedness undertake and agree
for the benefit of each holder of Senior Indebtedness to execute, verify,
deliver and file any proofs of claim which any holder of Senior Indebtedness may
at any time require in order to prove and realize upon any rights or claims
pertaining to the Subordinated Indebtedness to effectuate the full benefit of
the subordination contained herein; and upon failure of the holder of any
Subordinated Indebtedness so to do, any such holder of Senior Indebtedness shall
be deemed to be irrevocably appointed the agent and attorney-in-fact of the
holder of such Subordinated Indebtedness to execute, verify, deliver and file
any such proofs of claim.
6. No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company or the holders of
Senior Indebtedness, or by any noncompliance by the Company with any of the
terms, provisions and covenants applicable to the Subordinated Indebtedness,
regardless of any knowledge thereof that any such holder of Senior Indebtedness
may have or be otherwise charged with.
7. The Company agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that any Subordinated Indebtedness is declared
due and payable before its expressed maturity because of the occurrence of a
default hereunder, (i) the Company will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior Indebtedness
shall forthwith become immediately due and payable upon demand, regardless of
the expressed maturity thereof.
8. These subordination provisions shall be continuing and binding
until written notice of its discontinuance shall be actually received by the
holders of the Subordinated Indebtedness, and also shall continue to remain in
full force and effect until all Senior Indebtedness created or existing prior to
the receipt of such notice shall have been fully paid and satisfied.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT H (TO NOTE AGREEMENT)
BORROWING BASE CERTIFICATE
WORLD ACCEPTANCE CORPORATION AND RESTRICTED SUBSIDIARIES AS OF --------------, --------------
<S> <C> <C> <C>
TOTAL UNSECURED SECURED
COMPANY
1. Gross Finance Receivables
$---------- $---------- $----------
2. Less Credits/Allowances
$---------- $---------- $----------
3. Net Finance Receivables
$---------- $---------- $----------
Ineligibles:
Affiliate Receivables
$---------- $---------- $----------
Shareholder/Employee Receivables
$---------- $---------- $----------
Government Receivables
$---------- $---------- $----------
Bankruptcy
$---------- $---------- $----------
Subject to claims, offsets or defenses
$---------- $---------- $----------
60 days past due
$---------- $---------- $----------
4. Total Ineligibles
$---------- $---------- $----------
5. Eligible Finance Receivables
$---------- $---------- $----------
6. Unearned Finance Charges
$---------- $---------- $----------
7. Eligible Finance Receivables, Net
$---------- $---------- $----------
8.
Borrowing Base
(a) 85% of Secured Eligible Receivables $__________
(b) Lesser of:
(i) $15,000,000 $----------
(ii) 11.11% of (a) above $----------
(iii) 50% of Eligible Unsecured,
Net $----------
Lesser $----------
9. Total Borrowing Base (a+b) $----------
10. Current Maximum $----------
11. Current Outstanding Balance of
Term Notes $----------
12. Available Borrowing Base $----------
13. Current Outstanding Balance
of Revolver $----------
14. Current Availability $----------
</TABLE>
CONFORMED COPY
WORLD ACCEPTANCE CORPORATION
NOTE AGREEMENT
Dated as of June 30, 1997
Re: $10,000,000 10% Senior Subordinated Secured NotesDue June 30, 2004
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
(Not a part of the Agreement)
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT............................................. 1
Section 1.1. Description of Notes.......................................................... 1
Section 1.2. Security for the Notes........................................................ 1
Section 1.3. Commitment, Closing Date, Purchase Price...................................... 2
SECTION 2. PREPAYMENT OF NOTES............................................................. 3
Section 2.1. Required Prepayments.......................................................... 3
Section 2.2. Optional Prepayment With Premium.............................................. 3
Section 2.3. Notice of Prepayments......................................................... 3
Section 2.4. Allocation of Prepayments..................................................... 3
Section 2.5. Direct Payment................................................................ 3
SECTION 3. REPRESENTATIONS................................................................. 4
Section 3.1. Representations of the Company................................................ 4
Section 3.2. Representations of the Purchaser.............................................. 4
SECTION 4. CLOSING CONDITIONS.............................................................. 5
Section 4.1. Conditions.................................................................... 5
Section 4.2. Waiver of Conditions.......................................................... 7
SECTION 5. COMPANY COVENANTS............................................................... 7
Section 5.1. Existence, Etc................................................................ 7
Section 5.2. Insurance..................................................................... 7
Section 5.3. Taxes, Claims for Labor and Materials......................................... 8
Section 5.4. Compliance with Laws.......................................................... 8
Section 5.5. Maintenance, Etc.............................................................. 8
Section 5.6. Nature of Business............................................................ 8
Section 5.7. Consolidated Net Worth........................................................ 8
Section 5.8. Fixed Charge Coverage Ratio................................................... 9
Section 5.9. Permitted Indebtedness........................................................ 9
Section 5.10. Limitations on Indebtedness................................................... 9
Section 5.11. Limitation on Liens.......................................................... 10
Section 5.12. Dividends, Stock Purchases................................................... 11
Section 5.13. Mergers, Consolidations and Sales or Transfers of Assets..................... 12
Section 5.14. Lease-Backs.................................................................. 15
Section 5.15. Guaranties................................................................... 15
Section 5.16. Repurchase of Notes.......................................................... 15
Section 5.17. Transactions with Affiliates................................................. 15
Section 5.18. Investments.................................................................. 16
Section 5.19. Termination of Pension Plans................................................. 16
Section 5.20. Reports and Rights of Inspection............................................. 16
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR........................................ 19
Section 6.1. Events of Default............................................................ 19
Section 6.2. Notice to Holders............................................................ 22
Section 6.3. Acceleration of Maturities................................................... 22
Section 6.4. Rescission of Acceleration................................................... 23
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS............................................... 23
Section 7.1. Consent Required............................................................. 23
Section 7.2. Effect of Amendment or Waiver................................................ 24
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS....................................... 24
Section 8.1. Definitions.................................................................. 24
Section 8.2. Accounting Principles........................................................ 36
<PAGE>
Section 8.3. Directly or Indirectly....................................................... 36
SECTION 9. SUBORDINATION.................................................................. 36
Section 9.1. Subordination to Senior Indebtedness......................................... 36
Section 9.2. Proofs of Claim.............................................................. 39
Section 9.3. No Waiver.................................................................... 40
Section 9.4. Rights of Holders of Senior Indebtedness..................................... 40
Section 9.5. Rights of Holders of Notes................................................... 40
Section 9.6. Holders of Notes Agreement as to the Subsidiary Senior Subordinated
Guaranty Agreement........................................................... 41
SECTION 10. MISCELLANEOUS.................................................................. 41
Section 10.1. Registered Notes............................................................. 41
Section 10.2. Exchange of Notes............................................................ 41
Section 10.3. Loss, Theft, Etc. of Notes................................................... 42
Section 10.4. Expenses, Stamp Tax Indemnity................................................ 42
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative............................ 43
Section 10.6. Notices...................................................................... 43
Section 10.7. Successors and Assigns....................................................... 44
Section 10.8. Survival of Covenants and Representations.................................... 44
Section 10.9. Severability................................................................. 44
Section 10.10. Governing Law................................................................ 44
Section 10.11. Captions..................................................................... 44
Signatures......................................................................................... 45
ATTACHMENTS TO PURCHASE AGREEMENT:
Schedule I -- Name and Address of Purchaser
Schedule II -- Description of Liens
Exhibit A -- Form of 10% Senior Subordinated Secured Notes due June 30, 2004
Exhibit B -- Form of Security Agreement, Pledge and the Indenture of Trust
Exhibit C -- Representations and Warranties of the Company
Exhibit D -- Description of Special Counsel's Closing Opinion
Exhibit E -- Description of Closing Opinion of Counsel to the Company, World Finance
Corporation of South Carolina, WFC of South Carolina, Inc., World Acceptance
Corporation of Alabama, World Acceptance Corporation of Missouri, World
Finance Corporation of Illinois and World Finance Corporation of New Mexico
Exhibit F -- Description of Closing Opinion of Counsel to the Restricted Subsidiaries
(other than World Finance Corporation of South Carolina, WFC of South
Carolina, Inc., World Acceptance Corporation of Alabama, World Acceptance
Corporation of Missouri, World Finance Corporation of Illinois and World
Finance Corporation of New Mexico)
Exhibit G -- Form of Subordination Provisions
Exhibit H -- Form of Borrowing Base Certificate
</TABLE>
<PAGE>
World Acceptance Corporation
108 Frederick StreetGreenville, South Carolina 29607-2532
NOTE AGREEMENT
Re: $10,000,000 10% Senior Subordinated Secured Notes
Due June 30, 2004
Dated as of June 30, 1997
To the Purchaser Named in Schedule I
Hereto Which is a Signatory to this
Agreement
Ladies and Gentlemen:
The undersigned, WORLD ACCEPTANCE CORPORATION, a South Carolina
corporation (the "Company"), agrees with you as follows:
.'SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT';.
.Section 1.1. Description of Notes;. The Company will authorize the
issue and sale of $10,000,000 aggregate principal amount of its 10% Senior
Subordinated Secured Notes (as the same may from time to time be amended
pursuant to the terms hereof and thereof and any notes executed in replacement
thereof, the "Notes") to be dated the date of issue, to bear interest from such
date at the rate of 10% per annum (computed on the basis of a 360-day year of
twelve 30-day months), payable quarterly on the thirtieth day of each June,
September, December and March in each year (commencing September 30, 1997) and
at maturity and to bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the rate
of 12% per annum after maturity, whether by acceleration or otherwise, until
paid, to be expressed to mature on June 30, 2004, and to be substantially in the
form attached hereto as Exhibit A. The Notes are not subject to prepayment or
redemption at the option of the Company prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with the premium, if
any, set forth in ss.2 of this Agreement. The term "Notes" as used herein shall
include each Note delivered pursuant to this Agreement.
You are hereinafter sometimes referred to as the "Purchaser".
.Section 1.2. Security for the Notes;. (a) The Notes will be
secured, on a senior subordinated basis, by (i) the Amended and Restated
Security Agreement, Pledge and Indenture of Trust dated as of June 30, 1997
between the Company and the Security Trustee, substantially in the form attached
hereto as Exhibit B and as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof (the "Company
Security Agreement") and (ii) the Amended and Restated Security Agreement,
Pledge and Indenture of Trust dated as of June 30, 1997 between each Restricted
Subsidiary (other than the Insurance Subsidiary) and the Security Trustee,
substantially in the form attached as Exhibit A to the Company Security
Agreement, as the same may from time to time be amended, restated, modified,
supplemented or waived pursuant to the terms thereof (the "Subsidiary Security
Agreement").
(b) The Notes will also be secured by an absolute and unconditional
guarantee of all principal, interest and premium, if any, on the Notes and of
all of the covenants of the Company contained in this Agreement and the Company
Security Agreement under and pursuant to that certain Guaranty Agreement dated
as of June 30, 1997 of each Restricted Subsidiary, substantially in the form
attached as Exhibit B to the Company Security Agreement, as the same may from
time to time be amended, restated, modified, supplemented or waived pursuant to
the terms thereof (the "Subsidiary Senior Subordinated Guaranty Agreement").
.Section 1.3. Commitment, Closing Date, Purchase Price;. Subject to
the terms and conditions hereof and on the basis of the representations and
warranties set forth herein, in the Company Security Agreement and in the
Subsidiary Security Agreement, the Company agrees to issue and sell to you, and
you agree to purchase from the Company, Notes in the principal amount set forth
opposite your name on Schedule I hereto at a price equal to 99.6936% of the
principal amount thereof on the Closing Date
<PAGE>
hereinafter mentioned.
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment
therefor in Federal Reserve or other funds current and immediately available for
the account of World Acceptance Corporation at the principal office of Harris
Trust and Savings Bank, Chicago, Illinois, ABA: 071-000-288, Loan Accounting,
Account Number 1092154, reference World Acceptance Corporation, Obligor Number
9414991000 in the amount of the purchase price at 10:00 A.M., Chicago time, on
July 3, 1997 or such earlier date as the Company shall specify by not less than
five business days' prior written notice to you (the "Closing Date"). The Notes
delivered to you on the Closing Date will be delivered to you in the form of a
single registered Note for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee as you may specify and in substantially the form attached hereto as
Exhibit A, all as you may specify at any time prior to the date fixed for
delivery.
The Company and you acknowledge and agree that the purchase by you of
the Notes at a price equal to 99.6936% of the principal amount thereof results
in the creation of "original issue discount" under both generally accepted
accounting principles and the regulations of the Internal Revenue Service. The
Company and you acknowledge and agree, however, that due to the de minimis
nature of such "original issue discount" you and the Company are permitted to
and will treat the Notes as having no "original issue discount" for purposes of
the regulations of the Internal Revenue Service. .SECTION 2. PREPAYMENT OF
NOTES;.
.Section 2.1. Required Prepayments;. The Company agrees that on the
thirtieth day of June in each year commencing June 30, 2000 and ending June 30,
2003 it will prepay and apply and there shall become due and payable on the
principal indebtedness evidenced by the Notes an amount equal to the lesser of
(i) $2,000,000 or (ii) the principal amount of the Notes then outstanding. The
entire remaining, then outstanding principal amount of the Notes shall become
due on June 30, 2004. No premium shall be payable in connection with any
required prepayment made pursuant to this ss.2.1. For purposes of this ss.2.1,
any prepayment of less than all of the outstanding Notes pursuant to ss.2.2
hereof shall be deemed to be applied first to the amount of principal scheduled
to remain unpaid on June 30, 2004 and then to the remaining scheduled principal
payments in inverse chronological order.
.Section 2.2. Optional Prepayment With Premium;. Upon compliance
with ss.2.3, the Company shall have the privilege, at any time and from time to
time, of prepaying the outstanding Notes, either in whole or in part (but if in
part then in a minimum principal amount of $1,000,000) by payment of the
principal amount of the Notes, or portion thereof to be prepaid, and accrued
interest thereon to the date of such prepayment, together with an additional
amount equal to the Make-Whole Amount with respect to such principal amount then
to be prepaid, determined as of five business days prior to the date of such
prepayment pursuant to this ss.2.2.
.Section 2.3. Notice of Prepayments;. The Company will give notice
of any prepayment of the Notes pursuant to ss.2.2 to each holder thereof
(whether or not such holder's Notes are being prepaid) not less than 30 days nor
more than 60 days before the date fixed for such optional prepayment specifying
(i) such date, (ii) the section of this Agreement under which the prepayment is
to be made, (iii) the principal amount of the holder's Notes to be prepaid on
such date, (iv) whether a premium is payable, (v) the date when such premium
will be calculated, and (vi) the accrued interest applicable to the prepayment.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes specified in such notice, together with the premium, if any, and accrued
interest thereon shall become due and payable on the prepayment date. Not later
than two (2) business days prior to the prepayment date the Company shall
provide each holder of a Note written notice of the amount of the premium
payable in connection with such prepayment and, whether or not any premium is
payable, together with a reasonably detailed computation thereof.
.Section 2.4. Allocation of Prepayments;. All partial prepayments of
the Notes pursuant to ss.2.1, ss.2.2, the Company Security Agreement or the
Subsidiary Security Agreement shall be applied on all outstanding Notes ratably
in accordance with the unpaid principal amounts thereof.
.Section 2.5. Direct Payment;. Notwithstanding anything to the
contrary in this Agreement or
<PAGE>
the Notes, in the case of any Note owned by you or your nominee or owned by any
subsequent Institutional Holder who has given written notice to the Company
requesting that the provisions of this ss.2.5 shall apply, the Company will
promptly and punctually pay when due the principal thereof and premium, if any,
and interest thereon, without any presentment thereof directly to you or such
subsequent Institutional Holder at the address specified for you in Schedule I
or at such other address as you or such subsequent Institutional Holder may from
time to time designate in writing to the Company or, if a bank account is
designated for you on Schedule I hereto or in any written notice to the Company
from you or any such subsequent Institutional Holder, the Company will make such
payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account in any
bank in the United States as you or any such subsequent Institutional Holder may
from time to time direct in writing. The Company shall cause all payments made
by bank wire transfer to be transmitted by the initiating bank not later than
10:00 a.m., Chicago time, on the date such payment is due.
.SECTION 3. REPRESENTATIONS;.
.Section 3.1. Representations of the Company;. The Company
represents and warrants that all representations set forth in Exhibit C are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
.Section 3.2. Representations of the Purchaser;. (a) You represent,
and in entering into this Agreement the Company understands, that you are
acquiring the Notes for the purpose of investment and not with a view to the
resale or distribution thereof, and that you have no present intention of
selling, negotiating or otherwise disposing of the Notes; it being understood,
however, that the disposition of your property shall (i) at all times be and
remain within your control and (ii) be in compliance with ss.10.2.
(b) You further represent that at least one of the following
statements is an accurate representation as to each source of funds (a "Source")
to be used by you to pay the purchase price of the Notes to be purchased by you
hereunder:
(i) the Source is an "insurance company general account" within
the meaning of Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995), and there is no employee
benefit plan (treating as a single plan all plans maintained by the
same employer or employee organization) with respect to which the
amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan exceed 10% of the total
reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in your most
recent annual statement in the form required by the National
Association of Insurance Commissioners as filed with your state of
domicile; or
(ii) the Source is either (A) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (B) a bank collective investment fund, within the meaning
of the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this paragraph (ii),
no employee benefit plan or group of plans maintained by the same
employer or employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or collective
investment fund; or
(iii) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part
l(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns a
5% or more interest in the Company and (A) the identity of such QPAM
and (B) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company
in writing pursuant to this paragraph (iii); or
(iv) the Source is a governmental plan; or
<PAGE>
(v) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (v); or
(vi) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this ss.3.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
.SECTION 4. CLOSING CONDITIONS;.
.Section 4.1. Conditions;. Your obligation to purchase the Notes on
the Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Execution and Delivery of Security Documents. The Company
Security Agreement and the Subsidiary Security Agreement shall have
been executed and delivered by the Company, each Restricted Subsidiary
existing on the Closing Date and the Security Trustee, as the case may
be, and financing statements or other notices with respect to the
Company Security Agreement and the Subsidiary Security Agreement, shall
have been recorded or filed in all public offices, and all other steps
deemed necessary by you shall have been taken, in order to perfect the
security interests granted by the Company Security Agreement and the
Subsidiary Security Agreement.
(b) Guaranty Agreement. You shall have received the Guaranty
Agreement of each Restricted Subsidiary dated as of the date hereof and
substantially in the form attached as Exhibit B to the Company Security
Agreement.
(c) Stock Certificates. You shall have received evidence
reasonably satisfactory to you that the Security Trustee has in its
possession certificates representing all of the capital stock of the
Restricted Subsidiaries and stock powers executed by the Company in
blank attached to such certificates and such other documents or
instruments as may be necessary or appropriate to pledge and assign to
the Security Trustee under the Company Security Agreement all of the
capital stock of the Restricted Subsidiaries.
(d) Lien Searches. You shall have received the results of a
search of all filings made against the Company and its Subsidiaries
under the Uniform Commercial Code as in effect in any relevant state,
indicating that the Collateral is free and clear of any Lien except the
Liens of the Company Security Agreement and the Subsidiary Security
Agreement, the Weingarten Lien and Liens of the type described in
clauses (b), (e) and (f) of ss.5.11.
(e) Closing Certificate. You shall have received a certificate
dated the Closing Date, signed by the President or a Vice President of
the Company, the truth and accuracy of which shall be a condition to
your obligation to purchase the Notes proposed to be sold to you and to
the effect that (1) the representations and warranties of the Company
and each Restricted Subsidiary set forth in Exhibit C hereto and in the
Company Security Agreement, the Subsidiary Security Agreement and the
Subsidiary Senior Subordinated Guaranty Agreement are true and correct
in all respects on and with respect to the Closing Date, (ii) the
Company and each Restricted Subsidiary have each performed all of its
obligations hereunder and under the Company Security Agreement, the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated
Guaranty Agreement which are to be performed on or prior to the Closing
Date and (iii) no Default or Event of Default has occurred and is
continuing.
(f) Legal Opinions. You shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction,
from Robinson, Bradshaw & Hinson, P.A., counsel for the Company, World
Finance Corporation of South Carolina, WFC of South Carolina, Inc.,
World Acceptance Corporation of Alabama, World Acceptance Corporation
of Missouri, World Finance Corporation of Illinois and World Finance
Corporation of New Mexico, from Abbot, Murphy & Harvey, P.C., counsel
for World Finance Corporation of Georgia, from Comegys,
<PAGE>
Lawrence, Jones, Odom & Spruiell, counsel for World Finance Corporation
of Louisiana, from Crowe & Dunlevy, Luttrell, Pendarvis & Rawlinson,
counsel for World Acceptance Corporation of Oklahoma, Inc., from Sam
Kelley, Esq., counsel for World Finance Corporation of Texas and WFC
Limited Partnership, and from Dance, Dance & Lane, counsel for World
Finance Corporation of Tennessee, their respective opinions dated the
Closing Date, in form and substance satisfactory to you, and covering
the matters set forth in Exhibits D, E and F, respectively, hereto.
(g) Related Transactions. The Company and each Restricted
Subsidiary, as the case may be, shall have consummated the execution
and delivery of the Revolving Credit Agreement, the Senior Note
Agreements and the Subsidiary Senior Guaranty Agreement.
(h) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to you and your special counsel, and
you shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.
.Section 4.2. Waiver of Conditions;. If on the Closing Date the
Company fails to tender to you the Notes to be issued to you on such date or if
the conditions specified in ss.4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in ss.4.1 have not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole discretion determine. Nothing in this ss.4.2
shall operate to relieve the Company of any of its obligations hereunder or to
waive any of your rights against the Company.
.SECTION 5. COMPANY COVENANTS;.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
.Section 5.1. Existence, Etc.; The Company will preserve and keep in
force and effect, and will cause each Subsidiary to preserve and keep in force
and effect, its legal existence and all licenses and permits necessary to the
proper conduct of its business, provided that the foregoing shall not prevent
any transaction permitted by ss.5.13.
.Section 5.2. Insurance;. The Company will maintain, and will cause
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers accorded a rating of "A" or better by A.M. Best Company, Inc.
(the "Best Rating") at the time of the issuance of any such policy and in such
forms and amounts and against such risks as are customary for corporations of
established reputation engaged in the same or a similar business and owning and
operating similar properties with each such policy requiring renewal of such
policy at intervals of no greater than one year from the date of issuance or
renewal thereof; provided, however, that if, during the term of any such
insurance policy, the rating accorded the insurer shall be less than a Best
Rating of "A", the Company will, on the date of renewal of any such policy (or,
if such change in rating shall occur within 90 days prior to such renewal date,
within 90 days of the date of such change in rating), obtain such insurance
policy from an insurer accorded a Best Rating of "A" or better.
.Section 5.3. Taxes, Claims for Labor and Materials;. The Company
will promptly pay and discharge, and will cause each Subsidiary promptly to pay
and discharge, all taxes, assessments and governmental charges or levies imposed
upon the Company or such Subsidiary, respectively, or upon or in respect of all
or any part of the property or business of the Company or such Subsidiary
(including, but not limited to the Collateral), all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
property of the Company or such Subsidiary (including, but not limited to the
Collateral); provided the Company or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books, reserves adequate in accordance with
GAAP with respect thereto.
<PAGE>
.Section 5.4. Compliance with Laws;. The Company will promptly
comply and will cause each Subsidiary to comply with all laws, ordinances or
governmental rules and regulations to which it is subject, including without
limitation, the Employee Retirement Income Security Act of 1974 and all
Environmental Legal Requirements the violation of which could, individually or
in the aggregate, materially and adversely affect the properties (including the
Collateral), business, prospects, profits or condition of the Company and its
Subsidiaries or could, individually or in the aggregate, result in any lien or
charge upon any property of the Company or any Subsidiary.
.Section 5.5. Maintenance, Etc;. The Company will maintain, preserve
and keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order (ordinary
wear and tear excepted) and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
.Section 5.6. Nature of Business;. Neither the Company nor any
Restricted Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Company and its Restricted Subsidiaries (including, but not
limited to, the Insurance Subsidiary) would be substantially changed from the
general nature of the business engaged in by the Company and its Restricted
Subsidiaries on the date of this Agreement.
.Section 5.7. Consolidated Net Worth;. The Company will at all times
keep and maintain Consolidated Net Worth at an amount not less than the Minimum
Net Worth.
For purposes of this ss.5.7, "Minimum Net Worth" (i) for the fiscal
quarter of the Company ending March 31, 1997, shall be $38,000,000 and (ii) for
each fiscal quarter thereafter shall be the sum of the Minimum Net Worth for the
immediately preceding fiscal quarter plus 50% of Consolidated Net Income for
such fiscal quarter (but without deduction in the case of any deficit in
Consolidated Net Income for such fiscal quarter).
.Section 5.8. Fixed Charge Coverage Ratio;. The Company will at the
end of each fiscal quarter have a ratio of Net Income Available for Fixed
Charges to Fixed Charges for each period of four consecutive fiscal quarters
then ending at not less than 1.5 to 1. As of the end of each fiscal quarter, the
Company's provision for loan losses for the four fiscal quarters then ending
shall equal or exceed the net loan charge off for the corresponding period.
.Section 5.9. Permitted Indebtedness;. The Company will not and will
not permit any Restricted Subsidiary to incur, create, issue, assume or permit
to exist any Indebtedness for Borrowed Money other than:
(a) Senior Debt;
(b) Senior Subordinated Debt; and
(c) Junior Subordinated Debt.
.Section 5.10. Limitations on Indebtedness;. (a) The Company will
not at any time permit
(i) The aggregate unpaid principal amount of Senior Debt, on a
consolidated basis, to exceed 400% of the sum of (A) Consolidated
Adjusted Net Worth, (B) the aggregate unpaid principal amount of Junior
Subordinated Debt, and (C) the aggregate unpaid principal amount of
Senior Subordinated Debt; or
(ii) The sum of (A) the aggregate unpaid principal amount of
Senior Subordinated Debt and (B) the aggregate unpaid principal amount
of Junior Subordinated Debt to exceed 125% of Consolidated Adjusted Net
Worth; or
(iii) The aggregate unpaid principal amount of Junior
Subordinated Debt to exceed 50% of Consolidated Adjusted Net Worth; or
(iv) The aggregate amount of unused credit then available from
banks and trust companies under firmly committed lines of credit from a
lending group of not fewer than two banks to be less than the sum of
the (A) aggregate outstanding amount of its commercial paper and (B)
payments of principal then scheduled to become due during the
eight-month period then commencing on all Indebtedness for Borrowed
Money of the Company and its Restricted Subsidiaries (excluding
obligations under the Revolving Credit Notes and the Revolving Credit
Agreement).
<PAGE>
(b) The Company will not permit, (i) at any time on or before the
Trigger Date, the ratio of Indebtedness for Borrowed Money of the Company and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth to exceed 4.5 to
1 for any month; provided that the ratio of Indebtedness for Borrowed Money of
the Company and its Restricted Subsidiaries to Consolidated Adjusted Net Worth
may exceed 4.5 to 1 for no more than 4 months of any consecutive 12-month period
so long as such ratio does not exceed 5.5 to 1, and (ii) at any time after the
Trigger Date, the ratio of Indebtedness for Borrowed Money of the Company and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth to exceed 5.5 to
1 for any month; provided that the ratio of Indebtedness for Borrowed Money of
the Company and its Restricted Subsidiaries to Consolidated Adjusted Net Worth
may exceed 5.5 to 1 for no more than 4 months of any consecutive 12-month period
so long as such ratio does not exceed 6.5 to 1.
(c) The Company will not create, assume, or incur or otherwise become
liable in respect of any Junior Subordinated Debt unless such Junior
Subordinated Debt shall have a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of the Notes. For
purposes of this ss.5.10(c), "Weighted Average Life to Maturity" of the
principal amount of the Notes or any other Indebtedness of the Company shall
mean, as of the time of any determination thereof, the number of years obtained
by dividing the then Remaining Dollar-years of such Indebtedness by the then
outstanding principal amount of such Indebtedness; and the "Remaining
Dollar-years" of any Indebtedness means at any time the amount obtained by (a)
multiplying the amount of each then remaining installment, sinking fund, serial
maturity or other required principal payment, including payment at final
maturity, by the number of years (calculated to the nearest one-twelfth) which
will elapse between the time in question and the making of that payment and (b)
totaling all of the products obtained in (a).
(d) The Company will not permit any Restricted Subsidiary to create,
assume or incur, or otherwise be or become liable in respect of any Indebtedness
for Borrowed Money (other than the Subsidiary Senior Guaranty Agreement and the
Subsidiary Senior Subordinated Guaranty Agreement) to any Person (other than to
the Company or another Restricted Subsidiary) in an aggregate amount for all
Restricted Subsidiaries in excess of $1,000,000 at any time outstanding.
.Section 5.11. Limitation on Liens;. The Company will not, and will
not permit any Restricted Subsidiary to create, assume or suffer to exist any
Lien upon any of its property or assets (including, but not limited to, the
Collateral), whether now owned or hereafter acquired; provided, however, that
the foregoing restriction and limitation shall not apply to the following Liens:
(a) Liens created under the Company Security Agreement and
under the Subsidiary Security Agreement;
(b) Liens existing as of the date hereof and reflected on
Schedule II hereto;
(c) Liens existing on property at the time acquired by the
Company or any Restricted Subsidiary thereof or existing on the
property of a corporation at the time it becomes a Restricted
Subsidiary, or placed upon property within 120 days after the date of
acquisition thereof by the Company or any Restricted Subsidiary to
secure a portion of the purchase price thereof, but only if (i) such
Lien shall attach solely to the property acquired, purchased or
constructed and (ii) such Lien does not exceed the lesser of the fair
market value or cost of such property;
(d) Liens constituting renewals, extensions or refundings of
Liens permitted by clause (b) or (c) above, provided that the principal
amount of the Indebtedness secured by any such new Lien does not exceed
the principal amount of the Indebtedness being renewed, extended or
refunded at the time of renewal, extension or refunding thereof and
that such new Lien attaches only to the same property theretofore
subject to such earlier Lien;
(e) Liens securing taxes, assessments or governmental charges
or levies, or the claims or demands of materialmen, mechanics,
carriers, workmen, repairmen, warehousemen, landlords and other like
persons, provided that payment thereof is not at the time required by
ss.5.3;
(f) other Liens incidental to the conduct of its business or
the ownership of its property and assets when not incurred in
connection with the borrowing of money or the obtaining of advances of
credit, and which do not in the aggregate materially detract from the
value of its property or assets, or materially impair the use thereof
in the operation of its business;
<PAGE>
(g) attachment, judgment and other similar Liens arising in
connection with court proceedings, provided that (i) execution or other
enforcement of such Liens is effectively stayed, (ii) the claims
secured thereby are being actively contested in good faith by
appropriate proceedings, (iii) adequate reserves in conformity with
GAAP have been provided on the books of the Company or such Restricted
Subsidiary and (iv) the aggregate amount of the liabilities of the
Company and all Restricted Subsidiaries so secured, including interest
and penalties thereon, shall not be in excess of $100,000 at any one
time outstanding; and
(h) Liens on property of a Restricted Subsidiary of the
Company to secure obligations of such Restricted Subsidiary to the
Company or another Restricted Subsidiary.
.Section 5.12. Dividends, Stock Purchases;. The Company will not
except as hereinafter provided:
(a) Declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of capital stock of the
Company); or
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class
or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net cash
proceeds to the Company from the substantially concurrent issue or sale
of other shares of capital stock of the Company or warrants, rights or
options to purchase or acquire any shares of its capital stock); or
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
or
(d) Make any payment of principal, interest or premium on any
Junior Subordinated Debt other than any regularly scheduled payment of
principal or interest on the Junior Subordinated Debt;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options, and all such other
distributions and such payments on Junior Subordinated Debt being herein
collectively called "Restricted Payments"), if, after giving effect thereto (i)
a Default or Event of Default has occurred and is continuing or (ii) the
aggregate amount of Restricted Payments made during the period from and after
March 31, 1997, to and including the date of the making of the Restricted
Payment in question, would exceed the sum of (x) the net cash proceeds received
by the Company from the issuance or sale subsequent to March 31, 1997 of shares
of common stock of the Company or warrants, rights or options to purchase or
acquire any shares of its common stock, plus (y) at all times after the
Determination Date, 50% of Consolidated Net Income for the period commencing on
the day immediately succeeding the Determination Date and ending on the date of
the making of the Restricted Payment in question, computed on a cumulative basis
for said entire period (or if such Consolidated Net Income is a deficit figure,
then minus 100% of such deficit); provided that at all times after the
Determination Date and after giving effect to such Restricted Payment,
Consolidated Tangible Net Worth exceeds $42,000,000.
For the purposes of this ss.5.12 the amount of any Restricted Payment
declared, paid or distributed in property of the Company shall be deemed to be
the greater of the book value or fair market value (as determined in good faith
by the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of declaration
thereof.
.Section 5.13. Mergers, Consolidations and Sales or Transfers of
Assets;. (a) The Company will not, and will not permit any Restricted Subsidiary
to enter into any transaction of merger or consolidation or transfer, sell,
assign, lease, or otherwise dispose of all or a substantial part of its
properties or assets to any Person, except that:
(1) any Restricted Subsidiary may merge or consolidate with or
into the Company or any other Restricted Subsidiary (other than the
Insurance Subsidiary) so long as in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation;
<PAGE>
(2) the Company may merge or consolidate with any other
corporation provided that (i) the Company shall be the surviving and
continuing corporation; and (ii) at the time of such consolidation or
merger and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing;
(3) any Restricted Subsidiary may sell or convey all or
substantially all of its assets to the Company or to another Restricted
Subsidiary (other than the Insurance Subsidiary); and
(4) the Company or any Restricted Subsidiary may sell all or a
substantial part of the assets of the Company and its Restricted
Subsidiaries pursuant to and in compliance with Section 10.4 of the
Company Security Agreement or Section 10.4 of the Subsidiary Security
Agreement.
(b) The Company will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class or any partnership interest, membership
interest or other equity interest of any type (including for the purposes of
this ss.5.13, any warrants, rights or options to purchase or otherwise acquire
any such equity interest or other Securities exchangeable for or convertible
into any such equity interest) of such Restricted Subsidiary to any Person other
than the Company or a Restricted Subsidiary (other than the Insurance
Subsidiary), except for the purpose of qualifying directors.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock, partnership interest, membership interest or other equity
interest in any Restricted Subsidiary (except (i) to qualify directors and (ii)
the pledge of the Pledged Collateral under the Company Security Agreement and
any transfer or sale thereof pursuant to and in compliance with Section 10.4 of
the Company Security Agreement) or any Indebtedness of any Restricted
Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or
otherwise dispose of (except (i) to the Company or a Restricted Subsidiary or
(ii) the pledge of the Pledged Collateral under the Subsidiary Security
Agreement and any transfer or sale thereof pursuant to and in compliance with
Section 10.4 of the Subsidiary Security Agreement) any such shares of stock,
partnership interest, membership interest or other equity interest or any
Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition,
all such interests and all Indebtedness of such Restricted Subsidiary
at the time owned by the Company and by every other Restricted
Subsidiary shall be sold, transferred or disposed of as an entirety;
(2) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the retention of
such interest and Indebtedness is no longer in the best interests of
the Company or the holders of the Notes;
(3) such interest and Indebtedness is sold, transferred or
otherwise disposed of to a Person, for a cash consideration and on
terms reasonably deemed by the Board of Directors to be adequate and
satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have
any continuing investment in the Company or any other Restricted
Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the Company
and its Restricted Subsidiaries.
(d) As used in this ss.5.13, in the case of the sale, lease or other
disposition of any assets, such assets shall be deemed to be a "substantial
part" of the assets of the Company and its Restricted Subsidiaries if (x) such
assets, together with all other assets (i) sold, leased or otherwise disposed of
by the Company and its Restricted Subsidiaries or (ii) subject to any waiver of
or supplemental agreement to
<PAGE>
the Company Security Agreement or the Subsidiary Security Agreement without the
consent of the holders of at least a majority of the then outstanding principal
amount of the Notes or, if such waiver or supplemental agreement is described in
clauses (B), (C), (E) or (F) of Section 9.2(a) of the Company Security Agreement
or the Subsidiary Security Agreement, without the consent of all of the holders
of the Notes, in each case, during the period of 12 months ending with the date
of such sale, lease or disposition, contributed more than 15% of EBIT of the
Company and its Restricted Subsidiaries determined as of the end of the fiscal
year immediately preceding such sale or disposition, (y) the book value of such
assets, when added to the book value of all other assets of the Company and its
Restricted Subsidiaries (i) sold or otherwise disposed of by the Company and its
Restricted Subsidiaries or (ii) subject to any waiver of or supplemental
agreement to the Company Security Agreement or the Subsidiary Security Agreement
without the consent of the holders of at least a majority of the then
outstanding principal amount of the Notes or, if such waiver or supplemental
agreement is described in clauses (B), (C), (E) or (F) of Section 9.2(a) of the
Company Security Agreement or the Subsidiary Security Agreement, without the
consent of all of the holders of the Notes, in each case, during the period of
12 months ending with the date of such sale or disposition, exceeds 10% of the
book value of all Receivables of the Company and its Restricted Subsidiaries
determined on a consolidated basis as of the end of the fiscal year immediately
preceding such sale or disposition, or (z) the book value of such assets, when
added to the book value of all other assets of the Copany and its Restricted
Subsidiaries (i) sold or otherwise disposed of by the Company and its Restricted
Subsidiaries or (ii) subject to any waiver of or supplemental agreement to the
Company Security Agreement or the Subsidiary Security Agreement without the
consent of the holders of at least a majority of the then outstanding principal
amount of the Notes or, if such waiver or supplemental agreement is described in
clauses (B), (C), (E) or (F) of Section 9.2(a) of the Company Security Agreement
or the Subsidiary Security Agreement, without the consent of all of the holders
of the Notes, in each case, during the entire period commencing on April 1, 1997
and ending with the date of such sale or disposition, exceeds 25% of the book
value of all Receivables of the Company and its Restricted Subsidiaries
determined on a consolidated basis as of the end of the fiscal year immediately
preceding such sale or disposition.
(e) Nothing in this ss.5.13 shall prohibit the Company from
transferring, selling, assigning, leasing, subleasing or otherwise disposing of
an insubstantial part of its properties or assets, excluding Receivables of the
Company and its Restricted Subsidiaries, to any Person from time to time, in the
ordinary course.
.Section 5.14. Lease-Backs;. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any arrangements, directly or
indirectly, with any Person, whereby the Company or any Restricted Subsidiary
shall sell or transfer any property, whether now owned or hereafter acquired,
used or useful in their respective businesses in connection with the rental or
lease of the property so sold or transferred or of other property which the
Company or any Restricted Subsidiary intends to use for substantially the same
purpose or purposes as the property so sold or transferred.
.Section 5.15. Guaranties;. The Company will not and will not permit
any Restricted Subsidiary to become or be liable in respect of any Guaranty
except: (i) Guaranties of the Company which are limited in amount to a stated
maximum dollar exposure and are permitted under ss.5.10; (ii) the Subsidiary
Senior Subordinated Guaranty Agreement; and (iii) the Subsidiary Senior Guaranty
Agreement.
.Section 5.16. Repurchase of Notes;. Neither the Company nor any
Restricted Subsidiary or other Affiliate, directly or indirectly, may repurchase
or make any offer to repurchase any Notes unless the offer has been made to
repurchase Notes, pro rata, from all holders of the Notes at the same time and
upon the same terms. In case the Company repurchases any Notes, such Notes shall
thereafter be cancelled and no Notes shall be issued in substitution therefor.
Without limiting the foregoing, upon the repurchase or other acquisition of any
Notes by the Company, any Restricted Subsidiary or any other Affiliate, such
Notes shall no longer be outstanding for purposes of any section of this
Agreement relating to the taking by the holders of the Notes of any actions with
respect hereto. If, notwithstanding the provisions of this ss.5.16, the Company
purchases or acquires less than all of the Notes, the amount of the payment
required at maturity of the Notes and each prepayment of the Notes required to
be made pursuant to ss.2.1 shall be reduced in the proportion that the principal
amount of such purchase or other acquisition bears to the unpaid principal
amount of the Notes immediately prior to such purchase or other acquisition
(after giving effect to any prepayment made pursuant to ss.2.1 on the date of
such prepayment, purchase or other acquisition).
.Section 5.17. Transactions with Affiliates;. The Company will not,
and will not permit any Restricted Subsidiary to, enter into or be a party to,
any transaction or arrangement with any Affiliate (including without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
<PAGE>
.Section 5.18. Investments;. The Company will not, and will not
permit any Restricted Subsidiary to make any Investment except:
(a) Investments in obligations of the United States of America
(or any agency thereof for which the full faith and credit of the
United States of America is pledged for the repayment of principal and
interest thereof) maturing in twelve months or less from the date of
acquisition thereof;
(b) certificates of deposit of any banking institution with
combined capital and surplus of at least $500,000,000, maturing in
twelve months or less from the date of acquisition thereof which, at
the time of acquisition by the Company or any Restricted Subsidiary, is
accorded the rating of A or better by S&P and A2 or better by Moody's,
or if S&P and/or Moody's is no longer rating any such certificates of
deposit, then an equivalent rating by any other nationally recognized
credit rating agency of similar standing;
(c) loans, advances and extensions of credit to or for the
benefit of consumer/borrowers in the ordinary course of business in
accordance with ss.5.6;
(d) Investments by the Company or any Restricted Subsidiary in
and to any other Restricted Subsidiary provided, however, Investments
by the Company in and to the Insurance Subsidiary shall not exceed
$500,000 in the aggregate;
(e) Investments in commercial paper maturing in 270 days or
less from the date of issuance thereof which, at the time of
acquisition by the Company or any Restricted Subsidiary, is accorded
the rating of P1 or better by S&P and A1 or better by Moody's, or if
S&P and/or Moody's is no longer rating any such commercial paper, then
an equivalent rating by any other nationally recognized credit rating
agency of similar standing; or
(f) other Investments (in addition to those permitted in
clauses (a) through (e) above) provided that the aggregate amount of
all such Investments shall not at any time exceed 10% of Consolidated
Adjusted Net Worth.
.Section 5.19. Termination of Pension Plans;. The Company will not
and will not permit any Subsidiary to withdraw from any Multiemployer Plan or
permit any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as described in
Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any
property of the Company or any Subsidiary pursuant to Section 4068 of ERISA.
.Section 5.20. Reports and Rights of Inspection;. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries will be made of all dealings or transactions
of or in relation to the business and affairs of the Company or such Subsidiary,
in accordance with GAAP consistently maintained (except for changes disclosed in
the financial statements furnished to you pursuant to this ss.5.20 and concurred
in by the independent public accountants referred to in ss.5.20(b) hereof), and
will furnish to each holder of a Note and the Security Trustee (in duplicate if
so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, a copy of:
(1) consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as of the close of
such quarter and, in the case of the consolidated balance
sheets, setting forth in comparative form the amount for the
corresponding period of the preceding fiscal year,
(2) consolidated and consolidating statements of income
and retained earnings of the Company and its Restricted
Subsidiaries for the portion of the fiscal year ending with
such quarter and, in the case of the consolidated statements
of income and retained earnings, setting forth in comparative
form the amount for the corresponding period of the preceding
fiscal year,
(3) consolidated and consolidating statements of changes
in financial position of the Company and its Restricted
Subsidiaries for the portion of the fiscal year ending with
such quarter and, in the case of the consolidated statements
of changes in financial position, setting forth in comparative
form the amount for the corresponding period of the preceding
<PAGE>
fiscal year, and
(4) consolidated and consolidating statements of cash
flows of the Company and its Restricted Subsidiaries for the
portion of the fiscal year ending with such quarter and, in
the case of the consolidated statements of cash flows, setting
forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct, by an
authorized financial officer of the Company;
(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, a
copy of:
(1) consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as of the close of
such fiscal year,
(2) consolidated and consolidating statements of income
and retained earnings and changes in financial position of the
Company and its Restricted Subsidiaries for such fiscal year,
and
(3) consolidated and consolidating statements of changes
in cash flows of the Company and its Restricted Subsidiaries
for such fiscal year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied
by an opinion, unqualified as to scope limitations imposed by the
Company and otherwise without qualification except as therein noted,
thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the
consolidated financial statements have been prepared in accordance with
GAAP consistently applied (except for noted changes in application in
which such accountants concur) and present fairly the financial
condition of the Company and its Restricted Subsidiaries and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary
in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants and the Company's response, if
any, to such management letter;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice, proxy
statement or statement of additional information sent by the Company to
stockholders generally and of each regular or periodic report, and any
registration statement or prospectus filed by the Company or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which the Company or any of its Subsidiaries is a party,
issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) Requested Information. With reasonable promptness, such
other data and information as any holder of any Note or the Security
Trustee may reasonably request;
(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company stating that he has reviewed the provisions of
this Agreement and setting forth: (i) the information and computations
(in sufficient detail) required in order to determine whether the
Company was in compliance with the requirements of ss.5.7 through
ss.5.18, inclusive, at the end of the period covered by the financial
statements then being furnished, and (ii) whether, to the best of his
knowledge, there existed as of the date of such financial statements
and whether, to the best of his knowledge, there exists on the date of
the certificate or existed at any time during the period covered by
such financial statements any Default or Event of Default and, if any
such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action
the Company is taking and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a
<PAGE>
certificate of the accountants who render an opinion with respect to
such financial statements, stating that they have reviewed this
Agreement and stating further, whether in making their audit, such
accountants have become aware of any Default or Event of Default under
any of the terms or provisions of this Agreement insofar as any such
terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists,
specifying the nature and period of existence thereof;
(h) Unrestricted Subsidiaries. Within the respective periods
provided in paragraph (b) above, financial statements of the character
and for the dates and periods as in said paragraph (b) provided
covering each Unrestricted Subsidiary (or groups of Unrestricted
Subsidiaries on a consolidated basis);
(i) Loan Loss Reserve Report. On or before the twenty-fifth
day of every month, a loan loss reserve report with respect to the
Company and its Restricted Subsidiaries for the immediately preceding
month in form and substance reasonably satisfactory to the holders of
the Notes;
(j) Loan Charge-off Recovery Report. On or before the
twenty-fifthday of every month, a loan charge-off recovery report with
respect to the Company and its Restricted Subsidiaries for the prior
month in form and substance reasonably satisfactory to the holders of
the Notes; and
(k) Borrowing Base Certificate. On or before the twenty-fifth
day of every month, a Borrowing Base Certificate substantially in the
form attached hereto as Exhibit H calculated as of the last day of the
immediately preceding month.
Without limiting the foregoing, the Company will permit each holder of a Note
and the Security Trustee (or such Persons as any holder or the Security Trustee
may designate) to visit and inspect, any of the properties of the Company or any
Subsidiary, to inspect any other Collateral, to examine all their books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with such
Persons the finances and affairs of the Company and its Subsidiaries) all at
such reasonable times and as often as may be reasonably requested. Any
visitation, inspection or discussion shall be at the sole cost and expense of
the Company; provided, however, that prior to the occurrence of a Default or
Event of Default, the Company shall bear such costs and expenses not more
frequently than once every semi-annual fiscal period.
.SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR;.
.Section 6.1. Events of Default;. Any one or more of the following
shall constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes as provided in ss.2.1; or
(c) Default shall occur in the making of any other payment of
the principal of any Note or premium, if any, thereon at the expressed
or any accelerated maturity date or at any date fixed for prepayment;
or
(d) Default shall occur in the observance or performance of
any covenant or agreement contained in ss.5.7 through ss.5.19; or
(e) Default shall occur in the observance or performance of
any provision of this Agreement, the Company Security Agreement, the
Subsidiary Security Agreement or the Subsidiary Senior Subordinated
Guaranty Agreement which is not remedied within 30 days after the
earlier to occur of (i) the date on which such failure shall first
become known to any officer of the Company or (ii) the date on which
notice thereof is given to the Company; or
(f) An "Event of Default" shall occur under the Revolving
Credit Agreement (other than an Event of Default covered by clause (m)
of this ss.6.1) or the Senior Note Agreements; or
(g) Default shall occur under any interest rate or currency
protection agreement entered into by the Company or any Restricted
Subsidiary with any bank or other financial
<PAGE>
institution; or
(h) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest or premium on any Indebtedness for
Borrowed Money in excess of $1,000,000 (other than the Notes or the
Senior Notes) of the Company or any Restricted Subsidiary, individually
or in the aggregate, and such default shall continue beyond the period
of grace, if any, allowed with respect thereto; or
(i) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which any
Indebtedness for Borrowed Money in excess of $1,000,000 of the Company
or any Restricted Subsidiary (other than this Agreement, the Senior
Note Agreements, the Revolving Credit Agreement, the Subsidiary Senior
Guaranty Agreement or the Subsidiary Senior Subordinated Guaranty
Agreement), individually or in the aggregate, may be issued and such
default or event shall continue for a period of time sufficient to
permit the acceleration of the maturity of any Indebtedness for
Borrowed Money of the Company or any Restricted Subsidiary outstanding
thereunder; or
(j) Any representation or warranty made by the Company or any
Restricted Subsidiary herein, in the Company Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Senior Subordinated
Guaranty Agreement or made by the Company or any Restricted Subsidiary
in any statement or certificate furnished by the Company or any
Restricted Subsidiary in connection with the consummation of the
issuance and delivery of the Notes or furnished by the Company or any
Restricted Subsidiary pursuant hereto or pursuant to the Company
Security Agreement, the Subsidiary Security Agreement or the Subsidiary
Senior Subordinated Guaranty Agreement, is untrue in any material
respect as of the date of the issuance or making thereof; or
(k) The Subsidiary Senior Subordinated Guaranty Agreement
shall be held by a court of competent jurisdiction to be invalid or
unenforceable in whole or in part in any respect or shall otherwise
cease to be in full force and effect or the Company or any Restricted
Subsidiary takes any action for the purpose of repudiating or
rescinding the Subsidiary Senior Subordinated Guaranty Agreement in
whole or in part or the obligations of any Restricted Subsidiary,
respectively, thereunder or the Company or any Restricted Subsidiary
declares that the obligations of any Restricted Subsidiary under the
Subsidiary Senior Subordinated Guaranty Agreement are unenforceable in
whole or in part; or
(l) The Company Security Agreement or the Subsidiary Security
Agreement shall cease to be in full force and effect, or shall cease to
give the Security Trustee the Liens purported to be created thereby or,
in the reasonable judgment of the holders of the Notes, the practical
realization of the benefits of the Liens and security interest
purported to be created thereby; or
(m) The Company shall for any reason fail to make any required
prepayment of the Revolving Credit Notes pursuant to Section 2.6(b)(ii)
of the Revolving Credit Agreement within one day after such prepayment
becomes due; or
(n) Final judgment or judgments for the payment of money
aggregating in excess of $100,000 is or are outstanding against the
Company or any Restricted Subsidiary or against any property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 30 days
from the date of its entry; or
(o) A custodian, trustee or receiver is appointed for the
Company or any Restricted Subsidiary or for the major part of the
property of either and is not discharged within 45 days after such
appointment; or
(p) The Company or any Restricted Subsidiary becomes insolvent
or bankrupt, is generally not paying its debts as they become due or
makes an assignment for the benefit of creditors, or the Company or any
Restricted Subsidiary causes or suffers an order for relief to be
entered with respect to it under applicable Federal bankruptcy law or
applies for or consents to the appointment of a custodian, trustee or
receiver for the Company or such Restricted Subsidiary or for the major
part of the property of either; or
(q) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other
<PAGE>
proceedings for relief under any bankruptcy or similar law or laws for
the relief of debtors, are instituted by or against the Company or any
Restricted Subsidiary and, if instituted against the Company or any
Restricted Subsidiary, are consented to or are not dismissed within 60
days after such institution; or
(r) The Company or any ERISA Affiliate shall fail to pay when
due an amount or amounts aggregating in excess of $100,000 which it
shall have become liable to pay to the Pension Benefit Guaranty
Corporation (the "PBGC") or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans having aggregate Unfunded
Vested Liabilities in excess of $100,000 (collectively, a "Material
Plan") shall be filed under Title IV of ERISA by the Company or any
ERISA Affiliate, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer
any Material Plan or a proceeding shall be instituted by a fiduciary of
any Material Plan against the Company or any ERISA Affiliate to enforce
Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have
been dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated.
.Section 6.2. Notice to Holders;. When any Default or Event of
Default described in the foregoing ss.6.1 has occurred, or if the holder of any
Note or of any other evidence of Indebtedness of the Company gives any notice or
takes any other action with respect to a claimed default, the Company agrees to
give notice within three business days (except as otherwise specifically
provided herein) of such event to all holders of the Notes then outstanding,
such notice to be in writing and sent by registered or certified mail or by
telegram.
.Section 6.3. Acceleration of Maturities;. When any Event of Default
described in paragraph (a), (b) or (c) of ss.6.1 has happened and is continuing,
any holder of any Note may, and when any Event of Default described in
paragraphs (d) through (n), inclusive, or (r) of said ss.6.1 has happened and is
continuing, the holder or holders of at least a majority of the principal amount
of Notes at the time outstanding may, by notice in writing sent by personal
delivery, prepaid overnight mail or courier service or registered or certified
mail to the Company, declare the entire principal and all interest accrued on
all Notes to be, and all Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event of Default described in
paragraphs (o), (p) or (q) of ss.6.1 has occurred, then all outstanding Notes
shall immediately become due and payable without presentment, demand or notice
of any kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Company will forthwith pay to the holders of the Notes
the entire principal and interest accrued on the Notes and, to the extent
permitted by law, liquidated damages for the loss of the bargain evidenced
hereby in an amount equal to the Make-Whole Amount. No course of dealing on the
part of any holder of a Note and no delay or failure on the part of any holder
of a Note to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to the holder or holders
of the Notes all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including reasonable compensation
to such holder's or holders' attorneys for all services rendered in connection
therewith.
.Section 6.4. Rescission of Acceleration;. The provisions of ss.6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (n), inclusive, or (r) of ss.6.1, the holders of at least a majority in
aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes, this Agreement, the Company
Security Agreement, the Subsidiary Security Agreement or the Subsidiary
Senior Subordinated Guaranty Agreement;
(b) all arrears of interest upon, premium and principal
payable in respect of all of the
<PAGE>
Notes and all other sums payable under the Notes and under this
Agreement, the Company Security Agreement, the Subsidiary Security
Agreement and the Subsidiary Senior Subordinated Guaranty Agreement
(except any principal, interest or premium on the Notes which has
become due and payable solely by reason of such declaration under
ss.6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to ss.7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
.SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS;.
.Section 7.1. Consent Required;. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holders of at least 76% in aggregate principal
amount of outstanding Notes; provided that without the written consent of the
holders of all of the Notes then outstanding, no such waiver, modification,
alteration or amendment shall be effective (i) which will change the time of
payment (including any prepayment required by ss.2.1) of the principal of or the
interest on any Note or change the principal amount thereof or change the rate
of interest thereon, (ii) which will change any of the provisions with respect
to optional prepayments or (iii) which will change the percentage of holders of
the Notes required to (A) consent to any such amendment, alteration, waiver or
modification or any of the provisions of this ss.7 or (B) accelerate the Notes
or rescind the acceleration of the Notes pursuant to ss.6.
.Section 7.2. Effect of Amendment or Waiver;. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
.'SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS';.
.Section 8.1. Definitions;. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock (determined by number of shares or number
of votes) of the Company or (iii) 5% or more of the Voting Stock (determined by
number of shares or number of votes) (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by the Company or a Subsidiary. The term "control" means 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 Voting
Stock, by contract or otherwise.
"Agent" shall mean Harris Trust and Savings Bank and its permitted
successors and assigns, in each case in its capacity as agent for the Banks
under the Revolving Credit Agreement.
"Banks" shall mean Harris Trust and Savings Bank, The First National
Bank of Chicago, LaSalle National Bank and the other banks or financial
institutions that are or become a party to the Revolving Credit Agreement.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be required to be reflected under GAAP as a liability on a consolidated
balance sheet of such Person.
"Closing Date" shall have the meaning as defined in ss.1.3.
"Collateral" shall have the meaning as defined in the Company Security
Agreement and the
<PAGE>
Subsidiary Security Agreement.
"Company Security Agreement" shall have the meaning as defined in
ss.1.2.
"Consolidated Adjusted Net Worth" at any date means:
(a) as to any corporation, the amount of capital stock
liability plus (or minus in the case of a deficit) the capital surplus
and earned surplus of the Company and its Restricted Subsidiaries on a
consolidated basis, and as to any partnership or limited liability
company, the capital account of the Company and its Restricted
Subsidiaries on a consolidated basis; less (without duplication)
(b) the net book value, after deducting any reserves
applicable thereto, of all items of the following character which are
included in the assets of the Company and its Restricted Subsidiaries,
to wit:
(i) all real property, fixed assets, unamortized
leasehold improvements and furniture, fixtures and equipment
other than property held for immediate sale, lease or other
liquidation which has been held by the Company or a Restricted
Subsidiary for less than 90 days;
(ii) all deferred charges (other than deferred Federal
income taxes and deferred investment tax credits) and prepaid
expenses other than prepaid interest, prepaid taxes and
prepaid insurance premiums;
(iii) treasury stock;
(iv) unamortized debt discount and capitalized expense
and unamortized stock discount and capitalized expense;
(v) good will, organizational or experimental expense,
patents, trademarks, copyrights, trade names and other
intangibles;
(vi) Minority Interests;
(vii) "direct loan origination costs" as set forth in
FASB 91;
(viii) all Restricted Investments;
(ix) the excess, if any, of (A) net charge-offs of the
Company and its Restricted Subsidiaries over the twelve-month
period ending with such date over (B) reserves for credit
losses of the Company and its Restricted Subsidiaries as at
such date; and
(x) any surplus resulting from any write-up in the book
value of assets of the Company or any Restricted Subsidiary
subsequent to March 31, 1997.
"Consolidated Net Income" for any period shall mean the gross revenues
of the Company and its Restricted Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis in accordance with GAAP consistently applied and after
eliminating earnings or losses attributable to outstanding Minority Interests,
but excluding in any event:
(a) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any Person (other than a
Restricted Subsidiary), substantially all the assets of which have been
acquired in any manner, realized by such other Person prior to the date
of such acquisition;
(e) net earnings and losses of any Person (other than a
Restricted Subsidiary) with which the Company or a Restricted
Subsidiary shall have consolidated or which shall have merged into or
with the Company or a Restricted Subsidiary prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Company or any Restricted
Subsidiary has an ownership interest unless such net earnings shall
have actually been received by the Company or such Restricted
Subsidiary in the form of cash distributions;
<PAGE>
(g) any portion of the net earnings of any Restricted
Subsidiary (other than the Insurance Subsidiary) which for any reason
is unavailable for payment of dividends to the Company or any other
Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities of
the Company or any Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period; and
(l) any portion of the net earnings of the Insurance
Subsidiary in excess of $500,000 (on a cumulative basis) which has not
actually been distributed to the Company in the form of cash.
"Consolidated Net Worth" shall mean as of the date of any determination
thereof the total assets of the Company and its Restricted Subsidiaries less the
total liabilities of the Company and its Restricted Subsidiaries determined in
accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean as of the date of any
determination thereof Consolidated Net Worth less intangible assets of the
Company and its Restricted Subsidiaries determined in accordance with GAAP.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Determination Date" shall mean the last day of the fiscal quarter of
the Company occurring after the Closing Date in which the Company has maintained
a Consolidated Tangible Net Worth in excess of $42,000,000 at the end of such
fiscal quarter.
"EBIT" for any period shall mean the sum of (i) Consolidated Net Income
during such period plus (to the extent deducted in determining Consolidated Net
Income), (ii) all provisions for any Federal, state or other income taxes made
by the Company and its Restricted Subsidiaries during such period and (iii) all
Interest Charges on all Indebtedness (including the interest component of
Capitalized Rentals) of the Company and its Restricted Subsidiaries.
"Environmental Legal Requirement" shall mean any international,
Federal, state or local statute, law, regulation, order, consent decree,
judgment, permit, license, code, covenant, deed restriction, common law, treaty,
convention, ordinance or other requirement relating to public health, safety or
the environment, including without limitation, those relating to releases,
discharges or emissions to air, water, land or ground water, to the withdrawal
or use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, or Hazardous Substances or crude oil, or any fraction thereof, or
to exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any
regulation, order, notice or demand issued pursuant to such law, statute or
ordinance, in each case applicable to the property of the Company or any of its
Subsidiaries or the operation, construction or modification of any thereof,
including without limitation the following: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous
and Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act,
as amended, the Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1976, the Safe Drinking Water Control Act, the Clean Air Act of
1966, as amended, the Toxic Substances Control Act of 1976, the Occupational
Safety and Health Act of 1977, as amended, the Emergency Planning and Community
Right-to-Know Act of 1986, the National Environmental Policy Act of 1975 and the
Oil Pollution Act of 1990 and any similar or implementing state law, and any
state statute and any further amendments to these laws, providing for financial
responsibility for cleanup or other actions with respect to the release o
threatened release of Hazardous Substances or crude oil, or any fraction thereof
and all rules, regulations, guidance documents and publication promulgated
thereunder.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended, and
<PAGE>
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
to ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning as defined in ss.6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the
sum of (i) all Rentals (other than Capitalized Rentals) payable during such
period by the Company and its Restricted Subsidiaries, and (ii) all Interest
Charges on all Indebtedness (including the interest component of Capitalized
Rentals) of the Company and its Restricted Subsidiaries.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for Borrowed Money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for Borrowed
Money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substances" shall mean any hazardous or toxic material,
substance or waste pollutant or contaminant which is regulated as such under any
statute, law, ordinance, rule or regulation of any Federal, regional, state or
local authority having jurisdiction over the property of the Company or any
Subsidiary or its use, including but not limited to any material, substance or
waste which is: (a) defined as a hazardous substance under Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. ss.1317), as amended; (b)
regulated as a hazardous waste under Section 1004 of the Federal Resource
Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), as amended; (c)
defined as a hazardous substance under Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended; (d) defined
or regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes or (e) petroleum or
products derived therefrom.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all (i) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (ii)
obligations secured by any Lien upon property or assets owned by such Person,
even though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) Capitalized Rentals, (v) all obligations
of such Person on or with respect to letters of credit, bankers' acceptances and
other extensions of credit whether or not representing obligations for borrowed
money and (vi) Guaranties of obligations of others of the character referred to
in this definition.
<PAGE>
"Indebtedness for Borrowed Money" of any Person shall mean (a) all
Indebtedness of such Person for borrowed money or which has been incurred in
connection with the acquisition of assets, (b) all Capitalized Rentals of such
Person, and (c) all Guaranties by such Person of Indebtedness for Borrowed Money
of others, it being understood that Indebtedness for Borrowed Money shall not
include trade payables in the ordinary course of business.
"Institutional Holder" shall mean any insurance company, bank, savings
and loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution.
"Insurance Subsidiary" shall mean any one Subsidiary (i) which is
organized under the laws of the British Virgin Islands or such other
jurisdiction as shall be consented to in writing by the holders of the Notes;
(ii) which conducts substantially all of its business and has substantially all
of its assets within the British Virgin Islands or such other jurisdiction as
shall be consented to in writing by the holders of the Notes; (iii) of which
100% (by number of votes) (other than directors' qualifying shares) of the
Voting Stock is owned by the Company; and (iv) which is engaged in the business
of reinsuring the credit insurance written by the Subsidiaries.
"Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Junior Subordinated Debt" shall mean all unsecured Indebtedness for
Borrowed Money of the Company which (i) pursuant to its terms matures on a date
later than the stated maturity date of the Notes and (ii) contains or has
applicable thereto subordination provisions substantially in the form set forth
in Exhibit G hereto but with appropriate adjustments therein so as to provide
that such Junior Subordinated Debt be subordinate and junior to all Senior Debt
and Senior Subordinated Debt (but not to any other Indebtedness of the Company)
rather than only to Senior Debt or such other provisions as may be approved in
writing by the holders of all of the outstanding Notes and Senior Notes
(exclusive of any Notes or Senior Notes held by a Subsidiary or other
Affiliate).
"Lien" shall mean any interest in property securing an obligation owed
to a Person, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest arising from a
mortgage, security agreement, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"Lien" includes reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar title
exceptions and encumbrances, including but not limited to mechanics',
materialmen's, warehousemen's, carriers' and other similar encumbrances,
affecting property. For the purposes of this Agreement, a Person shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"Make-Whole Amount" as at any date a payment thereof is due (the
"payment date") in connection with a payment or prepayment of any Notes shall
mean the excess of (a) the present value as at the payment date of the Prepaid
Cash Flows, discounted quarterly at an annual rate which is equal to the
Reinvestment Rate plus .50%, over (b) the aggregate principal amount of such
Notes then to be paid or prepaid. The Make-Whole Amount shall in no event be
less than zero. For purposes of any determination of the Make-Whole Amount:
"Prepaid Cash Flows" shall mean, for each date on which a
payment of principal or interest, or both, is scheduled to become due
on the Notes, an amount determined by subtracting (i) the amount of
such payment scheduled to become due on such date after giving effect
to any prepayment pursuant to ss.2.1 on the date as to which the
determination is being made and the application of such prepayment from
(ii) the amount of such payment which would have become due
<PAGE>
on such date but for such prepayment.
"Reinvestment Rate" shall mean the asked yield to maturity of
the United States Treasury obligations with a maturity (as compiled by
and published on Telerate Page 5 or its successor not more than five
business days immediately preceding the payment date) most nearly equal
to the remaining Weighted Average Life to Maturity of the Prepaid Cash
Flows as at the payment date. If such rate shall not have been so
published, the Reinvestment Rate in respect of such payment date shall
mean the mean of the yields to maturity of United States Treasury
obligations (as compiled by and published in the United States Federal
Reserve Bulletin or its successor publication for each of the two weeks
immediately preceding the payment date) with a constant maturity most
nearly equal to the Weighted Average Life to Maturity of the Prepaid
Cash Flows as at the payment date. If no maturity exactly corresponding
to such remaining Weighted Average Life shall appear therein, yields
for the next longer and the next shorter published maturities shall be
calculated pursuant to the foregoing sentence and the Reinvestment Rate
shall be interpolated from such yields on a straight-line basis
(rounding to the nearest month). If such rates shall not have been so
published, the Reinvestment Rate in respect of such determination date
shall be calculated pursuant to the next preceding sentence on the
basis of the arithmetic mean of the arithmetic means of the secondary
market ask rates, as of approximately 3:30 P.M., New York City time, on
the last business days of each of the two weeks preceding the payment
date, for the actively traded U.S. Treasury security or securities with
a maturity or maturities most closely corresponding to the remaining
Weighted Average Life to Maturity, as reported by three primary United
States Government securities dealers in New York City of national
standing selected in good faith by the Company.
"Weighted Average Life to Maturity" with respect to the
Prepaid Cash Flows means, as at the payment date for the determination
of the Reinvestment Rate, the number of years obtained by dividing the
then Remaining Dollar-years of such Prepaid Cash Flows by the principal
amount of the prepayment. The term "Remaining Dollar-years" of the
Prepaid Cash Flows means the product obtained by (i) multiplying (A)
the principal portion of each Prepaid Cash Flow (including payment at
final maturity), by (B) the number of years (calculated to the nearest
one-twelfth) between the time of determination and the date of such
Prepaid Cash Flow, and (ii) totaling all the products obtained in the
computations described in clause (i).
"Material Plan" shall have the meaning as defined in ss.6.1.
"Maximum Principal Amount" shall mean the sum of (i) $65,000,000, plus
(ii) any principal amount in excess thereof agreed to in writing by the holders
of the Notes, plus (iii) any principal amount in excess thereof; provided, that,
at the time of any increase in the amount of the commitment of the Banks under
the Revolving Credit Agreement, the Agent shall have received a certificate or
certificates of the Chief Financial Officer of the Company and an authorized
officer of each holder of the Notes, in each case, certifying that on the date
of such increase and after giving effect thereto and, in the case of clause (B)
below, after giving effect to the treatment of the maximum aggregate amount of
the commitment as so increased as having been incurred as Indebtedness for
Borrowed Money on the last day of the calendar month then most recently ended
and, in the case of any certificate delivered by any holder of the Notes, to the
knowledge of such holder, (A) there does not exist any Default or Event of
Default under clauses (a), (b), (c), (n), (o), (p) or (q) of ss.6.1 as in effect
on the Closing Date or under ss.5.7, ss.5.8, ss.5.9, ss.5.10, ss.5.11 (but only
to the extent such Default or Event of Default under ss.5.11 relates to a Lien
on property of the Company or any Restricted Subsidiary with a fair market value
in excess of $1,000,000), ss.5.12, ss.5.13 or ss.5.18 as in effect on the
Closing Date and (B) the ratio of Indebtedness for Borrowed Money (as defined on
the Closing Date) of the Company and its Restricted Subsidiaries to Consolidated
Adjusted Net Worth (as defined on the Closing Date) for the calendar month then
most recently ended does not exceed 6.5 to 1.
"Minority Interests" shall mean any shares of stock, partnership
interests, membership interests or other equity interests of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, by valuing Minority Interests
constituting common stock at the book value of the capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of valuing Minority
Interests in preferred stock, and by valuing Minority Interests
<PAGE>
constituting partnership or limited liability company membership interests at
the book value of such interest.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Income Available for Fixed Charges" for any period shall mean the
sum of (i) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (ii) all provisions for any
Federal, state or other income taxes made by the Company and its Restricted
Subsidiaries during such period and (iii) Fixed Charges of the Company and its
Restricted Subsidiaries during such period.
"Notes" shall have the meaning as defined in ss.1.1.
"Operating Margin" shall mean as of the date of any determination
thereof the sum of the pretax net operating income of the Company and its
Restricted Subsidiaries plus amortization of intangible assets of the Company
and its Restricted Subsidiaries divided by the total revenues of the Company and
its Restricted Subsidiaries, in each case, determined on a consolidated basis in
accordance with GAAP.
"PBGC" shall have the meaning as defined in ss.6.1.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government agency
or political subdivision thereof.
"Plan" means a "pension plan" as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Pledged Collateral" shall have the meaning as defined in the Company
Security Agreement or in the Subsidiary Security Agreement, as the context may
require.
"Purchaser" shall have the meaning as defined in ss.1.1.
"Receivables" shall mean all accounts receivable, receivables, contract
rights, controls, instruments, notes, drafts, bills, acceptances, documents,
chattel paper, general intangibles and other forms of obligations owing to a
Person.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Restricted Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Restricted Investments" shall mean all Investments other than the
Investments permitted by paragraphs (a) through (f), both inclusive, of ss.5.18.
"Restricted Subsidiary" shall mean the Insurance Subsidiary, if any,
and any other Subsidiary (i) which is organized under the laws of the United
States or any State thereof; (ii) which conducts substantially all of its
business and has substantially all of its assets within the United States; and
(iii) of which 100% (by number of votes) of the Voting Stock is owned by the
Company and/or one or more Restricted Subsidiaries.
"Revolving Credit Agreement" shall mean that certain Amended and
Restated Revolving Credit Agreement dated as of June 30, 1997 among the Company,
the Agent and the Banks, as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof.
"Revolving Credit Notes" shall mean the borrowings pursuant to the
Revolving Credit Agreement, whether or not such borrowings are evidenced by
promissory notes and as the same may from time to time be amended or restated
pursuant to the terms thereof and any notes executed in replacement thereof, in
a maximum aggregate principal amount of borrowings at any one time outstanding
not to exceed the Maximum Principal Amount.
<PAGE>
"S&P" shall mean Standard & Poor's Ratings Services Group, a division
of The McGraw-Hill Companies, Inc.
"Security" shall have the same meaning as in Section 2(a) (1) of the
Securities Act of 1933, as amended.
"Security Trustee" shall mean Harris Trust and Savings Bank, an
Illinois banking corporation, and its successors and assigns under the Company
Security Agreement and the Subsidiary Security Agreement.
"Senior Debt" shall mean (i) the Senior Notes, (ii) the Voyager Note,
(iii) all other Indebtedness for Borrowed Money of the Company which is not
expressed to be subordinate or junior to any other Indebtedness of the Company
and (iv) all Indebtedness for Borrowed Money of Restricted Subsidiaries (other
than the Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary
Senior Guaranty Agreement).
"Senior Indebtedness" shall have the meaning as defined in ss.9.
"Senior Note Agreements" shall mean, collectively, the separate Amended
and Restated Note Agreements, each dated as of June 30, 1997, between the
Company and the respective note purchasers named therein, as the same may from
time to time be amended, restated, modified, supplemented or waived pursuant to
the terms thereof.
"Senior Notes" shall mean the Senior Secured Notes and the Revolving
Credit Notes.
"Senior Secured Notes" shall mean the Senior Secured Notes due December
1, 1999 issued pursuant to the Senior Note Agreements, as such Notes may from
time to time be amended or restated pursuant to the terms thereof and of the
Senior Note Agreements and any notes executed in replacement thereof.
"Senior Subordinated Debt" shall mean (i) the Notes and (ii) all other
unsecured Indebtedness for Borrowed Money of the Company which (A) pursuant to
its terms matures on a date later than the stated maturity date of the Senior
Notes and (B) contains or has applicable thereto subordination provisions
substantially in the form set forth in Exhibit G hereto or such other provisions
as may be approved in writing by the holders of all of the outstanding Notes and
Senior Notes (exclusive of any Notes and Senior Notes held by a Subsidiary or
other Affiliate).
The term "subsidiary" shall mean, as to any particular parent
corporation, any corporation, partnership, limited liability company or other
entity of which more than 50% (by number of votes or other similar
decision-making authority) of the Voting Stock shall be owned by such parent
corporation and/or one or more corporations, partnerships, limited liability
companies or other entities which are themselves subsidiaries of such parent
corporation. The term "Subsidiary" shall mean a subsidiary, directly or
indirectly, of the Company.
"Subsidiary Senior Guaranty Agreement" shall mean that certain Amended
and Restated Guaranty Agreement dated as of June 30, 1997 of each Restricted
Subsidiary (other than the Insurance Subsidiary) for the benefit of the holders
of the Senior Notes, as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof.
"Subsidiary Senior Subordinated Guaranty Agreement" shall have the
meaning as defined in ss.1.2.
"Subsidiary Security Agreement" shall have the meaning as defined in
ss.1.2.
"Trigger Date" shall mean the last day of the fiscal quarter of the
Company occurring after the Closing Date in which the Company has maintained (i)
a Consolidated Tangible Net Worth in excess of $42,000,000 throughout such
fiscal quarter and (ii) an Operating Margin in excess of 25% for the four
consecutive fiscal quarter period ending on such date.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Company or any ERISA Affiliate to the
PBGC or the Plan under Title IV of ERISA.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Unsecured Receivables" shall have the meaning as defined in the
Subsidiary Security Agreement.
"Voting Stock" shall mean Securities or other equity interests of any
class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
<PAGE>
(or Persons performing similar functions).
"Voyager Note" shall mean the 10% Senior Debenture of the Company,
dated October 23, 1989, payable to Voyager Life Insurance Company, without
taking into account any amendment thereof other than any amendment which extends
the maturity date thereof.
"Weingarten Lien" shall mean the Lien of Weingarten Realty Investors as
in effect on the Closing Date and as reflected on the UCC-1 financing statement
filed with the Secretary of State of the State of Texas on August 21, 1989
against World Finance Corporation of Texas under document number 189822 and
continued by the UCC-3 financing statement filed with the Secretary of State of
the State of Texas on July 15, 1994 under document number 685105.
.Section 8.2. Accounting Principles;. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
.Section 8.3. Directly or Indirectly;. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
.C.SECTION 9. SUBORDINATION;.
.Section 9.1. Subordination to Senior Indebtedness;. The
Indebtedness evidenced by the Notes (whether for principal, interest or premium)
and any renewals or extensions thereof, and any and all other obligations and
liabilities owing under this Agreement and all other instruments and agreements
relating thereto, shall at all times be wholly subordinate and junior in right
of payment to any and all indebtedness of the Company or any of the Restricted
Subsidiaries to the Security Trustee and/or the holders of the Senior Notes from
time to time outstanding under the Senior Note Agreements, the Revolving Credit
Agreement, the Company Security Agreement, the Subsidiary Security Agreement,
the Subsidiary Senior Guaranty Agreement and the Senior Notes (collectively, the
"Financing Documents") for (i) principal, interest and premium due thereunder
(including, without limitation any interest which, but for the filing of a
petition in bankruptcy or similar event, would accrue after the commencement of
any bankruptcy, insolvency, reorganization or similar proceeding of the Company)
other than (A) any principal amount of borrowings outstanding under the
Revolving Credit Notes in excess of the Maximum Principal Amount and (B) the
related interest thereon, (ii) the amounts payable by the Company under the
Revolving Credit Agreement in the form of fees pursuant to Sections 3.1 and 3.3
thereof as such Sections were in effect on the Closing Date or as amended or
revised after the Closing Date but not in excess of the aggregate amount of the
fees payable pursuant to Sections 3.1 and 3.3 as in effect on the Closing Date,
(iii) the amounts payable under the Revolving Credit Agreement for increased
costs, taxes and indemnification as described in Section 10.3, Section 12.3 and
paragraph (b) of Section 12.12, respectively, of the Revolving Credit Agreement,
(iv) the amounts payable by the Company under the Senior Note Agreements
pursuant to the final paragraph of Section 8.4 of the Senior Note Agreements and
Section 8.13 of the Company Security Agreement, and (v) the first $2,500,000 of
all other costs, claims, expenses and fees (including trustee's fees and
attorneys' fees) which become payable by the Company pursuant to or arising out
of the Financing Documents with respect to the Senior Notes (such indebtedness
being herein referred to as "Senior Indebtedness"), in the manner and with the
force and effect hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up
of the Company, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization, or other similar
proceeding relative to the Company or its property, all Senior
Indebtedness shall first be paid in full before any payment is made
upon the indebtedness evidenced by the Notes or related thereto and in
any such event any payment or distribution of any kind or character,
whether in cash, property or securities (other than in securities or
other evidences of indebtedness the payment of which is subordinated to
the payment of all Senior Indebtedness which may at the time be
outstanding to at least the same extent as the payment of the Notes is
subordinated thereto in this ss.9) which shall be made upon or in
respect of the Notes shall be paid over to the Security Trustee
<PAGE>
for application in payment of the Senior Indebtedness unless and until
such Senior Indebtedness shall have been paid or satisfied in full.
(b) In the event that the Notes are declared or become due and
payable because of the occurrence of any Event of Default hereunder or
otherwise (other than that portion of the Notes becoming due and
payable by reason of any required prepayment pursuant to ss.2.1 hereof
or any optional prepayment pursuant to ss.2.2 hereof with the prior
written consent of the Agent and the holders of at least 76% in
aggregate principal amount of outstanding Senior Secured Notes), under
circumstances when the foregoing clause (a) shall not be applicable,
the holders of the Notes shall be entitled to payments due thereon,
other than regularly scheduled payments of interest and the payments of
principal and interest due and payable under ss.2.1 hereof and at
maturity (other than by acceleration), only after there shall first
have been paid in full all Senior Indebtedness outstanding at the time
the Notes so become due and payable (plus interest, fees and expenses
incurred or accrued thereafter constituting Senior Indebtedness)
because of any such event, or payment shall have been provided for in a
manner satisfactory to the holders of such Senior Indebtedness.
(c) Without limiting any of the other provisions hereof,
during:
(i) the continuance of any default in the payment of
either principal, interest or premium, if any, on any Senior
Indebtedness (a "Payment Default") no payment of principal,
premium or interest or other amounts shall be made on or with
respect to the Notes if either (A) a Blockage Period
(hereinafter defined) exists with respect to such Payment
Default or (B) judicial proceedings shall be pending in
respect of such Payment Default; or
(ii) the continuance of any Event of Default under the
Senior Note Agreements or the Revolving Credit Agreement
resulting from the failure of the Company to comply with the
covenants contained in Sections 5.8, 5.10(a)(i) 5.12, 5.13 or
5.20(k) of the Senior Note Agreements or Sections 8.8,
8.10(a)(i), 8.12, 8.13 or 8.20(k) of the Revolving Credit
Agreement, in each case, as such Sections were in effect as of
the Closing Date or as amended or modified subsequent to the
Closing Date so long as such amended or modified covenants
either (i) relate to the same matters covered by such Sections
as of the Closing Date and are no more restrictive or (ii) are
consented to by the holders of the Notes (any such event being
a "Material Nonpayment Default"), no payment of principal,
premium or interest shall be made on the Notes if either (A) a
Blockage Period exists with respect to such Material
Nonpayment Default or (B) judicial proceedings shall be
pending in respect of such Material Nonpayment Default or any
other Material Nonpayment Default,
provided, that payment of principal, premium or interest to the holders
of the Notes may not be prohibited by Blockage Periods pursuant to the
preceding provisions (x) for more than an aggregate of 120 days in any
twelve month period in the case of prohibitions arising from Material
Nonpayment Defaults, (y) for more than an aggregate of 360 days for
prohibitions arising from Material Nonpayment Defaults during the
period beginning on the Closing Date and ending on the day next
following the date on which the Notes have been paid in full, or (z)
for more than an aggregate of 360 days in any thirteen month period. As
used herein the term "Blockage Period" shall mean the period of time
commencing upon (A) the occurrence of a Payment Default and ending
either 180 days later or on such earlier date, if any, on which such
Payment Default shall have ceased to continue, provided, that all of
the holders of the Senior Indebtedness may (I) waive retroactively any
Blockage Period resulting from a Payment Default within 10 business
days after the occurrence of such Payment Default by delivery during
such period of an instrument in writing to the Company to such effect
and (II) waive any such Blockage Period at any time after such 10
business days by delivery of an instrument in writing to the Company to
such effect, which waiver shall be effective not earlier than the date
of delivery thereof and (B) in the case of a Material Nonpayment
Default, the furnishing of a Blockage Notice as hereinafter provided
and ending either 120 days later or on such earlier date, if any, on
which such Material Nonpayment Default shall have ceased to continue,
and the term "Blockage Notice" shall mean the furnishing of notice by
the
<PAGE>
Security Trustee or one or more holders of Senior Indebtedness to the
Company of a Material Nonpayment Default. For purposes of this
paragraph (c) a Payment Default shall be deemed to be continuing until
the principal, interest and/or premium which is overdue has been paid
in full by the Company and a Material Nonpayment Default shall be
deemed to be continuing until waived by the requisite holders of Senior
Indebtedness by delivery of an instrument in writing to the Company to
such effect, which waiver shall be effective not earlier than the date
of delivery thereof. The Company agrees that immediately upon receipt
of any Blockage Notice or an instrument from the holders of the Senior
Indebtedness waiving a Blockage Period it will deliver copies thereof
to each holder of the Notes. In addition, the Company agrees that (A)
if any legal proceedings described in clauses (i) or (ii) above shall
be instituted or (B) if any Payment Default or any Material Nonpayment
Default shall be cured, waived or shall otherwise cease to exist, it
shall promptly furnish notice thereof to each holder of the Notes.
(d) During any period of time when pursuant to paragraph (c)
above payment of principal, premium and interest may not be made on the
Notes the holders of the Notes shall not be deemed to be prohibited
from (i) filing or initiating a petition in bankruptcy against the
Company or instituting any other proceedings relating to insolvency,
liquidation, readjustment, reorganization or other similar proceedings
relative to the Company or its property or (ii) joining in any
proceedings involving the Company initiated by the Security Trustee,
any holder of Senior Indebtedness or other Person to collect or enforce
such Senior Indebtedness or under laws relating to bankruptcy,
insolvency, liquidation, readjustment, reorganization or other similar
proceedings.
(e) In the event that notwithstanding this ss.9.1, the Company
shall make any payment in respect of the Notes in violation of this
ss.9.1, then until such violation shall have been cured (within the
applicable time period) or waived or shall have ceased to exist, such
payment shall be held by the recipient for the benefit of, and
forthwith shall be paid over and delivered to, the Security Trustee for
application to the payment of all Senior Indebtedness remaining unpaid
unless and until all Senior Indebtedness shall have been paid or
satisfied in full.
.Section 9.2. Proofs of Claim;. If, while any Senior Indebtedness is
outstanding, any bankruptcy, reorganization, insolvency, receivership,
arrangement, composition or marshalling of assets or similar proceedings
relating to the Company or its property is commenced by or against the Company
or its property:
(a) The Security Trustee and/or the holders of the Senior
Indebtedness each is hereby irrevocably authorized and empowered (in
its own name or in the name of the holder of each Note or otherwise),
but shall have no obligation, to demand, sue for, collect and receive
every payment or distribution referred to in respect of the Notes and
give acquittance therefor and to file claims and proofs of claim and
take such other action (including without limitation enforcing any lien
securing payment of the Notes) as it may deem necessary or advisable
for the exercise or enforcement of any of the rights or interests of
the holders of such Notes; provided, however, (i) in no event shall the
Security Trustee or any holder of such Senior Indebtedness be entitled
to vote the Notes on behalf of the holders of the Notes and (ii) within
5 business days following the taking of any material action by the
Security Trustee or the holders of the Senior Indebtedness pursuant to
this paragraph (a), the Company will furnish each holder of the Notes
written notice describing the action so taken; and
(b) The holder of each Note shall duly and promptly take such
action as the Security Trustee and/or the holders of the Senior
Indebtedness may reasonably request (i) to collect any payment with
respect to the Notes for the account of the holders of such Senior
Indebtedness and to file appropriate claims or proofs of claim in
respect of the Notes, (ii) to execute and deliver to the Security
Trustee and/or the holders of the Senior Indebtedness such powers of
attorney, assignments, or other instruments as it may request in order
to enable it to enforce any and all claims with respect to, and any
liens securing payment of, the Notes, and (iii) to collect and receive
any and all payments or distributions which may be payable or
deliverable upon or with respect to the Notes;
<PAGE>
provided, however, that the foregoing shall not waive or diminish the rights of
each holder of the Notes to take any action (including, without limitation, the
foregoing actions) itself in respect of enforcement of the Notes, and no waiver,
consent or failure to pursue any right or remedy in respect of the Notes shall
limit any rights which the Security Trustee or the holder of any Senior
Indebtedness otherwise may have.
.Section 9.3. No Waiver;. Except as otherwise specified in the
preceding provisions of this ss.9, no right of the Security Trustee or any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time or in any way be affected or impaired by any
act or failure to act on the part of the Company, the Security Trustee or the
holders of Senior Indebtedness, or by any noncompliance by the Company with any
of the terms, provisions and covenants of the Notes or the agreement under which
they are issued, regardless of any knowledge thereof that the Security Trustee
or any such holder of Senior Indebtedness may have or be otherwise charged with.
The holders of Senior Indebtedness may, without in any way affecting
the obligations of the holders of the Notes with respect thereto, at any time or
from time to time and in their absolute discretion, change the manner, place or
terms of payment of, change or extend the time of payment of, or renew or alter,
any Senior Indebtedness, or amend, modify or supplement any agreement or
instrument governing or evidencing such Senior Indebtedness or any other
documents referred to therein, or exercise or refrain from exercising any other
of their rights under the Senior Indebtedness including, without limitation, the
waiver of default thereunder and the exchange, release or nonperfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty securing such Senior Indebtedness, all without notice to or
assent from the holders of the Notes and, so long as any Senior Indebtedness
remains outstanding, all rights and interests of the holders of such Senior
Indebtedness and all agreements and obligations of each holder of a Note and the
Company under this Agreement shall remain in full force and effect irrespective
of the foregoing. As soon as available the Company shall furnish to each holder
of the Notes a copy of any amendment, modification or supplement to the
Financing Documents and any waiver of any of the provisions thereof.
.Section 9.4. Rights of Holders of Senior Indebtedness;. The Company
agrees, for the benefit of the holders of Senior Indebtedness, that in the event
that any Note is declared due and payable before its expressed maturity because
of the occurrence of an Event of Default, (i) the Company will give prompt
notice in writing of such happening to the holders of Senior Indebtedness and
(ii) all Senior Indebtedness shall forthwith become immediately due and payable
upon demand, regardless of the expressed maturity thereof.
.Section 9.5. Rights of Holders of Notes;. The foregoing provisions
are solely for the purpose of defining the relative rights of the holders of
Senior Indebtedness on the one hand, and the holders of the Notes on the other
hand, and nothing herein shall impair, as between the Company and the holders of
the Notes, the obligation of the Company which is unconditional and absolute, to
pay the principal, premium, if any, and interest on the Notes in accordance with
their terms, nor shall anything herein prevent the holders of the Notes from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default hereunder, subject to the rights of the holders of Senior Indebtedness
as herein provided for.
.Section 9.6. Holders of Notes Agreement as to the Subsidiary Senior
Subordinated Guaranty Agreement;. The holders of the Notes acknowledge that the
Subsidiary Senior Subordinated Guaranty Agreement has been executed for their
benefit by the Restricted Subsidiaries and agree to comply with the requirements
and obligations set forth in Section 15 thereof of the holders of the
Subordinated Guarantee Obligations thereunder and to be bound by the other
provisions contained in Section 15 thereof.
.SECTION 10. MISCELLANEOUS;.
.Section 10.1. Registered Notes;. The Company shall cause to be kept
at its principal office a register for the registration and transfer of the
Notes (hereinafter called the "Note Register"), and the Company will register or
transfer or cause to be registered or transferred, as hereinafter provided and
under such reasonable regulations as it may prescribe, any Note issued pursuant
to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
<PAGE>
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall
be deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
.Section 10.2. Exchange of Notes;. At any time, and from time to
time, upon not less than ten days' notice to that effect given by the holder of
any Note initially delivered or of any Note substituted therefor pursuant to
ss.10.1, this ss.10.2 or ss.10.3, and, upon surrender of such Note at its
office, the Company will deliver in exchange therefor, without expense to the
holder, except as set forth below, Notes for the same aggregate principal amount
as the then unpaid principal amount of the Note so surrendered, in the
denomination of the lesser of the then outstanding principal amount of the Note
so surrendered or $1,000,000 or any amount in excess thereof as such holder
shall specify, in each such case, dated as of the date to which interest has
been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue, payable to
such Person or Persons, or order, as may be designated by such holder, and
otherwise of the same form and tenor as the Notes so surrendered for exchange.
The Company may require the payment of a sum sufficient to cover any stamp tax
or governmental charge imposed upon such exchange or transfer.
.Section 10.3. Loss, Theft, Etc. of Notes;. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation upon
surrender and cancellation of the Note, the Company will make and deliver
without expense to the holder thereof, a new Note, of like tenor, in lieu of
such lost, stolen, destroyed or mutilated Note. If you or any subsequent
Institutional Holder is the owner of any such lost, stolen or destroyed Note,
then the affidavit of an authorized officer of such owner, setting forth the
fact of loss, theft or destruction and of its ownership of the Note at the time
of such loss, theft or destruction shall be accepted as satisfactory evidence
thereof and no further indemnity shall be required as a condition to the
execution and delivery of a new Note other than the unsecured written agreement
of such owner to indemnify the Company.
.Section 10.4. Expenses, Stamp Tax Indemnity;. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement, the Company Security Agreement, the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated Guaranty
Agreement and the transactions contemplated hereby and thereby, including but
not limited to:
(a) the cost of reproducing this Agreement, the Company
Security Agreement, the Subsidiary Security Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement and the Notes;
(b) the reasonable fees and disbursements of Chapman and
Cutler, your special counsel;
(c) the reasonable fees and disbursements of the local
counsels listed in ss.4.1(f);
(d) all reasonable fees, costs and other expenses of the
Security Trustee, as trustee under the Company Security Agreement and
the Subsidiary Security Agreement;
(e) all recording and filing fees and stamp taxes in
connection with the recordation or filing and re-recordation or
re-filing of the Company Security Agreement and the Subsidiary Security
Agreement and financing and continuation statements and other notices
of either thereof necessary to maintain the first perfected lien on the
Collateral under the Company Security Agreement and the Subsidiary
Security Agreement;
(f) the cost of conducting all reasonable Uniform Commercial
Code and tax lien searches; and
(g) all fees, expenses and disbursements of the Security
Trustee and the holders of the Notes (including without limitation,
reasonable attorneys' fees and court costs) relating to any
supplemental indentures, amendments, waivers or consents pursuant to
the provisions of this
<PAGE>
Agreement, the Company Security Agreement, the Subsidiary Security
Agreement, the Subsidiary Senior Subordinated Guaranty Agreement or the
Notes (whether or not the same is actually executed or delivered),
including without limitation, the fees, expenses and disbursements of
the holders of the Notes following the occurrence and during the
continuance of a Default or an Event of Default or in connection with
any supplemental indenture, amendment, waiver or consent resulting from
any work-out, restructuring or similar proceeding relating to the
performance or non-performance by the Company or any Restricted
Subsidiary of its obligations under the provisions of this Agreement,
the Company Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Senior Subordinated Guaranty Agreement or the Notes as the
result of any potential Default or Event of Default or incurred in
connection with the enforcement of rights hereunder or under the
Company Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Senior Subordinated Guaranty Agreement or the Notes as a
result of any potential Default or Event of Default, whether or not a
lawsuit is filed in connection therewith.
Except as set forth in ss.10.2, the Company also agrees that it will
pay and save you harmless against any and all liability with respect to stamp
and other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement, the
Company Security Agreement, the Subsidiary Security Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement or the Notes, whether or not any Notes
are then outstanding. Except as set forth in ss.10.2, the Company agrees to
protect and indemnify you against any liability for any and all brokerage fees
and commissions payable or claimed to be payable to any Person in connection
with the transactions contemplated by this Agreement.
.Section 10.5. Powers and Rights Not Waived; Remedies Cumulative';.
No delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to and are not exclusive of any rights or
remedies any such holder would otherwise have.
.Section 10.6. Notices;. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed by personal delivery,
prepaid overnight mail or courier service or registered or certified mail, in
each case, addressed to you at your address appearing on Schedule I to this
Agreement or such other address as you or the subsequent holder of any Note
initially issued to you, may designate to the Company in writing, and if to the
Company, delivered or mailed by personal delivery, prepaid overnight mail or
courier service or registered or certified mail to the Company at 108 Frederick
Street, Greenville, South Carolina 29607-2532, Attention: Chief Financial
Officer or to such other address as the Company may in writing designate to you
or to a subsequent holder of the Note initially issued to you.
.Section 10.7. Successors and Assigns;. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
.Section 10.8. Survival of Covenants and Representations;. All
covenants, representations and warranties made by the Company and the Restricted
Subsidiaries herein, in the Company Security Agreement, the Subsidiary Security
Agreement, and the Subsidiary Senior Subordinated Guaranty Agreement and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
.Section 10.9. Severability;. Should any part of this Agreement for
any reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts, or portion which may, for any reason, be
hereafter declared invalid.
.Section 10.10. GOVERNING LAW;. THIS AGREEMENT AND THE NOTES ISSUED
AND SOLD HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH SOUTH
CAROLINA LAW.
.Section 10.11. Captions;. The descriptive headings of the various
Sections or parts of this
<PAGE>
Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
<PAGE>
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
WORLD ACCEPTANCE CORPORATION
By /s/ A. Alexander McLean III
Its Executive Vice President
Accepted as of June 30, 1997.
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By /s/ James C. Fifield
Its Counsel
By /s/ Kent T. Kelsey
Its Counsel
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
<S> <C>
NAME AND ADDRESSES OF PURCHASER PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $8,000,000
$2,000,000
</TABLE>
711 High Street
$2,000,000
Des Moines, Iowa 50392-0800
Attention: Investment-Securities
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
With respect to the $8,000,000 Note:
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Mutual Life Insurance Company
Account No. 014752
OBI PFGSE (S) B61045()World Acceptance Corp. Sr.
Subordinated Notes due 2004
With respect to the $2,000,000 Note:
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Mutual Life Insurance Company
Account No. 7051484
OBI PFGSE (S) B61045()World Acceptance Corp. Sr.
Subordinated Notes due 2004
In each case with sufficient information (including interest rate,
maturity date, interest amount, principal amount and premium amount, if
applicable) to identify the source and application of such funds.
Notices
All notices with respect to payments to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment-Accounting & Treasury-Securities
Telefacsimile: (515) 248-2643
<PAGE>
Confirmation: (515) 248-8213
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 42-0127290
<PAGE>
DESCRIPTION OF LIENS
Schedule II to Senior Subordinated
Note Agreement dated June 30, 1997
Description of Liens
Lien of Weingarten Realty Investors on certain property of World Finance
Corporation of Texas, evidenced by UCC-1 financing statement No. 189822, filed
August 21, 1989 in the Office of the Texas Secretary of State and continued by
UCC-3 continuation statement No. 685105, filed July 15, 1994 in the Office of
the Texas Secretary of State.
Liens consisting of immaterial utility easements and similar immaterial
encumbrances on the real property of World Acceptance Corporation located at 108
Frederick Street, Greenville, South Carolina 29607. See Schedule B to owner's
title policy attached.
SCHEDULE II
(to Senior Subordinated Note Agreement)
<PAGE>
EXHIBIT A (TO NOTE AGREEMENT)
WORLD ACCEPTANCE CORPORATION
10% Senior Subordinated Secured Note
Due June 30, 2004
No. R-, 19
- ------- ----
$
WORLD ACCEPTANCE CORPORATION, a South Carolina corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the thirtieth day of June, 2004
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 10% per annum from the date hereof until maturity, payable quarterly on
the thirtieth of each September, December, March and June in each year
commencing September 30, 1997, and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the rate of 12% per
annum after maturity, whether by acceleration or otherwise, until paid. Both the
principal hereof, premium and interest hereon are payable at the principal
office of the Company in Greenville, South Carolina in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts.
This Note is one of the 10% Senior Subordinated Secured Notes due June
30, 2004 (the "Notes") of the Company in the aggregate principal amount of
$10,000,000 issued or to be issued under and pursuant to the terms and
provisions of that certain Note Agreement dated as of June 30, 1997, as the same
may from time to time be amended pursuant to the terms thereof (the "Note
Agreement"), entered into by the Company with the original purchaser therein
referred to and this Note and the holder hereof are entitled equally and ratably
with the holders of all other Notes outstanding under the Note Agreement to all
the benefits and security provided for thereby or referred to therein. Reference
is hereby made to the Note Agreement for a statement of such rights and benefits
and the terms of the subordination relating thereto.
This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement and the Company Security
Agreement (as hereinafter defined).
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
The Notes are secured, on a senior subordinated basis, by the Amended
and Restated Security Agreement, Pledge and Indenture of Trust dated as of June
30, 1997 between the Company and Harris Trust and Savings Bank, as security
trustee (the "Security Trustee"), as the same may from time to time be amended,
restated, modified, supplemented or waived pursuant to the terms thereof (the
"Company Security Agreement") and by the Amended and Restated Security
Agreement, Pledge and Indenture of Trust dated as of June 30, 1997 between each
Restricted Subsidiary and the Security Trustee, as the same may from time
<PAGE>
to time be amended, restated, modified, supplemented or waived pursuant to the
terms thereof (the "Subsidiary Security Agreement"), to which Company Security
Agreement, Subsidiary Security Agreement and all security agreements
supplementary thereto, reference is hereby made for the statement thereof,
including a description of the collateral, the nature and extent of the security
and the rights of the holder or holders of the Notes and of the Security Trustee
in respect thereof. The obligations of the Company under the Notes, the Note
Agreement and the Company Security Agreement are guaranteed pursuant to that
certain Guaranty Agreement dated as of June 30, 1997 of each Restricted
Subsidiary, as the same may from time to time be amended, modified,
supplemented, or waived pursuant to the terms thereof.
<PAGE>
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
WORLD ACCEPTANCE CORPORATION
By
Its
<PAGE>
[EXHIBIT B-FORM OF AMENDED AND RESTATED SECURITY
AGREEMENT, PLEDGE AND INDENTURE OF TRUST OMITTED]
EXHIBIT C (TO NOTE AGREEMENT)
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Annex A attached hereto states the name of each of the
Company's Subsidiaries existing on the Closing Date, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company and/or
its Subsidiaries. Those Subsidiaries listed in Section 1 of said Annex A
constitute Restricted Subsidiaries on the Closing Date. The Company has good and
marketable title to all of the shares of the stock, partnership interest,
membership interest or other applicable equity interest of each Subsidiary, free
and clear in each case of any Lien other than the Lien of the Company Security
Agreement and the Subsidiary Security Agreement. All such shares, partnership
interests, membership interests and other equity interests have been duly
authorized and validly issued and are fully paid and non-assessable.
2. Organization and Authority. The Company, and each Subsidiary,
(a) is a corporation, partnership, limited liability company
or other entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization;
(b) has all requisite corporate or other applicable power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation, partnership, limited liability company or other
entity in each jurisdiction where the nature of the business conducted
or the nature of the property owned or leased by it makes such
licensing or qualification necessary.
3. Financial Statements. (a) The consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of March 31 in each of the years
1993 to 1997, both inclusive, and the statements of income and retained earnings
and of cash flows for the fiscal year ended on said date accompanied by a report
thereon containing an opinion unqualified as to scope limitations imposed by the
Company and otherwise without qualification except as therein noted, by KPMG
Peat Marwick, were prepared in accordance with GAAP consistently applied except
as therein noted, are correct and complete in all material respects and present
fairly the financial position of the Company and its Subsidiaries as of such
date and the results of their operations for such period.
(b) Since March 31, 1997, there has been no change in the
condition, financial or otherwise, of the Company and its Subsidiaries
as shown on the consolidated balance sheet as of such date except
changes in the ordinary course of business, none of which individually
or in the aggregate have been materially adverse.
4. Indebtedness. Annex B attached hereto correctly describes all
Indebtedness for Borrowed Money of the Company and its Restricted Subsidiaries
outstanding on the Closing Date.
5. Full Disclosure. Neither the financial statements referred to in
paragraph 3 hereof, nor the Agreement, the Company Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Senior Subordinated Guaranty
Agreement nor any other written statement furnished by the Company or any
Restricted Subsidiary to you in connection with the negotiation of the sale of
the Notes, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its Subsidiaries which
the Company has not disclosed to you in writing which, individually or in the
aggregate, materially affects adversely or, so far as the Company can now
foresee, will materially affect adversely the properties, business, prospects,
profits or condition (financial or otherwise) of the Company and its
Subsidiaries.
6. Pending Litigation. Except for the litigation described on Annex C
attached hereto, there are no proceedings pending or, to the knowledge of the
Company threatened, against the Company or any Subsidiary in any court or before
any governmental authority or arbitration board or tribunal which involve the
possibility of, individually or in the aggregate, materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Company and its Subsidiaries.
7. Title to Properties. The Company and each Subsidiary has good and
marketable title in fee
<PAGE>
simple (or its equivalent under applicable law) to all the real property and has
good title to all the other property (including, but not limited to, the
Collateral) it purports to own, including that reflected in the most recent
balance sheet referred to in paragraph 3 except as sold or otherwise disposed of
in the ordinary course of business and except for liens disclosed in notes to
the financial statements referred to in paragraph 3 hereof or otherwise
permitted by the Agreement, the Company Security Agreement or the Subsidiary
Security Agreement.
8. Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks, copyright,
licenses and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any known conflict with the
rights of others which failure to own or possess or which conflict would,
individually or in the aggregate, materially and adversely affect the
properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries.
9. Sale Is Legal and Authorized. The sale of the Notes and compliance
by the Company with all of the provisions of the Agreement, the Notes and the
Company Security Agreement--
(a) are within the corporate powers of the Company and, on and
as of the Closing Date, have been duly authorized by proper corporate
action on the part of the Company;
(b) assuming the accuracy of the Purchaser representations
contained in ss.3.2, will not violate any provisions of any law;
(c) will not violate any order of any court or governmental
authority or agency and will not conflict with or result in any breach
of any of the terms, conditions or provisions of, or constitute a
default under the Articles of Incorporation or By-laws of the Company
or any indenture or other agreement or instrument to which the Company
is a party or by which it may be bound or result in the imposition of
any liens or encumbrances on any property of the Company; and
(d) have been duly authorized on and as of the Closing Date by
all necessary corporate action on the part of the Company, have been
duly executed on the Closing Date by authorized officers of the Company
and delivered on the Closing Date and constitute the legal, valid and
binding contracts and agreements of the Company enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally and general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law) and to the discretion
of the court before which any proceedings may be brought.
10. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness for Borrowed Money and is not in default under any
instrument or instruments or agreements under and subject to which any
Indebtedness for Borrowed Money has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
11. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company and each
Restricted Subsidiary of the Agreement, the Company Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Senior Subordinated Guaranty
Agreement or the Notes, as the case may be, or compliance by the Company and
each Restricted Subsidiary with any of the provisions of the Agreement, the
Company Security Agreement, the Subsidiary Security Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement or the Notes, as the case may be.
12. Taxes. As of the Closing Date, except as disclosed on Annex D
attached hereto, all tax returns required to be filed by the Company or any
Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. The
Company does not know of any proposed additional tax assessment against it for
which adequate provision in accordance with GAAP has not been made on its
accounts. The Federal income tax liability of the Company and its Subsidiaries
has been fully paid and satisfied for all taxable years
<PAGE>
up to and including the taxable year ended December 31, 1993 and no material
controversy in respect of additional income taxes due since said date is pending
or to the knowledge of the Company threatened, except as disclosed on Annex D
attached hereto. The provisions for taxes on the books of the Company and each
Subsidiary are adequate in accordance with GAAP for all open years, and for its
current fiscal period.
13. Use of Proceeds. The net proceeds from the sale of the Notes will
be used to provide additional working capital and for other corporate purposes.
None of the transactions contemplated in the Agreement, the Company Security
Agreement, the Subsidiary Security Agreement or the Subsidiary Senior
Subordinated Guaranty Agreement (including, without limitation thereof, the use
of proceeds from the issuance of the Notes) will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulation issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or intends to
carry or purchase any "margin stock" within the meaning of said Regulation G.
None of the proceeds from the sale of the Notes will be used to purchase, or
refinance any borrowing, the proceeds of which were used to purchase any
"security" within the meaning of the Securities Exchange Act of 1934, as
amended.
14. Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer any of the Notes or any
similar Security or has solicited or will solicit an offer to acquire any of the
Notes or any similar Security from or has otherwise approached or negotiated or
will approach or negotiate in respect of the Notes or any similar Security with
any Person other than you, who was offered the Notes at private sale for
investment. Neither the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Notes or any similar Security or has
solicited or will solicit an offer to acquire the Notes or any similar Security
from any Person so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act of 1933, as amended.
15. ERISA. The consummation of the transactions provided for in the
Agreement and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended. Each Plan complies in all material respects with all applicable
statutes and governmental rules and regulations, and (a) no Reportable Event has
occurred and is continuing with respect to any Plan, (b) neither the Company nor
any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or
instituted steps to do so, in each case, for which there is any withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of ERISA), and (c)
no steps have been instituted to terminate any Plan. No condition exists or
event or transaction has occurred in connection with any Plan which,
individually or in the aggregate, could result in the incurrence by the Company
or any ERISA Affiliate of any material liability, fine or penalty. No Plan
maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA nor does the present value of all benefits vested under all
Plans exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Purchaser.
16. Compliance with Law. Neither the Company nor any Subsidiary (a) is
in violation of any law, ordinance, franchise, governmental rule or regulation
to which it is subject; or (b) has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of its
property (including, but not limited to, the Collateral) or to the conduct of
its business, which violation or failure to obtain would, individually or in the
aggregate, materially adversely affect the business, prospects, profits,
properties or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or impair the ability of the Company or any
Restricted Subsidiary to perform its obligations contained in the Agreement, the
Company Security Agreement, the Subsidiary Security Agreement, the Subsidiary
Senior Subordinated Guaranty Agreement or the Notes, as the case may be. Neither
the Company nor any Subsidiary is in default with respect to any order of any
court or governmental authority or arbitration board or tribunal.
17. Compliance with Environmental Laws. The Company is not in violation
of any applicable
<PAGE>
Environmental Legal Requirement which violation could, individually or in the
aggregate, have a material adverse effect on the business, prospects, profits,
properties or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole. The Company does not know of any liability or
class of liability of the Company or any Subsidiary under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.), or the Resource Conservation and Recovery Act of
1976, as amended (42 U.S.C. Section 6901 et seq.).
18. Perfection of Security Interest. On and as of the Closing Date,
financing statements or other notices with respect to the Company Security
Agreement and the Subsidiary Security Agreement have been filed for record or
recorded in all the public offices wherein such filing or recordation is
necessary to perfect the lien and security interest of the Security Trustee in
the Collateral under the Company Security Agreement and the Subsidiary Security
Agreement as against creditors of and purchasers from the Company and each
Restricted Subsidiary, and the Company Security Agreement and the Subsidiary
Security Agreement have created valid and perfected first priority liens on, and
security interests in, the right, title and interest of the Company and each
Restricted Subsidiary in and to the Collateral (other than the Unsecured
Receivables); provided, that during the existence of a Default or Event of
Default, the Company has agreed to deliver, or cause to be delivered, to the
Security Trustee possession of promissory notes evidencing the Unsecured
Receivables in order to create valid and perfected first priority liens on the
Unsecured Receivables), effective as against creditors of and purchasers from
the Company and each Restricted Subsidiary other than the Weingarten Lien.
19. Compliance by Restricted Subsidiaries. Compliance by each
Restricted Subsidiary with all of the provisions of the Subsidiary Security
Agreement and the Subsidiary Senior Subordinated Guaranty Agreement--
(a) is within the corporate or other applicable powers of such
Restricted Subsidiary;
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the charter, by-laws,
certificate of limited partnership, partnership agreement, articles of
organization, operating agreement or other applicable governing
documents of such Restricted Subsidiary or any indenture or other
agreement or instrument to which such Restricted Subsidiary is a party
or by which it may be bound or result in the imposition of any Liens or
encumbrances on any property of such Restricted Subsidiary (other than
as contemplated by such Subsidiary Security Agreement); and
(c) has been duly authorized by proper corporate or other
proper action on the part of such Restricted Subsidiary (other than
such action as has already been taken, no action by the stockholders or
other equity holders of such Restricted Subsidiary being required by
law, by the charter, by-laws, certificate of limited partnership,
partnership agreement, articles of organization, operating agreement or
other applicable governing documents of such Restricted Subsidiary or
otherwise), executed and delivered by such Restricted Subsidiary and
the Subsidiary Security Agreement and the Subsidiary Senior
Subordinated Guaranty Agreement constitute the legal, valid and binding
obligations, contracts and agreements of such Restricted Subsidiary
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether the application of
such principles is considered in a proceeding in equity or at law) and
to the discretion of the court before which any proceedings may be
brought.
<PAGE>
ANNEX A
SUBSIDIARIES OF THE COMPANY
1. RESTRICTED SUBSIDIARIES:
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF PERCENTAGE OF VOTING STOCK OWNED BY THE
INCORPORATION COMPANY AND EACH OTHER SUBSIDIARY
<S> <C> <C>
World Acceptance Corporation of Alabama Alabama 100% (World Acceptance Corporation)
World Finance Corporation of Georgia Georgia 100% (World Acceptance Corporation)
World Finance Corporation of Illinois Illinois 100% (World Acceptance Corporation)
WFC Limited Partnership Texas 99% L.P. Interest (World Acceptance Corporation of
Oklahoma, Inc.)
1% G.P. Interest (WFC of South Carolina, Inc.)
World Finance Corporation of Louisiana Louisiana 100% (World Acceptance Corporation)
World Acceptance Corporation of Missouri Missouri 100% (World Acceptance Corporation)
World Finance Corporation of New Mexico New Mexico 100% (World Acceptance Corporation)
World Acceptance Corporation of Oklahoma, Inc. Oklahoma 100% (World Finance Corporation of Texas)
World Finance Corporation of South Carolina South Carolina 100% (World Acceptance Corporation)
WFC of South Carolina, Inc. South Carolina 100% (World Acceptance Corporation)
World Finance Corporation of Tennessee Tennessee 100% (World Acceptance Corporation)
World Finance Corporation of Texas Texas 100% (World Acceptance Corporation)
WAC Insurance Company, Ltd. British Virgin Islands 65% (World Acceptance Corporation)
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
None
</TABLE>
<PAGE>
ANNEX B
(to Exhibit C)
DESCRIPTION OF INDEBTEDNESS FOR BORROWED MONEY
<PAGE>
Annex B to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Description of Indebtedness for Borrowed Money
CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE NOTE AGREEMENT
UNLESS OTHERWISE INDICATED.
Indebtedness of World Acceptance Corporation ("World") evidenced by this Senior
Note Agreement, the separate Senior Note Agreement with the other purchaser
named in Schedule I hereto, the Revolving Credit Agreement, the Subordinated
Note Agreement and all Notes issued pursuant to the above-listed agreements.
Indebtedness of each of World Finance Corporation of Alabama, World Finance
Corporation of Georgia, World Finance Corporation of Illinois, World Finance
Corporation of Louisiana, World Acceptance Corporation of Missouri, World
Finance Corporation of New Mexico, World Acceptance Corporation of Oklahoma,
Inc., World Finance Corporation of South Carolina, WFC of South Carolina, Inc.,
World Finance Corporation of Tennessee, World Finance Corporation of Texas and
WFC Limited Partnership, under the Subsidiary Senior Guaranty Agreement, the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement.
Indebtedness evidenced by World's 10 Percent Senior Debenture in the principal
amount of $482,000, payable to Voyager Life Insurance Company.
Indebtedness evidenced by World Finance Corporation of Georgia's 8% Subordinated
Promissory Note(s) in the principal amount of $9,924,000, payable to World
Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of Louisiana's 8%
Subordinated Promissory Note(s) in the principal amount of $3,158,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Acceptance Corporation of Oklahoma's 8%
Subordinated Promissory Note(s) in the principal amount of $5,220,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of South Carolina's 8%
Subordinated Promissory Note(s) in the principal amount of $23,894,000, payable
to World Finance Corporation of Texas.
Indebtedness evidenced by WFC of South Carolina, Inc.'s 8% Subordinated
Promissory Note(s) in the principal amount of $295,000, payable to World Finance
Corporation of Texas.
Indebtedness evidenced by World Finance Corporation of Tennessee's 8%
Subordinated Promissory Note(s) in the principal amount of $4,268,000, payable
to World Finance Corporation of Texas.
ANNEX B
(to Exhibit C)
<PAGE>
Annex C to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Litigation
(1) World Acceptance Corporation and World Finance Corporation of Georgia are
named as co-defendants with 46 other finance companies, merchants and insurance
companies in a class action lawsuit, JORDAN, ET AL. V. AVCO FINANCIAL SERVICES,
INC., ET AL., (Case No. 96-CL-1557N, MDL No. 1130, U.S. District Court, Middle
District of Alabama), that challenges the defendants' practices with respect to
non-filing insurance. The action was filed on April 18, 1995, in U.S. District
Court for the Middle District of Georgia, in Columbus, Georgia, and by order
dated October 11, 1996 was consolidated for pre-trial proceedings before Judge
U.W. Clemon of the U.S. District Court for the Middle District of Alabama by the
Judicial Panel on Multidistrict Litigation. Non-filing insurance is a product
that lenders can purchase as an alternative to filing UCC-1 financing statements
to perfect the lenders' security interest in borrowers' collateral. Borrowers
are charged a fee representing the amount of the non-filing insurance premium.
In the JORDAN action, the plaintiffs have alleged that non-filing insurance is
not true, legitimate insurance and that non-filing fees charged to borrowers are
not being disclosed properly under the federal Truth-in-Lending Act. The
plaintiffs also have alleged violations of RICO and the federal antitrust laws.
The plaintiffs originally asserted state law claims for breach of contract,
conversion and fraud, but subsequently dismissed those claims without prejudice.
The plaintiffs seek damages, permanent injunctive relief, and attorneys' fees.
If the Company's non-filing insurance practices are found to be unlawful, the
Company could be required to refund non-filing insurance fees, pay other damages
to the plaintiffs, and change its non-filing insurance practices going forward.
World has denied that its non-filing practices are unlawful and is
defending the case vigorously. Discovery in the case is ongoing, and pursuant to
court order, will continue through March 1998. On June 23, 1997, Judge Clemon
issued a Class Certification Order that certified a nationwide class of
plaintiffs who, on or after April 18, 1991, were charged a non-filing insurance
fee. The order applies only to the liability aspects of the case.
(2) The Company has been named as a defendant in an action, Turner v. World
Acceptance Corp., pending in District Court for the Fourteenth Judicial
District, Tulsa County, Oklahoma (No. CJ-97-1921). The action was commenced
against the Company on May 20, 1997, names numerous other consumer finance
companies as defendants, and seeks certification as a statewide class action.
The action alleges that World and other consumer finance defendants collected
excess finance charges in connection with refinancing certain consumer finance
loans in Oklahoma and seeks money damages and an injunction against further
collection of such charges. The Company has filed an answer in the action
denying liability, and discovery has not commenced. The plaintiff's claim is
based on a recent opinion of the Oklahoma Attorney General interpreting a
provision of the Oklahoma Consumer Credit Code with respect to the permitted
amount of certain loan refinance charges in a manner contrary to prior
regulatory practice in Oklahoma. Enforcement of the Oklahoma Attorney General's
opinion has been enjoined, and such action is currently pending before the
Oklahoma Supreme Court. In addition, the State of Oklahoma has recently enacted
legislation to clarify the interpretation of the disputed provision of the
Oklahoma Consumer Credit Code consistent with prior regulatory practice. World
intends to vigorously defend this action.
ANNEX C
(to Exhibit C)
<PAGE>
Annex D to Exhibit C to Senior
Subordinated Note Agreement
dated June 30, 1997
Taxes
The Internal Revenue Service has issued a preliminary determination
that WAC Insurance Company, Ltd. is not engaged in a bona fide reinsurance
business and thus, that its earnings are not excludable from the taxable
earnings of World Acceptance Corporation and its subsidiaries. World Acceptance
Corporation is appealing this matter.
ANNEX D
(to Exhibit C)
EXHIBIT D (TO NOTE AGREEMENT)
<PAGE>
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchaser, called for by ss.4.1 of the Agreement, shall be dated the Closing
Date and addressed to the Purchaser, shall be satisfactory in form and substance
to the Purchaser and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of South Carolina and has the
corporate power and the corporate authority to execute and deliver the
Agreement and the Company Security Agreement and to issue the Notes.
2. Each Restricted Subsidiary is a corporation or partnership,
as the case may be, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, as the case
may be, has the power and the authority to execute and deliver the
Subsidiary Security Agreement and Subsidiary Senior Subordinated
Guaranty Agreement.
3. The Agreement and the Company Security Agreement have been
duly authorized by all necessary corporate action on the part of the
Company, have been duly executed and delivered by the Company and
constitute the legal, valid and binding contracts and agreements of the
Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
5. The Subsidiary Senior Subordinated Guaranty Agreement and
the Subsidiary Security Agreement have been duly authorized by all
necessary corporate or partnership, as the case may be, action on the
part of each Restricted Subsidiary and have been duly executed and
delivered by each Restricted Subsidiary.
6. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement constitute an exempt
transaction under the registration provisions of the Securities Act of
1933, as amended, and do not under existing law require the
registration of the Notes under the Securities Act of 1933, as amended,
or the qualification of an indenture in respect thereof under the Trust
Indenture Act of 1939.
7. The Security Trustee is an Illinois banking corporation
duly organized, validly existing and in good standing under the laws of
the State of Illinois and has the corporate power and authority to
enter into and perform its obligations under the Company Security
Agreement and the Subsidiary Security Agreement.
8. The Company Security Agreement and the Subsidiary Security
Agreement have been duly authorized, executed and delivered by the
Security Trustee and constitute the legal, valid and binding contracts
and agreements of the Security Trustee enforceable against the Security
Trustee in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
9. The execution and delivery of the Company Security
Agreement and the Subsidiary Security Agreement and compliance by the
Security Trustee with all of the provisions thereof does not and will
not contravene any law of the State of Illinois governing the banking
or trust powers of the Security Trustee, or any order of any court or
governmental authority or agency applicable to or binding on the
Security Trustee or its charter or its by-laws.
10. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution and delivery by the Security Trustee
of the Company Security Agreement and the Subsidiary Security
Agreement.
<PAGE>
11. Stock certificates representing the Pledged Shares have
been delivered to the Security Trustee by the Company. No filing or
recording in any public office is necessary in order to perfect the
security interest in the Pledged Shares granted by the Company to the
Security Trustee under the Company Security Agreement.
12. Arrangements satisfactory to us have been made for the
filing of each of the financing statements described in Schedule I
hereto in the public offices in the states referred to in Schedule I
with respect to such financing statement. No other filing or recording
in any public office in such state is necessary to perfect the security
interest of the Security Trustee under the Company Security Agreement
and the Subsidiary Security Agreement in the interest of the Company
and each Restricted Subsidiary in the Collateral specifically described
in the Company Security Agreement and the Subsidiary Security Agreement
as to which a security interest may be perfected by the filing of
financing statements, other than a security interest in fixtures.
No opinion is expressed as to the enforceability of the Subsidiary
Senior Subordinated Guaranty Agreement or the Subsidiary Security Agreement. We
have previously advised you that there is no clear legal precedent as to whether
the obligations of any particular Restricted Subsidiary under the Subsidiary
Senior Subordinated Guaranty Agreement or the Subsidiary Security Agreement may
be avoidable as a fraudulent transfer under Section 548 of the Bankruptcy Code
or may be subject to attack in an action brought pursuant to state fraudulent
conveyance statutes by a trustee in bankruptcy of such Restricted Subsidiary or
by third-party creditors.
No opinion is expressed as to the title of the Company or any
Restricted Subsidiary to the Collateral described in the Company Security
Agreement and the Subsidiary Security Agreement or as to the priority of the
security interest of the Security Trustee under the Company Security Agreement
and the Subsidiary Security Agreement in the Collateral described therein.
Section 36-9-308 of the Uniform Commercial Code of the State of South Carolina,
Section 9.308 of the Uniform Commercial Code of the State of Texas, Section
10:9-308 of the Uniform Commercial Code of the State of Louisiana, Section
11-9-308 of the Uniform Commercial Code of the State of Georgia, Section 9-308
of the Uniform Commercial Code of the State of Oklahoma, Section 9-308 of the
Uniform Commercial Code of the State of Illinois, Section 400.9-308 of the
Uniform Commercial Code of the State of Missouri, Section 47-9-308 of the
Uniform Commercial Code of the State of Tennessee, Section 7-9-308 of the
Uniform Commercial Code of the State of Alabama and Section 55-9-308 of the
Uniform Commercial Code of the State of New Mexico provide that a purchaser of
chattel paper who gives new value and takes possession of it in the ordinary
course of its business has priority over a security interest in chattel paper
which is perfected by the filing of a financing statement if such purchaser acts
without knowledge that the chattel paper is subject to a security interest.
Section 4.3 of the Company Security Agreement and the Subsidiary Security
Agreement requires that the Company and each Restricted Subsidiary place on each
document, instrument, chattel paper and other writing evidencing its Receivables
created on or after the Closing Date the legend described in said Section. No
opinion is expressed as to the perfection of the security interest of the
Company Security Agreement and the Subsidiary Security Agreement against any
fixtures or any other Collateral (other than the Pledged Shares) of a character
against which a security interest cannot be perfected b filing under the
applicable Uniform Commercial Code.
Your attention is directed to the Uniform Commercial Code, as adopted
in each of the jurisdictions listed in Schedule I hereto. In general, the
Uniform Commercial Code as in effect in most jurisdictions provides that a filed
financing statement which does not state a maturity date or which states a
maturity date of more than five years is effective only for a period of five
years from the date of filing unless within six months prior to the expiration
of said period a continuation statement is filed in the same office or offices
in which the original statement was filed. The continuation statement must be
signed by the secured party, identify the original statement by file number and
state that the original statement is still effective. Upon the timely filing of
a continuation statement, the effectiveness of the original financing statement
is continued for five years after the last date to which the original statement
was effective. Succeeding continuation statements may be filed in the same
manner to continue the effectiveness of the original statement.
We have also examined the opinions of Robinson, Bradshaw & Hinson,
P.A., counsel for the
<PAGE>
Company, World Finance Corporation of South Carolina, WFC of South Carolina,
Inc., World Acceptance Corporation of Alabama, World Acceptance Corporation of
Missouri, World Finance Corporation of Illinois and World Finance Corporation of
New Mexico, from Abbot, Murphy & Harvey, P.C., counsel for World Finance
Corporation of Georgia, from Comegys, Lawrence, Jones, Odom & Spruiell, counsel
for World Finance Corporation of Louisiana, from Crowe & Dunlevy, Luttrell,
Pendarvis & Rawlinson, counsel for World Acceptance Corporation of Oklahoma,
Inc., from Dance, Dance & Lane, counsel for World Finance Corporation of
Tennessee, and from Sam Kelley, Esq., counsel for World Finance Corporation of
Texas and WFC Limited Partnership, each delivered on the date hereof responsive
to the requirements of Section 4.1(f) of the Agreement, signed copies of which,
dated the date hereof, are delivered to you herewith. Said opinions are
satisfactory in scope and form and we believe that you are justified in relying
thereon.
Respectfully submitted,
<PAGE>
EXHIBIT E-1 (TO NOTE AGREEMENT)
DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY, WORLD FINANCE
CORPORATION OF SOUTH CAROLINA, WFC OF SOUTH CAROLINA, INC.,WORLD ACCEPTANCE
CORPORATION OF ALABAMA,WORLD ACCEPTANCE CORPORATION OF MISSOURI,WORLD FINANCE
CORPORATION OF ILLINOIS ANDWORLD FINANCE CORPORATION OF NEW MEXICO
The closing opinion of Robinson, Bradshaw & Hinson, P.C., counsel for
the Company, World Finance Corporation of South Carolina ("World-SC"), WFC of
South Carolina, Inc. ("WFC-SC"), World Acceptance Corporation of Alabama
("World-AL"), World Acceptance Corporation of Missouri ("World-MO"), World
Finance Corporation of Illinois ("World-IL") and World Finance Corporation of
New Mexico ("World-NM"), which is called for by ss.4.1 of the Agreement, shall
be dated the Closing Date and addressed to the Purchaser, shall be satisfactory
in scope and form to the Purchaser and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of South
Carolina, has the corporate power and authority to execute and perform
the Agreement and the Company Security Agreement and to issue the Notes
and is duly qualified and is in good standing as a foreign corporation
in each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
2. World-SC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of South
Carolina, has the corporate power and authority to execute and perform
the Subsidiary Security Agreement and the Subsidiary Senior
Subordinated Guaranty Agreement and is duly qualified and is in good
standing in each jurisdiction in which, to our knowledge, the character
of the properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
3. WFC-SC is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina, has
the corporate power and authority to execute and perform the Subsidiary
Security Agreement and the Subsidiary Senior Subordinated Guaranty
Agreement and is duly licensed or qualified and is in good standing in
each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary.
4. World-AL is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Alabama,
has the corporate power and authority to execute and perform the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated
Guaranty Agreement and is duly qualified and is in good standing in
each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
5. World-MO is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Missouri,
has the corporate power and authority to execute and perform the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated
Guaranty Agreement and is duly qualified and is in good standing in
each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
6. World-IL is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Illinois,
has the corporate power and authority to execute and perform the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated
Guaranty Agreement and is duly qualified and is in good standing in
each jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
7. World-NM is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New
Mexico, has the corporate power and authority to execute and perform
the Subsidiary Security Agreement and the Subsidiary Senior
Subordinated Guaranty
<PAGE>
Agreement and is duly qualified and is in good standing in each
jurisdiction in which, to our knowledge, the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such qualification necessary.
8. The Company is the sole record owner of all of the
outstanding capital stock of each Restricted Subsidiary existing as of
the Closing Date (other than (x) WFC Limited Partnership, of which
WFC-SC (a wholly-owned subsidiary of the Company) is a 1% general
partner and World Acceptance Corporation of Oklahoma, Inc. (a
wholly-owned subsidiary of the Company) is a 99% limited partner, (y)
World Acceptance Corporation of Oklahoma, Inc., which is wholly owned
by World Finance Corporation of Texas (a wholly-owned subsidiary of the
Company) and (z) WAC Insurance Company, Ltd., of which 65% is owned by
the Company). All of the outstanding shares of capital stock of each of
World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM have been
duly authorized and validly issued, and are fully paid and
non-assessable.
9. The Agreement, the Company Security Agreement and the Notes
have been duly authorized by all necessary corporate action on the part
of the Company, have been duly executed and delivered by the Company
and constitute the legal, valid and binding contracts and agreements of
the Company, enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, or general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law) and to the discretion of the court
before which any proceeding may be brought.
10. The Subsidiary Senior Subordinated Guaranty Agreement and
the Subsidiary Security Agreement have been duly authorized by all
necessary corporate action on the part of World-SC, WFC-SC, World-AL,
World-MO, World-IL and World-NM, have been duly executed and delivered
by World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM and
constitute the legal, valid and binding contracts and agreements of
World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM,
enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, or general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law) and to the discretion of the court
before which any proceeding may be brought.
11. Assuming the due authorization, execution and delivery of
the Subsidiary Security Agreement and the Subsidiary Senior
Subordinated Guaranty Agreement by World Finance Corporation of
Georgia, World Finance Corporation of Louisiana, World Acceptance
Corporation of Oklahoma, Inc., World Finance Corporation of Tennessee,
World Finance Corporation of Texas and WFC Limited Partnership, each of
the Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement constitute the legal, valid and binding
contracts and agreements of each Restricted Subsidiary, respectively,
enforceable in accordance with its terms, except as such enforceability
may be affected by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights
generally, or general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law) and to the discretion of the court before which any
proceeding may be brought.
12. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Agreement and the
Company Security Agreement do not violate any law, regulation, or, to
our knowledge, any order or decree of any court or governmental
instrumentality, or conflict with, or result in any breach of any of,
the provisions of, or constitute a default under, or result in the
creation or imposition of any lien or encumbrance upon any of the
property of the Company pursuant to, the provisions of the Articles of
Incorporation or Bylaws of the Company or, the Material Agreements. For
purposes of this opinion letter, "Material Agreements" mean all
agreements and instruments attached as exhibits to the Company's
Registration Statement No. 33-42879 and the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1996.
<PAGE>
13. The execution, delivery and performance by World-SC,
WFC-SC, World-AL, World-MO, World-IL and World-NM of the Subsidiary
Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement do not violate any law, regulation, or, to our knowledge, any
order or decree of any court or governmental instrumentality and the
execution, delivery and performance by each Restricted Subsidiary of
the Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement do not conflict with or result in any
breach of any of the provisions of or constitute a default under or
result in the creation or imposition of any lien or encumbrance upon
any of the property of such Restricted Subsidiary pursuant to the
provisions of the articles of incorporation, bylaws or other
organizational documents of such Restricted Subsidiary or the Material
Agreements.
14. Except for the filings referred to in paragraphs 22 and 23
below, no approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body,
federal, state or local, is necessary in connection with the execution,
delivery and performance by the Company, World-SC, WFC-SC, World-AL,
World-MO, World-IL or World-NM of the Agreement, the Company Security
Agreement, the Subsidiary Security Agreement or the Subsidiary Senior
Subordinated Guaranty Agreement.
15. Except as disclosed on Annex C to Exhibit C to the
Agreement, there are no proceedings pending or, to our knowledge,
threatened against the Company or any Restricted Subsidiary in any
court or before any governmental authority or arbitration board or
tribunal, an adverse determination in which could, individually or in
the aggregate, materially and adversely affect the properties, business
or condition (financial or otherwise) of the Company or such Restricted
Subsidiary, as the case may be, and to our knowledge, neither the
Company nor any such Restricted Subsidiary is in default with respect
to any order of any court or governmental authority or arbitration
board or tribunal.
16. With respect to each Receivable of World-SC and WFC-SC,
assuming that World-SC and WFC-SC each uses a written document to
evidence such Receivable, and assuming each such written document
evidences a monetary obligation of the account debtor and a grant by
such account debtor to World-SC or WFC-SC, as the case may be, of a
security interest in specific goods, the documents evidencing such
Receivable constitute chattel paper within the meaning of the Uniform
Commercial Code of the State of South Carolina.
17. Upon delivery to the Security Trustee by the Company of
stock certificates representing the Pledged Shares, the Security
Trustee shall have a perfected security interest in the Pledged Shares.
18. Assuming that (i) the financing statements in the form
attached hereto as Schedule 1 have been accepted for filing and
properly indexed in the Office of the Secretary of State of South
Carolina and the Register of Mesne Conveyances of the County of
Greenville, South Carolina, (ii) value has been given by the Banks and
purchaser to the Company and each Restricted Subsidiary, and (iii) the
Company and each Restricted Subsidiary have rights in the collateral
described on such financing statements, the security interests created
by the Company Security Agreement and the Subsidiary Security Agreement
in the collateral described therein constitute valid perfected security
interests in such types of collateral as to which a security interest
may be perfected by filing financing statements under the Uniform
Commercial Code of the State of South Carolina.
19. Section 36-9-308 of the Uniform Commercial Code of the
State of South Carolina provides that a purchaser of chattel paper who
gives new value and takes possession of it in the ordinary course of
its business has priority over a security interest in chattel paper
which is perfected by the filing of a financing statement if such
purchaser acts without knowledge that the chattel paper is subject to a
security interest. Assuming World-SC and WFC-SC place on each document,
instrument, chattel paper and other writing evidencing its Receivables
the legend described in Section 4.3(c) of the Subsidiary Security
Agreement and assuming that the assumptions set forth in paragraphs 16
and 18 of this opinion are true, nothing has come to our attention to
lead us to believe that, under Section 36-9-308 of the Uniform
Commercial Code of the State of South
<PAGE>
Carolina, the security interests of the Security Trustee in World-SC's
and WFC-SC's Receivables would not be prior to the rights of a
purchaser of such Receivables who thereafter gives new value and takes
possession thereof in the ordinary course of such purchaser's business.
20. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement do not, under existing law,
require the registration of the Notes under the Securities Act of 1933,
as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinions expressed above are subject to the effect of legal and
equitable doctrines and procedures (including the requirement that the Agent,
the Banks, the purchasers and the Security Trustee act in good faith) that may
limit the enforceability of any particular remedy, covenant or other provision
in the Loan Documents. In our opinion, however, the effect of such legal and
equitable doctrines and procedures will not prevent the practical realization of
the rights provided for in the Loan Documents. Specifically, but without
limiting the generality of the foregoing, no opinion is expressed as to
provisions, if any, contained in the Loan Documents that (a) purport to excuse a
party for liability for its own acts in contradiction of public policy, (b)
purport to make void any act done in contravention thereof, (c) relate to the
effect of laws or regulations that may be enacted in the future, (d) require
waivers or amendments to be made only in writing, (e) purport to effect waivers
of constitutional or statutory rights or the effect of applicable laws, or (f)
purport to preserve or maintain the obligation or liability of the Company or
the Restricted Subsidiaries despite the unenforceability of the Notes due to
illegality.
This opinion is subject to the following further assumptions and
qualifications:
a. We express no opinion as to the effectiveness of any of the
provisions of the Loan Documents whereby any legal or equitable rights
are purportedly waived.
b. We express no opinion as to the enforceability of
provisions relating to self help or evidentiary standards by which the
Loan Documents are to be construed.
c. We express no opinion as to the enforceability of any
provision of the Loan Documents whereby the Company or any Restricted
Subsidiary appoints the Agent, the Banks, the purchasers or the
Security Trustee or other parties as attorney-in-fact.
d. We express no opinion with regard to any provisions of the
Loan Documents whereby the Company or any Restricted Subsidiary
purports to indemnify the Agent, any of the Banks, the purchasers or
the Security Trustee against its own negligence or misconduct.
e. We express no opinion with regard to any choice of law
provisions in the Subsidiary Security Agreement and Subsidiary Senior
Subordinated Guaranty Agreement. Nothing has come to our attention,
however, to lead us to believe that a South Carolina court, if properly
presented with the question, would not enforce the choice of law
provisions contained in such agreements.
f. No opinion is expressed with respect to the validity or
existence of any security interest in fixtures.
g. In rendering the opinions in paragraph 8 relating to the
ownership by the Company of the capital stock of the Restricted
Subsidiaries, we have relied solely upon the stock transfer ledgers of
the Restricted Subsidiaries as certified by their respective officers
and certain statements of objective fact certified to us by officers of
the Restricted Subsidiaries.
h. In rendering the opinions set forth in paragraph 15, we
have relied solely on a review of the litigation log and telephone
complaint log of the Company, World-SC, WFC-SC, World-AL, World-MO,
World-IL and World-NM as certified by an officer of the Company as of
the date hereof and discussions with officers of the Company about the
matters contained therein.
i. In rendering the opinions set forth in paragraph 20, we
have relied, as to factual matters, solely on the representations of
the Purchaser under the Agreement.
j. We express no opinion as to whether any consents or
authorizations of third parties may be required under the Code of Laws
of South Carolina pursuant to Chapter 29 of Title 34 of the Consumer
Finance Law, the Consumer Protection Code or The Insurance Law as a
condition precedent to, or in connection with, (i) the ability of the
Security Trustee to foreclose on and transfer title to or vote the
Pledged Stock; or (ii) the ability of the Security Trustee to foreclose
on
<PAGE>
and take possession of or sell a substantial portion of the assets of
the Company, World-SC or WFC-SC where such foreclosure, possession or
sale may be deemed to involve an acquisition or transfer of control or
management of the Company, World-SC or WFC-SC, or where such
foreclosure, possession or sale may involve a transfer of licenses
granted to the Company, World-SC or WFC-SC under the foregoing laws.
k. As to factual matters related to the subject matter of this
opinion letter, we have relied on the representations of the Company,
World-SC, WFC-SC, World-AL, World-MO, World-IL and World-NM in the
Agreement, the Company Security Agreement, Subsidiary Senior
Subordinated Guaranty Agreement and Subsidiary Security Agreement and
on certificates of officers of the Company, World-SC, WFC-SC, World-AL,
World-MO, World-IL and World-NM.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for any other purposes, nor may it be relied
upon by any other person (other than your special counsel, Chapman and Cutler,
and any subsequent holder of a Note) for any purpose, without our prior written
consent.
Sincerely yours,
ROBINSON, BRADSHAW & HINSON, P.A.
Karen A. Gledhill
<PAGE>
EXHIBIT F-1 (TO NOTE AGREEMENT)
Form of Closing Opinion of Subsidiary Counsel
The closing opinion of Abbot, Murphy & Harvey, P.C., counsel for World
Finance Corporation of Georgia (the "Company"), which is called for by ss.4.1 of
the Agreement, shall be dated the Closing Date and addressed to the Purchaser,
shall be satisfactory in scope and form to the Purchaser and shall be to the
effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Georgia, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Subordinated Guaranty Agreement, and is duly licensed or
qualified and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it makes such licensing or qualification necessary.
2. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable.
3. The Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding contracts
and agreements of the Company, enforceable in accordance with their terms,
except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding equity
or at law) and to the discretion of the court at which any proceeding may be
brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement do not violate any law, regulation, order or decree of any court or
governmental instrumentality or conflict with the Articles of Incorporation or
Bylaws of the Company.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by the Company of the Subsidiary Security Agreement and the
Subsidiary Senior Subordinated
Guaranty Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to the Company of a security interest in specific
goods, the documents evidencing such Receivable constitute chattel paper within
the meaning of the Uniform Commercial Code of the State of Georgia.
7. All Financing Statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interests of the Security Trustee in the Collateral under the
Subsidiary Security Agreement as against creditors of and purchasers from the
Company and the liens and security interests created by the Subsidiary Security
Agreement in the Collateral described therein constitute valid perfected liens
on and security interests in the right, title and interest of the Company in and
to the Collateral, effective as against creditors of and purchasers from the
Company.
8. Assuming the Company complies with Section 4.3(c) of the
Subsidiary Security Agreement and assuming that the assumptions set forth in
paragraph 6 of this opinion are true, the security interests of the Security
Trustee in the Company's Receivables created on or after the Closing Date will
be prior to the right of any purchaser of such Receivables who thereafter gives
new value and takes possession thereof in the ordinary course of such
purchaser's business.
Very truly yours,
ABBOT, MURPHY AND HARVEY, P.C.
<PAGE>
By
Fred K. Harvey, Jr.
FKH:fs
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Comegys, Lawrence, Jones, Odom & Spruiell,
counsel for World Finance Corporation of Louisiana (the "Company"), which is
called for by ss.4.1 of the Agreement, shall be dated the Closing Date and
addressed to the Purchaser, shall be satisfactory in scope and form to the
Purchaser and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of State of Louisiana, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Subordinated Guaranty Agreement, and is duly qualified or
licensed and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it makes such qualification or licensing necessary.
2. All of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable.
3. The Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding contracts
and agreements of the Company, enforceable in accordance with their terms,
except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law) and to the discretion of the court before which any proceeding
may be brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement do not violate any law, regulation, order or decree of any court or
governmental instrumentality or conflict with the Articles of Incorporation or
Bylaws of the Company.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by the Company of the Subsidiary Security Agreement and the
Subsidiary Senior Subordinated Guaranty Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence each of such Receivable, and
assuming each such written document evidences a monetary obligation of the
account debtor and a grant by such account debtor to the Company of a security
interest in specific goods, the documents evidencing such Receivable constitute
chattel paper within the meaning of the Uniform Commercial Code of the State of
Louisiana.
7. All financing statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interest of the Security Trustee in the Collateral under the
Subsidiary Security Agreement as against creditors of and purchasers from the
Company and the liens and security interests created by the Subsidiary Security
Agreement in the Collateral constitute valid perfected liens on and security
interests in the right, title and interest of the Company in and to the
Collateral effective as against creditors or and purchasers from the Company.
8. Assuming the Company complies with Section 4.3(c) of the
Subsidiary Security Agreement and assuming that the assumptions set forth in
paragraph 6 of this opinion are true, the security interests of the Security
Trustee in the Company's Receivables will be prior to the rights of any
purchaser of such Receivables who thereafter gives new value and takes
possession thereof in the ordinary course of such purchaser's business.
We are licensed to practice law only in the State of Louisiana and we
express no opinion with respect to the effect of any laws other than the laws of
the State of Louisiana and those of the United States as are relative to the
operations of the Company in the State of Louisiana. This opinion is issued to
you and your assignees for value, and is not to be relied upon by anyone else
other than your special counsel and subsequent holders of the Notes.
<PAGE>
COMEGYS, LAWRENCE, JONES, ODOM & SPRUIELL
By
William M. Comegys, III
WMCIII/sdw
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Crowe & Dunlevy, Luttrell, Pendarvis &
Rawlinson, counsel for World Acceptance Corporation of Oklahoma, Inc. (the
"Company"), which is called for by ss.4.1 of the Agreement, shall be dated the
Closing Date and addressed to the Purchaser, shall be satisfactory in scope and
form to the Purchaser and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Oklahoma and has the
corporate power and authority to execute and perform the Subsidiary Security
Agreement and the Subsidiary Senior Subordinated Guaranty Agreement.
2. The outstanding shares of common stock of the Company, $1.00 par
value, have been duly authorized and validly issued and are fully paid and
nonassessable.
3. The Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding contracts
and agreements of the Company, enforceable in accordance with their terms,
except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding equity
or at law) and to the discretion of the court before which any proceeding may be
brought.
4. The execution, delivery and performance by the Company of the
Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary Security
Agreement do not violate any law, regulation, order or decree of any court or
governmental instrumentality or conflict with the Articles of Incorporation or
Bylaws of the Company.
5. Under current applicable Oklahoma law, no approval, consent or
withholding of objection on the part of, or filing, registration or
qualification with, any Oklahoma state or local governmental body, is necessary
in connection with the execution, delivery and performance by the Company of the
Subsidiary Security Agreement and the Subsidiary Senior Subordinated Guaranty
Agreement.
6. With respect to each Receivable of the Company, assuming that the
Company uses a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to the Company of a security interest in specific
goods, the documents evidencing such Receivable constitute chattel paper within
the meaning of the Uniform Commercial Code of the State of Oklahoma.
7. All financing statements and other notices with respect to the
Subsidiary Security Agreement have been filed for record or recorded in all
public offices where such filing or recordation is necessary to perfect the lien
and security interest of the Security Trustee in the Collateral as against
creditors of and purchasers from the Company. The liens and security interests
created by the Subsidiary Security Agreement in the Collateral constitute valid
perfected liens on and security interests in the right, title and interest of
the Company in and to the Collateral effective as against creditors and
purchasers from the Company, assuming the Company complies with Section 4.3(c)
of the Subsidiary Security Agreement.
8. Assuming the Company places on each document, instrument, chattel
paper and other writing evidencing its Receivable the legend described in
Section 4.3(c) of the Subsidiary Security Agreement to which it is a party and
assuming that the assumptions set forth in paragraphs 6 and 7 of this opinion
are true, then according to the official comments to Section 9-308 of the
Oklahoma Uniform Commercial Code, the security interests of the Security Trustee
in the Company's Receivables will be prior to the rights of a purchaser of such
Receivables who thereafter gives new value and takes possession thereof in the
ordinary course of such purchaser's business.
The opinions expressed above are subject to the effect of legal and
equitable doctrines and procedures (including the requirement that the Agent,
the Banks, the Noteholders and the Security Trustee act in good faith) that may
limit the enforceability of any particular remedy, covenant or other provision
of the Subsidiary Security Agreement or the Subsidiary Senior Subordinated
Guaranty Agreement. Specifically without limiting the generality of the
foregoing, no opinion is expressed as to provisions, if any, contained in the
Subsidiary Security Agreement or the Subsidiary Senior Subordinated Guaranty
Agreement that (a)
<PAGE>
purport to excuse a party for liability for its own acts that may be contrary to
public policy, (b) purport to make void any act done in contravention thereof,
(c) purport to authorize a party to act in its own discretion, (d) relate to the
effect of laws or regulations that may be enacted in the future, (e) require
waivers or amendments to be made all in writing, (f) purport to effect waivers
of constitutional or statutory rights or the effect of applicable laws or (g)
purport to preserve or maintain the obligation or liability of the borrower or
the liability of the Company despite the unenforceability of the Notes due to
illegality or impossibility of performance.
9. This opinion is further subject to the following qualifications
and exceptions:
A. We are licensed to practice law only in the State of
Oklahoma and we express no opinion with respect to the effect of any
laws other than the laws of Oklahoma and those of the United States.
B. We do not opine on any state or federal securities laws
which may be applicable to the Transaction or the compliance of such
Transaction with any state or federal securities laws.
C. We do not opine on any federal banking laws which may be
applicable to the Transaction.
D. We do not opine on any state or federal taxation laws which
may be applicable to the Transaction.
E. We do not opine on the qualification, authority to do
business or good standing of the Company in any jurisdiction other
than the State of Oklahoma.
F. We express no opinion as to whether any consents or
authorizations of third parties may be required under the Uniform
Consumer Credit Code and the State Insurance Code, as a condition
precedent to or in connection with (i) the ability of the Security
Trustee to foreclose on and transfer title to the pledged stock or
the Collateral described in the Subsidiary Security Agreement; or
(ii) the ability of the Security Trustee to foreclose and take
possession of or sell a substantial portion of the assets of the
Company or to collect the Receivables of the Company.
G. We do not opine on the compliance of the Company with any
state or federal laws relating to labor or employment.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for any other purposes, nor may it be relied
upon by any other person (other than your special counsel and subsequent holders
of the Notes) for any purpose without our prior written consent.
Very truly yours,
CROWE & DUNLEVY, LUTTRELL, PENDARVIS
& RAWLINSON
MSR:sdb
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Samuel L. Kelley, Esq., counsel for World
Finance Corporation of Texas (the "WFC-Texas"), and WFC Limited Partnership
("WFC-LP") which is called for by ss.4.1 of the Agreement, shall be dated the
Closing Date and addressed to the Purchaser, shall be satisfactory in scope and
form to the Purchaser and shall be to the effect that:
1. WFC-Texas is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, has
the corporate power and authority to execute and perform the Subsidiary Security
Agreement and the Subsidiary Senior Subordinated Guaranty Agreement, and is duly
qualified or licensed and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such qualification or licensing necessary.
2. WFC-LP is a limited partnership, duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has the
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Subordinated Guaranty Agreement, and is duly qualified or
licensed and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it makes such qualifications or licensing necessary.
3. All of the outstanding shares of capital stock of WFC-Texas have
been duly authorized and validly issued and are fully paid and non-assessable.
4. All of the outstanding partnership interests of WFC-LP have been
duly authorized and validly issued and are fully paid and non-assessable.
5. The Subsidiary Senior Subordinated Guaranty Agreement and the
Subsidiary Security Agreement have been duly authorized, executed and delivered
by WFC-Texas and WFC-LP and constitute the legal, valid, and binding contracts
and agreements of WFC-Texas and WFC-LP, enforceable in accordance with their
terms, except as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditor's rights generally, or general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law) and to the discretion of the court before which any proceeding
may be brought.
6. The execution, delivery and performance by WFC-Texas and WFC-LP
of the Subsidiary Senior Subordinated Guaranty Agreement and the Subsidiary
Security Agreement do not violate any law, regulation, order or decree of any
court or governmental instrumentality.
7. Except for the filing of UCC-3 financing statements with the
Texas Secretary of State as to WFC-LP and except for the filing of UCC-3
financing statements with the Texas Secretary of State with respect to
WFC-Texas, no approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, federal,
state or local, is necessary in connection with the execution, delivery and
performance by WFC-Texas or WFC-LP of the Subsidiary Security Agreement or the
Subsidiary Senior Subordinated Guaranty Agreement.
8. With respect to each Secured Receivable (as defined in the
Subsidiary Security Agreement) of WFC-Texas and WFC-LP, assuming that WFC-Texas
and WFC-LP use a written document to evidence such Receivable, and assuming each
such written document evidences a monetary obligation of the account debtor and
a grant by such account debtor to WFC-Texas or WFC-LP, as the case may be, of a
security interest in specific goods, the documents evidencing such Receivable
constitute chattel paper within the meaning of the Uniform Commercial Code of
the State of Texas.
9. Assuming that (i) financing statements in the forms attached
hereto as Schedule 1 have been accepted for filing and properly indexed in the
Office of the Secretary of State of Texas and the appropriate recording fees and
taxes paid thereon, (ii) value has been given by the Banks and Purchaser (as
defined in the Subsidiary Security Agreement) to WFC-LP and by the Banks and the
Purchaser (as defined in the Subsidiary Security Agreement) to WFC-Texas, and
(iii) WFC-LP and WFC-Texas each has rights in the collateral described on such
respective financing statements applicable to it, the security interest created
by
<PAGE>
the Subsidiary Security Agreement in the collateral described therein (other
than the Unsecured Receivables (as defined in the Subsidiary Security
Agreement), of WFC-LP or WFC-Texas, as the case may be; provided that during the
existence of a Default or Event of Default, the Company has agreed to deliver to
the Security Trustee possession of promissory notes evidencing the Unsecured
Receivables and such delivery shall create a valid and perfected lien on, and
security interest in, the Unsecured Receivables) constitutes a valid perfected
security interest in such types of collateral as to which a security interest
may be perfected by filing in such offices under the Uniform Commercial Code of
the State of Texas.
10. Section 9-308 of the Uniform Commercial Code of the State of
Texas provides that a purchaser of chattel paper who gives new value and takes
possession of it in the ordinary course of its business has priority over a
security interest in chattel paper which is perfected by the filing of a
financing statement if such purchaser acts without knowledge that the chattel
paper is subject to a security interest. Assuming WFC-Texas and WFC-LP place on
each document, instrument, chattel paper, and other writing evidencing its
Secured Receivables the legend described in Section 4.3(c) of the Subsidiary
Security Agreement and assuming that the assumptions set forth in paragraphs 6
and 7 of this opinion are true, nothing has come to my attention to lead me to
believe that, under Section 9-308 of the Uniform Commercial Code of the State of
Texas, the security interests of the Security Trustee in Secured Receivables of
WFC-Texas and WFC-LP would not be prior to the right of a purchaser of such
Receivables who thereafter gives new value and takes possession thereof in the
ordinary course of such purchaser's business.
11. Assuming possession by the Security Trustee of the certificates
evidencing the capital stock of World Acceptance Corporation of Oklahoma, Inc.,
an Oklahoma corporation, together with duly executed blank stock powers for the
transfer of such stock, and the promissory notes evidencing the intercompany
receivables referred to in clause (a) of the definition of "Pledged Collateral"
set forth in the Subsidiary Security Agreement, together with duly executed
blank assignments for the transfer of such notes in the form contained in such
notes, the Security Trustee will have a perfected security interest in the
Pledged Shares and such promissory notes pursuant to the Subsidiary Security
Agreement.
I am licensed to practice law only in the state of Texas, and the
opinions expressed in this letter relate only to the laws of Texas and federal
laws as they are applicable within Texas.
Sincerely,
Sam Kelley
<PAGE>
FORM OF CLOSING OPINION OF SUBSIDIARY COUNSEL
The closing opinion of Dance, Dance & Lane, counsel for World Finance
Corporation of Tennessee (the "Company"), which is called for by ss.4.1 of the
Agreement, shall be dated the Closing Date and addressed to the Purchaser, shall
be satisfactory in scope and form to the Purchaser and shall be to the effect
that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Tennessee, has the corporate
power and authority to execute and perform the Subsidiary Security Agreement and
the Subsidiary Senior Subordinated Guaranty Agreement (collectively, the "Loan
Documents").
2. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable.
3. The Loan Documents have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding contracts
and agreements of the Company enforceable in accordance with their terms, except
as such enforceability may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, inadequate or failure of
consideration, applicable regulatory law affecting the Receivables, or other
similar laws and proceedings affecting creditors' rights generally, or general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and to the discretion of the
court before which any proceeding may be brought, and to the laws of the State
of South Carolina.
4. Subject to all of the provisions of paragraph 3, the execution,
delivery and performance by the Company of the Loan Documents do not violate any
law or regulation or conflict with the provisions of its Charter or Bylaws.
5. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with any state or local governmental
body is necessary in connection with the execution, delivery and performance by
the Company of the Loan Documents.
6. Assuming that the Company uses written documents to evidence its
Receivables, and assuming each such written document evidences a monetary
obligation of the account debtor and a grant by such account debtor to the
Company of a security interest in specific goods, the documents evidencing all
of the Company's Receivables constitute chattel paper within the meaning of the
Uniform Commercial Code of the State of Tennessee.
7. Assuming that (i) the financing statements and amendments thereto
in the form attached hereto as Schedule 1 are accepted by, filed and properly
indexed in, the Office of the Secretary of State of Tennessee and the
appropriate recording fees and taxes paid thereon, (ii) new value/consideration
has been and will be given by the Banks and Purchaser to the Company and (iii)
the Company has rights in the collateral described in such financing statements,
the security interests created by the Subsidiary Security Agreement in the
collateral described therein constitute valid perfected security interests in
such types of collateral as to which a security interest may be perfected by
filing in such offices under the Uniform Commercial Code of the State of
Tennessee.
8. All recording, filing and other taxes, fees and charges to
enforce the liens created by the Subsidiary Security Agreement to the extent of
$10,000,000.00 in maximum principal indebtedness have been paid, and no
penalties, fines or additional taxes, fees or charges may be assessed with
respect to the liens created by the Subsidiary Security Agreement or by the
enforcement of the Subsidiary Senior Subordinated Guaranty Agreement unless and
until the Security Trustee attempts to enforce such lien of the Subsidiary
Security Agreement for amounts greater than the maximum principal indebtedness
so stated. The maximum principal indebtedness as herein stated may be increased
without penalty at any time, before or within sixty (60) days after an increase
occurs (and at any time after such 60-day period, upon the payment of applicable
penalties and applicable taxes) upon the filing of amendments to the financing
statements on file with the Tennessee Secretary of State declaring the increase
in maximum principal indebtedness and payment of the tax on the amount of the
increase plus filing fees.
<PAGE>
9. Section 47-9-308 of the Uniform Commercial Code of the State of
Tennessee provides that a purchaser of chattel paper who gives new value and
takes possession of it in the ordinary course of its business has priority over
a security interest in chattel paper which is perfected by the filing of a
financing statement if such purchaser acts without knowledge that the chattel
paper is subject to a security interest. Assuming the Company places on each
document, instrument, chattel paper and other writing evidencing its Receivables
the legend (legend) described in Section 4.3(c) of the Subsidiary Security
Agreement and assuming that the assumptions set forth in paragraphs 6 and 7 of
this opinion are true, nothing has come to our attention to lead us to believe
that, under Section 47-9-308 of the Uniform Commercial Code of the State of
Tennessee, the security interests of the Security Trustee in the Company's
Receivables would not be prior to the rights of a purchaser of such Receivables
who after the legend is placed therein and with knowledge of the interest of the
Security Trustee, gives new value and takes possession thereof in the ordinary
course of such purchaser's business.
10. A Tennessee Court, if properly presented with the question, would
enforce the choice of law provisions in, and not apply the Tennessee Usury Laws
to, the Subsidiary Security Agreement, the Subsidiary Senior Subordinated
Guaranty Agreement,
the Agreement or the Notes.
11. Notwithstanding paragraph 4.1(c) Subsidiary Security Agreement,
the Tennessee Industrial Loan and Thrift Companies Act requires, in certain
instances, that unearned finance charges and insurance premiums, which are
included in the Receivables, be refunded.
This opinion is rendered only to you and is intended solely for your
benefit in connection with the transactions contemplated in the Loan Documents.
This opinion may not be relied upon for other purposes, nor may it be relied
upon by any other person (other than your special counsel Chapman and Cutler and
any subsequent holder of a Note) for any purpose, without our prior written
consent.
DANCE, DANCE & LANE
By
Richard Dance
<PAGE>
EXHIBIT G (TO NOTE AGREEMENT)
SUBORDINATION PROVISIONS APPLICABLE TO
Senior Subordinated Debt
(other than the Notes)
and Junior Subordinated Debt
The indebtedness evidenced by the subordinated notes or related thereto
and any renewals or extensions thereof (the "Subordinated Indebtedness") shall
at all times be wholly subordinate and junior in right of payment to any and all
indebtedness of the Company and the Restricted Subsidiaries [here insert
description of indebtedness to which Subordinated Indebtedness is subordinate
which in all events must include all indebtedness, obligations and liabilities
of the Company and the Restricted Subsidiaries under the Revolving Credit
Agreement, the Senior Note Agreements, the Subsidiary Senior Guaranty Agreement,
the Senior Notes and the Company Security Agreement and the Subsidiary Security
Agreement as each relates to the Senior Notes and, with respect to Senior
Subordinated Debt under the Agreement, the Subsidiary Senior Subordinated
Guaranty Agreement, the Notes and the Company Security Agreement and the
Subsidiary Security Agreement as each relates to the Notes (the "Senior
Indebtedness") in the manner and with the force and effect hereinafter set
forth:
1. So long as any Senior Indebtedness shall remain outstanding and
unpaid, no payment either of principal, interest or premium (notwithstanding the
expressed maturity or any time for the payment of principal of, interest or
premium on any Subordinated Indebtedness) shall be made on Subordinated
Indebtedness except with the prior written consent of all of the holders of the
Notes and the holders of the Subordinated Indebtedness will take no steps,
whether by suit or otherwise to compel or enforce the collection of Subordinated
Indebtedness, nor will the holders of the Subordinated Indebtedness use
Subordinated Indebtedness by way of counterclaim, setoff, recoupment or
otherwise so as to diminish, discharge or otherwise satisfy in whole or in part
any indebtedness or liability of the holders of the Subordinated Indebtedness to
the Company, whether now existing or hereafter arising and howsoever evidenced,
provided, however, that the Company may pay interest on Subordinated
Indebtedness accrued to and payable on the date of any such payment so long as
(i) the Company shall not be in default in the payment of principal of, interest
or premium on Senior Indebtedness, (ii) the Company has not received written
notice from any holder of the Senior Indebtedness that some other default has
occurred and is continuing under any promissory note or agreement pertaining to
Senior Indebtedness or any collateral security therefor, and (iii) none of the
events hereinafter set forth in paragraph numbered 2 hereof has occurred.
2. In the event of any distribution, dividend, or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of the Company or of the proceeds thereof to
the creditors of the Company or upon any indebtedness of the Company, occurring
by reason of the liquidation, dissolution, or other winding up of the Company,
or by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Company or involving its property, no dividend, payment, distribution or
application shall be made, and the holders of the Subordinated Indebtedness
shall not be entitled to receive or retain any payment, dividend, distribution,
or application on or in respect of the Subordinated Indebtedness, unless and
until all of the Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, payment, distribution or
application otherwise payable in respect of Subordinated Indebtedness shall be
paid and applied on Senior Indebtedness until such Senior Indebtedness has been
fully paid and satisfied.
3. The holders of Senior Indebtedness need not at any time give the
holders of the Subordinated Indebtedness notice of any kind of the creation or
existence of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of Senior
Indebtedness may at any time from time to time, without the consent of or notice
to the holders of Subordinated Indebtedness, without incurring responsibility to
the holders of the Subordinated Indebtedness, and without impairing or releasing
the obligation of the undersigned under this agreement (i) renew, refund or
extend the maturity of any Senior Indebtedness, or any part thereof, or
otherwise revise, amend or alter the terms and conditions thereof, (ii) sell,
exchange, release or otherwise deal with any property by whomsoever at
<PAGE>
any time pledged, mortgaged or otherwise hypothecated or subjected to a lien to
secure any Senior Indebtedness, and (iii) exercise or refrain from exercising
any rights against the Company and others, including the holders of the
Subordinated Indebtedness.
4. The holders of the Subordinated Indebtedness will not sell,
assign or otherwise transfer any Subordinated Indebtedness, or any part thereof,
except subject to and in accordance with the terms hereof and upon the agreement
of the transferee or assignee to abide by and be bound by the terms hereof.
5. The holders of the Subordinated Indebtedness undertake and agree
for the benefit of each holder of Senior Indebtedness to execute, verify,
deliver and file any proofs of claim which any holder of Senior Indebtedness may
at any time require in order to prove and realize upon any rights or claims
pertaining to the Subordinated Indebtedness to effectuate the full benefit of
the subordination contained herein; and upon failure of the holder of any
Subordinated Indebtedness so to do, any such holder of Senior Indebtedness shall
be deemed to be irrevocably appointed the agent and attorney-in-fact of the
holder of such Subordinated Indebtedness to execute, verify, deliver and file
any such proofs of claim.
6. No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company or the holders of
Senior Indebtedness, or by any noncompliance by the Company with any of the
terms, provisions and covenants applicable to the Subordinated Indebtedness,
regardless of any knowledge thereof that any such holder of Senior Indebtedness
may have or be otherwise charged with.
7. The Company agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that any Subordinated Indebtedness is declared
due and payable before its expressed maturity because of the occurrence of a
default hereunder, (i) the Company will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior Indebtedness
shall forthwith become immediately due and payable upon demand, regardless of
the expressed maturity thereof.
8. These subordination provisions shall be continuing and binding
until written notice of its discontinuance shall be actually received by the
holders of the Subordinated Indebtedness, and also shall continue to remain in
full force and effect until all Senior Indebtedness created or existing prior to
the receipt of such notice shall have been fully paid and satisfied.
<PAGE>
EXHIBIT H (TO NOTE AGREEMENT)
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
WORLD ACCEPTANCE CORPORATIONAND RESTRICTED SUBSIDIARIES AS OF --------,------
TOTAL UNSECURED SECURED
COMPANY
<S> <C> <C>
1. Gross Finance Receivables $---------- $---------- $----------
2. Less Credits/Allowances $---------- $---------- $----------
3. Net Finance Receivables $---------- $---------- $----------
Ineligibles:
Affiliate Receivables $---------- $---------- $----------
Shareholder/Employee Receivables $---------- $---------- $----------
Government Receivables $---------- $---------- $----------
Bankruptcy $---------- $---------- $---------
Subject to claims, offsets or defenses $---------- $---------- $----------
60 days past due $---------- $---------- $---------
4. Total Ineligibles $---------- $---------- $----------
5. Eligible Finance Receivables $---------- $----------- $----------
6. Unearned Finance Charges $---------- $--------- $----------
7. Eligible Finance Receivables, Net $---------- $---------- $----------
8. Borrowing Base
(a) 85% of Secured Eligible Receivables $__________
(b) Lesser of:
(i) $15,000,000 $----------
(ii) 11.11% of (a) above $----------
(iii) 50% of Eligible Unsecured, Net $----------
Lesser $----------
9. Total Borrowing Base (a+b) $----------
10. Current Maximum $----------
11. Current Outstanding Balance of Term Notes $----------
12. Available Borrowing Base $----------
13. Current Outstanding Balance of Revolver $----------
14. Current Availability $----------
</TABLE>
AMENDED AND RESTATED SECURITY AGREEMENT, PLEDGE AND INDENTURE OF TRUST
Dated as of June 30, 1997
Between
WORLD ACCEPTANCE CORPORATION
And
HARRIS TRUST AND SAVINGS BANK,as Security Trustee
<PAGE>
TABLE OF CONTENTS
<TABLE>
SECTION HEADING PAGE
<S> <C> <C>
Parties 1
Recitals 1
SECTION 1. INTERPRETATION OF AGREEMENT; DEFINITIONS. 2
Section 1.1. Definitions 2
Section 1.2. Accounting Principles 8
Section 1.3. Directly or Indirectly 8
SECTION 2. GRANTING CLAUSES 8
Section 2.1. Equipment 9
Section 2.2. Receivables 9
Section 2.3. Pledged Collateral 9
Section 2.4. General Intangibles 9
Section 2.5. Investment Property 10
Section 2.6. Records and Cabinets 10
Section 2.7. Partnership Interests 10
Section 2.8. Additional Property 10
Section 2.9. Other Proceeds and Products 10
SECTION 3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
Section 3.1. Location of Collateral 11
Section 3.2. Warranty of Title 11
Section 3.3. No Alienation of Collateral 12
Section 3.4. Removal of Collateral 12
Section 3.5. Compliance with Leases 12
Section 3.6. Protection of Collateral 12
Section 3.7. Further Assurances 13
Section 3.8. Maintenance of Lien; Recording; Opinions of Counsel 13
Section 3.9. Guaranty and Security Agreement Supplements 14
Section 3.10. Note Register 14
SECTION 4. SPECIAL PROVISIONS RELATING TO RECEIVABLES 15
Section 4.1. Representations and Warranties 15
Section 4.2. Receivable Schedules 16
Section 4.3. Collection of Receivables 16
Section 4.4. Power of Attorney 18
SECTION 5. SPECIAL PROVISIONS RELATING TO PLEDGED COLLATERAL 18
Section 5.1. Delivery of Pledged Collateral; Transfer to Security Trustee 18
Section 5.2. Voting Power; Payments 19
Section 5.3. Covenants of the Company 20
SECTION 6. APPLICATION OF CERTAIN MONEYS. 21
Section 6.1. Application if no Default or Event of Default Exists. 21
Section 6.2. Application if a Default or an Event of Default Exists. 21
SECTION 7. DEFAULTS AND REMEDIES 21
Section 7.1. Events of Default 21
Section 7.2. Security Trustee's Rights 21
Section 7.3. Waiver by Company 22
<PAGE>
Section 7.4. Effect of Sale 23
Section 7.5. Application of Sale and Other Proceeds 23
Section 7.6. Discontinuance of Remedies 25
Section 7.7. Cumulative Remedies 25
SECTION 8. THE SECURITY TRUSTEE 25
Section 8.1. Duties of Security Trustee 25
Section 8.2. Security Trustee's Liability 26
Section 8.3. No Responsibility of Security Trustee for Recitals 27
Section 8.4. Certain Limitations on Security Trustee's Rights to Compensation and Indemnification 28
Section 8.5. Status of Moneys Received 28
Section 8.6. Resignation of Security Trustee 28
Section 8.7. Removal of Security Trustee 29
Section 8.8. Appointment of Successor Security Trustee 29
Section 8.9. Succession of Successor Security Trustee 29
Section 8.10. Eligibility of Security Trustee 30
Section 8.11. Successor Security Trustee by Merger 30
Section 8.12. Co-Trustees 30
Section 8.13. Compensation and Reimbursement 31
SECTION 9. SUPPLEMENTS; WAIVERS. 31
Section 9.1. Supplemental Security Agreements Without Noteholder Consent 31
Section 9.2. Waivers and Consents by Noteholders; Supplemental Security Agreements with Noteholders' Consent 32
Section 9.3. Notice of Supplements 34
Section 9.4. Opinion of Counsel Conclusive as to Supplements 34
SECTION 10. MISCELLANEOUS 34
Section 10.1. Successors and Assigns 34
Section 10.2. Severability 34
Section 10.3. Communications 34
Section 10.4. Release 35
Section 10.5. Counterparts 36
Section 10.6. Governing Law 36
Section 10.7. Headings 37
Section 10.8. Prior Liens 37
Section 10.9. Rights of Holders of Senior Subordinated Notes 37
Signature Page 38
ATTACHMENTS TO SECURITY AGREEMENT, PLEDGE AND INDENTURE OF TRUST:
Schedule I -- Description of Pledged Shares
Schedule II -- Description of Partnership Interest
Schedule III -- Locations of the Company's Offices and Facilities
Exhibit A -- Form of Subsidiary Security Agreement
Exhibit B -- Form of Subsidiary Guaranty Agreement
</TABLE>
<PAGE>
AMENDED AND RESTATED SECURITY AGREEMENT, PLEDGE AND INDENTURE OF TRUST
Parties; AMENDED AND RESTATED SECURITY AGREEMENT, PLEDGE AND
INDENTURE OF TRUST (this "AGREEMENT") dated as of June 30, 1997, between WORLD
ACCEPTANCE CORPORATION, a South Carolina corporation (the "COMPANY"), and HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation (the "SECURITY TRUSTEE")
which amends and restates that certain Security Agreement, Pledge and Indenture
of Trust dated as of December 1, 1992 (as the same has been amended, restated,
modified, supplemented or waived pursuant to the terms thereof) between the
Company and the Security Trustee (the "ORIGINAL SECURITY AGREEMENT"). The post
office addresses of the Company and the Security Trustee are set forth in
SS.10.3.
.C4.RECITALS;:
A. The capitalized terms used in this Agreement shall have the
respective meanings specified in SS.1.1 unless otherwise herein defined or the
context hereof shall otherwise require.
B. The Company is authorized by law, and deems it necessary from time
to time, to borrow money for its proper purposes and to secure the same as
hereinafter provided, and to that end, in the exercise of said authority, has
duly authorized the execution and delivery of this Agreement providing for the
securing of certain obligations of the Company hereunder, all as hereinafter
provided.
C. The Company has duly authorized, on the terms provided in the Senior
Note Agreements, the issuance of $20,000,000 aggregate principal amount of
Senior Secured Notes due December 1, 1999, as the same may from time to time be
amended or restated pursuant to the terms thereof and of the Senior Note
Agreements and any notes executed in replacement thereof (the "SENIOR SECURED
NOTES"). The Company has also authorized borrowings pursuant to the Revolving
Credit Agreement, whether or not such borrowings are evidenced by promissory
notes and as the same may from time to time be amended or restated pursuant to
the terms thereof and any notes executed in replacement thereof, in a maximum
principal amount of borrowings at any one time outstanding not to exceed the
Maximum Principal Amount (the "REVOLVING CREDIT NOTES"). The Senior Secured
Notes and the Revolving Credit Notes are hereinafter collectively referred to as
the "SENIOR NOTES." The Company has also authorized, on the terms provided in
the Senior Subordinated Note Agreement, the issuance of $10,000,000 aggregate
principal amount of Senior Subordinated Secured Notes due June 30, 2004, as the
same may from time to time be amended or restated pursuant to the terms thereof
and of the Senior Subordinated Note Agreement and any notes executed in
replacement thereof (the "SENIOR SUBORDINATED NOTES"). The Senior Notes and the
Senior Subordinated Notes are hereinafter collectively referred to as the
"NOTES".
D. All acts and proceedings required by law and by the Articles of
Incorporation and By-Laws of the Company, to make the above-described Notes,
when executed by the Company the valid, binding and legal obligations of the
Company, and to constitute this Agreement a valid and binding agreement for the
uses and purposes herein set forth, in accordance with its terms, have been done
and taken, and the execution and delivery of this Agreement has been in all
respects duly authorized.
.C.'SECTION 1. INTERPRETATION OF AGREEMENT; SECTION DEFINITIONS'.
1.1. DEFINITIONS;. Unless the context otherwise requires, the terms hereinafter
set forth when used herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and plural forms of
any of the terms herein defined:
"ACCOUNT DEBTOR" shall mean any Person who is or may become obligated
to the Company under or on account of a Receivable.
"AFFILIATE" shall mean any Person (other than a Restricted Subsidiary)
(i) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock
(determined by number of shares or by number of votes) of the Company or (iii)
5% or more of the Voting Stock (determined by number of shares or by number of
votes) (or in the case of a Person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means 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 Voting Stock, by contract or otherwise.
<PAGE>
"AGENT" shall mean Harris Trust and Savings Bank and its permitted
successors and assigns, in each case in its capacity as agent for the Banks
under the Revolving Credit Agreement.
"AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING NOTES" shall mean (i)
for purposes of SS.8.1 (A) if any Senior Note or any obligation or liability
owing under the Revolving Credit Agreement or the Senior Note Agreement remains
outstanding or any obligation to extend credit under the Revolving Credit
Agreement exists, the sum of the actual principal amount of the Senior Notes
then outstanding, and (B) if no Senior Note and no other obligation or liability
owing under the Revolving Credit Agreement or the Senior Note Agreement is then
outstanding and all obligations to extend credit under the Revolving Credit
Agreement have expired or otherwise terminated, the sum of the actual principal
amount of the Senior Subordinated Notes then outstanding, (ii) for purposes of
SS.8.7 and SS.8.8, the sum of the actual principal amount of the Notes then
outstanding, plus the amount of the unused commitment with respect to the
Revolving Credit Notes and (iii) for purposes of SS.9.2 and SS.10.4 (A) so long
as no Event of Default shall have occurred and be continuing, the sum of the
actual principal amount of Notes then outstanding, plus the amount of the unused
commitment with respect to the Revolving Credit Notes and (B) if an Event of
Default shall have occurred and be continuing, the actual principal amount of
the Notes then outstanding.
"BANKS" shall mean Harris Trust and Savings Bank, The First National
Bank of Chicago, LaSalle National Bank and the other banks or financial
institutions that are or become a party to the Revolving Credit Agreement.
"CLOSING DATE" shall mean July 3, 1997.
"COLLATERAL" as used herein shall mean any and all property from time
to time subject to the security interest granted hereby.
"COMPANY" shall mean World Acceptance Corporation, a South Carolina
corporation and any Person which succeeds to all, or substantially all of the
assets and business of World Acceptance Corporation.
"CONSOLIDATED ADJUSTED NET WORTH" shall have the meaning specified in
the Senior Subordinated Note Agreement as in effect on the Closing Date.
"CORPORATE BASE RATE" means for any day the rate of interest announced
by Harris Trust and Savings Bank from time to time as its prime commercial rate,
or equivalent, with any change in the Corporate Base Rate resulting from a
change in said prime commercial rate to be effective as of the date of the
relevant change in said prime commercial rate.
"DEFAULT" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"EVENT OF DEFAULT" shall have the meaning specified in SS.7.1.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States
"GOVERNING DOCUMENTS" shall mean collectively the charter instruments,
by-laws, partnership agreements, operating agreements and other similar
documents prescribing the internal governance of each Restricted Subsidiary.
"INDEBTEDNESS FOR BORROWED MONEY" shall have the meaning specified in
the Senior Subordinated Note Agreement as in effect on the Closing Date.
"INSURANCE SUBSIDIARY" shall mean any one Subsidiary (i) which is
organized under the laws of the British Virgin Islands or such other
jurisdiction as shall be consented to in writing by all of the holders of the
Notes; (ii) which conducts substantially all of its business and has
substantially all of its assets within the British Virgin Islands or such other
jurisdiction as shall be consented to in writing by all of the holders of the
Notes; (iii) of which 100% (by number of votes) (other than directors'
qualifying shares) of the Voting Stock is owned by the Company; and (iv) which
is engaged in the business of reinsuring the credit insurance written by the
Subsidiaries.
"INVESTMENT PROPERTY" shall have the meaning specified in SS.2.5.
"LIEN" shall mean any interest in property securing an obligation owed
to a Person, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest arising from a
mortgage, security agreement, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"LIEN" includes reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar title
<PAGE>
exceptions and encumbrances, including but not limited to mechanics',
materialmen's, warehousemen's, carriers' and other similar encumbrances,
affecting property. For the purposes of this Agreement, a Person shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"MAKE-WHOLE AMOUNT" (i) with respect to the Senior Secured Notes, shall
have the meaning as defined in the Senior Note Agreements and (ii) with respect
to the Senior Subordinated Notes, shall have the meaning as defined in the
Senior Subordinated Note Agreement.
"MATERIAL EVENT OF DEFAULT" shall mean (i) an Event of Default shall
have occurred under any of Sections 6.1(a), (b), (c), (n), (o), (p) or (q) of
any Senior Note Agreement, (ii) an Event of Default shall have occurred under
any of Sections 9.1(a), (b), (c), (n), (p), (q) or (r) of the Revolving Credit
Agreement, (iii) an Event of Default shall have occurred with respect to
Sections 5.7, 5.8, 5.9, 5.10, 5.11 (but only to the extent such Event of Default
relates to a Lien on property of the Company or any Restricted Subsidiary with a
fair market value in excess of $1,000,000), 5.12, 5.13 or 5.18 of any Senior
Note Agreement or (iv) an Event of Default shall have occurred with respect to
Sections 8.7, 8.8, 8.9, 8.10, 8.11 (but only to the extent such Event of Default
relates to a Lien on property of the Company or any Restricted Subsidiary with a
fair market value in excess of $1,000,000), 8.12, 8.13 or 8.18 of the Revolving
Credit Agreement.
"MAXIMUM PRINCIPAL AMOUNT" shall mean an amount equal to (i)
$65,000,000, plus (ii) any principal amount in excess thereof agreed to in
writing by the holders of the Senior Subordinated Notes, plus (iii) any
principal amount in excess thereof; PROVIDED, that, at the time of any increase
in the amount of the commitment of the Banks under the Revolving Credit
Agreement, the Agent shall have received a certificate or certificates of the
Chief Financial Officer of the Company and an authorized officer of each holder
of the Senior Subordinated Notes, in each case, certifying that on the date of
such increase and after giving effect thereto and, in the case of clause (B)
below, after giving effect to the treatment of the maximum aggregate amount of
the commitment as so increased as having been incurred as Indebtedness for
Borrowed Money on the last day of the calendar month then most recently ended
and, in the case of any certificate delivered by any holder of the Senior
Subordinated Notes, to the knowledge of such holder, (A) there does not exist
any Default or Event of Default under clauses (a), (b), (c), (n), (o), (p) or
(q) of Section 6.1 of the Senior Subordinated Note Agreement as in effect on the
Closing Date or under Sections 5.7, 5.8, 5.9, 5.10, 5.11 (but only to the extent
such Default or Event of Default relates to a Lien on property of the Company or
any Restricted Subsidiary with a fair market value in excess of $1,000,000),
5.12, 5.13 or 5.18 of the Senior Subordinated Note Agreement as in effect on the
Closing Date and (B) the ratio of Indebtedness for Borrowed Money of the Company
and its Restricted Subsidiaries to Consolidated Adjusted Net Worth for the
calendar month then most recently ended does not exceed 6.5 to 1.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"NOTE REGISTER" (i) with respect to the Senior Secured Notes, shall
have the meaning specified in Section 9.1 of the Senior Note Agreements and (ii)
with respect to the Senior Subordinated Notes, shall have the meaning specified
in Section 10.1 of the Senior Subordinated Note Agreement.
"NOTEHOLDERS" shall mean, collectively, the holders from time to time
and at any time of the Notes.
"NOTES" shall have the meaning specified in the recitals hereof.
"ORIGINAL CLOSING DATE" shall mean December 29, 1992.
"PARTNERSHIP INTERESTS" shall have the meaning specified in SS.2.6.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government agency
or political subdivision thereof.
"PLEDGED COLLATERAL" shall mean and include:
(a) the Pledged Shares;
(b) all shares, Securities, moneys, or other property
distributed as a dividend on any shares of capital stock or other
Pledged Collateral (including the Pledged Shares) at any time pledged
hereunder or a distribution or return of capital upon or in respect of
any such capital stock or other Pledged Collateral or any part thereof,
or resulting from a split-up, revision, reclassification or other like
change of any such capital stock or other Pledged Collateral, and any
subscription
<PAGE>
warrants, rights or options issued to the holders of, or otherwise in
respect of, any such capital stock or other Pledged Collateral; and
(c) in the event of any consolidation or merger in which the
issuer of any Pledged Collateral is not the surviving entity, or in the
event of any sale, lease, transfer or other disposition of all or
substantially all of the assets of such issuer;
(i) all shares of each class of the capital stock or
other Security of the successor entity formed by or resulting
from such consolidation or merger, or of the corporation to
which such sale, lease, transfer or other disposition shall
have been made, and
(ii) all other Securities, money or property,
distributed or distributable in any such event in respect of any of the
Pledged Collateral in connection with such consideration, merger, sale,
lease, transfer or other disposition.
"PLEDGED SHARES" shall mean all of the capital stock, partnership
interests, membership interests and other equity interests of each Restricted
Subsidiary owned by the Company (as more specifically set forth on Schedule I
hereto) or hereafter acquired, including, without limitation, (a) all rights,
authority, powers and privileges of the Company as a shareholder or holder of
any partnership interest, membership interest or other equity interest of the
Restricted Subsidiaries, whether now existing or hereafter arising under the
Governing Documents or at law or otherwise, and the rights of the Company under
such Governing Documents to acquire additional shares of stock or partnership
interests, membership interests or other equity interests or to acquire the
shares of stock, partnership interest, membership interest or other equity
interest of other shareholders, partners, members or other holders of equity
interests, and (b) all other instruments owned or held by, or otherwise
established in favor of, the Company in the nature of capital stock of,
partnership interest, membership interest or any other equity interest in the
Restricted Subsidiaries, of any and every type, class and series.
"RECEIVABLES" shall mean all accounts receivable, receivables, contract
rights, controls, instruments, notes, drafts, bills, acceptances, documents,
chattel paper, general intangibles and all other forms of obligations owing to a
Person.
"RESTRICTED SUBSIDIARY" shall mean the Insurance Subsidiary, if any,
and any other Subsidiary (i) which is organized under the laws of the United
States or any State thereof; (ii) which conducts substantially all of its
business and has substantially all of its assets within the United States; and
(iii) of which 100% (by number of votes) of the Voting Stock is owned by the
Company and/or one or more Restricted Subsidiaries.
"REVOLVING CREDIT AGREEMENT" shall mean that certain Amended and
Restated Revolving Credit Agreement dated as of June 30, 1997 among the Company,
the Agent and the Banks, as the same may from time to time be amended, restated,
modified, supplemented or waived pursuant to the terms thereof.
"REVOLVING CREDIT NOTES" shall have the meaning specified in the
recitals hereof.
"S&P" shall mean Standard & Poor's Ratings Services Group, a division
of The McGraw-Hill Companies, Inc.
"SECURED INDEBTEDNESS" shall mean (i) the outstanding Notes and all
principal thereof (and premium, if any) and interest thereon pursuant to the
terms of the outstanding Notes, this Agreement, the Senior Note Agreements, the
Revolving Credit Agreement and the Senior Subordinated Note Agreement; PROVIDED,
that, in no event shall "Secured Indebtedness" include (A) the principal amount
of the Revolving Credit Notes in excess of the Maximum Principal Amount and (B)
the related interest thereon and (ii) all additional amounts and other sums at
any time due and owing from or required to be paid by the Company or any
Restricted Subsidiary under the terms of this Agreement, the Senior Note
Agreements, the Revolving Credit Agreement, the Senior Subordinated Note
Agreement, the Subsidiary Security Agreement and the Subsidiary Guaranty
Agreements, as in effect on the Closing Date or as otherwise consented to in
writing by all of the holders of the Notes.
"SECURITY" shall have the same meaning as in Section 2(a)(1) of the
Securities Act of 1933, as amended.
"SECURITY TRUSTEE" means the Person named above as the "Security
Trustee" in the first paragraph of this Agreement until a successor Security
Trustee shall have become such pursuant to the applicable
<PAGE>
provisions of this Agreement, and thereafter "SECURITY TRUSTEE" shall mean such
successor Security Trustee.
"SENIOR NOTE AGREEMENTS" shall mean, collectively, the separate Amended
and Restated Note Agreements, each dated as of June 30, 1997, between the
Company and the respective note purchasers named therein, as the same may from
time to time be amended, restated, modified, supplemented or waived pursuant to
the terms thereof.
"SENIOR NOTES" shall have the meaning specified in the recitals hereof.
"SENIOR SECURED NOTES" shall have the meaning specified in the recitals
hereof.
"SENIOR SUBORDINATED NOTE AGREEMENT" shall mean that certain Note
Agreement dated as of June 30, 1997 between the Company and the purchaser named
therein, as the same may from time to time be amended, restated, modified,
supplemented or waived pursuant to the terms thereof.
"SENIOR SUBORDINATED NOTES" shall have the meaning specified in the
recitals hereof.
The term "SUBSIDIARY" shall mean, as to any particular parent
corporation, any corporation, partnership, limited liability company or other
entity of which more than 50% (by number of votes or other decision making
authority) of the Voting Stock shall be owned by such parent corporation and/or
one or more corporations, partnerships, limited liability companies or other
entities which are themselves subsidiaries of such parent corporation. The term
"SUBSIDIARY" shall mean a subsidiary, directly or indirectly, of the Company.
"SUBSIDIARY GUARANTY AGREEMENTS" shall mean (i) the Amended and
Restated Guaranty Agreement dated as of June 30, 1997 of each Restricted
Subsidiary existing on the Closing Date and each other Restricted Subsidiary
which has executed a Guaranty Supplement in the form of Exhibit A thereto
pursuant to the terms thereof and SS.3.9, in each case, for the benefit of the
Security Trustee and the holders of the Senior Notes, as the same may from time
to time be amended, restated, modified, supplemented or waived pursuant to the
terms thereof, and (ii) the Guaranty Agreement dated as of June 30, 1997 of each
Restricted Subsidiary existing on the Closing Date and each other Restricted
Subsidiary which has executed a Guaranty Supplement in the form of Exhibit A
thereto pursuant to the terms thereof and SS.3.9, in each case, for the benefit
of the Security Trustee and the holders of the Senior Subordinated Notes, as the
same may from time to time be amended, restated, modified, supplemented or
waived pursuant to the terms thereof.
"SUBSIDIARY SECURITY AGREEMENT" shall mean the Amended and Restated
Security Agreement, Pledge and Indenture of Trust dated as of June 30, 1997
between each Restricted Subsidiary existing on the Closing Date and the Security
Trustee, as supplemented from time to time by a security agreement supplement
between a Restricted Subsidiary and the Security Trustee delivered pursuant to
the terms thereof and SS.3.9, in each such case, substantially in the form of
Exhibit A to the Subsidiary Security Agreement, as the same may from time to
time be amended, restated, modified, supplemented or waived pursuant to the
terms thereof.
"UNDERLYING COLLATERAL" shall mean, with respect to any Receivable of
the Company, all of its rights with respect to any collateral granted by the
Account Debtor in connection with any Receivable owing by it to the Company.
"UNIFORM COMMERCIAL CODE" as used herein with reference to any
collateral shall mean the Uniform Commercial Code as enacted in the jurisdiction
applicable to such Collateral, as amended from time to time, and any successor
statute(s) thereto.
"VOTING STOCK" shall mean Securities or other equity interests of any
class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
.SECTION 1.2. ACCOUNTING PRINCIPLES;. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
.SECTION 1.3. DIRECTLY OR INDIRECTLY;. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
<PAGE>
.SECTION 2. GRANTING CLAUSES;.
The Company in consideration of the premises and other good and
valuable consideration, receipt whereof is hereby acknowledged, and intending to
be legally bound, and in order to secure (i) the equal and pro rata payment of
both the principal of and interest and premium, if any, on all Senior Notes at
any time outstanding according to their tenor and effect, (ii) on a senior
subordinated basis as set forth herein and in the Senior Subordinated Note
Agreement, the equal and pro rata payment of both the principal of and interest
and premium, if any, on all Senior Subordinated Notes at any time outstanding,
according to their tenor and effect, and (iii) the payment of all other Secured
Indebtedness and the performance and observance of all the covenants and
conditions contained in the Notes, this Agreement, the Senior Note Agreements,
the Revolving Credit Agreement, the Senior Subordinated Note Agreement, the
Subsidiary Guaranty Agreements and the Subsidiary Security Agreement, in each
case, subject to the terms thereof and SS7.5, does hereby mortgage, grant,
convey, warrant, assign, pledge and hypothecate unto the Security Trustee, its
successors in trust and assigns, forever, and grants to the Security Trustee,
its successors in trust and assigns, forever, a continuing security interest in,
all and singular the following described properties, rights, interests and
privileges, together with the proceeds thereof, now or hereafter owned by the
Company (hereinafter sometimes referred to as the "COLLATERAL"):
.SECTION 2.1. EQUIPMENT;. All building materials, building
equipment, machinery, fixtures, apparatus, furniture and equipment and other
personal property (other than motor vehicles and accessions to motor vehicles)
of every kind and nature whatsoever located, including without limitation: all
air conditioning, ventilating, plumbing, heating, lighting and electrical
systems and apparatus; all communications equipment and intercom systems and
apparatus; all typewriters, computers and other office machines and equipment,
furniture, furnishings; all sprinkler equipment and apparatus, all elevators and
escalators; and all machinery, equipment, engines, boilers, tools, fixtures,
furniture, carpeting, tables and chairs, together with all accessories, parts
and appurtenances appertaining or attached thereto, whether now owned or
hereafter acquired, and all substitutions, renewals, or replacements of and
additions, improvements, accessions and accumulations to any and all thereof,
together with all the rents, income, revenues, issues, proceeds, profits and
avails arising therefrom or in connection therewith;
.SECTION 2.2. RECEIVABLES;. Receivables, whether now existing or
hereafter arising, and however evidenced or acquired, or in which the Company
now has or hereafter acquires any rights and all rights of the Company to any
Underlying Collateral granted by an Account Debtor in connection with any
Receivable owing by it to the Company;
.SECTION 2.3. PLEDGED COLLATERAL;. The Pledged Collateral;
.SECTION 2.4. GENERAL INTANGIBLES;. General intangibles of the
Company, including, without limitation, tax refunds, rights with respect to
trademarks, service marks, trade names, patents, copyrights, trade-secrets
information and rights to prevent others from doing acts that constitute unfair
competition with or misappropriation of property of the Company including,
without limitation, any sums (net of expenses) that the Company may receive
arising out of any claim for infringement of its rights in any patent,
copyright, trademark, trade name, trade secret or other proprietary right and
all rights of the Company under contracts to enjoy performance by others or to
be entitled to enjoy rights granted by others, including, without limitation,
any licenses (to the extent permitted by law);
.SECTION 2.5. INVESTMENT PROPERTY;. All Investment Property, whether
now owned or existing or hereafter created, acquired or arising, or in which the
Company now has or hereafter acquires any rights (the term "INVESTMENT PROPERTY"
means and includes all investment property and any other securities (whether
certificated or uncertificated), security entitlements, securities accounts,
commodity contracts and commodity accounts, including all substitutions and
additions thereto, all dividends, distributions and sums distributable or
payable from, upon, or in respect of such property, and all rights and
privileges incident to such property, but excludes the Pledged Collateral);
.SECTION 2.6. RECORDS AND CABINETS;. Supporting evidence and
documents relating to any of the above-described property, including without
limitation, written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like, together with all
<PAGE>
books of account, data processing records, computer software and licenses to use
the same, ledgers and cabinets in which the same are reflected or maintained,
all whether now existing or hereafter arising;
.SECTION 2.7. PARTNERSHIP INTERESTS;. (i) All right, title and
interest of the Company, whether now owned or hereafter acquired, in all
partnerships or limited liability companies, including, but not limited to,
those set forth on Schedule II hereto (collectively, the "PARTNERSHIPS"), (ii)
any and all payments or distributions of whatever kind or character and whether
in cash or other property, at any time made, owing or payable to the Company in
respect of or on account of its present or hereafter acquired interest in the
Partnerships, whether due or to become due and whether representing profits,
distributions pursuant to complete or partial liquidation or dissolution,
repayment of capital contributions or otherwise, and the right to receive,
receipt for, use and enjoy all such payments and distributions, and all proceeds
thereof, in every case whether now arising or hereafter acquired or arising, and
(iii) all proceeds of any of the foregoing (all of the foregoing rights,
interests, properties and privileges assigned in and in which a security
interest is granted pursuant to this SS.2.7 being hereafter collectively called
the "PARTNERSHIP INTERESTS");
.SECTION 2.8. ADDITIONAL PROPERTY;. All property and rights, if any,
which are by the express provisions of this Agreement required to be subjected
to the lien hereof and any additional property and rights that may from time to
time hereafter, by writing of any kind, be subjected to the lien hereof by the
Company or by anyone acting at the direction or as an agent of the Company; and
.SECTION 2.9. OTHER PROCEEDS AND PRODUCTS;. All proceeds and
products of the foregoing and all insurance of the foregoing and proceeds
thereof, whether now existing or hereafter arising.
TO HAVE AND TO HOLD the Collateral, WITH POWER OF SALE and right of
entry and possession, unto the Security Trustee, its successors and assigns,
forever; IN TRUST NEVERTHELESS, upon the terms and trust herein set forth, for
the equal and proportionate benefit, security and protection of all present and
future holders of the Senior Notes outstanding hereunder from and after the
issuance of the Senior Notes, without preference, priority or distinction of any
Senior Note over any other Senior Note by reason of series, priority of time of
issue, sale, negotiation, time of any extensions of credit evidenced thereby,
date of maturity thereof or otherwise for any cause whatsoever and, on a senior
subordinated basis as set forth herein and in the Senior Subordinated Note
Agreement, for the equal and proportionate benefit, security and protection of
all present and future holders of the Senior Subordinated Notes outstanding
hereunder from and after the issuance of the Senior Subordinated Notes, without
preference, priority or distinction of any Senior Subordinated Note over any
other Senior Subordinated Note by reason of series, priority of time of issue,
sale, negotiation, date of maturity thereof or otherwise for any cause
whatsoever; PROVIDED ALWAYS, HOWEVER, that these presents are upon the express
condition that if the Company shall irrevocably pay or cause to be irrevocably
paid all the Secured Indebtedness and all obligations to extend Senior
Indebtedness have expired or otherwise terminated, then these presents and the
estate hereby granted and conveyed shall cease and this Agreement shall become
null and void; otherwise this Agreement shall remain in full force and effect.
.C.SECTION 3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY;.
The Company hereby covenants with, and represents and warrants to, the
Security Trustee and for the benefit of the holders of the Notes from time to
time that:
.SECTION 3.1. LOCATION OF COLLATERAL;. The Collateral (other than
the Underlying Collateral and the Pledged Collateral) and the books and records
relating thereto are in the Company's possession at the offices and facilities
owned or leased by the Company set forth in Schedule III hereto. Not less than
ten days before the opening of any additional business location which would
require the filing of an additional financing statement in accordance with the
Uniform Commercial Code in order to perfect the security interest of the
Security Trustee in the Collateral, any change in the business location where
the Collateral and the books and records relating thereto are located and/or
maintained which would require the filing of an additional financing statement
in accordance with the Uniform Commercial Code in order to perfect the security
interest of the Security Trustee in the Receivables or any other Collateral, the
Company will deliver to the Security Trustee a supplement hereto amending
Schedule III to include such business location, together with evidence of the
filing of financing statements or other notices of the security interest hereof
and an opinion of the Company's counsel responsive to the requirements of SS.3.8
hereof. On or before the fifth day of every December of every year, the Company
will deliver to the Security Trustee a supplement hereto
<PAGE>
amending Schedule III to include any additional business locations not
previously reflected in a supplement hereto.
.SECTION 3.2. WARRANTY OF TITLE;. The Company is the lawful owner of
the Collateral (other than the Underlying Collateral) and has the sole right and
lawful authority to deliver this Agreement. The Collateral (other than the
Underlying Collateral) and every part thereof is, on the Closing Date, free and
clear of all Liens, except the Lien of this Agreement and will be free and clear
of all Liens, except the Lien of this Agreement and the other Liens of the
character described in clauses (e), (f), (g) and (h) of Section 5.11 of the
Senior Note Agreements and the Senior Subordinated Note Agreement and in clauses
(e), (f), (g) and (h) of Section 8.11 of the Revolving Credit Agreement, and the
Company will warrant and defend the Collateral (other than the Underlying
Collateral) against any claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Security Trustee.
.SECTION 3.3. NO ALIENATION OF COLLATERAL;. Except as permitted by
the provisions of Section 5.13 of the Senior Note Agreements and the Senior
Subordinated Note Agreement and Section 8.13 of the Revolving Credit Agreement,
the Company will not, without the Security Trustee's prior written consent,
sell, assign, mortgage, lease or otherwise dispose of the Collateral or any
interest therein.
.SECTION 3.4. REMOVAL OF COLLATERAL;. The Company will not remove
the Collateral and/or the books and records relating thereto from the locations
set forth in Schedule III hereto (i) without complying withSS.3.1 hereof or (ii)
without the Security Trustee's prior written consent (provided that the Company
may move items of Collateral among such locations). The Company will at all
times allow the Security Trustee, the holders of the Notes and their
representatives free access to, and right of inspection of, the Collateral.
.SECTION 3.5. COMPLIANCE WITH LEASES;. The Company will comply with
the terms and conditions of any leases covering the premises wherein the
Collateral is located and any orders, ordinances, laws or statutes of any city,
state or other governmental entity, department or agency having jurisdiction
with respect to such premises or the conduct of business thereon unless the
failure to so comply will not, individually or in the aggregate, have a material
adverse effect on such Collateral or impair the rights or interests of the
Company or the Security Trustee therein.
.SECTION 3.6. PROTECTION OF COLLATERAL;. At any time and from time
to time, the holder of any Notes may, at its option, or the Security Trustee
may, at the direction of the holders of the Notes, discharge any taxes, or other
Liens at any time levied or placed on the Collateral which are due and unpaid
and (A) which are not being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of the Collateral or any
material interference with the use thereof or (B) for which the Company has not
set aside on its books, reserves adequate in accordance with GAAP with respect
thereto, and such parties may pay for the maintenance and preservation of the
Collateral, including the purchasing of insurance therefor to the extent
required to be maintained by the Company pursuant to Section 5.2 of the Senior
Note Agreements and the Senior Subordinated Note Agreement and Section 8.2 of
the Revolving Credit Agreement and not so maintained, and the Company will
immediately reimburse the Security Trustee or such holder on demand for any
payment made or any expense incurred by the Security Trustee or such holder
pursuant to the foregoing authority with interest at a rate per annum equal to
the higher of (i) 10.5% and (ii) the Corporate Base Rate plus 2%. All such
expenses and payments shall have the benefit of and be secured by the security
interest herein granted, and the Security Trustee is authorized to charge any
depository account of the Company maintained with the Security Trustee or any
holder of the Notes for the amount of such expenses and payments.
.SECTION 3.7. FURTHER ASSURANCES;. The Company agrees to execute and
deliver to the Security Trustee such further agreements and assignments or other
instruments and to do all such other things as the Security Trustee may deem
necessary or appropriate to assure the Security Trustee its first priority
security interest hereunder, including such financing statement or statements or
amendments thereof or supplements thereto or other instruments as the Security
Trustee may from time to time reasonably require to perfect, and continue the
perfection of, the security interest in the Collateral contemplated by this
Agreement. The Company hereby agrees that, to the extent permitted by applicable
law, a carbon, photographic or other reproduction of this Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Security Trustee without notice thereof to the Company wherever the Security
Trustee in
<PAGE>
its sole discretion desires to file the same. The Security Trustee shall, when
an Event of Default shall have occurred and be continuing, or at such other time
pursuant to SS.4 or SS.5, have the right to take physical possession of any and
all of the Collateral and to maintain such possession on the Company's premises
or, if possible, to remove the Collateral or any part thereof to such other
places as the Security Trustee may desire. If the Security Trustee exercises its
right to take possession of the Collateral, the Company shall, upon the Security
Trustee's demand, if possible, assemble the Collateral and make it available to
the Security Trustee at a place designated by the Security Trustee. The Company
shall at its expense perform any and all other steps reasonably requested by the
Security Trustee to preserve and protect the first priority security interest
hereby granted in the Collateral. If any Collateral is in the possession or
control of any of the Company's agents or processors while a Default or an Event
of Default shall have occurred and be continuing, the Company agrees (i) to
notify such agents or processors in writing of the Security Trustee's security
interest therein, and (ii) upon the Security Trustee's request instruct them to
hold all such Collateral for the Security Trustee's account and subject to the
Security Trustee's instructions. The Company agrees to mark its books and
records to reflect the security interest of the Security Trustee in the
Collateral.
.'SECTION 3.8. MAINTENANCE OF LIEN; RECORDING; OPINIONS OF
COUNSEL';. (a) The Company will, at its expense, take all necessary action to
maintain and preserve the first and prior perfected lien of this Agreement
(including, without limitation, the filing of all financing statements or
similar notices thereof if and to the extent permitted or required by applicable
law) so long as any Notes are outstanding.
(b) The Company will, forthwith after the execution and delivery of
this Agreement and thereafter from time to time, cause this Agreement (and all
financing statements, continuation statements or similar notices thereof if and
to the extent permitted or required by applicable law) to be filed, registered
and recorded in such manner and in such places as may be required by law in
order to publish notice of and fully to protect the first lien of the Security
Trustee in and to the Collateral; and from time to time will perform or cause to
be performed any other act as provided by law and will execute or cause to be
executed any and all further instruments that may be required for such
publication and protection or requested by any Noteholder. With respect to any
Investment Property held by a securities intermediary, commodity intermediary,
or other financial intermediary of any kind, at the Security Trustee's request,
acting at the direction of the holders of the Notes, the Company shall execute
and deliver, and shall cause any such intermediary to execute and deliver, an
agreement among the Company, the Security Trustee and such intermediary in form
and substance reasonably satisfactory to the Noteholders which provides, among
other things, for the intermediary's agreement that, upon notice by the Security
Trustee that an Event of Default has occurred and is continuing, it shall comply
with entitlement orders, and apply any value distributed on account of any
Investment Property maintained in an account with such intermediary, as directed
by the Security Trustee without further consent of the Company.
(c) The Company agrees at its own expense to furnish to the Security
Trustee promptly after the execution and delivery of any supplement or amendment
hereto or any continuation statement, an opinion of counsel satisfactory to the
Security Trustee (who may be independent counsel to the Company) stating that in
the opinion of such counsel, such supplement or amendment to this Agreement (or
a financing statement, continuation statement or similar notice thereof if and
to the extent required by applicable law) or such continuation statement, as the
case may be, has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to perfect the Lien
provided by this Agreement as a valid Lien and security interest in the
Collateral.
.SECTION 3.9. GUARANTY AND SECURITY AGREEMENT SUPPLEMENTS;. The
Company hereby covenants and agrees that, within 30 days after any Person
becomes a Restricted Subsidiary, it will (i) deliver all of the certificates or
other instruments evidencing the capital stock, partnership interests,
membership interests or other equity interests of such Restricted Subsidiary
(except the Company will transfer and deliver only 65% of the capital stock of
the Insurance Subsidiary) and all other items constituting Pledged Collateral,
with all such certificates or other instruments duly endorsed in blank or
accompanied by an assignment or assignments sufficient to transfer title
thereto, to the Security Trustee to be held in pledge pursuant to the terms
hereof as part of the Pledged Collateral, together with an amended Schedule I
and, if applicable, Schedule II, hereto or to the Subsidiary Security Agreement,
as the case may be, describing such additional
<PAGE>
Pledged Shares and, if applicable, Partnership Interests, and (ii) cause such
Restricted Subsidiary (other than the Insurance Subsidiary) to enter into a
Guaranty Supplement to each Subsidiary Guaranty Agreement substantially in the
form of Exhibit A thereto and a supplement to the Subsidiary Security Agreement
substantially in the form of Exhibit A thereto, together with such items
described in SS.3.8 hereof as the Security Trustee or any Noteholder may
reasonably request.
.SECTION 3.10. NOTE REGISTER;. The Company will, forthwith after the
execution and delivery of this Agreement, provide a copy of the Note Register to
the Security Trustee. The Company agrees to promptly notify the Security Trustee
of any changes to such Note Register.
.C.SECTION 4. SPECIAL PROVISIONS RELATING TO RECEIVABLES;.
.SECTION 4.1. REPRESENTATIONS AND WARRANTIES;. As of the time any
Receivable of the Company becomes subject to the security interest provided for
hereby, the Company shall be deemed to have warranted as to such Receivables
that:
(a) Such Receivable and all papers and documents relating
thereto are genuine and in all respects what they purport to be;
(b) Such Receivable is legal, valid and subsisting;
(c) The amount of such Receivable represented as owing is the
correct amount actually and unconditionally owing, is not disputed and
is not subject to any set-offs, credits, deductions or countercharges;
(d) Such Receivable has been created, and is, in all respects
in compliance with applicable state and federal lending laws and will
continue to be in compliance with such laws;
(e) The Company has no knowledge or reason to know of any fact
which would impair the collectibility of such Receivable;
(f) All of the Company's procedures, requirements and
conditions and all federal and state laws applicable to the making of
the loans related to such Receivable and the creation of such
Receivable have been complied with;
(g) To the best knowledge of the Company, the Account Debtor
on such Receivable and other obligors had legal capacity to enter into
the transactions related to such Receivable;
(h) The form and content of each document related to such
Receivable, the security related thereto, and the transactions from
which it arose comply fully with any and all applicable laws,
ordinances, rules and regulations, federal, state and/or local, with
respect to the extension of credit and charging of interest, including
without limitation, as applicable, the Federal Consumer Credit
Protection Act, the Federal Fair Credit Reporting Act, the Federal
Trade Commission Act, the Federal Equal Credit Opportunity Act and all
federal, state and local laws related to licensing, usury, truth in
lending, real estate settlement procedures, consumer protection, equal
credit opportunity, fair debt collection, unfair and deceptive trade
practices, rescission rights and disclosures, and with all rules and
regulations thereunder, all as amended, and any disclosures required
with respect to such Receivable were and will continue to be made
properly and in a timely manner;
(i) To the best knowledge of the Company, such Receivable and
all facts, statements or obligations contained or implicit in any
application for credit or financial statement of the Account Debtor or
other obligor submitted to the Company, including without limitation,
the description of any Underlying Collateral securing such Receivable
and the amount owing from the Account Debtor or other obligor, and the
signatures of the parties are genuine, correct, true and complete;
(j) The Company has extended no credit of any kind or in any
manner to the Account Debtor or other obligors in connection with the
transactions from which such Receivable arose other than as indicated
on and evidenced by the Company's files related to such Receivable;
(k) To the best knowledge of the Company, each security
agreement, UCC filing, title retention instruments and other document
and instrument, if any, which is security for such Receivable contains
a correct and sufficient description of any Underlying Collateral
covered thereby and each lien or security interest which secures such
Receivable is and will continue to be valid;
<PAGE>
(l) Before extending credit to the Account Debtor or other
obligor on such Receivable, the Company has made an adequate credit
investigation of the Account Debtor or other obligor and has determined
that the risk of extending such credit is satisfactory and in
accordance with the standards historically observed by the Company in
the conduct of its business;
(m) Any and all policies of insurance related to the property
securing any obligation of the Account Debtor in connection with such
Receivable and any credit life insurance, credit disability insurance,
or credit unemployment insurance are in full force and effect in
accordance with the terms of all agreements between the Company and the
Account Debtor; and
(n) As to such Receivable, the Company was duly authorized to
do business and in good standing in the jurisdiction in which such
Receivable was originated and was duly licensed to originate such
Receivable in such jurisdiction.
.SECTION 4.2. RECEIVABLE SCHEDULES;. On or before the fifth day of
every month, the Company shall provide the Security Trustee with a monthly
consolidated report of gross Receivables created or acquired by the Company and
the Restricted Subsidiaries. The Company shall provide the Security Trustee with
such other relevant information as the Security Trustee may request from time to
time.
.SECTION 4.3. COLLECTION OF RECEIVABLES;. (a) Unless and until a
Default or an Event of Default shall have occurred and be continuing and the
Company shall have received written notice from the Security Trustee not to
collect the Receivables, the Company shall make collection of all Receivables of
the Company and may use the same to carry on its business in accordance with
sound business practice and otherwise subject to the terms hereof.
(b) At any time while a Default or an Event of Default shall have
occurred and be continuing, in the event the Security Trustee requests the
Company to do so:
(i) All instruments and chattel paper at any time constituting
part of the Receivables of the Company (including any postdated checks)
shall, upon receipt by the Company and to the extent permitted by law,
be immediately endorsed to and deposited with the Security Trustee in
the same form as received by the Company; and/or
(ii) The Company shall, to the extent permitted by law, instruct
all account debtors to remit all payments in respect of Receivables of
the Company to a lockbox to be maintained at the main post office,
Chicago, Illinois, or such other single location as the Security
Trustee may reasonably designate, under the sole custody and control of
the Security Trustee.
(c) Except as otherwise directed by the Security Trustee, the Company
shall immediately place the following legend conspicuously, on the face of each
document, instrument, chattel paper and other writing evidencing the Receivables
created on or after the Original Closing Date but before the Closing Date: "A
SECURITY INTEREST IN THIS DOCUMENT HAS BEEN GRANTED TO HARRIS TRUST AND SAVINGS
BANK, AS SECURITY TRUSTEE AND SECURED PARTY, PURSUANT TO THAT CERTAIN SECURITY
AGREEMENT, PLEDGE AND INDENTURE OF TRUST DATED AS OF DECEMBER 1, 1992." Except
as otherwise directed by the Security Trustee, the Company shall, within ten
days after the Closing Date, place the following legend conspicuously, on the
face of each document, instrument, chattel paper and other writing evidencing
the Receivables created on or after the Closing Date: "A SECURITY INTEREST IN
THIS DOCUMENT HAS BEEN GRANTED TO HARRIS TRUST AND SAVINGS BANK, AS SECURITY
TRUSTEE AND SECURED PARTY, PURSUANT TO A SECURITY AGREEMENT, PLEDGE AND
INDENTURE OF TRUST." At any time while a Default or an Event of Default shall
have occurred and be continuing, the Security Trustee or its designee may notify
the Company's customers or account debtors at any time that Receivables of the
Company have been assigned to the Security Trustee or of the Security Trustee's
security interest therein and either in its own name, that of the Company or
both, demand, collect (including without limitation through a lockbox analogous
to that described in SS. 4.3(B)(II) hereof), receive, receipt for, sue for,
compound and give acquittance for any or all amounts due or to become due on
such Receivables, and in the Security Trustee's discretion file any claim or
take any other action or proceeding which the Security Trustee may deem
necessary or appropriate to protect and realize upon the security interest of
the Security Trustee in such Receivables.
(d) In the event the Security Trustee has exercised any or all of its
rights under SS.SS.4.3(B) or (C) hereof, the Security Trustee may, at any time
while a Default or an Event of Default shall have occurred
<PAGE>
and be continuing, cause all instruments, chattel paper, moneys or other
proceeds received by the Security Trustee to be deposited, handled and
administered in and through a remittance account. If a Default or an Event of
Default has occurred and is continuing to the knowledge of the Security Trustee,
all amounts received by the Security Trustee pursuant to the Granting Clauses
hereof and all amounts held in any remittance account referred to above in this
paragraph shall be held by the Security Trustee for application in the manner
provided for in SS.7 in respect of proceeds and avails of the Collateral.
.SECTION 4.4. POWER OF ATTORNEY;. Upon the occurrence and during the
continuance of a Default or an Event of Default, in addition to any other powers
of attorney granted herein, the Company appoints the Security Trustee, its
nominee, or any other Person whom the Security Trustee may designate as the
Company's attorney-in-fact, with full power at any time and from time to time to
endorse the Company's name on any checks, notes, acceptances, money orders,
drafts or other forms of payment or security that may come into the Security
Trustee's possession, upon the occurrence and during the continuance of a
Default or an Event of Default, to sign the Company's name on any invoice or
bill of lading relating to any Collateral of the Company, on drafts against
customers, on schedules and assignments of Collateral of the Company, on notices
of assignment, and other public records, on verification of accounts and on
notices to customers, to notify the post office authorities to change the
address for delivery of the Company's mail to an address designated by the
Security Trustee, to receive, open and dispose of all mail addressed to the
Company, to send requests for verification of Receivables of the Company to
customers or account debtors, and to do all things necessary to carry out this
Agreement. The Company ratifies and approves all acts of any such attorney and
agrees that neither the Security Trustee nor any such attorney will be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law other than their willful misconduct or gross negligence. The foregoing power
of attorney, being coupled with an interest, is irrevocable until the Secured
Indebtedness is fully and irrevocably paid and satisfied and all obligations to
extend credit under the Revolving Credit Notes have expired or otherwise
terminated. The Security Trustee may file one or more financing statements
disclosing its security interest in any or all of the Collateral without the
Company's signature appearing thereon. The Company also hereby grants the
Security Trustee a power of attorney to execute any such financing statement, or
amendments and supplements to financing statements on behalf of the Company with
notice thereof to the Company, which power of attorney is coupled with an
interest and irrevocable until the Secured Indebtedness is fully paid and
satisfied.
.C.SECTION 5. SPECIAL PROVISIONS RELATING TO PLEDGED COLLATERAL;.
.'SECTION 5.1. DELIVERY OF PLEDGED COLLATERAL; TRANSFER TO SECURITY
TRUSTEE';. All instruments and certificates representing or evidencing the
Pledged Collateral shall be delivered to and held by or on behalf of the
Security Trustee for the ratable benefit of the holders of the Notes pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
undated, all in form and substance satisfactory to the Security Trustee. The
Security Trustee shall have the right, subject to applicable law, at any time in
its discretion after the occurrence of an Event of Default, to transfer to or to
register in the name of the Security Trustee or any of its nominees any or all
of such Pledged Collateral. Promptly after any such transfer or registration,
the Security Trustee shall give notice thereof to the Company, but the failure
to give such notice shall not affect any of the rights or remedies of the
Security Trustee hereunder. The Security Trustee shall have the right at any
time to exchange instruments or certificates representing or evidencing such
Pledged Collateral for instruments or certificates of smaller or larger
denominations, subject to the terms thereof.
.'SECTION 5.2. VOTING POWER; PAYMENTS';.
(a) VOTING POWER. So long as an Event of Default shall not have
occurred and be continuing, the Company shall have the right to exercise any and
all voting or other consensual rights pertaining to the Pledged Collateral or
any part thereof for all purposes not inconsistent with the terms of this
Agreement, the Senior Note Agreements, the Revolving Credit Agreement and the
Senior Subordinated Note Agreement, and the Company agrees that it will not
exercise any such rights in any manner which is inconsistent with the terms of
this Agreement, the Senior Note Agreements, the Revolving Credit Agreement and
the Senior Subordinated Note Agreement; PROVIDED, HOWEVER, that the Company
shall not exercise or shall refrain from exercising any such right if such
action would have a material adverse affect on the value of the Pledged
<PAGE>
Collateral or any part thereof; the Security Trustee (1) shall have no right to
exercise such voting rights as are reserved in this SS.5.2(A) to the Company and
(2) shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, and other orders,
and all such instruments, without recourse, as the Company may reasonably
request in writing for the purpose of enabling the Company to exercise the
voting rights which it is entitled to exercise under this SS.5.2(A).
(b) PAYMENTS ON DEFAULT. So long as no Default or Event of Default
shall have occurred and be continuing, the Company shall have the right to
receive and retain all cash distributions and payments made in respect of the
Pledged Collateral to the extent such payments (1) may be legally declared and
paid under applicable law and (2) are not prohibited by the applicable
provisions hereof and of the Senior Note Agreements, the Revolving Credit
Agreement or the Senior Subordinated Note Agreement; PROVIDED, HOWEVER, that any
and all
(i) dividends and distributions paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(ii) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any Pledged Collateral; shall be forthwith
delivered to the Security Trustee to hold as, and such amounts so
delivered shall be, Pledged Collateral and shall, if received by the
Security Trustee, be received in trust for the benefit of the
Security Trustee, be segregated from the other property or funds of
the Company and be forthwith delivered to the Security Trustee as
Pledged Collateral in the same form as so received (with all
appropriate powers, authorizations, orders and documents).
(c) VOTING RIGHTS AFTER AN EVENT OF DEFAULT AND RECEIPT OF
DISTRIBUTIONS AFTER A DEFAULT OR AN EVENT OF DEFAULT. Upon the occurrence and
during the continuance of an Event of Default, all rights of the Company to
exercise or refrain from exercising the voting and other consensual rights that
it would otherwise be entitled to exercise pursuant to clause (a) above and,
upon the occurrence and during the continuance of a Default or an Event of
Default, all rights of the Company to receive the dividends and other
distributions which it would otherwise be entitled to receive and retain
pursuant to clause (b) above, in each such case, shall cease during the period
and continuance of such Default or Event of Default, as the case may be, and all
such rights shall thereupon become vested in the Security Trustee, which shall
thereupon have the sole right to exercise or refrain from exercising such voting
and other consensual rights, as directed in writing by the the Noteholders
pursuant to SS.8.1 hereof, and to receive and hold as Pledged Collateral such
distributions and dividends.
.SECTION 5.3. COVENANTS OF THE COMPANY;. The Company hereby
covenants and agrees as follows:
(a) ISSUANCE OF ADDITIONAL SHARES OF STOCK. The Company will
not vote to enable or otherwise cause any Restricted Subsidiary to
issue any shares of stock or other Securities in addition to, or to
issue other securities of any nature in exchange or substitution for,
the Pledged Collateral (except to qualify directors) unless such stock
or other securities may be issued under the relevant provisions hereof,
are pledged to the Security Trustee for the ratable benefit of the
holders of the Notes as part of the Pledged Collateral and the Company
represents to the Security Trustee and the holders of the Notes that
(i) the Company has good and marketable title to such stock or other
Security, free and clear of any Lien other than the Lien hereof and
(ii) such stock or other Security has been duly authorized, validly
issued and is fully paid and non-assessable.
(b) REGULATORY CONSENT. The Company will use its best efforts
to obtain consent of any regulatory authority, Federal, state or local,
if any, having jurisdiction over any license, franchise or other
authorization granted by any governmental unit or authority, which
consent may be required in connection with the transfer of the Pledged
Collateral, and will cooperate fully with the Security Trustee in
effecting any such transfer, including, without limitation, the
execution and
<PAGE>
delivery of all applications, certificates and other documents that may
be required to obtain the consent and approval or authorization of or
registration or qualification with, any governmental authority, and
specifically, without limitation, any application for consent to
assignment of license or transfer of control necessary or appropriate
under the rules and regulations of any governmental authority for
approval of (1) any sale or sales of property constituting Pledged
Collateral by or on behalf of the Security Trustee or (2) any
assumption by the Security Trustee of voting rights or management
rights in the Pledged Collateral, effected in accordance with the terms
of this Agreement.
(c) ADDITIONAL PLEDGED COLLATERAL. If any of the Pledged
Collateral, including, without limitation, any shares, notes,
obligations, Securities, instruments, property or (except to the extent
otherwise provided in clauses (b) and (c) in the definition of Pledged
Collateral) moneys, distributions or other payments of every kind and
variety referred to in clauses (a) through (c) in the definition of
Pledged Collateral are received by the Company, the Company agrees
forthwith to transfer and deliver the same (with the certificates or
other instruments or documents evidencing or documenting any such
shares, notes, obligations, interests, instruments, or other Securities
duly endorsed in blank or accompanied by an assignment or assignments
sufficient to transfer title thereto), to the Security Trustee to be
held in pledge pursuant to the terms of this Agreement, as part of the
Pledged Collateral.
(d) SCHEDULE OF PLEDGED COLLATERAL. The Company will furnish
to the Security Trustee from time to time statements and schedules
further identifying and describing the Pledged Collateral and such
other reports in connection with the Pledged Collateral as the Security
Trustee may reasonably request, all in reasonable detail.
SECTION 6. APPLICATION OF CERTAIN MONEYS.
.SECTION 6.1. APPLICATION IF NO DEFAULT OR EVENT OF DEFAULT EXISTS.;
So long as no Default or Event of Default shall have occurred and be continuing,
subject to the Company's contractual obligations to other parties (including,
without limitation, the Revolving Credit Agreement), the Company shall be
allowed to receive and apply the Collateral and to carry on its business in
accordance with sound business practices.
.SECTION 6.2. APPLICATION IF A DEFAULT OR AN EVENT OF DEFAULT
EXISTS.; If a Default or an Event of Default has occurred and is continuing, all
amounts which constitute Collateral shall be paid over to the Security Trustee
for application in the manner provided inSS.7 in respect of proceeds and avails
of the Collateral.
SECTION 7. DEFAULTS AND REMEDIES;.
.SECTION 7.1. EVENTS OF DEFAULT;. An "Event of Default" under the
Senior Note Agreements, the Revolving Credit Agreement or the Senior
Subordinated Note Agreement shall constitute an Event of Default hereunder.
.SECTION 7.2. SECURITY TRUSTEE'S RIGHTS;. The Company agrees that
when any Event of Default has occurred and is continuing, the Security Trustee
may, subject to the provisions of SS.8.1, without limitation of all other rights
and remedies available herein, in the Subsidiary Security Agreement, at law or
in equity in such event, exercise any one or more or all, and in any order, of
the remedies hereinafter set forth, it being expressly understood that no remedy
herein conferred is intended to be exclusive of any other remedy or remedies;
but each and every remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or in equity or by
statute:
(a) The Security Trustee personally, or by agents or
attorneys, shall have the right (subject to compliance with any
applicable mandatory legal requirements) to enter into and upon the
premises of the Company and take possession of all or any part of the
Collateral and to exclude the Company wholly therefrom, and having and
holding the same may use, operate, manage and control the Collateral
and collect and receive all earnings, revenues, issues, proceeds and
income of the Collateral and every part thereof and may maintain,
repair and renew the Collateral and make replacements, alterations,
additions and improvements thereto or remove and dispose of any portion
of the Collateral and may otherwise exercise any and all of the rights
and powers of the Company
<PAGE>
in respect thereof.
(b) The Security Trustee may, if at the time such action may
be lawful and always subject to compliance with any mandatory legal
requirements, either with or without taking possession, and either
before or after taking possession, and without instituting any legal
proceedings whatsoever, and having first given notice of such sale by
registered mail to the Company and each holder of the Notes once at
least ten days prior to the date of such sale, and any other notice
which may be required by law, sell and dispose of the Collateral, or
any part thereof, or interest therein, at public auction to the highest
bidder, in one lot as an entirety or in separate lots, and either for
cash or on credit and on such terms as the Security Trustee may
determine, and at any place (whether or not it be the location of the
Collateral or any part thereof) designated in the notice above referred
to. Any such sale or sales may be adjourned from time to time by
announcement at the time and place appointed for such sale or sales, or
for any such adjourned sale or sales, without further notice, and the
Security Trustee or the holder or holders of any Notes, or of any
interest therein, may bid and become the purchaser at any such sale.
(c) The Security Trustee may proceed to protect and enforce
this Agreement and the Notes by suit or suits or proceedings in equity,
at law or in bankruptcy, and whether for the specific performance of
any covenant or agreement herein contained or in execution or aid of
any power herein granted; or for foreclosure hereunder, or for the
appointment of a receiver or receivers for the Collateral or any part
thereof, or for the recovery of judgment for the Secured Indebtedness
or for the enforcement of any other proper, legal or equitable remedy
available under applicable law.
.SECTION 7.3. WAIVER BY COMPANY;. To the extent now or at any time
hereafter enforceable under applicable law, the Company covenants that it will
not at any time insist upon or plead, or in any manner whatsoever claim or take
any benefit or advantage of, any stay or extension law now or at any time
hereafter in force, nor claim, take nor insist upon any benefit or advantage of
or from any law now or hereafter in force providing for the valuation or
appraisement of the Collateral or any part thereof, prior to any sale or sales
thereof to be made pursuant to any provision herein contained, or to the decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made or
enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Company acquiring any
interest in or title to the Collateral or any part thereof subsequent to the
date of this Agreement, all benefit and advantage of any such law or laws, and
covenants that it will not invoke or utilize any such law or laws or otherwise
hinder, delay or impede the execution of any power herein granted and delegated
to the Security Trustee, but will suffer and permit the execution of every such
power as though no such law or laws had been made or enacted.
.SECTION 7.4. EFFECT OF SALE;. Any sale, whether under any power of
sale hereby given or by virtue of judicial proceedings, shall operate to divest
all right, title, interest, claim and demand whatsoever, either at law or in
equity, of the Company in and to the property sold and shall be a perpetual bar,
both at law and in equity, against the Company, its successors and assigns, and
against any and all persons claiming the property sold or any part thereof
under, by or through the Company, its successors or assigns.
.SECTION 7.5. APPLICATION OF SALE AND OTHER PROCEEDS;. The Security
Trustee shall give at least one day prior written notice to each holder of a
Note then outstanding of each date (the "APPLICATION DATE") on which the
proceeds and/or avails of any sale of the Collateral, or any part thereof, shall
be applied, and on such Application Date, or as soon thereafter as may be
practical, the proceeds and the avails of any remedy hereunder then available to
the Security Trustee shall be irrevocably paid to and applied as follows:
FIRST, to the payment of costs and expenses of foreclosure or
suit, if any, and of such sale, and of all proper expenses, liability
and advances, including reasonable legal and administrative expenses
and attorneys' fees, incurred or made hereunder by the Security Trustee
and of all taxes, assessments or Liens superior to the lien of these
presents, except any taxes, assessments or other superior lien subject
to which said sale may have been made;
SECOND, to the irrevocable payment of the whole amount then
due upon the Senior Notes, whether by acceleration or otherwise, for
principal, interest and premium, if any; and in case such
<PAGE>
proceeds shall be insufficient to pay in full the whole amount so due,
owing or unpaid upon the Senior Notes, then ratably according to the
aggregate of such principal and the accrued and unpaid interest and
premium, if any, with application on each Senior Note to be made,
first, to unpaid interest thereon, second, to the unpaid principal
thereof, and third, to unpaid premium (including, but not limited to,
any Make-Whole Amount and any other amounts due and owing pursuant to
Section 2.10 of the Revolving Credit Agreement), if any, thereon; such
application to be made upon presentation of the several Senior Notes,
and the notation thereon of the payment, if partially paid, or the
surrender and cancellation thereof, if fully paid;
THIRD, on a pro rata basis without any order of priority, to
the irrevocable payment of (i) the amounts payable by the Company under
the Revolving Credit Agreement in the form of fees pursuant to Sections
3.1 and 3.3 thereof as such sections were in effect on the Closing Date
or as amended or revised after the Closing Date but not in excess of
the aggregate amount of the fees payable pursuant to Sections 3.1 and
3.3 as in effect on the Closing Date, (ii) the amounts payable under
the Revolving Credit Agreement for increased costs, taxes and
indemnification as described in Section 10.3, Section 12.3 and
paragraph (b) of Section 12.12, respectively, of the Revolving Credit
Agreement, (iii) the amounts payable by the Company under the Senior
Note Agreements pursuant to the final paragraph of Section 8.4 of the
Senior Note Agreements and SS.8.13 (in each case, except to the extent
covered by clause FIRST above), and (iv) the first $2,500,000 of all
other costs, claims, expenses and fees (including trustee's fees and
attorneys' fees) which become payable by the Company pursuant to or
arising out of the Senior Note Agreements, the Revolving Credit
Agreement or this Agreement, in each case, with respect to the Senior
Notes;
FOURTH, to the irrevocable payment of the whole amount then
due upon the Senior Subordinated Notes, whether by acceleration or
otherwise, for principal, interest and premium, if any; and in case
such proceeds shall be insufficient to pay in full the whole amount so
due, owing or unpaid upon the Senior Subordinated Notes, then ratably
according to the aggregate of such principal and the accrued and unpaid
interest and premium, if any, with application on each Senior
Subordinated Note to be made, first, to unpaid interest thereon,
second, to the unpaid principal thereof, and third, to unpaid premium,
if any, thereon; such application to be made upon presentation of the
several Senior Subordinated Notes, and the notation thereon of the
payment, if partially paid, or the surrender and cancellation thereof,
if fully paid;
FIFTH, to the irrevocable payment of any other Secured
Indebtedness, including, without limitation, (i) all other expenses,
fees and amounts owing to the holder of any Senior Note and not covered
by the immediately preceding clauses FIRST through FOURTH and (ii) all
expenses, fees and other amounts owing to the holder of any Senior
Subordinated Note; and
SIXTH, to the irrevocable payment of the surplus, if any, to
the Company, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same.
The proceeds and/or avails of the Collateral shall be applied as set
forth above notwithstanding the time or order of advance of any funds secured by
any such Collateral or any other priority provided by law or otherwise. By
accepting the benefits of this Agreement, each of the holders of the Notes
agrees that it will not initiate or prosecute, or encourage any other person to
initiate or prosecute, any claim, action or other proceeding challenging the
enforceability of the claims of the holders of the Notes or challenging the
enforceability of any liens or security interests in assets securing the Notes
and the other obligations and liabilities relating thereto, in each case,
created or incurred in accordance with the terms of this Agreement and the
Subsidiary Security Agreement.
.'SECTION 7.6. DISCONTINUANCE OF REMEDIES';. In case the Security
Trustee shall have proceeded to enforce any right under this Agreement by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case the Company, the Security Trustee and the
holders of the Notes shall be restored to their former positions and rights
hereunder with respect to the property subject to the lien and security interest
created under this Agreement.
.SECTION 7.7. CUMULATIVE REMEDIES;. No delay or omission of the
Security Trustee or of the
<PAGE>
holder of any Note to exercise any right or power arising from any default,
shall exhaust or impair any such right or power or prevent its exercise during
the continuance of such default. No waiver by the Security Trustee or the holder
of any Note of any such default, whether such waiver be full or partial, shall
extend to or be taken to affect any subsequent default, or to impair the rights
resulting therefrom except as may be otherwise provided therein. No remedy
hereunder is intended to be exclusive of any other remedy but each and every
remedy shall be cumulative and in addition to any and every other remedy given
hereunder or otherwise existing; nor shall the giving, taking or enforcement of
any other or additional security, collateral or guaranty for the payment of the
Secured Indebtedness operate to prejudice, waive or affect the security of this
Agreement or any rights, powers or remedies hereunder, nor shall the Security
Trustee or the holder of any Note be required to first look to, enforce or
exhaust such other or additional security, collateral or guaranties.
.C.SECTION 8. THE SECURITY TRUSTEE;.
The Security Trustee accepts the trusts hereunder and agrees to perform
the same, but only upon the terms and conditions hereof, including the
following, to all of which the Company and the respective holders of the Notes
at any time outstanding by their acceptance thereof agree:
.SECTION 8.1. DUTIES OF SECURITY TRUSTEE;. (a) The Security Trustee
undertakes (i) except while an Event of Default actually known to the Security
Trustee shall have occurred and be continuing, to perform such duties and only
such duties as are specifically set forth in this Agreement, or in any direction
given pursuant to this Agreement, and (ii) while an Event of Default actually
known to the Security Trustee shall have occurred and be continuing, (A) to
exercise such of the rights and powers as are vested in it by this Agreement and
subject to SS.8.1(B), to use the same degree of care and skill in their exercise
as an ordinary prudent man would exercise or use under the circumstances in the
conduct of his own affairs and (B) to conduct any sale or disposition of the
Collateral pursuant to SS.7.2 in a commercially reasonable manner.
The Security Trustee upon receipt of instruments or notices furnished
to the Security Trustee pursuant to the provisions of this Agreement shall
furnish copies of the same to the holders of the Notes.
(b) In the event that the Security Trustee shall have actual
knowledge of an Event of Default, the Security Trustee shall give prompt written
notice of such Event of Default to each holder of a Note. Subject to the terms
of SS.8.2(H), in accordance with written instructions received from the holders
of at least a majority of the Aggregate Principal Amount of the Outstanding
Notes, the Security Trustee shall take such action or refrain from taking such
action as the Security Trustee shall be directed in writing by such holders. If
the Security Trustee shall not have received written instructions as above
provided within twenty (20) days after mailing notice of such Event of Default
to the holders, the Security Trustee may, subject to instructions received
pursuant to the preceding sentence, take such action, or refrain from taking
such action, but shall be under no duty to take or refrain from taking any
action, with respect to such Event of Default, as it shall determine advisable
in the best interests of the holders of the Notes.
(c) The Security Trustee shall not have any duty or obligation to
manage, control, use, sell, dispose of or otherwise deal with the Collateral,
or, to otherwise take or refrain from taking any action under, or in connection
with, this Agreement, except as expressly provided by the terms of this
Agreement or expressly provided in written instructions received pursuant to
this Agreement.
(d) Except if it is herein otherwise expressly provided that no such
request is required, the Security Trustee shall not be under any obligation to
take any action which is discretionary with the Security Trustee or otherwise
requires judgment to be made by the Security Trustee under the provisions
hereof, except on written request by the holders of the Notes or by the
requisite portion thereof as expressly provided herein.
.SECTION 8.2. SECURITY TRUSTEE'S LIABILITY;. No provision of this
Agreement (except to the extent provided in SS.8.13 hereof) shall be construed
to relieve the Security Trustee from liability for its own negligent action,
negligent failure to act, or its own willful misconduct, except that:
(a) unless an Event of Default actually known to the Security
Trustee shall have occurred and be continuing, the Security Trustee
shall not be liable except for the performance of such duties as are
specifically set forth in this Agreement and no implied covenants or
obligations
<PAGE>
shall be read into this Agreement against the Security Trustee but the
duties and obligations of the Security Trustee shall be determined
solely by the express provisions of this Agreement; and
(b) in the absence of bad faith on the part of the Security
Trustee, the Security Trustee may rely upon the authenticity of, and
the truth of the statements and the correctness of the opinions
expressed in, and shall be protected in acting upon, any resolution,
officer's certificate, opinion of counsel (which counsel shall be
independent of the Company, any Affiliate thereof and the holders of
the Notes), Note, request, notice, consent, waiver, order, signature
guaranty, notarial seal, stamp, acknowledgment, verification,
appraisal, report, stock certificate, or other paper or document
believed by the Security Trustee to be genuine and to have been signed,
affixed or presented by the proper party or parties; and
(c) in the absence of bad faith on the part of the Security
Trustee, whenever the Security Trustee, or any of its agents,
representatives, experts or counsel (which counsel shall be independent
of the Company, any Affiliate thereof and the holders of the Notes),
shall consider it necessary or desirable that any matter be proved or
established, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved
and established by an officer's certificate; provided, however, that
the Security Trustee, or such agent, representative, expert or counsel,
may require such further and additional evidence and make such further
investigation as it or they may consider reasonable; and
(d) the Security Trustee may consult with counsel (which
counsel shall be independent of the Company, any Affiliate thereof and
the holders of the Notes) and the advice or opinion of such counsel
shall be full and complete authorization and protection in respect of
any action taken or suffered hereunder in good faith and in accordance
with such advice or opinion of counsel; and
(e) the Security Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with any direction or request of the holders of Notes or the
requisite portion thereof as expressly provided herein; and
(f) the Security Trustee shall not be liable for any error of
judgment made in good faith by an officer of the Security Trustee
unless it shall be proved that the Security Trustee was negligent in
ascertaining the pertinent facts; and
(g) the Security Trustee shall not be deemed to have knowledge
of any Default or Event of Default unless and until an officer of the
Corporate Trust Department of the Security Trustee who customarily
handles corporate trusts or such other Person employed by the Security
Trustee who has primary responsibility for the transactions
contemplated hereby shall have actual knowledge thereof or the Security
Trustee shall have received written advice thereof from the holder of
any Note; and
(h) whether or not an Event of Default shall have occurred,
the Security Trustee shall not be under any obligation to take or
refrain from taking any action under this Agreement which may tend to
involve it in any expense or liability, the payment of which within a
reasonable time is not, in its reasonable opinion, assured to it by the
security afforded to it by the terms of this Agreement, unless and
until it is requested in writing so to do by one or more holders of
Notes outstanding hereunder and furnished, from time to time as it may
require, with reasonable security and indemnity.
.SECTION 8.3. NO RESPONSIBILITY OF SECURITY TRUSTEE FOR RECITALS;.
The recitals and statements contained herein and in the Notes shall be taken as
the recitals and statements of the Company, and the Security Trustee assumes no
responsibility for the correctness of the same, nor shall the Security Trustee
have any responsibility for or any liability with respect to any disclosure,
warranty, representation or concealment or failure to disclose in connection
with the offering, solicitation, sale or distribution Notes by the Company or by
any other Person.
The Security Trustee makes no representation as to the validity or
sufficiency of this Agreement, or of the Notes secured hereby, the security
hereby or thereby afforded, the title of the Company to or the existence of the
Collateral or the descriptions thereof, or the filing or recording or
registering of this Agreement or any other document.
<PAGE>
The Security Trustee shall not be concerned with or accountable to any
Person for the use or application of any deposited moneys which shall be
released or withdrawn in accordance with the provisions of this Agreement or of
any property or Securities or the proceeds thereof which shall be released from
the lien and security interest hereof in accordance with the provisions of this
Agreement.
.SECTION 8.4. CERTAIN LIMITATIONS ON SECURITY TRUSTEE'S RIGHTS TO
COMPENSATION AND INDEMNIFICATION;. Except to the extent otherwise expressly
provided herein the Security Trustee shall have no right against the holder of
any Note for the payment of compensation for its services hereunder or any
expenses or disbursements incurred in connection with the exercise and
performance of its powers and duties hereunder or any indemnification against
liabilities which it may incur in the exercise and performance of such powers
and duties but on the contrary, shall look solely to the Company for such
payment and indemnification which the Company hereby agrees to make, and the
Security Trustee shall have no lien on or security interest in the Collateral as
security for such compensation, expenses, disbursements and indemnification
except to the extent provided for in SS.7.5.
.SECTION 8.5. STATUS OF MONEYS RECEIVED;. (a) All moneys received by
the Security Trustee shall, together with any interest thereon, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but (except as herein otherwise provided with respect to the
funds referred to in paragraph (b) of this Section) need not be segregated in
any manner from any other moneys, except to the extent required by law, and may
be deposited by the Security Trustee under such general conditions as may be
prescribed by law in the Security Trustee's general banking department, and the
Security Trustee shall be under no liability for interest (other than any
interest accrued pursuant to clause (b) of this SS.8.5) on any moneys received
by it hereunder.
(b) The Security Trustee shall invest and reinvest any funds from
time to time held by the Security Trustee in direct obligations of the United
States of America or obligations for which the full faith and credit of the
United States is pledged to provide for the payment of principal and interest,
maturing not more than 90 days from the date of such investment.
. SECTION 8.6. RESIGNATION OF SECURITY TRUSTEE;. The Security
Trustee may resign without cause and be discharged from the trusts created
hereby by delivering notice thereof, by registered or certified mail postage
prepaid to the Company and all holders of the Notes at the time outstanding.
Such resignation shall take effect immediately upon the appointment of a
successor Security Trustee as provided inSS.SS.8.8 and 8.9.
. SECTION 8.7. REMOVAL OF SECURITY TRUSTEE;. The Security Trustee
may be removed at any time, for or without cause, by an instrument or
instruments in writing executed by the holders of a majority of the Aggregate
Principal Amount of the Outstanding Notes and delivered to the Security Trustee
with a copy to the Company, specifying the removal and the date when it shall
take effect provided, however, that no such removal shall be effective hereunder
unless and until a successor security trustee shall have been appointed and
shall have accepted such appointment as provided in SS.SS.8.8 and 8.9.
.SECTION 8.8. APPOINTMENT OF SUCCESSOR SECURITY TRUSTEE;. In case at
any time the Security Trustee shall resign or be removed or become incapable of
acting, a successor Security Trustee may be appointed by the holders of a
majority of the Aggregate Principal Amount of the Outstanding Notes, by an
instrument or instruments in writing executed by such Noteholders and filed with
such successor Security Trustee and the Company.
Until a successor Security Trustee shall be so appointed by the
Noteholders, the Company shall appoint a successor Security Trustee to fill such
vacancy, by an instrument in writing executed by the Company and delivered to
the successor Security Trustee. If all or substantially all of the Collateral
shall be in the possession of one or more receivers, trustees, liquidators or
assignees for the benefit of creditors, then such receivers, trustees,
custodians, liquidators or assignees may, by an instrument in writing delivered
to the successor Security Trustee, appoint a successor Security Trustee.
Promptly after any such appointment, the Company, or any such receivers,
trustees, custodians, liquidators or assignees, as the case may be, shall give
notice thereof by first class mail postage prepaid to each holder of the Notes
at the time outstanding.
Any successor Security Trustee so appointed by the Company, or such
receivers, trustees, custodians, liquidators or assignees, shall immediately and
without further act be superseded by a successor
<PAGE>
Security Trustee appointed by the holders of a majority in Aggregate Principal
Amount of the Outstanding Notes.
If a successor Security Trustee shall not be appointed pursuant to this
Section within thirty days after notice of the resignation or removal of the
retiring Security Trustee, the holder of any Note or such retiring Security
Trustee (unless the retiring Security Trustee is being removed) may apply to any
court of competent jurisdiction to appoint a successor Security Trustee, and
such court may thereupon, after such notice, if any, as it may consider proper,
appoint a successor Security Trustee.
.SECTION 8.9. SUCCESSION OF SUCCESSOR SECURITY TRUSTEE;. Any
successor Security Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and the predecessor Security Trustee an instrument
accepting such appointment, and thereupon such successor Security Trustee,
without any further act, deed, conveyance or transfer, shall become vested with
the title to the Collateral, and with all the rights, powers, trusts, duties and
obligations of the predecessor Security Trustee in the trust hereunder, with
like effect as if originally named as Security Trustee herein.
Upon the request of any such successor Security Trustee, however, the
Company and the predecessor Security Trustee shall execute and deliver such
instruments of conveyance and further assurance and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in
such successor Security Trustee its interest in the Collateral and all such
rights, powers, trusts, duties and obligations of the predecessor Security
Trustee hereunder, and the predecessor Security Trustee shall also assign and
deliver to the successor Security Trustee any property subject to the lien and
security interest of this Agreement which may then be in its possession.
.SECTION 8.10. ELIGIBILITY OF SECURITY TRUSTEE;. The Security
Trustee shall be a state or national bank or trust company in good standing,
organized under the laws of the United States of America or of any state
thereof, having a capital, surplus and undivided profits aggregating at least
$500,000,000 and whose certificates of deposit are accorded a rating of A or
better by S&P and Moody's or, if S&P and Moody's are no longer rating such
banks, then by any other nationally recognized credit rating agency of similar
standing or a guaranty of its obligations hereunder from such a bank or trust
company or holding company in good standing, organized under the laws of the
United States of America or of any State thereof, having a capital, surplus and
undivided profits aggregating at least $500,000,000 and whose certificates of
deposit are accorded a rating of A or better by S&P and Moody's or, if S&P and
Moody's are no longer rating such banks, then by any other nationally recognized
credit rating agency of similar standing, if there be such a bank or trust
company willing and able to accept such trust upon reasonable and customary
terms. In case the Security Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Security Trustee shall resign
immediately in the manner and with the effect specified in SS.8.6.
.SECTION 8.11. SUCCESSOR SECURITY TRUSTEE BY MERGER;. Any
corporation into which the Security Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Security Trustee shall be a party, or any state or national bank or
trust company in any manner succeeding to the corporate trust business of the
Security Trustee as a whole or substantially as a whole, if eligible as provided
in SS.8.10, shall be the successor of the Security Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything to the contrary contained herein notwithstanding.
.SECTION 8.12. CO-TRUSTEES;. At any time, for the purpose of meeting
any legal requirements of any jurisdiction in which any part of the Collateral
may at the time be located, the Company and the Security Trustee jointly shall
have power and shall execute and deliver all instruments, to appoint one or more
persons approved by the Security Trustee, to act as co-trustee, or co-trustees,
jointly with the Security Trustee, or separate trustee or separate trustees, of
all or any part of the Collateral, and to vest in such person or persons in such
capacity, such interest in the Collateral or any part thereof, and such rights,
powers, duties, trusts or obligations as the Company and the Security Trustee
may consider necessary or desirable. If the Company shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default shall have occurred and be continuing, the
Security Trustee alone shall have power to make such appointment if the Security
Trustee reasonably believes such appointment is necessary or desirable to carry
out the transactions contemplated hereby.
<PAGE>
.SECTION 8.13. COMPENSATION AND REIMBURSEMENT;. The Company agrees:
(a) to pay to the Security Trustee all of its out-of-pocket expenses
in connection with the preparation, execution and delivery of this Agreement and
the transactions contemplated hereby, including but not limited to the
reasonable charges and disbursements of its special counsel;
(b) to pay to the Security Trustee from time to time reasonable
compensation for all services rendered by it hereunder;
(c) except as otherwise expressly provided herein, to reimburse the
Security Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Security Trustee in accordance with any
provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its gross negligence or
willful misconduct; and
(d) to indemnify the Security Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without gross negligence or
willful misconduct on its part, arising out of or in connection with the
acceptance or administration of the Agreement, including, but not limited to,
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, and any loss, liability, expense or claim arising out of its
possession, management, control, use or operation of the Collateral.
.c.'SECTION 9. SUPPLEMENTS; WAIVERS'.
.SECTION 9.1. SUPPLEMENTAL SECURITY AGREEMENTS WITHOUT NOTEHOLDER
CONSENT;. The Company and the Security Trustee from time to time and at any
time, subject to the restrictions in this Agreement contained, may enter into an
agreement or agreements supplemental hereto, which thereafter shall form a part
hereof, for any one or more or all of the following purposes:
(a) to add to the covenants and agreements to be observed by,
and to surrender any right or power reserved to or conferred upon the
Company;
(b) to subject to the lien and security interest of this
Agreement additional property hereafter acquired by the Company and
intended to be subjected to the lien and security interest of this
Agreement and to correct and amplify the description of any property
subject to the lien and security interest of this Agreement; and
(c) to permit the qualification of this Agreement under the
Trust Indenture Act of 1939, as amended, or any similar Federal statute
hereafter in effect, except that nothing herein contained shall permit
or authorize the inclusion of the provisions referred to in Section
316(a)(2) of said Trust Indenture Act of 1939 or any corresponding
provision in any similar Federal statute hereafter in effect;
and the Company covenants to perform all requirements of any such supplemental
agreement. No restriction or obligation imposed upon the Company may, except as
otherwise provided in this Agreement, be waived or modified by any such
supplemental agreement.
.'SECTION 9.2. WAIVERS AND CONSENTS BY NOTEHOLDERS; SUPPLEMENTAL
SECURITY AGREEMENTS WITH NOTEHOLDERS' CONSENT';. (a) Upon the waiver or consent
of (x) the holders of more than 50% of the Aggregate Principal Amount of
Outstanding Notes, computed solely by reference to the Senior Secured Notes, (y)
the holders of more than 50% of the Aggregate Principal Amount of Outstanding
Notes, computed solely by reference to the Revolving Credit Notes, and, if any
of the waivers or supplemental agreements described below relate to Collateral
involving assets of the Company and its Restricted Subsidiaries which constitute
a "substantial part" (as defined below), (z) the holders of more than 50% of the
Aggregate Principal Amount of Outstanding Notes, computed solely by reference to
the Senior Subordinated Notes, the Company and the Security Trustee may enter
into an agreement or agreements supplemental hereto for the purpose of waiving,
adding, changing or eliminating any provisions of this Agreement or of any
agreement supplemental hereto or modifying in any manner the rights and
obligations of the holders of the Notes and the Company; PROVIDED, HOWEVER, that
no such waiver or supplemental agreement shall (A) impair or affect the right of
any holder to receive payments or prepayments of the principal of and payments
of the interest and premium, if any, on its Note, as therein and herein
provided, without the consent of such holder,
<PAGE>
(B) permit the creation of any lien and security interest with respect to any of
the Collateral, without the consent of the holders of all the Senior Notes at
the time outstanding and, if such waiver or supplemental agreement relates to
Collateral which constitutes a "substantial part" of the assets of the Company
and its Restricted Subsidiaries, without the consent of all of the holders of
the Senior Subordinated Notes at the time outstanding, (C) except as otherwise
provided in SS.10.4, effect the deprivation of the holder of any Note of the
benefit of the lien and security interest of this Agreement upon all or any part
of the Collateral without the consent of the holders of all of the Senior Notes
at the time outstanding and, if such waiver or supplemental agreement relates to
Collateral which constitutes a "substantial part" of the assets of the Company
and its Restricted Subsidiaries, without the consent of all of the holders of
the Senior Subordinated Notes at the time outstanding, (D) reduce the aforesaid
percentages of the aggregate principal amount of Notes, the holders of which are
required to consent to any such waiver or supplemental indenture pursuant to
this Section, without the consent of the holders of all of the Notes at the time
outstanding (including, without limitation, any change to the definition of
"Aggregate Principal Amount of the Outstanding Notes"), (E) modify the rights,
duties or immunities of the Security Trustee without the consent of the Security
Trustee and the holders of all of the Senior Notes at the time outstanding and,
if such waiver or supplemental agreement relates to Collateral which constitutes
a "substantial part" of the assets of the Company and its Restricted
Subsidiaries, without the consent of all of the holders of the Senior
Subordinated Notes at the time outstanding, or (F) except as otherwise provided
in SS.10.4 hereof, consent to the release or termination of any Subsidiary
Guaranty Agreement without the consent of the holders of all of the Senior Notes
at the time outstanding and, if such waiver or supplemental agreement relates to
Collateral which constitutes a "substantial part" of the assets of the Company
and its Restricted Subsidiaries, without the consent of all of the holders of
the Senior Subordinated Notes at the time outstanding.
(b) For purposes of this SS.9.2, assets subject to any waiver or
supplemental agreement shall be deemed to be a "substantial part" of the assets
of the Company and its Restricted Subsidiaries if (i) such assets, together with
all other assets (A) sold, leased or otherwise disposed of by the Company and
its Restricted Subsidiaries or (B) subject to any waiver or supplemental
agreement pursuant to this SS.9.2 or Section 9.2 of the Subsidiary Security
Agreement without the consent of the holders of more than 50% of the Aggregate
Principal Amount of Outstanding Notes, computed solely by reference to the
Senior Subordinated Notes or, if such waiver or supplemental agreement is
described in clauses (B), (C), (E) or (F) of SS.9.2(A) or Section 9.2(a) of the
Subsidiary Security Agreement, without the consent of all of the holders of the
Senior Subordinated Notes, in each case, during the period of 12 months ending
with the date of such waiver or supplemental agreement, contributed more than
15% of EBIT of the Company and its Restricted Subsidiaries determined as of the
end of the fiscal year immediately preceding such waiver or supplemental
agreement, (ii) the book value of such assets, when added to the book value of
all other assets of the Company and its Restricted Subsidiaries (A) sold or
otherwise disposed of by the Company and its Restricted Subsidiaries or (B)
subject to any waiver or supplemental agreement pursuant to this SS.9.2 or
Section 9.2 of the Subsidiary Security Agreement without the consent of the
holders of more than 50% of the Aggregate Principal Amount of Outstanding Notes,
computed solely by reference to the Senior Subordinated Notes or, if such waiver
or supplemental agreement is described in clauses (B), (C), (E) or (F) of
SS.9.2(A) or Section 9.2(a) of the Subsidiary Security Agreement, without the
consent of all of the holders of the Senior Subordinated Notes, in each case,
during the period of 12 months ending with the date of such waiver or
supplemental agreement, exceeds 10% of the book value of all Receivables of the
Company and its Restricted Subsidiaries determined on a consolidated basis as of
the end of the fiscal year immediately preceding such waiver or supplemental
agreement, or (iii) the book value of such assets, when added to the book value
of all other assets of the Company and its Restricted Subsidiaries (A) sold or
otherwise disposed of by the Company and its Restricted Subsidiaries or (B)
subject to any waiver or supplemental agreement pursuant to this SS.9.2 or
Section 9.2 of the Subsidiary Security Agreement without the consent of the
holders of more than 50% of the Aggregate Principal Amount of Outstanding Notes,
computed solely by reference to the Senior Subordinated Notes or, if such waiver
or supplemental agreement is described in clauses (B), (C), (E) or (F) of
SS.9.2(A) or Section 9.2(a) of the Subsidiary Security Agreement, without the
consent of all of the holders of the Senior Subordinated Notes, in each case,
during
<PAGE>
the entire period commencing on April 1, 1997 and ending with the date of such
waiver or supplemental agreement, exceeds 25% of the book value of all
Receivables of the Company and its Restricted Subsidiaries determined on a
consolidated basis as of the end of the fiscal year immediately preceding such
waiver or supplemental agreement.
.SECTION 9.3. NOTICE OF SUPPLEMENTS;. Promptly after the execution
by the Company and the Security Trustee of any supplemental agreement pursuant
to the provisions ofSS.9.1 orSS.9.2 the Company shall deliver a conformed copy
thereof, mailed first-class postage prepaid, to each holder of the Notes at its
address set forth in the Note Register. Any failure of the Company to give such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental agreement.
.SECTION 9.4. OPINION OF COUNSEL CONCLUSIVE AS TO SUPPLEMENTS;. The
Security Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture or agreement authorized or permitted by the
terms of this Agreement and to make the further agreements and stipulations
which may be therein contained, and the Security Trustee may receive an opinion
of independent counsel selected by the Security Trustee as conclusive evidence
that any supplemental agreement executed pursuant to the provisions of this SS.9
complies with the requirements of this SS.9.
.C.SECTION 10. MISCELLANEOUS;.
.SECTION 10.1. SUCCESSORS AND ASSIGNS;. Whenever any of the parties
hereto is referred to such reference shall be deemed to include the successors
and assigns of such party; and all the covenants, promises and agreements in
this Agreement contained by or on behalf of the Company or by or on behalf of
the Security Trustee shall bind and inure to the benefit of the respective
successors and assigns of such parties whether so expressed or not.
.SECTION 10.2. SEVERABILITY;. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
.SECTION 10.3. COMMUNICATIONS;. All communications provided for
herein shall be in writing. Communications to the Company or the Security
Trustee shall be deemed to have been given (unless otherwise required by the
specific provisions hereof in respect of any matter) when addressed and
delivered in person, or five days after being deposited in the U.S. mail,
postage prepaid, by registered or certified mail or by overnight express mail,
as follows:
If to the Company: World Acceptance Corporation
108 Frederick Street
Greenville, South Carolina 29607-2532
Attention: Chief Financial Officer
If to the Security Harris Trust and Savings Bank
Trustee: 311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Robert Foltz
Indenture Trust Division
or to the Company or the Security Trustee at such other address as the Company
or the Security Trustee may designate by notice duly given in accordance with
this Section to the other. Communications to the holder of a Note shall be
deemed to have been given (unless otherwise provided for by the specific
provisions hereof in respect of any matter) when delivered personally or five
days after being deposited in the U.S. mail, postage prepaid by registered or
certified mail or by overnight express mail, addressed to such holder at its
address set forth in the Note Register in the case of any holder of the Senior
Secured Notes or the Senior Subordinated Notes and at its address set forth in
the Revolving Credit Agreement in the case of any holder of the Revolving Credit
Notes.
.SECTION 10.4. RELEASE;. The Security Trustee shall release fully or
partially, as the case may
<PAGE>
be, the Lien granted by this Agreement under and only under the following
circumstances:
(a) Upon the presentation of satisfactory evidence that all
Secured Indebtedness has been irrevocably fully paid or discharged and
all obligations of the holders of Notes to extend Secured Indebtedness
to the Company have terminated or otherwise expired, the Security
Trustee shall release the Lien and security interest of this Agreement
by proper instrument or instruments;
(b) So long as no Default or Event of Default then exists,
upon the sale or other disposition of any assets of the Company and its
Restricted Subsidiaries which the Chief Financial Officer of the
Company certifies to the Security Trustee and the Noteholders in
writing does not constitute a "substantial part" of the assets of the
Company and its Restricted Subsidiaries (as defined in Section 5.13 of
the Senior Note Agreements, Section 5.13 of the Senior Subordinated
Note Agreement and Section 8.13 of the Revolving Credit Agreement), the
Security Trustee shall, upon the written direction of the Company and
without the consent of the Noteholders (unless the Security Trustee has
been notified in writing by a Noteholder prior to such release that
such Noteholder in good faith believes that the conditions set forth
above have not been satisfied, in which case no such release shall be
issued), release the Lien of this Agreement on such assets by proper
instrument or instruments. If any such sale or other disposition of
assets constituting less than a "substantial part" of the assets of the
Company and its Restricted Subsidiaries pursuant to this SS.10.4(B)
results in the sale or other disposition of the capital stock or other
equity interest in a Restricted Subsidiary, the Subsidiary Guaranty
Agreements with respect to, and only with respect to, such Restricted
Subsidiary shall automatically be released and the Security Trustee and
the Noteholders agree to execute and deliver such further instruments
and do such further acts as the Company may deem necessary or proper to
carry out more effectively the foregoing;
(c) Upon the sale or other disposition by the Company of a
"substantial part" of the assets of the Company and its Restricted
Subsidiaries (as defined in Section 5.13 of the Senior Note Agreements,
Section 5.13 of the Senior Subordinated Note Agreement and Section 8.13
of the Revolving Credit Agreement) after the occurrence and during the
continuance of a Material Event of Default, the Security Trustee shall,
upon the written direction of the Company and the written consent of
(x) the holders of more than 50% of the Aggregate Principal Amount of
Outstanding Notes, computed solely by reference to the Senior Secured
Notes, and (y) the holders of more than 50% of the Aggregate Principal
Amount of Outstanding Notes, computed solely by reference to the
Revolving Credit Notes, and without the further consent of the holders
of the Senior Subordinated Notes, release the Lien of this Agreement on
such assets by proper instrument or instruments, PROVIDED, that, (i)
such sale or other disposition is not to an Affiliate, (ii) the sale
price for such assets is determined by the Company in good faith to be
reasonable, as evidenced by a resolution of the board of directors of
the Company, (iii) the proceeds of any such sale or other disposition
are applied to the satisfaction of Secured Indebtedness and, if such
application results in the prepayment of any obligations under the
Revolving Credit Agreement, such application permanently reduces the
amount of the commitment under the Revolving Credit Agreement, (iv)
each Noteholder shall have received written notice of such sale or
other disposition at least ten days prior to the date of such sale or
other disposition and (v) the Security Trustee and the Noteholders
receive a certificate of the Chief Financial Officer of the Company
certifying to each of the foregoing. If any such sale or other
disposition of assets of the Company and its Restricted Subsidiaries
pursuant to this SS.10.4(C) results in the sale or other disposition of
the capital stock or other equity interest in a Restricted Subsidiary,
the Subsidiary Guaranty Agreements with respect to, and only with
respect to, such Restricted Subsidiary shall automatically be released
and the Security Trustee and the Noteholders agree to execute and
deliver such further instruments and do such further acts as the
Company may deem necessary or proper to carry out more effectively the
foregoing;
(d) Upon the sale or other disposition of the Collateral or
any part thereof pursuant to and in accordance with SS.7.2 and
conducted in a commercially reasonable manner, the Security Trustee
shall release the Lien of this Agreement on the Collateral or such
part, as the case may be, by proper instrument or instruments; and
<PAGE>
(e) With the prior written consent of each Noteholder, the
Security Trustee shall release the Lien of this Agreement by proper
instrument or instruments.
.SECTION 10.5. COUNTERPARTS;. This Agreement may be executed,
acknowledged and delivered in any number of counterparts, each of such
counterparts constituting an original but all together only one Agreement.
.SECTION 10.6. GOVERNING LAW;. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF SOUTH CAROLINA.
.SECTION 10.7. HEADINGS;. Any headings or captions preceding the
text of the several sections hereof are intended solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
.SECTION 10.8. PRIOR LIENS;. Upon the execution and delivery of this
Agreement by the Company and the Security Trustee, this Agreement shall
supersede all provisions of the Original Security Agreement as of the date of
such execution and delivery. The Company hereby agrees that, notwithstanding the
execution and delivery of this Agreement, the liens and security interests
created and provided for under the Original Security Agreement continue in
effect under and pursuant to the terms of this Agreement for the benefit of all
of the Secured Indebtedness. Nothing herein shall in any manner affect or impair
the priority of the liens and security interests created and provided for by the
Original Security Agreement as to the indebtedness and obligations which would
otherwise be secured thereby prior to giving effect to this Agreement.
.SECTION 10.9. RIGHTS OF HOLDERS OF SENIOR SUBORDINATED NOTES;. The
rights and remedies under this Agreement of the holders of the Senior
Subordinated Notes are junior and subordinate to the rights and remedies of the
holders of the Senior Notes pursuant to the terms of the Senior Subordinated
Note Agreement, reference to Section 9 of which is hereby made for a statement
of the terms and conditions thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed, and the Security Trustee in evidence of its acceptance of the trusts
hereby created, has caused this Agreement to be executed on its behalf.
WORLD ACCEPTANCE CORPORATION
By /s/ A. Alexander McLean III
Its Executive Vice President
HARRIS TRUST AND SAVINGS BANK, as
Security Trustee
By /s/ Robert D. Foltz
Its Vice President
<PAGE>
NOTEHOLDERS CONSENT
The undersigned Noteholders hereby consent to the execution and
delivery of this Agreement by the Companies and the Security Trustee and hereby
agree to the terms and provisions of the Amended and Restated Guaranty Agreement
executed contemporaneously herewith.
HARRIS TRUST AND SAVINGS BANK, as a
Noteholder
By /s/ Jerome P. Crokin
Its Vice President
THE FIRST NATIONAL BANK OF CHICAGO, as
a Noteholder
By /s/ Craig Goldsmith
Its Assistant Vice President
LASALLE NATIONAL BANK, as a Noteholder
By /s/ Ben Schreiner
Its Loan Officer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
as a Noteholder
By /s/ James C. Fifield
Its Counsel
By /s/ Stephen G. Skrivanek
Its Counsel
JEFFERSON-PILOT LIFE INSURANCE COMPANY,
as a Noteholder
By /s/ James E. McDonald, Jr.
Its Second Vice President
<PAGE>
<TABLE>
<CAPTION>
Schedule I to Company
Security Agreement dated June 30, 1997
Description of Pledged Shares
Number of Stock
Subsidiary Description Shares Certificate No.
---------- ----------- ------ ---------------
<S> <C> <C> <C>
WAC Insurance Company, Ltd. Common, $1 par 325* 1
WFC of South Carolina, Inc. Common, $.01 par 10,000 1
World Acceptance Common, $.01 par 1,000 1
Corporation of Alabama
World Acceptance Common, $.01 par 1,000 1
Corporation of Missouri
World Finance Corporation Common, $1 par 25,000 1
of Georgia 25,000 2
World Finance Corporation Common, $.01 par 1,000 1
of Illinois
World Finance Corporation Common, no par 25 1
of Louisiana
World Finance Corporation Common, $.01 par 1,000 3
of New Mexico
World Finance Corporation Common, $1 par 3,750 1
of South Carolina
World Finance Corporation Common, $.01 par 1,000 1
of Tennessee
World Finance Corporation Class A Common, $1 par 125,000 A-1
of Texas
Class B Common, par 5,802 B-2
</TABLE>
* Constituting 65% of the outstanding stock
Date: June 30, 1997
SCHEDULE I TO COMPANY SECURITY AGREEMENT DATED JUNE 30, 1997
<PAGE>
SCHEDULE II
PARTNERSHIP INTERESTS
NONE.
<PAGE>
Schedule III to Company
Security Agreement dated June 30, 1997
Location of Offices - World Acceptance Corporation
108 Frederick Street
Post Office Box 6429 (29606)
Greenville, South Carolina 29607
125 Edgeworth Street
Post Office Box 6429 (29606)
Greenville, South Carolina 29607
[Exhibit A, Form of Subsidiary Amended and Restated Security Agreement,
Pledge and Indenture of Trust and Exhibit B, Form of Subsidiary Amended
and Restated Guaranty Agreement, omitted.]
<PAGE>
SCHEDULE III TO COMPANY SECURITY AGREEMENT DATED JUNE 30, 1997
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> mar-31-1998
<PERIOD-START> apr-1-1997
<PERIOD-END> sep-30-1997
<CASH> 2,283
<SECURITIES> 0
<RECEIVABLES> 98,819
<ALLOWANCES> 7,527
<INVENTORY> 0
<CURRENT-ASSETS> 93,575
<PP&E> 6,714
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0
0
<COMMON> 42,162
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 113,724
<SALES> 0
<TOTAL-REVENUES> 39,117
<CGS> 0
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<OTHER-EXPENSES> 25,467
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