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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MARCH 15, 1996
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SEARCH CAPITAL GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-9539 41-1356819
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(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
700 NORTH PEARL STREET
SUITE 400
DALLAS, TEXAS 75201-7490
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 965-6000
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
GENERAL
By court order entered on March 4, 1996, effective March 15, 1996,
Search Capital Group, Inc. ("Search") obtained the confirmation of the joint
plan of reorganization for eight of its subsidiaries operating under Chapter 11
bankruptcy proceedings since August 14, 1995. As a result, 100% of the
non-recourse debt of these subsidiaries has been converted into equity
securities issued or to be issued by Search. Effective April 2, 1996,
Hall Phoenix/Inwood, Ltd. ("HPIL"), as assignee of Hall Financial Group, Inc.
("HFG"), fully exercised its rights to convert approximately $2.3 million of
indebtedness owed by Search into Search Common Stock and to purchase for
approximately $4.35 million in cash additional Search equity securities of the
kind distributed to creditors of Search's subsidiaries under the bankruptcy
plan. This Form 8-K Current Report contains a description of these
transactions and the securities issued and to be issued by Search.
CONFIRMATION AND EFFECTIVENESS OF JOINT PLAN OF REORGANIZATION
Filing of Bankruptcy Proceedings. On August 14, 1995, eight
subsidiaries of Search, namely Automobile Credit Fund 1991-III, Inc.,
Automobile Credit Finance, Inc., Automobile Credit Partners, Inc., Automobile
Credit Finance 1992-II, Inc., Automobile Credit Finance III, Inc., Automobile
Credit Finance IV, Inc., Automobile Credit Finance V, Inc., and Automobile
Credit Finance VI, Inc. (collectively "Debtors" and individually "Debtor"),
filed a petition in the U. S. Bankruptcy Court in the Northern District of
Texas, Dallas Division ("Court"), seeking protection under Chapter 11 of the
United States Bankruptcy Code ("Code") under Case Nos. 395-34981-RCM-11 through
395-34988-SAF-11. These Cases were consolidated for purposes of joint
administration under Case No. 395-34981-RCM-11. Search did not seek protection
under the Code.
Confirmation of Joint Plan. On March 4, 1996, the Court entered an
order (the "Confirmation Order") confirming the Third Amended Plan of
Reorganization (the "Joint Plan") for all of the Debtors. Search and the
Debtors were co-proponents of the Joint Plan. Confirmation occurred after
sufficient affirmative votes for confirmation of the Joint Plan were obtained
from the holders ("Noteholders") of outstanding notes issued by the Debtors
("Notes"). The Notes and the Noteholders constituted essentially all of the
indebtedness and creditors, respectively, of the Debtors. The effective date
of the Joint Plan was March 15, 1996 (the "Effective Date"). The following
discussion summarizes the terms and provisions of the Joint Plan, but reference
is made to Joint Plan itself for the full terms and provisions of the Joint
Plan.
Plan Options for Secured Claims of Noteholders. The Joint Plan
provided that Noteholders voting to accept the Joint Plan could choose one of
two options (the "Plan Options"). Under one of the Plan Options (the "Search
Equity Option"), the Noteholders ultimately receive with respect to the secured
portion of their claims the issuance by Search of a combination of shares of
Common Stock and a new series of 9%/7% Convertible Preferred Stock (the "New
Preferred Stock") and the cash dividends accrued on their New Preferred Stock
from July 1, 1995 to the Effective Date of the Joint Plan. For a description
of the terms of the New Preferred Stock, see "Description of New Preferred
Stock." Under the other Plan Option (the "Collateral Option"), the Noteholders
would receive with respect to the secured portion of their claims distributions
of the proceeds of the continued collection or the sale of the motor vehicle
receivables securing their Notes. The selection of either Plan Option was made
by each Noteholder except that those Noteholders who voted against the Joint
Plan were not entitled to select a Plan Option but received treatment under the
Search Equity Option. The Search Equity Option requires each dollar of secured
claim represented by a Note to be initially exchanged for a share of the common
stock of the Debtor issuing the Note. These shares are then exchanged for
shares of New Preferred Stock and Common Stock in specified ratios. According
to the Joint Plan, however, the number of shares of Common Stock to be issued
must be adjusted, by agreement of the financial advisors of Search and the
official Creditors Committee of the Debtors as of the Effective Date of the
Joint Plan or, if no agreement can be reached, by the Court, to the extent
necessary so that the Noteholders will receive New Preferred Stock and Common
Stock equal, on a fully diluted basis, to 75% of the value of all shares of New
Preferred Stock, Common Stock, 12% Preferred Stock, Warrants (as defined
below), other warrants, stock options and rights then outstanding, or agreed to
be issued by Search (with certain exceptions, including any shares issued to
HPIL under the Funding Agreement). An agreement has not yet been reached as to
the required adjustment. See "Securities Issued and to be Issued by Search."
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Determination of Secured Claims of Noteholders. With respect to each
Debtor, the total amount of the allowed secured claims for the Noteholders of
that Debtor equaled 120% of the present value (the "Present Value") of the
Debtor's "Net Cash Flow," using a 15% discount rate. The "Net Cash Flow" for
each Debtor was the estimated periodic cash distributions that would have been
made by the Debtor to its Noteholders assuming it continued to collect its
receivables at the historical average collection rate experienced by Search and
the Debtors in the collection of their receivables. The Present Value was
determined as of August 1, 1995. The total Present Values and secured claims
of Noteholders for all Debtors were $44,367,048 and $53,240,457, respectively.
Change of All Collateral Option Claims to Search Equity Option.
Between the confirmation of the Joint Plan and the Effective Date, Value
Partners, Ltd. ("VPL") purchased all of the secured claims of Noteholders who
had elected the Collateral Option ( approximately $12,800,000 of original Note
principal amount) and changed the election for such secured claims to the
Search Equity Option. The selling Noteholders retained their unsecured claims.
The sale of these secured claims to VPL and the necessary modification of the
Joint Plan to permit the change in the election of the Plan Option were
approved by order of the Court. As a consequence of this transaction, all of
the secured claims of Noteholders received treatment under the Search Equity
Option.
Unsecured Claims of Noteholders. The unsecured portion of the claims
of the Noteholders consisted of the difference (i.e. $16,077,203) between total
principal and interest due the Noteholders of $69,317,661 and the amount of the
secured claims of $53,240,457. All Noteholders, with respect to the unsecured
portion of such Noteholders' claims, and any other holders of unsecured claims
against the Debtors, will receive from Search a pro rata share of five year
warrants to purchase an aggregate of 5,000,000 shares of Common Stock (the
"Warrants"). The Warrants will not be issued and distributed until the
unsecured claims of non-Noteholders have been finally determined by the Court.
The exercise price of the Warrants will be $2.00 during the first year and
increase by $0.25 per year over the term of the Warrants. All Warrants not
exercised prior to expiration will be redeemed by Search at a price of $0.25
per Warrant. For a more detailed description of the terms of the Warrants, see
"Description of Warrants."
As required by the Joint Plan, a new trust (the "Litigation Trust")
has been established for the benefit of the holders of unsecured claims against
the Debtors, including the Noteholders, with a total funding of $350,000
supplied pro rata from the Debtors' assets. The Litigation Trust is authorized
to pursue any claims and causes of action of each Debtor and of any Noteholder
who elected, or failed to elect not, to assign his or her claims and causes of
action to the Litigation Trust. Any proceeds will be distributed pro rata to
unsecured claim holders. The Litigation Trust cannot pursue any cause of
action during the first year following the Effective Date. The Litigation
Trust will automatically terminate if Search's Common Stock trades at an
average price of $2.50 per share for 30 consecutive trading days during the
first year following effectiveness of the Joint Plan.
Transfer of Assets and Dissolution of Debtors. As a consequence of
effectiveness of Joint Plan and the treatment of all of the Noteholders'
secured claims under the Search Equity Option, the net assets of the Debtors
(less the $350,000 funding of the Litigation Trust and $2,000,000 escrowed for
payment of fees of the Debtors' professionals) were transferred to Search by
operation of law on the Effective Date. The Joint Plan requires Search to
cause each of the Debtors to be liquidated and dissolved as soon as possible
after the assignment of the Debtors' assets to the Noteholders Trust, the
Litigation Trust and Search.
Cancellation of Notes. Under the Joint Plan, the Notes and the
indebtedness represented by the Notes were deemed canceled when the
Confirmation Order became final. The trust indentures for the Notes, and all
related restrictions, were also deemed canceled. As a condition to receiving
any distributions under the Joint Plan, Noteholders must surrender the
certificates for their Notes to the transfer agent of the Joint Plan.
Appointment of Creditor Directors. The Board of Directors of Search
has selected two additional directors from qualified director nominees
submitted by the official Creditors Committee for the Debtors. These new
directors will be Susan A. Brown and Frederick S. Hammer. Pursuant to their
request, these individuals will be appointed as directors when Search obtains
directors and officers liability insurance, which Search is pursuing. Pending
appointment, they are attending meetings of the directors of Search solely as
non-voting representatives of the former creditors of the Debtors. The
duration
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of the term of one of the new directors will be three years, and the duration
of the term of the other new director will be two years. These two new members
will also be appointed to membership on the Compensation Committee of the Board
for a one year period after the Effective Date. If required, the board of
directors of Search will amend its Bylaws to make the Compensation Committee's
determination as to the issuance, granting terms and conditions of all
warrants, stock options, bonuses and forms of compensation for Search's
officers and directors to be binding on the whole board of directors for one
year after the Effective Date.
Adoption of Amendments to Certificate of Incorporation. As a
condition to confirmation of the Joint Plan, the shareholders of Search
approved the adoption of two amendments to Search's Certificate of
Incorporation at a special shareholders meeting held on March 1, 1996. As a
result, Search's authorized capital stock was increased to 130,000,000 shares
of Common Stock and 60,000,000 shares of Preferred Stock. The Certificate of
Incorporation also was amended to prohibit Search from issuing any non-voting
capital stock.
TRANSACTIONS WITH HPIL AND HFG
HFG Loan. On November 30, 1995, Search entered into a Funding
Agreement with HFG. Pursuant to the Funding Agreement, HFG made loans totaling
$2,284,487 to Search, with an initial advance of $1,784,487 and, in January
1996, an additional advance of $500,000. The loans were represented by two
promissory notes payable by Search to HFG (the "HFG Notes"). These Notes
could, at the election of HFG or its assigns, be converted into 2,500,000
shares of Search Common Stock.
Conversion of HFG Notes. Effective April 12, 1996, HPIL, as assignee
from HFG of the HFG Notes, fully exercised the rights of the holder of the HFG
Notes to convert them into 2,500,000 shares of Search Common Stock. Because
the conversion price specified in the HFG Notes for these shares was 65% of the
implied price of the shares of Common Stock to be issued to Noteholders under
the Joint Plan (the "Implied Common Stock Price") and the Implied Common Stock
Price had not yet been determined, HPIL and Search agreed to a preliminary
conversion price of $0.6585 per share (or a total conversion price of
$1,645,250). Search paid to HPIL the remaining portion of the debt evidenced
by the HFG Notes ($638,587) in cash. HPIL and Search agreed to make a final
determination of the conversion price when the Implied Common Stock Price was
finally determined. At that time, Search would pay to HPIL any remaining
unpaid portion of the debt evidenced by the HFG Notes or receive a refund of
any amount overpaid to HPIL.
Exercise of Right to Purchase Common Stock, New Preferred Stock and
Warrants. The Funding Agreement also provided to HFG the option, exercisable
in its sole discretion, to purchase Common Stock, New Preferred Stock, and
Warrants for a purchase price equal to 80% of the Present Value attributable to
such securities for purpose of their issuance to Noteholders under the Joint
Plan, less an amount equal to the accrued dividends since July 1, 1995
attributable to the New Preferred Stock purchased by HFG. HFG was entitled to
purchase securities in an amount up to a maximum of $6,000,000 in Present
Value. Effective April 2, 1996, HPIL, as assignee of HFG, fully exercised this
purchase option by paying $4,346,429 cash to Search. Because the final number
of shares of Common Stock to be issued to Noteholders under the Joint Plan has
not been determined, the final number of shares of Common Stock to be issued to
HPIL could not be determined. Pending a final determination of the number of
shares of Common Stock to be issued to Noteholders, Search and HPIL escrowed
$250,000 of the purchase price payable by HPIL, and Search reserved 484,242
shares of Common Stock for issuance to HPIL. Upon a final determination,
Search will issue the remaining shares of Common Stock to which HPIL is
entitled and the $250,000 escrow will be released to Search.
Appointment of HFG Directors. Pursuant to the Funding Agreement,
Search was obligated to elect one director to Search's Board if HFG converted
the HFG Notes into Common Stock and to elect another director if HFG purchased
at least $1,000,000 Present Value of securities from Search. As a result of
satisfaction of these conditions, HFG has designated Craig Hall and Larry E.
Levey as its representatives for appointment to Search's Board. Search's Board
of Directors has indicated its willingness to appoint HFG's representatives as
directors. Pursuant to HFG's request, these representatives will be appointed
when Search obtains directors and officers liability insurance, which Search is
pursuing. Pending appointment, they are attending meetings of the directors of
Search as non-voting representatives of HFG.
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SECURITIES ISSUED OR TO BE ISSUED BY SEARCH
As of January 23, 1996, Search had issued and outstanding 8,694,155
shares of Common Stock, 400,000 shares of 12% Senior Convertible Preferred
Stock ($0.01 par value and $5 liquidation preference per share) and 6,106,520
shares of Common Stock reserved for issuance under its 1994 Employee Stock
Option Plan and other outstanding warrants, including the warrant issued to HFG
described in the next paragraph.
Pursuant to the Funding Agreement, effective November 20, 1995, Search
issued to HFG a warrant to purchase 3,000,000 shares of Common Stock (the "HFG
Warrant") at an exercise price of $2.00 per share. The HFG Warrant expires on
November 30, 2000. Under the HFG Warrant, HFG has the right to require Search
to effect the registration under the Securities Act of 1933 (the "1933 Act") of
the shares purchasable by HFG under the Warrant as well as the shares that HFG
may obtain upon conversion of the Notes. HFG will also have the right to
require Search to register such shares if Search proposes to register any of
its securities under the 1933 Act. In the event of the registration of HFG's
shares under the 1933 Act, Search will be obligated to indemnify HFG and its
affiliates from losses or liabilities arising out of untrue statements of
material fact contained in the registration statement or related prospectus.
Effective April 2, 1996, Search issued to HPIL (i) 2,500,000 shares of
Common Stock pursuant to the conversion of the HFG Notes and (ii) 2,032,812
shares of New Preferred Stock, 1,452,725 shares of Common Stock and Warrants to
purchase 676,178 shares of Common Stock pursuant to the exercise by HPIL of
HFG's purchase rights under the Funding Agreement. Search has reserved an
additional 484,242 shares of Common Stock, some or all of which may be issued
to HPIL depending on the final determination of the Implied Common Stock Price
for the equity securities issued to Noteholders under the Joint Plan.
1,518,925 of the 2,500,000 shares of Common Stock are restricted from resale
for a period of 12 months except that 25,000 shares may be resold per month on
a cumulative basis during such 12 month period.
Pursuant to the Joint Plan, Search has caused to be delivered to the
transfer agent for the Joint Plan, American Securities Transfer, Inc., the
shares of common stock of the Debtors that were required under the Search
Equity Option to be issued to Noteholders in exchange for their secured claims.
These shares are then required to be exchanged with Search for newly issued
shares of Common Stock and New Preferred Stock. As discussed above under
"Confirmation and Effectiveness of Joint Plan of Reorganization--Plan Options
for Secured Claims of Noteholders," the number of shares of Common Stock to be
issued to Noteholders has not been finally determined. The Joint Plan requires
Search to make an initial distribution of 75% of the shares of Common Stock
based on an estimated Implied Common Stock Price determined by Search's
financial advisor, Alex. Brown & Sons, Inc., and to reserve an additional 25%
of such shares pending final determination of such amount. The final
determination of the Implied Common Stock Price and the number of shares of
Common Stock to be issued to Noteholders depends on the number of shares to be
issued by Search to the plaintiffs in settlement of the pending suit styled
Ellen O'Shea et al. v. Search Capital Group, Inc., et al., Civil Action No.
3:94-CV-1428-J, U.S. District Court, Northern District of Texas, Dallas
Division. Upon a final order of the court approving the settlement, Search
will issue to the plaintiffs that number of shares of Common Stock which equals
$2,612,500 divided by the average trading price for the Common Stock for the
prior 30 days. In turn, using the actual number of shares issued in the
settlement, the financial advisors of Search and the Creditors' Committee will
make a final determination of the number of shares of Common Stock to be issued
to the Noteholders for their secured claims.
Based on the initial estimated Implied Common Stock Price of $1.013,
Search will issue to Noteholders in the near future under the Joint Plan
15,031,648 shares of New Preferred Stock and 10,742,183 shares of Common Stock,
and reserve 3,580,727 shares of Common Stock for possible future issuance to
Noteholders. Using the same Implied Common Stock Price, Search would issue
2,578,973 shares of Common Stock to settle the O'Shea lawsuit. In addition,
upon final determination of the total unsecured claims of the Debtors, Search
will issue Warrants to purchase 5,000,000 shares of Common Stock under the
Joint Plan.
DESCRIPTION OF NEW PREFERRED STOCK
The Board of Directors of Search has established a new series of
Preferred Stock for the purpose of effecting the Joint Plan. The series has
been designated as the "9%/7% Convertible Preferred Stock" (the "New Preferred
Stock"). The
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New Preferred Stock ranks on a parity with Search's 12% Senior Convertible
Preferred Stock (the "12% Preferred Stock") as to rights to dividends and
liquidation preferences. The Joint Plan specified certain of the basic
preferences, rights and powers of the New Preferred Stock. The final terms of
the New Preferred Stock were established by the Board of Directors in the
Certificate of Designations filed with the Delaware Secretary of State. The
following discussion is a summary only of the basic preferences, rights and
powers of the New Preferred Stock and reference is made to the Certificate of
Designations for a complete statement of the preferences, rights and powers of
the New Preferred Stock.
Dividends. Holders of the New Preferred Stock are entitled to
receive, out of funds legally available therefor, non-cumulative dividends at a
per annum rate of (i) $0.315 per share until the end of the twelfth (12th) full
calendar quarter following payment of the first dividend on the New Preferred
Stock ("9% End Date"), and (ii) $0.245 per share after the 9% End Date.
Dividends on the New Preferred Stock accrue from July 1, 1995, which was the
date through which the Debtors paid accrued interest on the Notes to the
Noteholders. Search is required to pay the dividends in cash until payment in
full of the first year's dividends after the first dividend payment is made and
thereafter to the extent Delaware law or the terms and conditions of any loan
agreement for a loan of $5,000,000 or more do not limit or prevent the payment
by Search of cash dividends on the New Preferred Stock. To the extent that
Search's right to pay cash dividends is limited or prevented, Search may pay
the dividends in the form of Common Stock so long as the average closing
trading price for the Common Stock is $.50 or greater during the 20 trading
day period ending five days prior to the payment of such dividend. The
dividends are payable quarterly, with the first payment being due in connection
with the initial distribution of the New Preferred Stock as soon as practicable
after the Effective Date of the Joint Plan. The dividends will be paid to the
holders of record on or about the 15th day of the month following the end of
each quarter. Search may not make any dividend or distribution (other than a
dividend payable in Common Stock or other junior capital stock) on, or purchase
or redeem, any of its Common Stock or other capital stock that ranks junior to
the New Preferred Stock unless all accrued and unpaid dividends on the New
Preferred Stock have been paid or declared and set aside for payment.
Conversions. Holders of outstanding shares of the New Preferred Stock
may elect at any time to convert their shares into Common Stock. The
conversion ratio is two shares of Common Stock for each share of New Preferred
Stock. The conversion ratio will be proportionately adjusted upon any stock
dividend on the Common Stock, any stock split, reverse stock split, stock
combination or reclassification of the Common Stock or any merger,
consolidation or combination of Search with any other entity.
Up to 50% of the number of shares of New Preferred Stock issued as of
the Effective Date could be mandatorily converted into shares of Common Stock
at the option of Search if Search's Common Stock trades (i) at a price of $4.25
per share or higher on any 20 trading days in a period of 30 consecutive
trading days between the second and third anniversaries of the Effective Date
of the Joint Plan, or (ii) at a price of $3.50 or higher on any 20 trading days
in a period of 30 consecutive trading days after the third anniversary of the
Effective Date of the Joint Plan. Finally, on the seventh anniversary of the
Effective Date, all of the outstanding shares of New Preferred Stock will be
mandatorily converted into shares of Common Stock. The conversion ratios for
these mandatory conversions will be the ratio of the market price of the Common
Stock to the $3.50 liquidation value of the New Preferred Stock, subject to a
maximum ratio of 3-to-1. Holders of the converted New Preferred Stock would
also be entitled to receive any accrued and unpaid dividends on their shares.
Liquidation Rights. If Search is liquidated, the holders of the New
Preferred Stock are entitled to be paid $3.50 per share plus all accrued and
unpaid dividends thereon before any distribution or payment is made to the
holders of Common Stock or any other capital stock of Search ranking junior to
the New Preferred Stock. The New Preferred Stock ranks on a parity with the
12% Preferred Stock. If, upon any liquidation of Search, the amounts payable
with respect to the New Preferred Stock and any other stock of the Company
ranking on a parity with the New Preferred Stock, including the 12% Preferred
Stock, cannot be paid in full, the holders of such stock share ratably in any
such distribution of assets in proportion to the respective full preferential
amounts to which they would otherwise be entitled. After payment of the full
preferential amount to which the holders of the Company's New Preferred Stock
would be entitled upon any liquidation, dissolution or winding up, they would
have no right or claim to any of the remaining assets of Search.
Voting Rights. Each share of New Preferred Stock has the same voting
attributes and characteristics as do the shares of Common Stock which is one
vote per share. If Search defaults in the payment of the first two quarterly
dividends
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following the Effective Date or any four consecutive quarterly dividends on the
outstanding New Preferred Stock, the holders of outstanding New Preferred Stock
would be automatically entitled to an additional vote per share and given the
right to elect immediately at an emergency meeting of shareholders, which
Search must hold within thirty days after any such failure, such additional
directors as equals two-thirds of Search's Board of Directors determined after
such election.
The affirmative vote or consent of the holders of more than 66-2/3% of
all outstanding shares of New Preferred Stock, voting as a separate class, is
required (i) to amend, alter or repeal any provision of the Certificate of
Designations establishing the New Preferred Stock to adversely affect the
relative rights, preferences, qualifications, limitations or restrictions of
the New Preferred Stock or (ii) to effect any reclassification of the New
Preferred Stock. The affirmative vote or consent of the holders of more than
50% of all outstanding shares of New Preferred Stock, voting as a separate
class, is required to approve any merger of Search with another company when
Search is not the surviving entity or any sale of more than 50% of Search's
assets. In addition, Delaware corporation law provides that the vote of the
holders of a majority of the outstanding shares of any series of Search's
preferred stock, voting separately as a class, is required in order to: (a)
increase or decrease the par value of such series of shares, or (b) change the
powers, preferences, or special rights of such series of shares so as to affect
them adversely.
Subsequent Issuances of Preferred Stock. Search is prohibited from
issuing Preferred Stock in the future that is pari passu with the New Preferred
Stock unless at the time of such issuance all dividends due on the New
Preferred Stock have been paid in full. Search is also prohibited from issuing
convertible Preferred Stock which is senior in rights to the New Preferred
Stock except that such convertible Preferred Stock may carry a then-current
market interest rate, which may be higher or lower than that of the New
Preferred Stock. Search is also prohibited from issuing preferred or common
stock or warrants or any other form of security to any of its affiliates for
consideration that does not equal or exceed the fair market value of such
security, as determined by an independent third party. Search may,
nevertheless, issue options or warrants to new or existing directors or
management if such options or warrants are approved by the Compensation
Committee. Search may also issue Common Stock upon the exercise of outstanding
warrants or options but may not amend or modify such warrants or options
without the approval of the Compensation Committee. If Search issues any
security for consideration less than its fair market value, the number of
shares of New Preferred Stock will be immediately and appropriately adjusted,
and the conversion price of the New Preferred Stock will be adjusted downward,
to take into account the dilution in value of the security holdings of
Noteholders caused by such below fair market issuance of Search's securities.
Other Rights. The New Preferred Stock is not subject to redemption by
Search or at the election of the holders thereof. The New Preferred Stock does
not have any preemptive or sinking fund rights.
Transfer Agent. American Securities Transfer, Inc., Denver, Colorado
serves as the transfer agent and registrar for the Common Stock and the New
Preferred Stock. Search acts as its own transfer agent and registrar for the
12% Preferred Stock.
DESCRIPTION OF WARRANTS
The Board of Directors of the Company has authorized the Company to
issue the Warrants to purchase up to 5,676,178 shares of Common Stock. The
Warrants are governed by a Warrant Agreement dated as of March 22, 1996 between
Search and American Securities Transfer, Inc., acting as the Warrant Agent (the
"Warrant Agent"). Warrants to purchase 5,000,000 shares are to be issued under
the Joint Plan, and Warrants to purchase 676,178 shares of Common Stock have
been issued to HPIL, as assignee of HFG, pursuant to the Funding Agreement.
The following is a summary of the provisions of the Warrants, but does
not purport to be a complete description of such provisions. This summary is
qualified in its entirety by reference to the Warrant Agreement and form of
Warrant that is attached as an exhibit to this Form 8-K Current Report.
Exercise. The holder of a Warrant must pay the exercise price per
share of Common Stock in cash upon any exercise of the Warrant. The exercise
price per share of the Warrants (the "Exercise Price") is initially $2.00 and
increases
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by $.25 on March 15 of each successive year as follows: $2.00 from March 15,
1996 to March 14, 1997, $2.25 from March 15, 1997 to March 14, 1998, $2.50 from
March 15, 1998 to March 14, 1999, $2.75 from March 15, 1999 to March 14, 2000,
$3.00 from March 15, 2000 to the Expiration Time.
To exercise a Warrant, the Warrant Certificate, properly completed and
accompanied by full payment (via check or money order) for all shares of Common
Stock to be purchased, must be surrendered to the Warrant Agent. At that time
(or upon later clearance of funds if an uncertified check is issued for
payment), the exercising holder will be deemed to be the record holder of the
shares of Common Stock issuable upon such exercise. Upon receipt of the
surrendered Warrant Certificate and payment in full, the Warrant Agent will
mail or cause to be mailed, to or upon the written instructions of the
exercising holder, certificates representing the number of shares of Common
Stock so purchased.
Termination; Redemption. The Warrants will expire at 5:00 p.m. New
York time on March 14, 2001 (the "Expiration Time"). Within 90 days following
the Expiration Time, Search must redeem all Warrants remaining unexercised at
the Expiration Time at a redemption price of $0.25 per Warrant (the "Redemption
Price"). Notice of the redemption must be mailed by Search not later than 10
days nor more than 60 days prior to the date of redemption to each record
holder of the Warrants. The notice must specify the place for surrender of the
Warrant certificates. Upon surrender of a Warrant certificate, the holder will
be paid the Redemption Price for the Warrant. Except for the right to receive
the Redemption Price, all rights under the Warrants expire at the Expiration
Time.
Anti-Dilution Provisions. In the event of any Common Stock dividend
on the Common Stock, any stock split or any stock combination, then the number
of shares of Common Stock subject to purchase under each Warrant will be
proportionately adjusted so that the holders of the Warrants after such event
shall be entitled to receive upon exercise the number and kind of shares which
they would have owned or been entitled to receive had such Warrants been
exercised immediately prior to such event. In the event of (i) a
recapitalization or reclassification of Common Stock (other than a change of
par value), (ii) any consolidation or merger of Search with or into another
person or any merger of another person into Search (other than a merger that
does not result in a reclassification, conversion, exchange or cancellation of
Common Stock), (iii) a sale or transfer of all or substantially all the assets
of Search, or (iv) a compulsory share exchange where the holders of Common
Stock receive other securities, cash or property, no adjustment in the Exercise
Price will be made but appropriate provision will be made so that each holder
of Warrants shall have the right to purchase upon exercise of each Warrant the
cash, securities or property to which such holder would have been entitled had
the Warrants been exercised prior to such transaction. If Search issues or
sells any shares of Common Stock (other than pursuant to employee stock options
granted in good faith by the Board of Directors) for consideration that is less
than the then current market price of the Common Stock, the number of shares of
Common Stock for which the Warrants are exercisable will be adjusted to equal
the product of the number of shares for which the Warrants are exercisable
immediately prior to the issuance or sale by the ratio of the then current
market price of the Common Stock to the per share consideration at which such
additional shares of Common Stock are issued or sold. The foregoing
adjustments will be made successively whenever any event listed above shall
occur. If Search takes any action with respect to its Common Stock that has an
adverse effect on the rights of the Warrantholders, upon the request of the
holders of more than 50% of the Warrants, the Exercise Price and the number of
shares of Common Stock for which the Warrants are exercisable will be adjusted
in such manner as may be equitable in the circumstances.
Partial Exercise; Fractional Shares. Partial exercise from time to
time of purchase rights under the Warrants will be allowed, and a new Warrant
or Warrants will be delivered by the Warrant Agent to an exercising holder
evidencing such holder's right to purchase the balance of the Common Stock
subject to purchase thereunder. Search will not be required to issue
fractional shares of its Common Stock, but upon exercise of a Warrant as to any
fractional share interest thereunder, Search must pay an amount in cash equal
to the then current market price per share of the Common Stock multiplied by
such fraction.
Registration. The Warrants are transferable only on the registry
books of the Warrant Agent by surrender of the Warrant certificate endorsed or
accompanied by a proper transfer instrument satisfactory to the Warrant Agent
and Search. Search and the Warrant Agent may treat the registered holder of a
Warrant as the absolute owner thereof for all purposes.
-7-
<PAGE> 9
Amendments. The Warrant Agent and Search may amend the Warrant
Agreement to cure ambiguities or correct defects or mistakes or to make changes
that they deem necessary which do not adversely affect the interests of the
Warrantholders. The written consents of holders of not less than 50% of the
outstanding Warrants are required for any other amendments.
Miscellaneous. The Warrants are not subject to conversion. A
registered owner of a Warrant will not have any rights of a stockholder of the
Company by virtue of holding the Warrants, including, without limitation, any
right to vote, give or withhold consent to any corporate action, receive notice
of meetings of stockholders or receive dividends or subscription rights prior
to the issuance of Common Stock upon exercise thereof. American Securities
Transfer, Inc., Denver, Colorado, serves as transfer agent, registrar and
Warrant Agent of the Warrants.
PRO FORMA FINANCIAL INFORMATION
The following condensed consolidated financial statements of Search
and its subsidiaries set forth unaudited condensed consolidated balance sheets
as of December 31, 1995, on an actual historical basis and on a pro forma
adjusted basis as though the debt conversions and equity security purchases by
HPIL and the consummation of the transactions required by the Joint Plan,
including payoff of a line of credit from General Electric Capital Corporation,
payment of accrued restructuring expenses and certain accounts payable, and
settlement of the O'Shea class action lawsuit, had occurred on December 31,
1995. The following pro forma adjustments assume an Implied Common Stock
Price for the Joint Plan and the HPIL transactions of $1.013 per share.
-8-
<PAGE> 10
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 (UNAUDITED)
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Search & Fund Subsidiaries
Unrestricted & Eliminations Consolidated Pro Forma Pro Forma
Subsidiaries (Debtors-in-Possession) Actual Adjustments(a) Consolidated
------------ ----------------------- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
Net contract receivables $ 1,741 $ 23,710 $ 25,451 -- $ 25,451
Cash and equivalents 855 -- 855 9,237 (1) 10,092
Restricted cash -- 12,573 12,573 (12,573) (2) --
Vehicles held for resale 220 1,133 1,353 -- 1,353
Deferred note offering cost,
net -- 2,324 2,324 (2,324) (3) --
Property and equipment 1,294 -- 1,294 -- 1,294
Inter-company balance 428 (428) -- -- --
Other assets, net 103 (8) 111 -- 111
-------- --------- --------- -------- --------
Total assets $ 4,641 $ 39,320 $ 43,961 $(5,660) $ 38,301
======== ========= ========= ======== ========
LIABILITIES AND SHAREHOLDERS'
- -----------------------------
EQUITY (CAPITAL DEFICIT)
- ------------------------
Line of credit $ 2,280 -- $ 2,280 (2,280) (4) --
Accounts payable and other
liabilities 3,050 252 3,302 (496) (5) 2,806
Accrued settlement 2,912 -- 2,912 (2,912) (6) --
Accrued restructuring 260 -- 260 (260) (5) --
Accrued interest 1 -- 1 -- 1
-------- --------- --------- -------- --------
Total liabilities not subject
to compromise 8,503 252 8,755 (5,948) 2,807
-------- --------- --------- -------- --------
Liabilities subject to
compromise -- 69,320 69,320 (69,320) (3) --
-------- --------- --------- -------- --------
Preferred stock,
12% senior convertible 4 -- 4 -- 4
9%/7% senior convertible -- -- -- 196 (7) 196
Common stock 117 -- 117 189 (7) 306
Additional paid-in capital 26,766 -- 26,766 38,971 (7) 65,747
Accumulated deficit (29,609) (30,252) (59,861) 30,252 (8) (29,609)
Treasury stock (1,150) -- (1,150) -- (1,150)
-------- --------- --------- -------- --------
Total shareholders' equity
(capital deficit) $ 3,862 $(30,252) $(34,114) $ 69,608 $ 35,494
-------- --------- --------- -------- --------
Total liabilities and
shareholders' equity
(capital deficit) $ 4,641 $ 39,320 $ 43,961 $(5,660) $ 38,301
======== ========= ========= ======== ========
</TABLE>
See notes to proforma condensed consolidated financial statements
-9-
<PAGE> 11
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Adjustments to reflect the impact on the December 31, 1995
consolidated balance sheets of the transactions contemplated by the
Joint Plan, the security purchases and debt conversions by HPIL and
the settlement of the O'Shea class action lawsuit, as if such
transactions had been consummated on December 31, 1995, as summarized
below:
(1) Adjustment represents the sum of the cash transferred from
restricted cash ($12,573,000) plus the net cash proceeds
($4,346,000) from the sale of Common Stock, New Preferred
Stock and Warrants to HPIL, less (i) the cash used by the
Debtors for the $350,000 deposit to the Litigation Trust and
to pay Debtors' estimated professional fees of $2,300,000),
(ii) the cash paid for accrued dividends on the shares of New
Preferred Stock issued under the Search Equity Option
(consisting of $3,354,000), (iii) the cash used to pay off the
GECC line of credit ($496,000) and the unconverted portion of
the HPIL debt ($139,000), (iv) the cash portion of the
settlement of the shareholder class action lawsuit ($288,000),
and (v) cash used to pay Search's professional fees, estimated
to be $756,000.
(2) Adjustment for elimination of restrictions on cash due to
cancellation of trust indentures for Notes.
(3) Adjustments due to cancellation of indebtedness (including
accrued interest) represented by the Notes.
(4) Adjustment for payoff of GECC line of credit ($496,000),
conversion to stock of a portion of the HPIL debt ($1,645,000)
and payoff of the remaining HPIL debt ($139,000).
(5) Adjustments for payment of professional fees of Search
(estimated to be $756,000).
(6) Adjustment for settlement of class action lawsuit, payable
$288,000 in cash and $2,612,000 in Common Stock.
(7) Adjustments for issuance of shares of New Preferred Stock and
Common Stock pursuant to (i) the Joint Plan, (ii) settlement
of the class action lawsuit, and (iii) purchases and debt
conversions by HPIL.
(8) Adjustment to eliminate deficit retained earnings of
subsidiaries.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not Applicable
(B) PRO FORMA FINANCIAL INFORMATION.
Not Applicable
(C) EXHIBITS.
-10-
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
2.1 Third Amended Joint Plan of Reorganization
2.2 Modification to Third Amended Joint Plan of Reorganization
2.3 Order Confirming Third Amended and Supplemented Joint Plan,
Pursuant to 11 U.S.C. Section 1129
2.4 Chapter 11 Post-Confirmation Order
2.5 Order Regarding Entry Date of Order Confirming Third Amended
and Supplemented Joint Plan Pursuant to 11 U.S.C. Section 1129
2.6 Order Granting Second Motion for Technical, Non-Material
Modification to the Third Amended and Supplemented Joint Plan
of Reorganization
4.1 Certificate of Designation 9%/7% Convertible Preferred Stock
4.2 Warrant Agreement dated as of March 27, 1996 between Search
Capital Group, Inc. and American Securities Transfer, Inc., as
Warrant Agent
4.3 Form of Warrant issued pursuant to Joint Plan of Reorganization
99.1 Agreement Regarding Conversion of Notes dated effective April
2, 1996 among Hall Phoenix/Inwood, Ltd., Search Capital Group,
Inc., Search Funding Corp., Automobile Credit Acceptance Corp.,
Newsearch, Inc. and Automobile Credit Holdings, Inc.
99.2 Escrow Agreement dated effective as of April 2, 1996 among Hall
Phoenix/Inwood, Ltd., Search Capital Group, Inc., Search
Funding Corp., and Burke, Wright & Keiffer, P.C.
</TABLE>
-11-
<PAGE> 13
SIGNATURE
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 hereunto duly authorized.
SEARCH CAPITAL GROUP, INC.
By: /s/ Robert Idzi
-------------------------------------
Robert Idzi, Executive Vice President
Dated: April 17, 1996
-12-
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<S> <C> <C>
2.1 Third Amended Joint Plan of Reorganization
2.2 Modification to Third Amended Joint Plan of Reorganization
2.3 Order Confirming Third Amended and Supplemented Joint Plan,
Pursuant to 11 U.S.C. Section 1129
2.4 Chapter 11 Post-Confirmation Order
2.5 Order Regarding Entry Date of Order Confirming Third Amended
and Supplemented Joint Plan Pursuant to 11 U.S.C. Section 1129
2.6 Order Granting Second Motion for Technical, Non-Material
Modification to the Third Amended and Supplemented Joint Plan
of Reorganization
4.1 Certificate of Designation 9%/7% Convertible Preferred Stock
4.2 Warrant Agreement dated as of March 27, 1996 between Search
Capital Group, Inc. and American Securities Transfer, Inc., as
Warrant Agent
4.3 Form of Warrant issued pursuant to Joint Plan of Reorganization
99.1 Agreement Regarding Conversion of Notes dated effective April
2, 1996, among Hall Phoenix/Inwood, Ltd., Search Capital
Group, Inc., Search Funding Corp., Automobile Credit
Acceptance Corp., Newsearch, Inc. and Automobile Credit
Holdings, Inc.
99.2 Escrow Agreement dated effective as of April 2, 1996 among
Hall Phoenix/Inwood, Ltd., Search Capital Group, Inc., Search
Funding Corp., and Burke, Wright & Keiffer, P.C.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
EXHIBIT "A"
Michael R. Rochelle Joe B. Dorman
State Bar No. 17126700 State Bar No.06003500
Stephen T. Hutcheson Senior Vice President & General Counsel
State Bar No. 10335700 Search Capital Group, Inc.
Rochelle and Hutcheson, L.L.P. 700 N. Pearl Street, Ste. 400
2929 Carlisle, Suite 222 Dallas, Texas 75201
Dallas, Texas 75204 (214) 965-6007 (tel)
(214) 953-0182 (214) 965-6098 (fax)
(214) 953-0185 (Facsimile) COUNSEL FOR SEARCH CAPITAL GROUP, INC.
COUNSEL FOR THE DEBTORS
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: Section CHAPTER 11
Section
Section CASE NOS. 395-34981-RCM-11
AUTOMOBILE CREDIT Section THROUGH 395-34988-SAF-11
FUND 1991-III, ET. AL., Section
Section ADMINISTRATIVELY
Section CONSOLIDATED UNDER
DEBTORS. Section CASE NO. 395-34981-RCM-11
THIRD AMENDED
JOINT PLAN OF REORGANIZATION
Search Capital Group, Inc., and Automobile Credit Fund 1991-III, Inc.,
Automobile Credit Finance, Inc., Automobile Credit Partners, Inc., Automobile
Credit Finance 1992-II, Inc., Automobile Credit Finance III, Inc., Automobile
Credit Finance IV, Inc., Automobile Credit Finance V, Inc. and Automobile
Credit Finance VI, Inc. file this Third Amended Joint Plan of Reorganization
pursuant to the provisions of Chapter 11 of the Code. Each of the Debtors
filed a petition seeking protection under Chapter 11 of the Code on August 14,
1995. This Joint Plan is a consolidated plan of reorganization for each
Debtor, and proposes the method for the treatment of each class of Creditors
and Interest Holders for each Debtor.
ARTICLE I.
DEFINITIONS
Many terms used in this Joint Plan are specifically defined for
purposes of this Joint Plan. These definitions are set forth in Appendix I
which is attached to and made an integral part of this Joint Plan. You will
need to read these definitions to understand this Joint Plan. Any word that is
not specifically defined in Appendix I shall have the meaning ascribed to it in
the text hereof or under the Code, if applicable. Otherwise it shall have its
usual and customary meaning. Rules of interpretation and construction are also
set forth in Appendix I.
<PAGE> 2
ARTICLE II.
HOW THE PLAN WORKS:
SEARCH EQUITY OPTION AND COLLATERAL OPTION
A. Noteholders Voting to Accept the Joint Plan.
2.01 Plan Options. Noteholders voting to accept the Joint Plan may
choose one of two options ("Plan Options"): First, an exchange of Notes for
Common Stock and Convertible Preferred Stock in Search (the "Search Equity
Option"); and second, the continued collection (Servicing) or sale of the Note
Collateral and distribution of resulting cash proceeds to the Noteholders (the
"Collateral Option"). As to any one Debtor, a vote to accept this Joint Plan
by two-thirds (2/3) in dollar amount of Notes and one-half ( 1/2) in number of
Noteholders voting on the Joint Plan will allow it to be confirmed and will
provide Noteholders the right to select either Plan Option.
As to any one Debtor, the Noteholders' selection of either
Plan Option will be implemented on a Noteholder by Noteholder basis. There are
no restrictions on the amount and number of Noteholders accepting the Joint
Plan that may select either the Search Equity Option or the Collateral Option.
B. Noteholders Voting Against the Joint Plan.
Noteholders voting against this Joint Plan will not be
entitled to select between the Search Equity Option and the Collateral Option.
If the Joint Plan is confirmed with respect to a particular Debtor, Noteholders
voting "No" on the Joint Plan with respect to their Allowed Noteholder Secured
Claim will receive treatment under the Search Equity Option.
2.02 The Search Equity Option and Collateral Option.
A. Search Equity Option. The Search Equity Option provides that
Noteholders who select it will exchange their Notes of their respective Debtor
for newly-issued stock of that Debtor, which will then be transferred to Search
in exchange for the Noteholders' share of newly issued Search Convertible
Preferred Stock and Search Common Stock, as described hereinafter. On the
Effective Date, Noteholders selecting the Search Equity Option will be paid a
cash dividend, accrued from July 1, 1995 at the rate of nine percent (9%) per
annum on the Convertible Preferred Stock.
B. The Collateral Option. Noteholders selecting the Collateral
Option will receive their beneficial interest in their proportionate share of
Note Collateral, including:
(i) existing Sinking Fund Account (as defined in the Indenture
Agreements or Memoranda) for each Debtor;
(ii) the future stream of cash from the automobile loans that
secure their notes; and
(iii) sale proceeds of repossessed automobiles, minus
(iv) the Noteholders' Pro Rata share of each Debtor's proportionate
share of the Administrative Claims,
by transferring their share of that Collateral to a Noteholders' Trust and
either (a) having it Serviced and the Cash proceeds regularly distributed to
the respective Noteholders or (b) having the Note Collateral sold to the
highest bidder, assuming a sale price greater than the Collateral's liquidation
value, (which value shall be the then-present value of the remaining Note
Collateral at the time of determination as agreed to by the Plan Proponents and
the Creditors' Committee or failing agreement, determined by the Bankruptcy
Court) and the proceeds distributed, as soon as practicable after such sale.
The Noteholders' Trustee will account for the Collateral and all proceeds
separately for each Debtor. The Noteholders' Trust will operate under and be
governed in accordance with a Noteholders' Trust Agreement which will be
prepared by the Creditors' Committee, filed with the Bankruptcy Court, treated
as a Plan Document and contain the terms and conditions similar to those as set
forth in Appendix II.
Third Amended and Supplemented
Joint Plan of Reorganization
2
<PAGE> 3
2.03 Transfer of Assets. On the Effective Date and pursuant to
Section 1123(a)(5)(B) of the Code, each Debtor with respect to which this Plan
is confirmed will cause a transfer of the proportionate share of the Note
Collateral and other assets of the Debtor (except those assets transferred to
the Litigation Trust pursuant to Sections 9.04 or 9.05 below) to be made to
Search for those Noteholders selecting the Search Equity Option and, subject to
the provisions of Section 4.04(B) below, to the Noteholders' Trust for those
Noteholders selecting the Collateral Option. Under Section 1141 (b) and (c) of
the Bankruptcy Code, the Confirmation Order will vest title to all of the
Debtors' assets in either Search, the Noteholders' Trust or the Litigation
Trust as of the Effective Date. Search will thereafter liquidate and dissolve
each Debtor.
The determination of the exact Loans, related Collateral, files and
computerized information (except for proprietary Search software) to be
assigned to Search for those Noteholders selecting the Search Equity Option and
to be assigned or delivered to the Noteholders' Trust, New Servicer or highest
bidder at a sale for those Noteholders selecting the Collateral Option shall be
made by the Collateral Consultant. The Creditors' Committee or a sub-committee
thereof and Search shall agree by the Confirmation Hearing date as to the
appropriate person(s) or institution(s) to undertake that role and if no
agreement can be reached then the Bankruptcy Court shall appoint such a
person(s) or institution(s), after notice and hearing and submission of
suggestions by the Creditors' Committee and Search.
The fees of the Collateral Consultant shall be treated as and paid as
an Ordinary Course Claim.
In performing its functions, the Collateral Consultant shall employ
criteria and standards typical of the sub-prime auto loan industry and which
are designed to and, achieve a fair and equitable division of the Collateral in
accordance with the Plan Options selected by the Noteholders.
2.04 Treatment of Noteholders Who Did Not Vote or Who Failed to
Select an Option. If the Joint Plan is confirmed as to any one Debtor, then
the holders of Allowed Noteholder Secured Claims who either (i) did not vote or
(ii) voted "Yes" but did not select a Plan Option will receive the
distributions provided for in the Search Equity Option.
ARTICLE III.
DIVISION OF CREDITORS INTO CLASSES
3.01 Class 1: Noteholder Secured Claims of Creditors of ACF-1991;
3.02 Class 2: Noteholder Secured Claims of Creditors of ACF;
3.03 Class 3: Noteholder Secured Claims of Creditors of ACP;
3.04 Class 4: Noteholder Secured Claims of Creditors of ACF-1992;
3.05 Class 5: Noteholder Secured Claims of Creditors of ACF-III;
3.06 Class 6: Noteholder Secured Claims of Creditors of ACF-IV;
3.07 Class 7: Noteholder Secured Claims of Creditors of ACF-V;
3.08 Class 8: Noteholder Secured Claims of Creditors of ACF-VI.
3.09 Class 9: Unsecured Claims of Creditors of ACF-1991;
3.10 Class 10: Unsecured Claims of Creditors of ACF;
3.11 Class 11: Unsecured Claims of Creditors of ACP;
3.12 Class 12: Unsecured Claims of Creditors of ACF-1992;
3.13 Class 13: Unsecured Claims of Creditors of ACF-III;
3.14 Class 14: Unsecured Claims of Creditors of ACF-IV;
3.15 Class 15: Unsecured Claims of Creditors of ACF-V;
3.16 Class 16: Unsecured Claims of Creditors of ACF-VI;
Third Amended and Supplemented
Joint Plan of Reorganization
3
<PAGE> 4
3.17 Class 17: Unsecured Claims of Search with respect to any
Debtor; 3.18 Class 18: Interest Holder of each Debtor.
ARTICLE IV.
TREATMENT OF CLASSES
Claims of Creditors that are Allowed Claims shall be satisfied and
paid in the following manner:
4.01 Allowed Noteholder Secured Claims in Classes 1 through 8.(1)
In consideration of and in full satisfaction for any and all Allowed
Noteholder Secured Claims against the Debtors, the holders of such Claims will
receive the treatment shown below, subject to the conditions which follow:
A Noteholder may vote either "YES" or "NO" on the Joint Plan.
A "YES" VOTE FOR THIS JOINT PLAN IS A VOTE TO RESOLVE ALL OUTSTANDING
CLAIMS AGAINST EACH DEBTOR, WHETHER THE RESULT BE THE EXCHANGE OF NOTES FOR
SEARCH EQUITY OR THE LIQUIDATION OF THE NOTEHOLDERS' COLLATERAL. A PERSON
SHOULD VOTE "NO" ON THE JOINT PLAN ONLY IF HE THINKS THAT THE SEARCH EQUITY
OPTION OR THE COLLATERAL OPTION DESCRIBED BELOW IS NOT A PREFERABLE ALTERNATIVE
AND THAT ANOTHER METHOD OF REORGANIZING OR LIQUIDATING THE DEBTORS SHOULD BE
PROPOSED.
4.02 Selection of Options by Classes 1 through 8. Each Noteholder
voting "Yes" on the Joint Plan may select either the Search Equity Option or
the Collateral Option. Any Noteholder voting "No" on the Joint Plan will not
be given the right to select either the Search Equity Option or the Collateral
Option. If the Joint Plan is confirmed as to the applicable Debtor, those who
voted "No" on the Joint Plan shall receive treatment under the Search Equity
Option.
4.03 The Search Equity Option
Each holder of an Allowed Noteholder Secured Claim selecting this Plan
Option shall receive a combination of Convertible Preferred Stock, with accrued
dividends from July 1, 1995 and Common Stock in the amounts and for the
consideration more particularly described below.
A. Exchange of Allowed Noteholder Secured Claims for
Securities Upon Confirmation of the Joint Plan, the Plan Transfer
Agent shall send a request to each holder of an Allowed
Noteholder Secured Claim to tender his Note or Notes. In consideration of and
in full satisfaction for all Allowed Noteholder Secured Claims against the
Debtors, the holders of Allowed Noteholder Secured Claims as of the Record Date
electing the Search Equity Option will receive such Debtor's newly issued
common stock that will be held temporarily by the Plan Transfer Agent on behalf
of such holder and who will on the Effective Date, exchange the Debtor's Common
Stock for Search Convertible Preferred Stock and Common Stock. With respect to
each Debtor, the total amount of the Allowed Noteholder Secured Claims for each
Class shall equal the Present Value of the Note Collateral and the Common Stock
Portion.
B. Issuance of Debtor's Common Stock
Holders of Allowed Noteholder Secured Claims against a Debtor will be
paid one (1) share of that Debtor's Common Stock for every one dollar ($1.00)
of such holder's Allowed Noteholder Secured Claim.
____________________
(1) NOTE: EACH NOTEHOLDER WILL HAVE BOTH A SECURED AND AN
UNSECURED CLAIM; NOTEHOLDERS MUST REVIEW SECTIONS 4.03 AND 4.04 REGARDING
PAYMENT OF THEIR ALLOWED NOTEHOLDER SECURED CLAIMS, AND SECTION 4.06 REGARDING
PAYMENT OF THEIR UNSECURED CLAIMS FOR A COMPLETE EXPLANATION OF THE TREATMENT
OF ALL NOTEHOLDER CLAIMS.
Third Amended and Supplemented
Joint Plan of Reorganization
4
<PAGE> 5
On the Effective Date, each Debtor will issue and deliver the Debtor's
Common Stock to the Plan Transfer Agent. The Debtor's Common Stock will be
held by the Plan Transfer Agent for the benefit of the holders of Allowed
Noteholder Secured Claims.
C. Issuance of Search Stock
On the Effective Date, Search will issue to the Plan Transfer Agent
the following: 0.2823 shares of Convertible Preferred Stock for each share of
Debtor's Common Stock and 0.3109 shares of Common Stock for each share of
Debtor's Common Stock. The Convertible Preferred Stock and the Common Stock
will be temporarily held by the Plan Transfer Agent for the benefit of the
holders of Allowed Noteholder Secured Claims. Such share amounts will, if
necessary, be adjusted pursuant to Section 4.03.D and E.
The Plan Transfer Agent will deliver the appropriate shares of
Convertible Preferred Stock and Common Stock to the holders of Allowed
Noteholder Secured Claims in exchange for the Notes originally issued thereto
by each such Debtor within twenty (20) days after the delivery of their
corresponding Notes to the Plan Transfer Agent.
D. Non-Dilutive Effect
Notwithstanding anything contained herein to the contrary, if all of
the Noteholders in each Class 1-8 elects the Search Equity Option, then on a
fully-diluted basis to be determined by agreement of the financial advisors for
Search and the Creditors' Committee as of the Effective Date (and if an
unresolvable dispute arises, then by the Bankruptcy Court), the Convertible
Preferred Stock and Common Stock to be issued to the Noteholders in such
classes shall equal seventy-five percent (75%) of the value of all shares of
Convertible Preferred Stock, Common Stock and Warrants, outstanding 12% Search
Preferred Stock, existing Search Common Stock, other warrants, stock options
and rights, then outstanding, issued or agreed to be issued by Search, as
verified in a certification delivered by Search to the Creditors' Committee
prior to the Effective Date.
E. Allocation of Securities if Collateral Option Selected
In the event that any Allowed Noteholder Secured Claimant selects the
Collateral Option, the financial advisors to Search and the Creditors'
Committee will determine the amounts of Convertible Preferred Stock and Common
Stock to be issued to the Allowed Noteholder Secured Claimants that do not
select the Collateral Option by (a) determining the amounts of Convertible
Preferred Stock and Common Stock that would have been issued had no Allowed
Noteholder Secured Claimant selected the Collateral Option and (b) multiplying
the amounts determined in Section (a) by the fraction of (i) the Allowed
Noteholder Secured Claims of those holders who do not select the Collateral
Option divided by (ii) the total Allowed Noteholder Secured Claims. In such
event, an Allowed Noteholder Secured Claimant not selecting the Collateral
Option would receive his pro rata share of the amounts determined in Section
(b) based upon his Allowed Noteholder Secured Claim relative to the total
Allowed Noteholder Secured Claims that do not select the Collateral Option.
4.04 The Collateral Option
Each Noteholder selecting the Collateral Option shall receive the
proceeds of his proportional amount of the Note Collateral for such Debtor as
more particularly described below.
A. The Noteholders' Trust
The proportionate amount of all Note Collateral assets (other than
those transferred to the Litigation Trust pursuant to Sections 9.04 and 9.05)
for each Debtor relating to the amount of Allowed Noteholder Secured Claims
whose holders elect the Collateral Option, will be transferred on the Effective
Date to the Trustee of the Noteholders' Trust, to be administered pursuant to
the terms of a Noteholders' Trust Agreement, which will be filed with the
Bankruptcy Court as a Plan Document (the "Noteholders' Trust Agreement"). A
summary of the basic terms to be incorporated in the Noteholders' Trust
Agreement is contained in Appendix II. The Noteholders' Trustee will either
sell or Service the Note Collateral and distribute the proceeds to the
Noteholders of a particular Debtor who selected the Collateral Option. The
beneficial interests in the Noteholders' Trust will be essentially
non-transferrable. The initial Trustee of the Noteholders' Trust will be
selected by the Creditors' Committee which will make its decision known to the
Bankruptcy Court on or prior to the Confirmation Hearing.
Third Amended and Supplemented
Joint Plan of Reorganization
5
<PAGE> 6
B. Sale of Assets
If, prior to the Effective Date, the Creditors' Committee receives a
bona fide offer to purchase the respective Collateral at a price, net of
selling costs and after taking into account risks associated with other
alternatives which exceeds the liquidation value of the Collateral (as agreed
upon by the Plan Proponents and the Committee or, if necessary, determined by
the Bankruptcy Court), the Noteholders' Trust may not be formed. Instead, the
net proceeds of the Collateral sale shall, after providing appropriate escrows
for the payment of Administrative Claims and other contingency expenses or
claims, be distributed to all Noteholders selecting the Collateral Option
within thirty (30) days following the closing of such sale.
For each Noteholder electing the Collateral Option, the Collateral
corresponding to such electing Noteholder shall be sold to the highest bidder
for cash if, in the estimation of the Noteholders' Trustee, the anticipated
proceeds net of selling costs equals or exceeds the liquidation value (as
defined above) of the Collateral. The proceeds of such Collateral sale,
together with the corresponding amount of escrowed cash, will be distributed to
all Noteholders electing the Collateral Option in such Class within thirty (30)
days following the closing of any such sale. If the Creditors' Committee or
Noteholder's Trustee determines that the cash purchase offers for such Note
Collateral are insufficient, the underlying loans will be collected pursuant to
a new servicing contract that will be executed by the Noteholders' Trust and/or
the Creditors' Committee and the New Servicer to be effective and fully
operational as soon as possible after the Confirmation Date.
Through the date of the Confirmation Hearing (and later as
necessary to consummate a sale or transfer of the Servicing), interested
parties will be permitted, subject to entering into appropriate confidentiality
agreements, to perform appropriate due diligence with respect to the Note
Collateral and ACAC's records pertaining thereto and reduce, if appropriate,
their bid to a definitive written contract for Servicing or sale to be closed
after Confirmation of the Joint Plan for those Classes or individual
Noteholders who select the Collateral Option.
All Note Collateral transferred to the Noteholders Trust on
behalf of Noteholders electing the Collateral Option will be segregated on the
books of the Noteholders Trust on a Debtor-by-Debtor basis, whether the Note
Collateral is sold in a bulk sale or collected over time under a new servicing
contract. Accordingly, Noteholders will receive the proceeds of the Note
Collateral of their particular Debtor, regardless of the manner in which their
Note Collateral is liquidated, and the actual percentage recoveries on their
respective Note Collateral may vary significantly.
4.05 Result of a "No" Vote in Classes 1 - 8.
If the Joint Plan is not confirmed as to any Debtor, that Debtor will
continue to conduct its business in the ordinary course although the
exclusivity period will terminate. Any party-in-interest may thereafter,
propose a new plan of reorganization, seek to have the Chapter 11 case
dismissed or converted to a Chapter 7 case, or take such other actions as may
be available to such party-in-interest under the Code with respect to that
Debtor.
4.06 Treatment of Classes 9 through 16: Allowed Unsecured Claims.
In consideration and in full satisfaction of any and all Allowed
Unsecured Claims within Classes 9 through 16 against the Debtors, a holder of
an Allowed Unsecured Claims will receive:
(a) his share of the 5,000,000 Warrants distributed to Allowed
Unsecured Claims as soon after the Effective Date as possible
in the ratio that each such holder's Allowed Unsecured Claim
bears to all Allowed Unsecured Claims against the Debtors; and
(b) a distribution of the proceeds, if any, of the Litigation
Trust that is established pursuant Article IX hereof.
Distributions, if any, from such Litigation Trust will be made
on a quarterly basis beginning on the first anniversary date
of the Effective Date. As to any single Debtor, such
distributions will be made to each holder of an Allowed
Unsecured Claim on pro rata basis in a ratio that such
holder's Allowed Unsecured Claim bears to all Allowed
Unsecured Claims against that Debtor.
Third Amended and Supplemented
Joint Plan of Reorganization
6
<PAGE> 7
4.07 Class 17: Unsecured Claims of Search.
Class 17 will receive nothing on account of such Claims.
4.08 Class 18: Interest Holder of Each Debtor.
Allowed Interests in Class 18 will receive nothing on account of such
Interests.
4.09 Designation of Impaired Classes.
All Classes in this Joint Plan are impaired.
ARTICLE V.
CONDITIONS PRECEDENT TO CONFIRMATION AND THE EFFECTIVE DATE
5.01 Confirmation of Joint Plan. Confirmation of the Joint Plan is
specifically conditioned on:
A. Shareholders of Search shall have by proxy solicitation
approved by the required voting margins the amendments to its articles of
incorporation and authorized the issuance of necessary Convertible Preferred
Stock, Common Stock and Warrants to fulfill Search's obligations hereunder; and
B. Applicable requirements of Title 11 of the Bankruptcy Code
have been fulfilled.
5.02 Effective Date. Occurrence of the Effective Date is
specifically conditioned upon:
A. As of the Effective Date if a New Servicer has been selected
by the Creditors' Committee, then such New Servicer will either be
substantially operational or Search will have turned over all of the required
documentation and computerized information (other than Search's proprietary
software) pertaining to the applicable Note Collateral to be Serviced by such
New Servicer, or Search shall have committed in writing to the Noteholders'
Trust to continue Servicing such Collateral for so long as requested by the
Noteholders' Trustee, at a reasonable and appropriate rate which shall not
exceed the rate to be charged by the New Servicer. In order to become fully
operational, such New Servicer will have been provided by Search full and
complete access to and been delivered all original files and computerized
information with respect to such Collateral, other than Search's proprietary
software.
B. Search will have selected and appointed two such nominees as
active members of its Board of Directors. Provided, however, that the failure
or refusal of such approved nominee to serve shall not prevent the Joint Plan
from becoming effective.
C. The specific Note Collateral applicable to all Noteholders
having selected a Plan Option will have been selected by the Collateral
Consultant and such Note Collateral will be ready for immediate delivery and/or
transfer, as the case may be, to Search or the Noteholders' Trust (or, if
applicable, the highest bidder) in accordance with each such Noteholders'
election.
Third Amended and Supplemented
Joint Plan of Reorganization
7
<PAGE> 8
ARTICLE VI.
TERMS AND CONDITIONS GOVERNING
CONVERTIBLE PREFERRED STOCK
6.01 Dividends.
The Convertible Preferred Stock dividend annual rate will be:
o $0.315 (9%) per share from July 1, 1995, to the end of 12th
full calendar quarter following payment of first dividend
("End Date").
o $0.245 (7%) per share from the day following the End Date to
the date it is converted but no later than the seventh
anniversary of the Effective Date.
6.02 Payment of Dividends.
The dividends on the Convertible Preferred Stock will only be paid to
the Noteholders entitled to receive the Convertible Preferred Stock pursuant to
the terms of the Search Equity Option. Convertible Preferred Stock dividends
will begin to accrue from July 1, 1995. The first payment of Convertible
Preferred Stock dividends will be made in conjunction with the disbursement of
the Convertible Preferred Stock as soon as practicable after the Effective Date
and will be based on the accrual period of July 1, 1995 to the date the
Confirmation Order becomes a Final Order. This dividend payment will be made
in Cash. Thereafter, quarterly dividends will be paid in Cash (the first
quarter's payment being based on the accrual period beginning the day the
Confirmation Order becomes a Final Order and ending on the last day of the
quarter) to the holders of record on or about the 15th day of the month
following the end of each quarter, until one full year's dividends have been
paid in cash by Search following the Effective Date. After one (1) full year
of Cash dividends have been paid by Search, dividends will continue to be paid
entirely in Cash unless Search is prohibited from paying the dividends entirely
in Cash by Delaware law (the state of its incorporation ) or by the terms of
any loan agreement of $5,000,000 or more. If Search is prevented from paying a
dividend entirely in Cash, it will pay a dividend in the form of a mixture of
Cash and Common Stock to the extent possible under Delaware law and any
applicable loan agreement or, if necessary, entirely in Common Stock, provided
the average closing price of the Common Stock is $.50 or greater for the twenty
(20) trading day period ending five (5) days prior to the date of payment of
the Common Stock Dividend.
6.03 Conversion.
On any Conversion Date the Convertible Preferred Stock will convert to
Common Stock at the ratio of 2.0 shares of Common Stock for each 1.0 share of
Convertible Preferred Stock.
6.04 Mandatory Conversion.
Search may, at its option, call for the conversion, in whole or in
part, of up to one-half (50%) of the number of shares of Convertible Preferred
Stock issued as of the Effective Date under the following conditions: (i) the
Common Stock trades at $4.25 or higher on each of any twenty (20) trading days
in a period of thirty (30) consecutive trading days, beginning with the first
day following the second anniversary of the Effective Date and ending on the
third anniversary of the Effective Date, or (ii) the Common Stock trades at
$3.50 or higher on each of any twenty (20) trading days in a period of thirty
(30) consecutive trading days, beginning with the first day following the third
anniversary of the Effective Date and ending on the day immediately preceding
the Conversion Date. For purposes of this Section, the Common Stock price
shall be determined by using the closing bid price as reported by NASDAQ or
comparable national exchange. The conversion prices shall be subject to
adjustment in the same manner as the conversion rate is adjusted, as discussed
herein.
Any previously unconverted Convertible Preferred Stock (which shall be
a minimum of fifty percent (50%) of the Convertible Preferred Stock) shall be
convertible by Search on the seventh anniversary of the Effective Date. The
Convertible Preferred Stock shall be convertible into Common Stock at a
fraction which has as its denominator the market price of the Common Stock at
the time of conversion, and which has as its numerator the $3.50 liquidation
value of the Convertible Preferred Stock; provided, however, that in no event
shall the ratio so expressed be higher than 3 to 1.
Third Amended and Supplemented
Joint Plan of Reorganization
8
<PAGE> 9
Within thirty (30) days after any Conversion Date, Search will deliver
the new Common Stock certificates and pay all accrued and unpaid dividends on
the Convertible Preferred Stock.
6.05 Voluntary Conversion Rate.
At any time after the Effective Date but prior to the seventh
anniversary of the Effective Date, a holder of the Convertible Preferred Stock
may, upon written notice to Search and in compliance with the Certificate of
Designation and applicable laws, convert all or any portion of the Convertible
Preferred Stock then held at the ratio of two (2.0) shares of Common Stock for
each one (1.0) share of Convertible Preferred Stock. Within thirty (30) days
after voluntary conversion of any Convertible Preferred Stock, Search will
deliver the new Common Stock Certificates and pay any accrued but unpaid
dividends.
6.06 No Required Redemption.
Because Search is not obligated to redeem the Convertible Preferred
Stock, Search will not establish a redemption or sinking fund.
6.07 Board of Directors.
On the Effective Date, subject to the conditions of Article
5.02.B, and subject to any lenders' negotiated rights to appoint new board
members, the initial board of directors of Search shall consist of eight (8)
members, which shall include the six (6) current members of the Search board
and two (2) additional directors selected by Search from the nominees selected
by the Creditors' Committee. The duration of the terms of the new directors
shall be three (3) years for one of the two additional directors, and two (2)
years for the other. With the exception of the two additional directors
selected by the Creditors' Committee referred to above, all of the terms of the
directors shall remain as they presently exist, subject to the terms of
Search's amended charter and bylaws. The board of directors shall be
compensated under a plan providing for the payment to non-employee directors of
annual director fees and meeting fees and the reimbursement to all directors
for expenses incurred in attending meetings of the board of directors. The two
(2) new members of the board of directors nominated by the Creditors' Committee
shall be members of the three-member Compensation Committee for a one (1) year
period after the Effective Date. The Compensation Committee will have, among
its responsibilities, that of approving the issuance, granting terms and
conditions of all warrants, stock options, bonuses, and forms of compensation
for the officers and directors set forth in the Joint Plan or Joint Disclosure
Statement. To the extent necessary, Search will amend by the Effective Date
its charter and/or Bylaws so as to make the Compensation Committee's
determination as to the above binding on the whole Board of Directors for one
(1) year after the Effective Date.
6.08 Voting.
Each share of Convertible Preferred Stock shall be entitled to
exercise the same voting rights as each share of Common Stock and shall have
one vote per share.
6.09 Voting After Failure to Pay Dividends.
In addition to the foregoing voting rights, if Search fails to pay a
dividend on the Convertible Preferred Stock (i) in Cash for either of the first
two quarterly dividends following the Effective Date or (ii) in Cash or Stock
for any four consecutive quarters, the Convertible Preferred Stock shall
automatically be vested with an additional one vote per share, and the holders
of the Convertible Preferred Stock will be given the right to elect immediately
at an emergency meeting of shareholders which Search shall hold within thirty
(30) days after any such failure, such additional members as equals two-thirds
(2/3) of Search's Board of Directors determined after such election.
6.10 Supermajorities Required.
Prior to the seventh anniversary of the Effective Date, Search will
not, without the affirmative vote or consent of the holders of at least 66 2/3%
of all outstanding shares of Convertible Preferred Stock, voting as a single
class, (i) amend, alter or repeal any provision of the Certificate of
Designation, to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Convertible Preferred Stock
or (ii) effect any reclassification of the Convertible Preferred Stock (other
than by virtue of the mandatory conversion set forth above).
Third Amended and Supplemented
Joint Plan of Reorganization
9
<PAGE> 10
6.11 Merger and Sale.
Prior to the seventh anniversary of the Effective Date, Search will
not, without the affirmative vote or consent of holders of at least fifty
percent (50%) of all outstanding shares of Convertible Preferred Stock, voting
as a single class (i) merge with another company when thereafter Search is not
the controlling entity, or (ii) sell more than fifty percent (50%) of Search's
assets.
6.12 Liquidation Preference.
If Search is liquidated, the holders of Convertible Preferred Stock
will have a preference to receive liquidation proceeds (proceeds from the
disposition of assets less payment of all debts) in the amount of $3.50 per
share plus all accrued and unpaid dividends, if any.
6.13 Status With Relation to Subsequently-Issued Convertible
Preferred Stock Issues. Search may issue other convertible preferred
stock after the consummation of the Joint Plan. However, no other
preferred stock, whether or not convertible, may be issued in the future that
will be pari passu with the Convertible Preferred Stock unless at the time of
such issuance all dividends due the Convertible Preferred Stock have been paid
in full. In no event shall convertible preferred stock be issued which is
senior in rights to that of the Convertible Preferred Stock, other than that
such pari passu convertible preferred stock may carry the then-current market
interest rate, which may be higher or lower than that of the Convertible
Preferred Stock.
6.14 Status With Relation To Currently-Existing and Any Future
Preferred Issues. The Convertible Preferred Stock will be pari passu
with the existing 12% Preferred Stock and pari passu or
senior in rights to future issues of straight, convertible and all other forms
of preferred stock with the exception of the rate of interest for such future
issues of preferred stock, which shall be no greater than the prevailing market
rate for similar such issues.
6.15 Anti-Dilution.
Search shall be prohibited from issuing preferred or common stock or
warrants or any other form of security to an affiliate for consideration that
does not equal or exceed the fair market value of such security (as determined
by an independent third party); provided, that Search may issue options or
warrants to new or existing directors or management, so long as such warrants
or options are approved by the Compensation Committee of the Board of
Directors. Search may also issue Common Stock upon the exercise of warrants or
options presently outstanding; provided, that such warrants or options are not
amended or modified without the approval of the Compensation Committee. In the
event that Search issues any security not excepted above for consideration that
is less than the fair market value (as determined above) of such security, the
number of shares of Common Stock, Convertible Preferred Stock and Warrants
shall be immediately and appropriately adjusted (and the conversion price of
the Convertible Preferred Stock and the exercise price of Warrants shall be
adjusted downward on a full ratchet basis) to take into account the dilution in
value of the securities holdings of Noteholders caused by such below-market
issuance of Search's securities.
In addition, Search will not: (a) declare any cash or other form of
dividend on or with respect to any issue of common stock unless all dividends
on the Convertible Preferred Stock have been paid, nor (b) issue common stock
that is convertible into convertible or other preferred stock.
ARTICLE VII.
TREATMENT OF UNCLASSIFIED CLAIMS
7.01 Administrative Claims and Priority Tax Claims.
As provided in Section 1123(a)(1) of the Code, Administrative Claims
and Priority Tax Claims against the Debtors shall not be classified for
purposes of voting or receiving distributions under the Joint Plan. Rather,
all such Claims shall be treated separately as unclassified Claims.
Third Amended and Supplemented
Joint Plan of Reorganization
10
<PAGE> 11
7.02 Treatment of Administrative Claims.
All Administrative Claims against any of the Debtors shall be treated
as set forth in Sections 7.03 - 7.08 below:
7.03 Time for Filing Administrative Claims.
The holder of an Administrative Claim, other than (1) a Fee Claim, (2)
a liability incurred and paid prior to the Confirmation Date in the ordinary
course of business by the Debtors, (3) an Allowed Administrative Claim, or (4)
a Rejection Claim which must be filed in accordance with Article X of this
Joint Plan, must file with the Bankruptcy Court and serve on the Plan
Proponents and their counsel, notice of such Administrative Claim within five
(5) days prior to the Confirmation Hearing. Such notice must include at a
minimum: (1) the Debtor that is liable for the Administrative Claim, (2) the
name of the holder of the Administrative Claim, (3) the amount of the
Administrative Claim, and (4) the basis of the Administrative Claim. Failure
to file this notice timely and properly shall result in the Administrative
Claim being forever barred and discharged.
7.04 Procedure and Time for Filing Fee Claims.
Each professional hired pursuant to Section 330 of the Bankruptcy
Code, any indenture trustee or other entity (including attorneys, accountants,
investment bankers, brokers, consultants and other such persons for the Debtors
and the Creditors' Committee) that hold or assert a Fee Claim against the
Debtors that is for unpaid fees or unreimbursed expenses (including "success
fees") incurred by or agreed to be paid by the Debtors before the Effective
Date or arising from or in connection with the Bankruptcy Cases shall be
required to file with the Bankruptcy Court and serve on all parties required to
receive notice an estimate of such fees on or before the Confirmation Date and
a Fee Application on or before the date set for such filings by the Bankruptcy
Court. The failure to file timely the Fee Application as required by the
Bankruptcy Court shall result in the Fee Claim being forever barred and
discharged. To the extent necessary, entry of the Confirmation Order shall
amend and supersede any previously entered order of the Bankruptcy Court
regarding procedures for the payment of such Fee Claims.
7.05 Allowance of Administrative Claims.
An Administrative Claim with respect to which notice has been properly
filed pursuant to the Joint Plan shall become an Allowed Administrative Claim
if no objection is filed within thirty (30) days after the filing and service
of notice of such Administrative Claim. If an objection is filed within such
thirty (30) day period, the Administrative Claim shall become an Allowed
Administrative Claim only to the extent Allowed by Final Order. An
Administrative Claim that is a Fee Claim, and with respect to which a Fee
Application has been properly filed pursuant to the Joint Plan, shall become an
Allowed Administrative Claim only to the extent Allowed by Final Order.
Section 1129(a)(4) of the Code provides that any payment made or to be
made by the proponent, by the debtor, or by a person issuing securities or
acquiring property under the plan, for services or for costs and expenses in or
in connection with the case, or in connection with the plan and incident to the
case, must be approved by the court as reasonable. Pursuant to Section
1129(a)(4), Search will seek approval from the Bankruptcy Court of the
reasonableness of the fees and expenses to be paid to Search's professionals in
connection with these cases.
7.06 Payment of Allowed Administrative Claims.
Allowed Administrative Claims shall be paid in full, in cash, on the
Effective Date, or within fifteen (15) days after allowance of such Claim, if
entry of a Court order of allowance be necessary. Allowed Administrative Claim
for professional fees of the Debtors' and Creditors' Committee's counsel,
financial and other advisors shall be allocated among and remain the liability
of each Debtor in the ratio that the Present Value of the Notes of each Debtor
bears to the Present Value of the Notes of all Debtors. If, on the Effective
Date, a particular Debtor does not have enough cash to pay the professional
fees mentioned above, then the liability for such fees shall follow the Note
Collateral. Such fees shall then be paid out of the first amounts collected
from the Note Collateral and from Search, on a pro rata basis based upon the
percentages of Allowed Noteholder Secured Claims of each of the Debtors that
chooses the Collateral Option and the Search Equity Option under this Plan.
The Noteholders' Trust and the Collateral attributable to the Noteholders
having selected the Collateral Option shall not be liable for the fees,
incurred by Search's professionals, such as Alex. Brown & Sons, Brean Murray,
Foster Securities, or Akin Gump Strauss Hauer & Feld.
Third Amended and Supplemented
Joint Plan of Reorganization
11
<PAGE> 12
7.07 Priority Tax Claims.
Each holder of an Allowed Priority Tax Claim as to a particular Debtor
shall receive the amount of such holder's Allowed Claim in one cash payment in
full satisfaction of such holder's Allowed Claim upon the latest to occur of
(a) the Effective Date; (b) as soon as practicable after the tenth (10th)
business day after such Claim becomes an Allowed Claim; (c) the date that the
Allowed Claim becomes due and payable pursuant to the terms of the agreement
upon which such Allowed Claim is based or becomes due and payable under
applicable law, or (d) upon such other terms as may be agreed to by the holder
of such Allowed Claim and the Plan Proponents (or Search or the Noteholders'
Trustee as is appropriate if after the Effective Date). Search and the
Noteholders' Trustee reserve the right under Section 1129(a)(9)(C) of the Code
to extend the payment of Allowed Priority Tax Claims; provided, however, in
such event, that the holder of such Allowed Priority Tax Claim shall receive on
account of such Claim deferred cash payments, over a period not exceeding two
(2) years after the date of assessment of the tax, of a value, as of the
Effective Date of this Joint Plan, equal to the Allowed amount of such Claim.
7.08 Treatment of Fees and Expenses of Indenture Trustee.
The reasonable fees, costs and out-of-pocket expenses, including
attorneys' fees, of the Indenture Trustee, including without limitation such
fees, costs and expenses incurred prior to the Petition Date, are
Administrative Claims in the Case. Set forth in Section 2(G)(i)(b) of the
Disclosure Statement are the fees incurred as of the most recent available date
by the Indenture Trustee for the Notes of six (6) of the Debtors. Any dispute
regarding the reasonableness of any of such fees and expenses shall be
determined by the Bankruptcy Court at or prior to the Confirmation Hearing.
The treatment of the Indenture Trustee's fees and expenses as provided in this
Section 7.08 shall be in lieu of and in consideration of the respective
Indenture Trustee's lien rights (if any) under the applicable Trust Indenture.
ARTICLE VIII.
MEANS FOR EXECUTION AND CONSUMMATION OF THE JOINT PLAN
8.01 Amended Articles of Incorporation and Amended Charter.
Prior to the Effective Date, each Debtor that has Allowed Noteholder
Secured Claimants who elect the Search Equity Option will amend and restate its
Articles of Incorporation pursuant to either Article 4.14 of the Texas Business
Corporation Act or Section 303 of the Delaware General Corporation Law in order
to provide for the issuance of sufficient shares of Debtor's Common Stock to
satisfy the requirements of Article 4.03.B. above for which it will also have
obtained shareholder approval necessary under Delaware law. Prior to the
Effective Date, Search will amend its Charter to include a provision which is
consistent with the requirements of Section 1123(a)(6) of the Bankruptcy Code,
and to the extent necessary to implement any of the other provisions of this
Joint Plan.
8.02 Certificate of Designation.
Search's Board of Directors will file a Certificate of Designation
with the Secretary of State of the State of Delaware, containing the terms and
conditions of the Convertible Preferred Stock as set forth in Article VI.
8.03 Liquidation of Debtors.
As soon as possible after the transfer and assignment of the Debtors'
assets to the Noteholders' Trust, the Litigation Trust or Search, as the case
may be, Search shall cause each of the Debtors to be liquidated or dissolved.
8.04 Stock Exchange Listing.
Search will use commercially reasonable business efforts to cause the
Convertible Preferred Stock, Common Stock, and Warrants to be listed on NASDAQ
or another national stock exchange.
8.05 Plan Documents.
On or before five (5) days prior to the commencement of the
Confirmation Hearing, the Plan Proponents shall file the Plan Documents with
the Bankruptcy Court.
Third Amended and Supplemented
Joint Plan of Reorganization
12
<PAGE> 13
8.06 Condition to Distribution to Record Noteholders.
As a condition to receiving distributions provided for by this Joint
Plan in respect of the Notes, any record Noteholder shall be required to
surrender to the Plan Transfer Agent the Notes, certificates or other
instruments evidencing such holder's ownership of the Notes. All such
instruments surrendered shall be delivered to the Plan Transfer Agent
accompanied by completed letters of transmittal or otherwise in proper form.
Unless waived by Search or the Noteholders' Trustee, any person seeking the
benefits of being a record Noteholder who is unable to surrender the necessary
instrument shall supply, if required by Search or, if applicable, the
Noteholders' Trustee, an indemnity bond acceptable to Search, the Noteholders'
Trustee and the Plan Transfer Agent, which indemnity bond shall hold harmless
the Plan Proponents, the Noteholders Trustee, and the Plan Transfer Agent
acting from any damages, liabilities, or costs incurred in treating such person
as a record Noteholder, together with appropriate evidence of the destruction,
loss, or theft of such instrument. Thereafter, such person shall be treated as
the record Noteholder for purposes of this Joint Plan.
8.07 Means of Cash Payment.
Cash payments made pursuant to this Joint Plan shall be in U.S. funds,
by check drawn on a domestic bank, or, at the option of Search or the
Noteholders' Trustee, as the case may be, by wire transfer from a domestic
bank.
8.08 De Minimis Distributions.
No distribution of less than twenty-five dollars ($25.00) or fewer
than five (5) shares of Convertible Preferred Stock or Common Stock shall be
made to any holder of an Allowed Claim. The Allowed Claim producing such
distribution shall be canceled and discharged, and the de Minimis distribution
shall be retained by Search or the Noteholders' Trustee, as the case may be.
8.09 Post-Effective Date Fees and Expenses of Professional Persons.
Except as provided in this Section of the Joint Plan, after the
Effective Date, Search or the Noteholders' Trust, as the case may be, shall in
the ordinary course of business and without the necessity for any approval by
the Bankruptcy Court, pay the reasonable fees and expenses of the professional
persons employed by the Debtors, Search and the Creditors' Committee related to
implementation and consummation of the Plan provided, however, that no such
fees and expenses shall be paid except upon receipt by such respective entity
of a written notice, which invoice shall also be served upon counsel for the
Creditors' Committee, the Plan Proponents and the United States Trustee, from
the professional person seeking fee and expense reimbursement and provided,
further, however, that Search or another party-in-interest may, within ten
(10) days after receipt of an invoice for fees and expenses, request that the
Bankruptcy Court adjudicate the reasonableness and appropriateness of any such
request.
8.10 Time Bar to Cash Payments.
Checks issued in respect of Noteholders by the Noteholders' Trust or
Search shall be null and void if not negotiated within six (6) months after the
date of issuance thereof. Request for reissuance of any check shall be made
directly to the Noteholders' Trustee, or, if applicable, Search by the
Noteholder with respect to which such check originally was issued. Any claim
in respect of such a voided check shall be made on or before the later of the
second anniversary of the Effective Date or the date ninety (90) days after
such check becomes null and void pursuant hereto. After such date, all claims
in respect of void checks shall be discharged and forever barred.
8.11 Delivery of Distributions.
Subject to Bankruptcy Rule 9010, distributions to holders of Allowed
Claims shall be made at the address of each such holder as set forth on the
proofs of Claim or proofs of Interest filed by such holders (or at the last
known addresses of such a holder if no proof of Claim or proof of Interest is
filed or if the Debtors have been notified in writing of a change of address),
or in the case of Noteholders, may be made at the addresses contained in the
records of the Indenture Trustee, except as provided below. If any holder's
distribution is returned as undeliverable, no further distributions to such
holder shall be made unless and until Search, the Plan Transfer Agent, or the
Noteholders' Trustee is notified of such holder's then current address, at
which time all missed distributions shall be made to such holder without
interest. Amounts in respect of undeliverable distributions made through the
Plan Transfer Agent or through the Noteholders' Trustee shall be returned to
the Plan Transfer Agent or the Noteholders' Trustee making such
Third Amended and Supplemented
Joint Plan of Reorganization
13
<PAGE> 14
distribution until such distributions are claimed. All Claims for
undeliverable distributions shall be made on or before the later of second
anniversary of the Effective Date and the date ninety (90) days after such
Claim is Allowed. After such date, all unclaimed property shall revert to
Search or its successor or the Noteholders' Trustee and the Claim of any holder
with respect to such property shall be discharged and forever barred.
8.13 Cancellation of Notes.
In respect of Debtors whose Plans are confirmed, when the Confirmation
Order becomes a Final Order, the Notes for all such Debtors will be canceled.
8.14 Purchase of Stock by Hall Financial Group, Incorporated.
Under this Joint Plan, Hall Financial Group, Inc. ("HFG") will have
the option to purchase Search Common Stock, Convertible Preferred Stock, and
Warrants. HFG shall receive securities equal to those received by Noteholders
who elect the Search Equity Option as though it held Allowed Secured and
Allowed Unsecured Claims. The purchase price will be equal to an amount that
is 80% of the Present Value of the Notes that would have been entitled to such
shares and warrants under the Search Equity Option less an amount equal to
seven months of the accrued dividends attributable to the Convertible Preferred
Stock that is received by HFG. HFG shall be entitled to purchase an amount of
securities equating to up to a maximum of $6,000,000 in Present Value of Notes.
The proceeds of any shares so purchased will be paid to Search.
ARTICLE IX.
ESTABLISHMENT AND GOVERNANCE OF
THE CREDITORS' LITIGATION TRUST
9.01Establishment.
On the Effective Date, the Litigation Trust will be established for
the benefit of the holders of Allowed Unsecured Claims against those Debtors
for whom the Confirmation Order applies. The beneficial interests in the
Litigation Trust will be non-transferrable. The Litigation Trust will maintain
separate accounting records for each Class 9 through 16 and the holders of
Allowed Unsecured Claims within each such Class, who will hold Class A
Beneficial Interests (as defined in the Litigation Trust Agreement). In
addition, the Litigation Trust shall keep separate accounting records for all
Noteholders who by default or in accordance with the procedures set forth in
the Ballot assign their individual causes of action to the Litigation Trust
(the "Assigning Noteholders"), who will hold Class B Beneficial Interests (as
defined in the Litigation Trust Agreement). The terms of the Litigation Trust
shall be as set forth in the Litigation Trust Agreement which will be filed
with the Bankruptcy Court as a Plan Document prior to Confirmation. The
Litigation Trust is intended to be a grantor trust for federal income tax
purposes. After the Effective Date, the Litigation Trust shall be maintained in
accordance with this Joint Plan and the Litigation Trust Agreement.
9.02 Title.
On and after the Effective Date, title to the assets of the Litigation
Trust, including those described in Section 9.04 herein, shall be transferred
by the Debtors and the Assigning Noteholders to and vested in the Litigation
Trustee for the benefit of the beneficiaries of the Litigation Trust on the
Confirmation Date.
9.03 Funding.
The Litigation Trust shall be established with a total funding of
$350,000. For purposes of funding or cost allocation, this sum shall be
prorated among the eight (8) Debtors, in a ratio that each Debtor's Allowed
Unsecured Claims bears to all Debtor's Allowed Unsecured Claims, or if required
by the Creditors' Committee, estimated under Section 502 of the Code, as the
Unsecured Claims for each. No distribution shall be made to the beneficiaries
of the Litigation Trust attributable to particular Debtors, until such
allocated costs have been first recovered from the proceeds of litigation
attributable to such Debtor and/or its particular Noteholders.
9.04 Preservation and Assignment of Causes of Action.
Each Debtor will transfer and assign, to the extent permitted by
applicable law, all rights and causes of action pursuant to (a) Section 502 of
the Bankruptcy Code; (b) preference claims pursuant to Section 547 of the
Bankruptcy Code; (c) fraudulent transfer claims pursuant to Section 548 of the
Bankruptcy Code; (d) all other claims and causes of action of each Debtor
against any Person to the Litigation Trust ("Estate Claims") as of the
Effective Date.
Third Amended and Supplemented
Joint Plan of Reorganization
14
<PAGE> 15
Accordingly, the Estate Claims shall be preserved, transferred and assigned to,
and vested in, the Litigation Trust for all purpose as of that date. Subject
in all respects to the following limitations, the respective Litigation Trust
will be authorized to prosecute, settle and collect the Estate Claims on behalf
of each Debtor. The Litigation Trust may also hold, prosecute, settle and
collect causes of action which may be the property of Noteholders ("Individual
Claims"), but only to the extent that such claims are assigned to the Trust
pursuant to the procedure contained in the ballot for voting on the Joint Plan
or by default by such Noteholder failing to submit a Ballot or properly execute
the Non-Assignment Election provided for on the Ballot. The Litigation
Trustee, in its sole discretion, may pursue such causes of action and without
further order of the Bankruptcy Court take all actions in connection with the
prosecution, defense, compromise and settlement thereof. In such connection,
the Litigation Trustee may retain such counsel, accountants or other
professionals deemed necessary in connection therewith. All proceeds of
recoveries, if any, received from or in respect of the causes of action
(whether by settlement, judgment, or otherwise) shall, after payment of all
related reasonable professional and experts fees, become and be distributed to
the Noteholders of the respective Debtor, Pro Rata, for whom such settlement,
judgment or other form of recovery was obtained.
9.05 Assignment of Causes of Action.
On the Effective Date, Noteholders, on the Record Date will in their
Ballots for voting on the Joint Plan assign to the Litigation Trust any
pre-petition Claims or causes of action such Noteholders may hold as of the
Record Date against any Persons, including, but not limited to, the Debtors,
Search, their respective current or former directors, officers, and
professionals, or other third parties, including, but not limited to, financial
institutions and third party professionals arising from or relating to such
holder's status as a Creditor of the Debtors on account of a financial
transaction, such Noteholder's transactions with the Debtors, or such
Noteholder's purchase or sale of any portion of the Notes, or which arise
pursuant to the terms of the respective Indenture Agreement or Memorandum under
which such Notes were issued.
A Noteholder may elect not to assign his Individual Claims to the
Litigation Trust by checking the Non-Assignment Election on the Ballot.
Absent checking the Non-Assignment Election on the Ballot, including if a
Noteholder does not return a Ballot, the Noteholder will be deemed to have
chosen to assign his Individual Claims to the Litigation Trust. In the event a
Noteholder does not return a Ballot, the Confirmation Order shall be deemed the
operative document for assignment of such Noteholder's Individual Claims.
9.06 Interim Trustee.
To the extent Debtors' counsel and the Creditors' Committee agree and
notify the Bankruptcy Court of same, that discussions regarding the resolution
or liquidation of certain Trust Assets (causes of action) are susceptible to
imminent resolution, the appointment of a permanent Litigation Trustee may be
deferred for a period of ninety (90) days. During such ninety (90) day period,
the Assignments discussed in Sections 9.04 and 9.05 above shall be effective
and the Interim Trustee shall have the full authority that the Litigation
Trustee would have to settle or pursue causes of action subject to Bankruptcy
Court approval of the same. Accordingly, the Interim Trustee shall be fully
indemnified and upon resignation of the Interim Trustee at the end of or during
the ninety (90) day period be fully released from any and all liability or
potential claims against same.
9.07 Hiatus.
During the first year following the Effective Date, the Litigation
Trust will have the authority to commence discovery or suit with respect to any
Estate Claim or an Individual Claim assigned to the Litigation Trust against
any party only in the event that such party is (i) requested to execute an
agreement which tolls for the one year after the Effective Date any applicable
statue of limitations and (ii) refuses to execute or fails to return an
executed copy of such tolling agreement to the Litigation Trust within ten (10)
days after such tolling agreement is provided to such party.
9.08 Termination.
The Litigation Trust will automatically terminate and be subject to
liquidation and asset distribution if the Common Stock trades at an average
price of $2.50 per share for thirty (30) consecutive trading days during the
first year following the Effective Date. For purposes of this section, the
Common Stock price shall be determined by using the closing bid price as
reported by NASDAQ or other comparable national securities exchanges. Should
the foregoing not occur, the Litigation Trust will terminate on the date which
is five (5) years following the Effective Date.
9.09 Accounting.
Within 120 days after the end of each calendar year after the
Effective Date, the Litigation Trustee shall prepare with respect to the
preceding year (or part thereof) an accounting of its proceedings as Litigation
Trustee in a form acceptable for filing and settlement in the courts of the
State of Texas. Unless the Litigation Trust has terminated during the first
year following the Effective Date pursuant to Section 9.08 above, the
Litigation Trustee shall give the beneficiaries a copy of such accounting.
Third Amended and Supplemented
Joint Plan of Reorganization
15
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<PAGE> 17
ARTICLE X.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
10.01 General Treatment: Rejected.
Unless a Debtor, with the consent of the Creditors' Committee, files
an application to accept a particular executory contract or unexpired lease ten
(10) days prior to the Confirmation Date, all executory contracts or unexpired
leases for any Debtors shall be deemed rejected as of the Confirmation Date.
Except as provided below, servicing contracts between a Debtor and Search
Capital or one of its subsidiaries, including Auto Credit Acceptance
Corporation, Inc. ("ACAC"), for servicing the Noteholders' Collateral shall be
rejected or deemed rejected within the meaning of Section 365 of the Code as of
Confirmation. In the case of Noteholders selecting the Collateral Option, ACAC
shall continue to service the respective noteholders' collateral, if requested
by the Noteholders' Trustee, until it can be sold to the highest bidder or a
New Servicer becomes substantially operational in accordance with Section
5.02.A. of the Joint Plan. In that situation, the Noteholders' Trustee shall
compensate ACAC in accordance with Section 5.02.A. until the respective
Noteholders' Collateral is either sold or servicing rights transferred to the
New Servicer.
10.02 Indemnity Contracts.
To the extent that it is deemed an executory contract for purposes of
the Bankruptcy Code, any contract whereby any of the Debtors have agreed to
indemnify the other party to such contract upon the occurrence of an event
specified in such contract shall be, if not otherwise previously rejected be
deemed to be rejected, on the Confirmation Date. Such rejection shall
constitute a breach of the indemnity agreement and the other party to such
indemnity agreement shall be entitled to assert an Unsecured Claim against the
applicable Debtor.
10.03 Bar Date For Rejection Claims.
Rejection Claims must be filed within ten (10) days after the earlier
of the entry of the Confirmation Order or, if applicable, entry of a Final
Order rejecting such executory contract or unexpired lease within the meaning
of Section 365 of the Code.
ARTICLE XI.
RELEASE AND BINDING EFFECT
11.01 Discharge and Release of Claims Against and Interest In
Debtors.
Any consideration distributed under the Joint Plan shall be in
exchange for and in complete satisfaction, discharge, and release of all Claims
of any nature whatsoever against the Debtors or any of their assets or
properties; and, except as otherwise provided herein, upon the Effective Date,
the Debtors shall be deemed discharged and released to the extent permitted by
Section 1141 of the Bankruptcy Code from any and all Claims, including but not
limited to demands and liabilities that arose before the Effective Date, and
all debts of the kind specified in Section 502(g), 502(h), or 502(i) of the
Bankruptcy Code, whether or not (a) a proof of Claim based upon such debt is
filed or deemed filed under Section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is allowed under Section 502 of the Bankruptcy Code; or
(c) the holder of a Claim based upon such debt has accepted the Plan. Except
as provided herein, the Confirmation Order shall be a judicial determination of
discharge of all liabilities of the Debtors. As provided in Section 524 of the
Bankruptcy Code, such discharge shall void any judgment against the Debtors at
any time obtained to the extent it relates to a Claim discharged, and operates
as an injunction against the prosecution of any action against the Debtors, or
the property of any of them, to the extent it relates to a Claim discharged.
11.02 Release by Claimants and Interest Holders.
Neither the Debtors, the Creditors' Committee, Search, the Interim
Trustee (should one be appointed) nor any of their respective members,
officers, directors, employees, agents, or professionals shall have or incur
any liability to any holder of a Claim or Interest for any act, event, or
omission in connection with, or arising out of, the Chapter 11 Cases (including
the activities and deliberations of the Creditors' Committee), the confirmation
and consummation of the Joint Plan, or the administration of the Joint Plan or
the property to be distributed under the Joint Plan, except for willful
misconduct or gross negligence.
Third Amended and Supplemented
Joint Plan of Reorganization
16
<PAGE> 18
11.03 Mutual Release Among the Principal Parties to the
Reorganization.
The Debtors, Search, members of the Creditors' Committee, and their
affiliates, directors, officers, employees, attorneys, agents, financial
advisors, or other representatives, and any or all of their assigns, shall be
mutually released and discharged each from the others upon Confirmation from
any and all post-petition claims arising in connection with the Chapter 11
Cases.
11.04 Injunction.
The Confirmation Order will provide, among other things, that all
persons who have held, hold, or may hold Claims against or Interests in the
Debtors are permanently enjoined, on and after the Effective Date from:
o commencing or continuing in any manner any action or other
proceeding of any kind against the Debtors or their former
assets,
o the enforcement, attachment, collection or recovery by any
manner or means of any judgment, award, decree or order
against the Debtors or their former assets,
o creating, perfecting or enforcing any encumbrance of any kind
against the Debtors or their former assets,
o asserting any right of setoff, subrogation, or recoupment of
any kind against any obligation due, against the Debtors, and
any or all of their assigns; no such enjoined act may be based
upon any act, event, or omission in connection with, or
arising out of, the confirmation of the Joint Plan or the
conduct of these Chapter 11 Cases generally (including the
activities and deliberations of the Creditors' Committee) and
the consummation of the Joint Plan, or the administration of
the Joint Plan or the property to be distributed under the
Joint Plan, except for willful misconduct or gross negligence.
11.05 Contribution Bar.
The Confirmation Order shall constitute an order forever barring
Claims for contribution, reimbursement, subrogation or indemnity against the
Debtors, or the Litigation Trust and their successors by any holder of an
indemnity Claim or any Person or entity who was named as a defendant, who could
have been named as a defendant, or who otherwise may claim contribution,
reimbursement, subrogation and indemnity rights in the future against a Debtor
in connection with the facts and Claims asserted, or that could have been
asserted within the scope of any lawsuit that was pending or could have been
pending on the Effective Date.
ARTICLE XII.
PROCEDURES FOR RESOLVING AND TREATING CONTESTED
AND DISPUTED CLAIMS UNDER THE JOINT PLAN
12.01 Objection Deadline.
As soon as practicable, but in no event later than thirty (30) days
after the Effective Date, unless otherwise ordered by the Bankruptcy Court,
objections to Claims shall be filed with the Bankruptcy Court and served upon
the holders of each of the Claims to which objections are made.
12.02 Prosecution of Objections.
On and after the Effective Date, except as the Bankruptcy Court may
otherwise order, the filing, litigation, settlement, or withdrawal of all
objections shall be the responsibility of the Creditors' Committee, if
applicable, or the Litigation Trustee.
12.03 No Distributions Pending Allowance.
Notwithstanding any other provision of the Joint Plan, no payment or
distribution shall be made with respect to any Claim to the extent it is a
Disputed Claim unless and until such Disputed Claim becomes an Allowed Claim.
Third Amended and Supplemented
Joint Plan of Reorganization
17
<PAGE> 19
12.04 Withholding of Allocated Distributions.
Search or the Noteholders' Trustee, as the case may be, shall withhold
from the property to be distributed on the Effective Date under the Joint Plan
amounts sufficient to be distributed on account of Claims that are not Allowed
Claims, other than Administrative Claims, Priority Non-Tax Claims and Priority
Tax Claims, as of the Effective Date. Such withheld amounts shall be held by
the Plan Transfer Agent, Search or the Noteholders' Trustee, as the case may
be, until the Claim is Allowed.
ARTICLE XIII.
RETENTION OF JURISDICTION
13.01 The Court shall retain jurisdiction over this case after
Confirmation for the following purposes:
A. To determine all controversies relating to or concerning the
classification, allowance or satisfaction of Claims;
B. To liquidate all disputed, contingent or unliquidated Claims;
C. To determine any and all applications for the rejection or
assumption and/or assignment, as the case may be, of executory
contracts and unexpired leases to which any of the Debtors are
party or with respect to which any of the Debtors may be
liable, and to determine and, if necessary, to liquidate, any
and all Claims arising therefrom;
D. To determine any and all applications, adversary proceedings,
and contested or litigated matters properly before the Court,
including, without limitation, any proceeding commenced for
the purpose of avoiding, recovering or preserving for the
benefit of the estate any transfer of property, obligation
incurred by the Debtor, lien or setoff,
E. To determine any dispute arising under this Joint Plan and to
make such orders as are necessary or appropriate to carry out
the provisions of this Joint Plan;
F. To grant extensions of any deadlines set herein;
G. To hear and determine all requests for compensation and/or
reimbursement of expenses which may be made after
Confirmation; provided, however, this paragraph shall not be
construed as limiting the Debtors' ability to pay their
attorneys and other professionals for services performed after
the Confirmation Date, including services performed in
connection with this Case;
H. To enforce all provisions of the Confirmation Order and this
Joint Plan;
I. To modify this Joint Plan; and
J. To hear and determine all issues with respect to the accounts,
if any, filed by the Noteholders Trustee and the Litigation
Trustee.
K. In addition, and at any time, the Court may make such orders
or give such direction as may be appropriate under Sections
105 or 1142 of the Bankruptcy Code.
L. If the need arises, to enforce the rights of Noteholders to
receive cash dividends and elect a supermajority of board of
directors under the terms of the Joint Plan.
Third Amended and Supplemented
Joint Plan of Reorganization
18
<PAGE> 20
M. To enter and implement such orders as may be appropriate in
the event the Confirmation Order is for any reasons stayed,
revoked, modified, reversed, or vacated;
N. To enter and implement such orders as may be necessary or
appropriate to execute, interpret, implement, consummate, or
enforce the Joint Plan and the transactions contemplated
thereunder;
O. To consider any modification of the Joint Plan pursuant to
Section 1127 of the Bankruptcy Code, to cure any defect or
omission, or reconcile any inconsistency in any order of the
Bankruptcy Court, including, without limitation, the
Confirmation Order;
P. To recover all assets of the Debtors and property of the
estates, wherever located;
Q. To hear and determine matters concerning state, local, and
federal taxes in accordance with Sections 346, 505, and 1146
of the Bankruptcy Code;
R. To hear and determine any other matter not inconsistent with
the Bankruptcy Code and title 28 of the United States Code
that may arise in connection with or related to the Plan;
S. To approve any settlements reached by the Interim Trustee; and
T. To enter a final decree closing the Chapter 11 Cases.
ARTICLE XIV.
MISCELLANEOUS
14.01 Satisfaction of All Claims.
Various classes of Claims are defined in this Joint Plan. This Joint
Plan is intended to satisfy all Claims against each Debtor of whatever
character, whether or not contingent or liquidated, and whether or not Allowed
Claims. Only Allowed Claims will be entitled to receive the treatment afforded
by this Joint Plan.
14.02 Time for Filing Claims.
All Creditors, other than creditors having Administrative Claims or
Rejection Claims will be required to file proofs of claim, if necessary, by the
Bar Date. Rejection Claims must be filed in accordance with Article X of this
Joint Plan. Administrative Claims, other than those made pursuant to Section
330 of the Bankruptcy Code, must be filed within five (5) days before the
Confirmation Hearing. Any Administrative Claim not filed by the time specified
will be barred.
14.03 Modifications to the Joint Plan.
This Joint Plan may be modified or corrected with the consent of
Search, the applicable Debtor and the Creditors' Committee and as permitted by
the Bankruptcy Code prior to Confirmation, including in accordance with
Bankruptcy Rule 3019, without notice and hearing and without additional
disclosure pursuant to Section 1125 of the Bankruptcy Code provided that the
Court finds, in accordance with Section 1127(b) of the Bankruptcy Code, that
such modification does not adversely affect any Creditor or class of Creditors
or equity owner or make modifications to remedy any defect or omission or
reconcile any inconsistencies in the Joint Plan in such a manner as may be
necessary to carry out the purposes and intent of the Joint Plan.
14.04 Discontinuation of Creditors' Committee.
The Creditors' Committee shall cease to exist upon the earlier to
occur of (a) 90 days after the Effective Date or (b) Substantial Consummation
of the Joint Plan. Neither Search nor the Noteholders' Trust shall be
obligated to pay fees to the Creditors' Committee's professionals for services
rendered or costs incurred ninety days after the Effective Date.
14.05. Events of Default..
Third Amended and Supplemented
Joint Plan of Reorganization
19
<PAGE> 21
In the event of a default under the provisions of the Joint Plan (as
opposed to a default under documentation executed in implementing the terms of
the Joint Plan, which documents shall provide independent basis for relief),
any Creditor or party in interest desiring to assert such a default shall
provide the Debtors and the Noteholders' Trustee with written notice of the
alleged default. Search, or if applicable, the Noteholders' Trustee shall have
ten (10) business days from receipt of the written notice in which to cure the
default. Such notice shall be delivered by certified mail, return receipt
requested to Search, or if applicable, the Noteholders' Trustee and its
counsel. If the default is not cured, any Creditor or party in interest may
thereafter file and serve upon Search, or if applicable, the Noteholders'
Trustee and their respective counsel provided in the Confirmation Order, a
Motion to Compel in compliance with applicable provisions of the Joint Plan.
The Bankruptcy Court, upon finding a material default, shall issue such orders
compelling compliance with the pertinent provisions of the Joint Plan.
An event of default will be deemed to have occurred if distributions
of the Convertible Preferred Stock and Common Stock are not timely made to
holders of Allowed Noteholders Secured Claims who have been requested by Search
to tender and have, in fact, tendered their Notes to the Plan Transfer Agent
and if the Warrants are not distributed within ninety (90) days of the
Effective Date.
14.06. Securities Law Matters.
It is an integral and essential element of this Joint Plan that the
issuance to holders of Allowed Claims and to Hall Financial Group, Inc. of the
Convertible Preferred Stock, Common Stock, and Warrants pursuant to this Joint
Plan, and the subsequent exercise of Warrants by such holders or transferees to
purchase the Common Stock issuable hereunder, or conversion of Convertible
Preferred Stock into Common Stock issued hereunder shall be exempt from
registration under the Securities Act of 1933, as amended, pursuant to Section
1145 of the Bankruptcy Code. Any such securities issued to an "affiliate" of
Search within the meaning of the Securities Act of 1933 or any person Search
reasonably determines to be an "underwriter", and which does not agree to
resell such securities only in "ordinary trading transactions", within the
meaning of Section 1145(b)(1) of the Bankruptcy Code shall be subject to such
transfer restrictions and bear such legends as shall be appropriate to ensure
compliance with the Securities Act of 1933. It is an integral and essential
element of the Joint Plan that Rule 144 under the Securities Act of 1933 be
available to any such "affiliate" that is not otherwise such an "underwriter"
for purposes of permitting resales of such securities.
14.07 Due Authorization.
Each and every Noteholder who elects to participate in the
distributions provided for in this Joint Plan warrants that such Noteholder is
authorized to accept, in consideration of its Claims against the Debtor, the
distributions provided for in this Joint Plan, and that there are no
outstanding commitments, agreements, or understandings, express or implied,
that may or can in any way defeat or modify the rights conveyed, or obligations
undertaken, by such holder of a Claim under this Joint Plan.
14.08 Cancellation of Indentures and Memoranda.
On the Effective Date, the Indenture Agreements and Memoranda for each
Debtor shall, except as otherwise provided in the Joint Plan, be deemed
canceled, terminated, and of no further force or effect pursuant to Section
1123(a)(5)(F) of the Bankruptcy Code. Except as otherwise provided, such
cancellation of the Indenture Agreements and Memoranda shall extinguish the
rights of the Indenture Trustee to assert liens against the distributions to
the holders of Allowed Noteholder Claims for unpaid fees and expenses, as set
forth in the indentures and memoranda. The cancellation of the Indenture
Agreements and Memoranda, and surrender of instruments pursuant to Section 8.06
of the Joint Plan shall extinguish the right of any Noteholder to commence any
cause of action against any person for principal and interest. Subject to the
foregoing, neither the cancellation of the Indenture Agreements or Memoranda,
nor the surrender of Note instruments pursuant to Section 8.06 of the Joint
Plan shall in any way affect individual causes of action assigned to the
Litigation Trust or of a holder electing not to have such causes of action
assigned to the Litigation Trust pursuant to Section 9.05 of the Joint Plan. A
"Yes" vote for the Joint Plan may, if the Joint Plan is confirmed for the
applicable Debtor, be considered a vote to amend the applicable Indenture
Agreement or Memorandum, if such is deemed by the Plan Proponents and the
Creditors' Committee to be needed to implement either the Search Equity Option
and/or the Collateral Option.
Third Amended and Supplemented
Joint Plan of Reorganization
20
<PAGE> 22
14.09 Fees Payable to the United States Trustee.
All fees payable pursuant to Section 1930 of Title 28 of the United
States Bankruptcy Code, as determined by the Bankruptcy Court at the
Confirmation Hearing, shall be paid on or before the Effective Date.
14.10 Transfer Taxes.
The issuance, transfer or exchange of any new note or stock instrument
issued under, or the transfer of any other assets or property pursuant to this
Joint Plan or the Plan Documents, or the making or delivery of an instrument of
transfer under this Joint Plan or the Plan Documents, shall not (and the
Confirmation Order shall so order), under Section 1146 of the Bankruptcy Code,
be taxed under any law imposing a stamp tax, transfer tax or other similar tax.
14.11 Governing Law.
Unless a rule of law or procedure is supplied by federal law
(including the Bankruptcy Code and Bankruptcy Rules), or the Texas General
Corporation Law, Delaware General Corporation Law, or the law of the
jurisdiction of organization of any entity, the internal laws of the State of
Texas shall govern the construction and implementation of the Joint Plan and
any agreements, documents, and instruments executed in connection with the
Joint Plan or the Chapter 11 Cases, including the Plan Documents, except as may
otherwise be provided in such agreements, documents, instruments, and Plan
Documents.
14.12 Severability.
SHOULD THE BANKRUPTCY COURT DETERMINE THAT ANY PROVISION OF THE JOINT
PLAN IS UNENFORCEABLE EITHER ON ITS FACE OR AS APPLIED TO ANY CLAIM OR EQUITY
INTEREST OR TRANSACTION, THE PLAN PROPONENTS MAY MODIFY THE JOINT PLAN, WITH
THE CREDITORS' COMMITTEE'S CONSENT, SO THAT SUCH PROVISION SHALL NOT BE
APPLICABLE TO THE HOLDER OF ANY CLAIM OR EQUITY INTEREST. SUCH A DETERMINATION
OF UNENFORCEABILITY SHALL NOT (1) LIMIT OR AFFECT THE ENFORCEABILITY AND
OPERATIVE EFFECT OF ANY OTHER PROVISION OF THE JOINT PLAN OR (2) REQUIRE THE
RESOLICITATION OF ANY ACCEPTANCE OR REJECTION OF THE JOINT PLAN.
Third Amended and Supplemented
Joint Plan of Reorganization
21
<PAGE> 23
Respectfully submitted this 22nd day of December, 1995.
AUTOMOBILE CREDIT FINANCE, INC., et al., Debtors
By: /s/ Robert Idzi
------------------------------
Title: SVP & CFO
---------------------------
and
/s/ Micheal R. Rochelle
---------------------------------
Their Counsel
Michael R. Rochelle
Stephen T. Hutcheson
Rochelle & Hutcheson
2929 Carlisle, Suite 222
Dallas, TX 75204
(212) 953-0182
COUNSEL FOR THE DEBTORS
and
SEARCH CAPITAL GROUP, INC., Joint Plan Proponent
By: /s/ Robert Idzi
------------------------------
Title: SVP & CFO
---------------------------
and
/s/ Joe B. Dorman (By permission)
---------------------------------
Joe B. Dorman
State Bar No.06003500
Senior Vice President & General Counsel
Search Capital Group
700 N. Pearl Street, Ste. 400
Dallas, Texas 75201
(214) 965-6007 (tel)
(214) 965-6098 (fax)
COUNSEL FOR SEARCH CAPITAL GROUP, INC.
Third Amended and Supplemented
Joint Plan of Reorganization
22
<PAGE> 24
APPENDIX 1
DEFINITIONS
Ground Rules
INTERPRETATION: Unless otherwise specified, all section, article, and exhibit
references in this Joint Plan are to the respective section in, article of, or
exhibit to, this Joint Plan, as the same may be amended, waived or modified
from time to time. The headings in this Joint Plan are for convenience of
reference only and shall not limit or otherwise affect the provisions of this
Joint Plan. Any reference in this Joint Plan to an existing document or
instrument means such document or instrument as it may have been amended,
modified, or supplemented from time to time. As contextually appropriate, each
term stated in either the singular or plural shall include both the singular
and the plural. The words herein, hereof, hereto, hereunder, and others of
similar import refer to this Joint Plan as a whole and not to any particular
section, subsection, or clause contained in this Joint Plan.
RULES OF CONSTRUCTION: The rules of construction set forth in Section
102 of the Bankruptcy Code shall apply to this Joint Plan. In computing any
period of time prescribed or allowed by this Joint Plan, the provisions of
bankruptcy Rule 9006(a) shall apply.
JOINT PLAN DOCUMENTS: The Plan Documents and the Appendices hereto
are incorporated into and are a part of the Joint Plan as if set forth in full
herein.
Definitions
a. "ADMINISTRATIVE CLAIM OR CLAIMS" means a request for payment of an
administrative expense under Section 503(b) of the Code that, if
allowable, would be entitled to priority under Section 507 (a) (1) of
the Code.
b. "ALLOWED" with respect to a Claim means to which (a) the Debtor has not
scheduled as disputed, contingent or unliquidated, (b) no party in
interest, including the Debtor, has made an objection or (c), if an
objection has been made, a Final Order has been entered by the
Bankruptcy Court under Section 502 of the Code allowing in whole or in
part such Claim. A Disputed Claim is not an Allowed Claim. This
definition should be equally applicable when used in conjunction with
any other defined terms, including Administrative Claim, Noteholder
Claims and Unsecured Claim.
c. "ACF-1991" means Automobile Credit Fund 1991-III, Inc.
d. "ACF" means Automobile Credit Finance, Inc.
e. "ACP" means Automobile Credit Partners, Inc.
f. "ACF-1992" means Automobile Credit Finance 1992-II Inc.
g. "ACF-III" means Automobile Credit Finance III, Inc.
h. "ACF-IV" means Automobile Credit Finance IV, Inc.
i. "ACF-V" means Automobile Credit Finance V, Inc.
j. "ACF-VI" means Automobile Credit Finance VI, Inc.
k. "BALLOT" means the official documents recording the votes of Creditors
on this Joint Plan which are sent out as part of the Disclosure
Statement package.
Third Amended and Supplemented
Joint Plan of Reorganization
23
<PAGE> 25
l. "BALLOTING AGENT" means that entity selected by the Debtors to receive
and tabulate the Ballots.
m. "BANKRUPTCY CODE" OR "CODE" means, Title I of the Bankruptcy Reform Act
of 1978, Pub. L. No. 95598, 92 stat 2549 (1978), as amended and as set
forth in 11 U.S.C. Sections 101-1330.
n. "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy Procedure,
Title 11, United States Code, and the related Federal Rules of Evidence.
o. "BAR DATE" means the date of the meeting of creditors and equity
security holders held pursuant to Rule Section 341 of the Code by which
all Creditors, other than creditors having Administrative Claims or
Rejection Claims, will be required to file proofs of claim.
p. "CASE OR CASES" means one or more of these Chapter 11 Cases pending
before the Court.
q. "CERTIFICATE OF DESIGNATION" means the document filed and approved by
the Secretary of State of Delaware which sets forth the terms and
conditions governing the Convertible Preferred Stock issued by Search
and authorizing the issuance of the Convertible Preferred Stock. The
terms of the Certificate of Designation shall be consistent with Article
VI of the Joint Plan.
r. "CHAPTER 11 OR CHAPTER 11 OF THE BANKRUPTCY CODE" means a business
reorganization under Chapter 11 of the Code.
s. "CHAPTER 11 CASE OR CASES" means, collectively, the case under chapter
11 of the Code concerning the Debtor or jointly or severally, the cases
under chapter 11 of the Code concerning the Debtors.
t. "CLAIM OR CLAIMS" means, (a) a right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured; or (b) a right to an equitable remedy for breach
of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured.
u. "CLAIMANT"means the holder of a Claim.
v. "COLLATERAL CONSULTANT" means an individual with experience in valuing
note paper of the sort which constitute the Loans, who shall select and
equitably divide the Note Collateral between Search and the Noteholders'
Trust, with such division to be agreed upon by Search and the
Noteholders' Trust.
w. "COMMON STOCK" means, the stock of Search, last to share in property of
Search on dissolution, representing the residual ownership $.01 par
value common stock of Search which is to be issued pursuant to the terms
of the Joint Plan and the Confirmation Order.
x. "COMMON STOCK DIVIDEND" means a dividend consisting of Common Stock that
is paid to holders of the Convertible Preferred Stock. The number of
shares of Common Stock issued in payment of Common Stock Dividends will
be determined by dividing the accrued Convertible Preferred Stock
dividend payable in Common Stock by the average closing price of the
Common Stock for the 20 trading day period ending 5 trading days prior
to the payment of such dividend.
y. "COMMON STOCK PORTION" means 20% of the Present Value of the Notes. The
Common Stock Portion for each Debtor is:
Third Amended and Supplemented
Joint Plan of Reorganization
24
<PAGE> 26
<TABLE>
<CAPTION>
DEBTOR AMOUNT
- ------ ------
<S> <C>
ACF-1991 36,659
ACF 86,977
ACP 44,427
ACF-1992 1,336,170
ACF-III 1,803,494
ACF-IV 1,209,273
ACF-V 2,870,834
ACF-VI 1,485,574
</TABLE>
z. "CONFIRMATION" means the confirmation of the Joint Plan by the
Bankruptcy Court pursuant to Section 1129 of the Code.
aa. "CONFIRMATION DATE" means the date and time the Confirmation Order is
entered on the Bankruptcy Court's docket.
bb. "CONFIRMATION HEARING" means the hearing at which the Bankruptcy Court
confirms the Joint Plan.
cc. "CONFIRMATION ORDER" means the order of the Bankruptcy Court confirming
the Plan pursuant to Section 1129 of the Bankruptcy Code.
dd. "CONVERTIBLE PREFERRED STOCK" means the preferred stock of Search as is
more fully described in Article VI of the Joint Plan.
ee. "CONVERSION DATE" means either (a) the seventh anniversary of the
Effective Date, or (b) earlier, as provided in Section 6.04.
ff. "COURT" means United States Bankruptcy Court Northern District of Texas
at Dallas, having primary jurisdiction over the Cases and any other
court having appellate jurisdiction over the Cases.
gg. "CREDITOR OR CREDITORS" means a person or entity holding a claim against
the Debtors as defined in Section 101 (10) of the Code.
hh. "CREDITORS' COMMITTEE" means the committee appointed by the United
States trustee pursuant to Section 1102 of the Code
ii. "DEBTOR OR DEBTORS" means any of the following: Automobile Credit Fund
1991-III, Inc., Automobile Credit Finance, Inc., Automobile Credit
Partners, Inc., Automobile Credit Finance 1992-II, Inc., Automobile
Credit Finance III, Inc., Automobile Credit Finance IV, Inc., Automobile
Credit Finance V, Inc., and Automobile Credit Finance VI, Inc., and
collectively, "DEBTORS" means any two or more of the above.
jj. "DEBTOR'S COMMON STOCK" means the $.01 par value of each Debtor's Common
Stock to be issued pursuant to the Joint Plan and the Confirmation
Order.
kk. "DISCLOSURE STATEMENT" means the Chapter 11 disclosure statement, as it
may be amended and as approved by the Court pursuant to Section 1125(b)
of the Code.
ll. "DISPUTED CLAIM OR CLAIMS" means the portion (including, when
appropriate, all) of a Claim that is not an Allowed Claim as to which:
(a) a proof of claim has been (or is deemed to have been) filed with the
Bankruptcy Court; (b) an objection has been or may be timely filed; and
(c) any such objection has not
Third Amended and Supplemented
Joint Plan of Reorganization
25
<PAGE> 27
been withdrawn or overruled, denied, or granted by a Final Order. For
purposes of the Plan, a Claim filed against a Debtor, other than a Claim
allowed or disallowed by Final Order of the Plan, shall be considered a
Disputed Claim in its entirety before the objection deadline if, in the
Schedule of Assets and Liabilities, a corresponding Claim has: (x) not
been listed; (y) been listed as disputed, contingent, or unliquidated;
or (z) been listed in a lower amount or classification than the amount
or classification specified in the proof of claim.
mm. "EFFECTIVE DATE" means 20 days following the date that the Confirmation
Order becomes a Final Order.
nn. "FEE CLAIM" means any claim for compensation or reimbursement of
expenses filed pursuant to Section 330 of the Bankruptcy Code.
oo. "FINAL ORDER" means an order or judgment of the Bankruptcy Court as
entered on the docket of such Bankruptcy Court which order has not been
reversed, stayed, modified, or amended, and as to which: (a) the time to
appeal, seek review or rehearing, or petition for certiorari has expired
and no timely-filed, appeal taken, or (b) any motion for review or
rehearing filed, appeal taken, or petition for certiorari filed has been
resolved by the highest court to which the order or judgment was or may
be appealed or from which certiorari was or may be sought.
pp. "INDENTURE AGREEMENTS" means the agreements between the Debtors issuing
publicly-held Notes and Texas Commerce Bank, as successor in interest to
Ameritrust Texas National Bank Association under which the Notes are
issued, setting forth the form of the Notes, the maturity date, the
amount of issue, a description of the pledged assets, interest rate, and
other general terms are set forth.
qq. "INDENTURE TRUSTEE"means Texas Commerce Bank N.A. successor in interest
to Ameritrust Texas National Association, the trustee under the
"Indenture Agreement".
rr. "INTERESTS" shall mean any share or other instrument evidencing an
ownership interest in any of the Debtors, whether or not transferable or
denominated "stock," or similar security, and any warrant or right
(other than a right to convert) to purchase, sell, or subscribe to a
share, security, or interest in any of the Debtors.
ss. "INTEREST HOLDERS" means the holder of any equity interest of the
Debtor.
tt. "JOINT PLAN" means this Third Amended Joint Plan of Reorganization filed
by Search and the Debtors on December 11, 1995, together with any
amendments or modifications thereto.
uu. "LITIGATION TRUST" means the trust established pursuant to Article IX of
the Joint Plan.
vv. "LITIGATION TRUSTEE" means the trustee of the Litigation Trust selected
pursuant to the terms of the Litigation Trust instrument.
ww. "LOAN" as to the Debtors' Loan Portfolio's means a retail installment
sale contract and security agreement entered into between an automobile
dealer and an obligor thereunder and thereafter assigned to a Debtor.
As to borrowing in general, "Loan" means (1) the creation of debt by a
person or entity under which it agrees to make a payment or periodic
payments to a lender or its assigns or (2) the creation of debt by a
credit to an account with a lender upon which Search is entitled to draw
immediately.
xx. "LOAN PORTFOLIO" means the automobile loans held by Texas Commerce Bank
as Trustee under the terms of the Indenture Agreements and Memoranda
between certain Debtors and Texas Commerce Bank as successor in interest
to Ameritrust Texas National Bank Association.
Third Amended and Supplemented
Joint Plan of Reorganization
26
<PAGE> 28
yy. "MEMORANDA" means the agreements governing the issuance of the
privately-held Notes which set forth the form of the Notes, the maturity
date, the amount of issue, a description of the pledged assets, interest
rate, and other general terms.
zz. "NASDAQ" means National Association of Securities Dealers Automated
Quotations.
aaa. "NET CASH FLOW" means periodic Cash distribution that would be made
(pursuant to the terms of the Indenture Agreements or Memoranda) by
Debtors to the Noteholders as estimated by Search, assuming the Debtors
continued to collect their receivables at the historical average rate of
each Debtor's Loan Portfolio.
bbb. "NEW SERVICER" means that entity selected to service the Note Collateral
of those Noteholders electing the Collateral Option under the Plan.
ccc. "NOTE OR NOTES" means one or more of the promissory notes issued by a
Debtor and secured by the Loan Portfolio.
ddd. "NOTE COLLATERAL" or "COLLATERAL" means the Loans in each Debtor's Loan
Portfolio which secure the repayment of the Notes issued by such Debtor,
as well as any and all sinking fund Cash, automobile inventories, and
any other rights pertaining to these items, save and except for causes
of action.
eee. "NOTEHOLDER" means the holders of a Note or the Notes or "NOTEHOLDERS"
means the holder of a Note or the Notes of issued by a Debtor.
fff. "NOTEHOLDER CLAIM RATIO" means a fraction the numerator of which is the
original principal of the Note or Notes held by a Noteholder and the
denominator of which is the original principal amount of all Notes
originally issued by each Debtor. The original principal amount of all
Notes originally issued by each Debtor is:
<TABLE>
<CAPTION>
Debtor Name Denominator
- ----------- -----------
<S> <C>
ACF-1991 1,000,000
ACF 5,000,000
ACP 1,000,000
ACF-1992 9,990,000
ACF-III 15,000,000
ACF-IV 10,000,000
ACF-V 19,872,000
ACF-VI 10,675,000
</TABLE>
ggg. "NOTEHOLDER SECURED CLAIM" means the Secured Claim held by a Noteholder
which, for each Debtor is equal to the sum of the Present Value of the
Notes plus the Common Stock Portion.
hhh. "NOTEHOLDERS' TRUST" means the trust established pursuant to Section
4.04 of the Joint Plan.
iii. "NOTEHOLDERS' TRUSTEE" means the trustee selected by the Creditors'
Committee or such trustee's successor, selected in accordance with
Section 4.04.A. of the Joint Plan.
jjj. "ORDINARY COURSE CLAIM OR CLAIMS" means Administrative Claims of
Creditors that were incurred by the Debtors in the ordinary course of
its business after the Petition Date which has been regularly paid
during the pendency of the Case.
Third Amended and Supplemented
Joint Plan of Reorganization
27
<PAGE> 29
kkk. "PETITION DATE" means the date on which the Debtors filed the Cases with
the Bankruptcy Court, August 14, 1995.
lll. "PLAN DOCUMENTS" means any and all contracts, trust agreements,
conveyancing documents, certificates of designation, or any other
document referred to in this Joint Plan which is required to be
executed by the Debtors in the consummation of this Joint Plan.
mmm. "PLAN TRANSFER AGENT" means the office or agency of Search or its
designee to which Search will deliver its shares of Convertible
Preferred Stock, Common Stock, and Warrants, and to which each Debtor
will deliver its share of Debtor's Common Stock and to which Noteholders
will deliver their Notes. The Plan Transfer Agent will be designated at
the time of the Confirmation Hearing.
nnn. "PRESENT VALUE OF THE NOTES" means the value obtained by discounting at
a rate of 15% per annum to the date of August 1, 1995 the Net Cash Flow.
The total value of all Notes for each Debtor is:
<TABLE>
<CAPTION>
Debtor Amount
- ------ ------
<S> <C>
ACF-1991 183,295
ACF 434,886
ACP 222,137
ACF-1992 6,680,851
ACF-III 9,017,468
ACF-IV 6,046,367
ACF-V 14,354,171
ACF-VI 7,427,872
</TABLE>
ooo. "PRIORITY CLAIM OR CLAIMS" means any Claim, if allowed, entitled to
priority pursuant to Section 507(a) of the Bankruptcy Code, other than
an Administrative Claim or a Tax Claim.
ppp. "PRO RATA" means the proportion that an Allowed Claim bears to a larger
group that subsumes it, whether it be the aggregate of all Allowed
Claims in a particular Class, or some other greater group of Allowed
Claims specified by the particular language of the text.
qqq. "RECORD DATE" means December 15, 1995.
rrr. "REJECTION CLAIM OR CLAIMS" means a claim for a loss suffered from the
rejection of an executory contract or unexpired lease pursuant to
Section 365 or Section 1123(b)(2) of the Code.
sss. "SEARCH" means Search Capital Group, Inc. and any of its subsidiaries,
excluding the Debtors.
ttt. "SECURED CLAIM OR CLAIMS" means any Claim (other than an Administrative
Claim, Priority Claim, or Tax Claim) to the extent such Claim
constitutes a secured Claim pursuant to Section 506 or 1111(b) of the
Bankruptcy Code.
uuu. "SECURITIES ACT OF 1933" means 15 U.S.C. Sections 77a-77z.
vvv. "SERVICE" OR "SERVICED" means, the billing, Cash application processing,
accounting, repossessing of vehicles, disbursing of Cash and other
matters related to the Note Collateral.
www. "SUBSIDIARY" means a corporation run and owned by Search.
Third Amended and Supplemented
Joint Plan of Reorganization
28
<PAGE> 30
xxx. "SUBSTANTIAL CONSUMMATION" means the later of (i) distribution of
Certificates of Convertible Preferred Stock and Common Stock to
Noteholders who individually select the Search Equity Option and who
have transmitted their Notes for exchange; (ii) the delivery of all
books, records, related files and computerized information, as
designated by the Noteholder Trustee, to the New Servicer, or purchaser
of particular Noteholders' Collateral; (iii) the selection of the
specific Noteholder Collateral to be allocated to the Noteholders' Trust
for those Noteholders electing the Collateral Option and to Search, for
those Noteholders electing the Search Equity Option; and (iv)
commencement of delivery of Certificates of Warrants to Noteholders
having Allowed Unsecured Claims within Classes 9-16.
yyy. "UNSECURED CLAIM OR CLAIMS" means any Claim except an Administrative
Claim, Priority Claim, or Secured Claim, including any Claim arising
under and assertable pursuant to a contract of any type which contract
requires that a Debtor indemnify the other party to such contract upon
the occurrence of events specified in such contract which is rejected
pursuant to Article X.
zzz. "WARRANTS" means the 5 million warrants issued under this Joint Plan,
each of which is, when exercised at the then applicable exercise price,
convertible into one share of Common Stock. The term of the Warrants is
five years from the Effective Date. The exercise prices per Warrant are
as follows:
<TABLE>
<S> <C>
Year 1 $2.00
Year 2 $2.25
Year 3 $2.50
Year 4 $2.75
Year 5 $3.00
</TABLE>
All Warrants not exercised at the end of Year 5 will be redeemed
in Cash at a price of $0.25 per Warrant.
Third Amended and Supplemented
Joint Plan of Reorganization
29
<PAGE> 31
APPENDIX 2
TERM SHEET FOR NOTEHOLDERS' TRUST AGREEMENT
I. APPOINTMENT OF NOTEHOLDERS' TRUSTEE
A. Selection of Trustee by Working Group of Creditors' Committee
(current members of Committee, excluding any members who are
brokers, dealers, other members of securities industry)
B. Approval of Trustee by Bankruptcy Court
II. DELIVERY OF COLLATERAL INTO TRUST
A. Selection of Collateral
1. Appointment of Collateral Consultant acceptable to both
Working Group and Search
2. Methodology for division of Collateral to be
substantially similar to methodology used to identify
Collateral for sale by Debtors to Search
3. Loans in each Debtors' portfolio to be divided between
Search and Noteholders' Trust based upon percentages of
Noteholders of each Debtor electing Search Equity
Option and Collateral Option
B. Transfer of Collateral by Debtors to Noteholders' Trust on
Effective Date, subject to beneficial interests of electing
Noteholders in Collateral transferred by their particular
Debtors on account of their particular claims
C. Segregation of Collateral on Debtor-by-Debtor Basis
1. Initial report to all Noteholders identifying
Collateral transferred on account of claims of
Noteholders of each particular Debtor, and names,
addresses, and amounts of claims of Noteholders with
claims against each pool of Collateral; to be delivered
within 60 days of Effective Date (in lieu of issuance
of certificates)
2. Quarterly reports to all Noteholders of Debtors in
question
3. Monthly reports to be available upon request
4. Noteholders' Trustee to record transfers of
Noteholders' interests in Noteholders' Trust on books
of Noteholders' Trust, upon written request of electing
Noteholder; only
Third Amended and Supplemented
Joint Plan of Reorganization
30
<PAGE> 32
limited transfers to be permitted under Noteholders'
Trust Agreement, e.g., death, divorce, or dissolution
of Noteholder.
III. LIQUIDATION OF COLLATERAL
A. Aggregation of Collateral for Disposition
1. Collateral may be aggregated for either sale or
servicing by New Servicer or purchaser
2. Proceeds of Collateral belonging to different Debtors
may be commingled for investment by Trustee pending
distributions to Noteholders
B. Sale/Servicing Decisions
1. In discretion of Noteholders' Trustee, provided that
Noteholders' Trustee has obtained and reviewed adequate
information to make informed decision
2. Right, but not obligation, to confer with Noteholders
or with representatives of Creditors' Committee
C. Allocation of Administrative and Liquidation Costs of the
Noteholders' Trust based upon amounts of Allowed Noteholders'
Secured Claims of Noteholders electing Collateral Option for
each Debtor
D. Investment guidelines for Collateral proceeds pending
distributions to electing Noteholders
IV. DISTRIBUTIONS
A. If Collateral is sold -- promptly following receipt of
consideration from buyer, subject to reasonable reserves for
administrative and liquidation costs
B. If Loans are serviced -- not less than quarterly for each
Noteholders of each Debtor in question, together with
accountings showing gross receipts, costs of servicing, and
costs of administration by Trustee
V. RESERVATION OF BANKRUPTCY COURT JURISDICTION
A. Approve/Disapprove of program to dispose of Collateral
B. Issue orders regarding liens or encumbrances on Collateral
C. Allowance or allocation of administrative or liquidation
expenses
Third Amended and Supplemented
Joint Plan of Reorganization
31
<PAGE> 33
D. Removal or replacement of Noteholders' Trustee
1. For gross negligence/reckless behavior
2. For breach of duty/fraud/conversion of Noteholders'
Trust assets
3. Can be filed by any electing Noteholder, on notice to
Noteholders' Trustee and twenty largest electing
Noteholders (Noteholders' Trustee to provide names and
addresses of such Noteholders)
4. Appointment of successor trustee consistent with
provisions of Section I above
E. Notices
F. Governing Law
Third Amended and Supplemented
Joint Plan of Reorganization
32
<PAGE> 1
EXHIBIT 2.2
Michael R. Rochelle
State Bar No. 17126700
Stephen T. Hutcheson
State Bar No. 10335700
Rochelle and Hutcheson, L.L.P.
2929 Carlisle, Suite 222
Dallas, TX 75024
(214) 953-0182
(214) 953-0185 (fax)
ATTORNEYS FOR DEBTOR
Joe B. Dorman
State Bar No. 06003500
Senior Vice President and General Counsel
Search Capital Group, Inc.
700 N. Pearl Street, Ste. 400
Dallas, Texas 75201
(214) 965-6007 (tel.)
(214) 965-6098 (fax)
COUNSEL FOR SEARCH CAPITAL GROUP, INC.
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: Section CHAPTER II
Section
AUTOMOBILE CREDIT FUND Section CASES 395-34981-RCM-11
1991-111, INC., ET AL., Section THROUGH 395-34988-SAF-11
Section
Section JOINTLY ADMINISTERED UNDER
Debtors. Section CASE NO. 395-3498 1 -RCM- 11
MODIFICATION TO THIRD AMENDED JOINT PLAN OF REORGANIZATION
Search Capital Group, Inc., and Automobile Credit Fund 1991-III,
Inc., Automobile Credit Finance, Inc., Automobile Credit Partners, Inc.,
Automobile Credit Finance 1992-II, Inc.,
1
<PAGE> 2
Automobile Credit Finance III, Inc., Automobile Credit Finance IV. Inc.,
Automobile Credit Finance V, Inc., Automobile Credit Finance VI, Inc., and
Automobile Credit Partners, Inc. file this Modification to Third Amended Joint
Plan of Reorganization pursuant to 11 U.S.C Section 1127(a).
The Third Amended Joint Plan of Reorganization is modified as follows:
1. Article I, paragraph mm is amended to read as follows:
"Effective Date means the eleventh day after the entry of the Confirmation
Order by the Court unless Search, in its sole discretion, determines to extend
the Effective Date; provided, however, that the Effective Date will occur no
later than the twentieth day after the entry of the Confirmation Order."
2. Article IIA, Section 2.01 is amended be deleting the last
sentence of the first paragraph.
3. Article II, Section 2.02 B is amended by deleting in its
entirety subparagraph (v).
4. Article II, Section 2.04 is amended by deleting the original
text and substituting the following language: "The holders of Allowed
Noteholder Secured Claims who either (I) did not vote or (ii)voted 'Yes' but
did not select a Plan Option prior to the voting deadline set by the Court,
will receive a written communication from the Balloting Agent that will allow
each Noteholder an additional 14 days from the date of the mailing of such
communication to select either the Search Equity Option or the Collateral
Option. Upon the expiration of the 14-day period, anyone who fails to select a
Plan Option will receive the distributions provided for in the Search Equity
Option."
5. Article IV, Section 4.03 C is amended by adding the following
paragraphs:
"For purposes of determining the number of shares of
Convertible Preferred
2
<PAGE> 3
Stock and Common Stock to be issued to the Noteholders that elected
the Search Equity Option (the "SEO Noteholders") pursuant to Sections
4.03(D) and (E) of the Joint Plan, the Financial advisors for Search
and the Creditors' Committee shall estimate as of the Effective Date
the number of shares issued pursuant to settlement of the O'Shea Class
Action Litigation ("Settlement Shares") to be equal to $2,612,500
divided by the Common Stock price estimated by Alex. Brown.
The Plan Transfer Agent will (a) reserve 25% of the shares of
Common Stock to be distributed to SEO Noteholders (the "Reserved
Shares") pending final settlement of the O'Shea matter and (b) make an
initial distribution of all cash dividends and securities except the
Reserved Shares (the "Initial Distribution").
Subsequently, when the settlement of the O'Shea matter becomes
final, the Settlement Shares will be determined based upon the formula
($2,612,500 divided by the average trading price for the prior 30
days), and if different from the estimate on the Effective Date, the
financial advisors to Search and the Creditors' Committee will again
determine, using the actual number of Settlement Shares, the number of
securities to be issued to the SEO Noteholders (the
"Re-Determination").
If, based upon the Re-Determination, additional shares need to
be issued to SEO Noteholders to comply with Sections 4.03(D) and (E),
then Search shall issue such additional shares as soon as practicable
to the Plan Transfer Agent, who will distribute such additional shares
and the Reserved Shares Pro Rata to those SEO Noteholders. If, based
upon the Re-Determination, fewer shares need to be issued to SEO
Noteholders to comply with Sections 4.03(D) and (E), then the Plan
Transfer
3
<PAGE> 4
Agent will (a) return to Search such fewer shares from the Reserved
Shares and (b) distribute any remaining Reserved Shares Pro Rata to
the SEO Noteholders.
If in the Initial Distribution, the Plan Transfer Agent
rounded down to eliminate fractional shares of Common Stock, the Plan
Transfer Agent will include such fractional shares in determining the
total number of shares that each SEO Noteholder should receive and
then round down to eliminate fractional shares in order to avoid
rounding fractional shares twice."
6. Article IV, Section 4.06(b) is amended by deleting the
original text and substituting the following language:
"a distribution of the proceeds, if any, of the Litigation Trust that
is established pursuant to Article IX. Distributions, if any, will be
attributable to and allocated among the holders of Class A Beneficial Interests
and Class B Beneficial Interests as those interests are defined in the
Litigation Trust Agreement. The recoveries, if any, from the Estate Claims (as
defined in 9.04 below) will be allocated to the Class A Beneficial Interests
and will be distributed among all holders of Allowed Unsecured Claims in
Classes 9 through 16 in accordance with the terms of the Joint Plan and the
Litigation Trust Agreement. The recoveries, if any, from the Individual Claims
(as defined in 9.04 below) will be allocated to the Class B Beneficial
Interests and will be distributed only among the holders of Allowed Unsecured
Claims in Classes 9 through 16 whose causes of action were assigned to the
Litigation Trust through the procedures described in 9.05 below. Distributions,
if any, from the Litigation Trust will be made to the holders of the respective
interests on a quarterly basis beginning on the second anniversary date of the
Effective Date. As to any single Debtor, such distributions will be made to the
holders of Class A Beneficial Interests and Class B Beneficial
4
<PAGE> 5
Interests, as the case may be, on a pro rata basis in a ratio that such
holder's Allowed Unsecured Claims bears to all Allowed Unsecured Claims
included in the applicable class of Beneficial Interests. "
7. Article V, Section 5.01 A is amended by deleting the original
text and substituting the following: "The Judge of United States District Court
for the Northern District of Texas presiding over the O'Shea Class Action
Litigation, Case No. 3:94-CV- 1428-J shall have entered an order (a) certifying
the settlement class, (b) approving notice to the class and (c) preliminarily
approving the class settlement."
8. Article V, Section 5.02 is amended by deleting the original
text of subparagraph B and substituting the following: "Search will have
selected and appointed two directors nominated by the Creditors' Committee as
active members of its Board of Directors. Provided, however, that the failure
or refusal of such nominees to serve shall not prevent the Joint Plan from
becoming effective. "
9. Article VI, Section 6.01 is amended by deleting the words
Conversion Date from the last sentence of such Section and adding the following
phrase at the end of the last sentence: "date it is converted, but no later
than the seventh anniversary of the Effective Date."
10. Article VI, Section 6.02 is amended by inserting before the
words "the Effective Date" in the fourth line the phrase "in conjunction with
the initial distribution of the Convertible Preferred Stock as soon as
practicable after".
11. Article VI, Section 6.08 is amended by deleting the original
text and substituting the following: "Each share of Convertible Preferred Stock
shall have the same voting attributes and characteristics as do the shares of
the Common Stock which shall be one vote per share."
5
<PAGE> 6
12. Article VII, Section 7.06 is amended by deleting the original
text and substituting the following: "Allowed Administrative Claims shall be
paid in full, in cash, on the Effective Date, or within fifteen (15) days after
allowance of such Claim, if entry of a Court order of allowance be necessary.
Allowed Administrative Claim for professional fees of the Debtors' and
Creditors' Committee's counsel, financial and other advisors shall be allocated
among and remain the liability of each Debtor in the ratio that the Present
Value of the Notes of each Debtor bears to the Present Value of the Notes of
all Debtors. If, on the Effective Date, a particular Debtor does not have
enough cash to pay the professional fees mentioned above, then the liability
for such fees shall follow the Note Collateral. Such fees shall then be paid
out of the first amounts collected from the Note Collateral in the Noteholders
Trust and from Search, on a pro rata basis based upon the percentages of
Allowed Noteholder Secured Claims of each of the Debtors that chooses the
Collateral Option and the Search Equity Option under this Plan. The
Noteholders' Trust and the Collateral attributable to the Noteholders having
selected the Collateral Option shall not be liable for the fees, incurred by
Search's professionals, such as Alex. Brown & Sons, Brean Murray, Foster
Securities, or Akin Gump Strauss Hauer & Feld."
13. Article VII, Section 7.08 is amended by deleting the original
text and substituting the following: "The reasonable fees, costs and
out-of-pocket expenses, including attorneys' fees, of the Indenture Trustee,
including without limitation such fees, costs and expenses incurred prior to
the Petition Date, are Administrative Claims in the Case. Set forth in Section
2(f)(1)(h) of the Disclosure Statement are the fees incurred as of the most
recent available date by the Indenture Trustee for the Notes of six (6) of the
Debtors. Any dispute regarding the reasonableness of any of such fees and
expenses shall be determined by the Bankruptcy Court at or prior to the
Confirmation
6
<PAGE> 7
Hearing. The treatment of the Indenture Trustee's fees and expenses as provided
in this Section 7.08 shall be in lieu of and in consideration of the respective
Indenture Trustee's lien rights (if any) under the applicable Indenture
Agreement."
14. Article IX, Section 9.01 is amended by deleting the original
text and substituting the following: "On the Effective Date, the Litigation
Trust will be established for the benefit of the holders of Allowed Unsecured
Claims against those Debtors for whom the Confirmation Order applies. The
beneficial interests in the Litigation Trust will be non-transferable except as
mandated by applicable nonbankruuptcy law. The Litigation Trust will maintain
separate accounting records for each Class 9 through 16 and the holders of
Allowed Unsecured Claims within each such Class, who will hold Class A
Beneficial Interests (as defined in the Litigation Trust Agreement). In
addition, the Litigation Trust shall keep separate accounting records for all
Noteholders who by default or in accordance with the procedures set forth in
the Ballot assign their individual causes of action to the Litigation Trust
(the "Assigning Noteholders"), who will hold Class B Beneficial Interests (as
defined in the Litigation Trust Agreement). The terms of the Litigation Trust
shall be as set forth in the Litigation Trust Agreement which will be filed
with the Bankruptcy Court as a Plan Document prior to Confirmation. The
Litigation Trust is intended to be a grantor trust for federal income tax
purposes. After the Effective Date, the Litigation Trust shall be maintained in
accordance with this Joint Plan and the Litigation Trust Agreement."
15. Article IX, Section 9.01 is further amended by adding a new
subparagraph A which reads as follows: "The Litigation Trust Agreement shall
provide for the appointment of an Interim Trustee in the same manner by which
the Trustee will be appointed. To the extent that Debtors' counsel and the
Creditors' Committee agree, that discussions regarding the resolution or
liquidation
7
<PAGE> 8
of certain Trust Assets (causes of action) are susceptible to imminent
resolution and if they so notify the Bankruptcy Court of the same, the
appointment of a permanent Litigation Trustee may be deferred for a period not
to exceed ninety (90) days. During such ninety (90) day period, the Assignments
discussed Sections 9.04 and 9.05 above shall be effective and the Interim
Trustee shall have the full authority that the Litigation Trustee would have to
settle or pursue causes of action subject to Bankruptcy Court approval.
Accordingly, the Interim Trustee shall be fully indemnified and upon
resignation of the Interim Trustee at the end of or during the ninety (90) day
period be fully released to the same extent as provided for the permanent
Litigation Trustee."
16. Article IX, Section 9.02 is amended by deleting the original
text and substituting the following: "On and after the Effective Date, title to
the assets of the Litigation Trust, including those described in Section 9.04
herein, shall be transferred by the Debtors and the Assigning Noteholders to
and be vested in the Litigation Trustee for the benefit of the beneficiaries of
the Litigation Trust existing as of the Confirmation Date."
17. Article IX, Section 9.04 is amended by deleting the original
text and substituting the following: "Each Debtor will transfer and assign, to
the extent permitted by applicable law, all rights and causes of action
pursuant to (a) Section 502 of the Bankruptcy Code, (b) preference claims
pursuant to Section 547 of the Bankruptcy Code; (c) fraudulent transfer claims
pursuant to Section 548 of the Bankruptcy Code; (d) all other claims and causes
of action of each Debtor against any Person to the Litigation Trust ("Estate
Claims") as of the Effective Date. Accordingly, the Estate Claims shall be
preserved, transferred and assigned to, and vested in, the Litigation Trust for
all purposes as of that date. Subject in all respects to the following
limitations, the respective Litigation Trust will be authorized to prosecute,
settle and collect the Estate Claims on behalf of each Debtor.
8
<PAGE> 9
The Litigation Trust may also hold, prosecute, settle and collect recoveries of
causes of action which may be the property of Noteholders ("Individual
Claims"), but only to the extent that such claims are assigned to the Trust
pursuant to the procedure contained in the ballot for voting on the Joint Plan
or by default by such Noteholder failing to submit a Ballot or properly execute
the Non-Assignment Election provided for on the Ballot. The Litigation Trustee,
in its sole discretion, may pursue such causes of action and without further
order of the Bankruptcy Court take all actions in connection with the
prosection, defense, compromise and settlement thereof. In such connection, the
Litigation Trustee may retain such counsel, accountants or other professionals
deemed necessary in connection therewith. All proceeds of recoveries, if any,
received from or in respect of the causes of action (whether by settlement,
judgment, or otherwise) shall, after payment of all related reasonable
professional and expert fees, become and be distributed to the Noteholders of
the respective Debtor, Pro Rata, for whom such settlement judgment or other
form of recovery was obtained."
18. Article IX, Section 9.05 is amended by deleting the original
text and substituting the following: "Noteholders, as of the Record Date will
in their Ballots for voting on the Joint Plan and by virtue of Bankruptcy Court
order have assigned to the Litigation Trust any pre-petition Claims or causes
of action such Noteholders may hold as of the Record Date against any Persons,
including, but not limited to, the Debtors, Search, their respective current or
former directors, officers, and professionals, or other third parties,
including, but not limited to, financial institutions and third party
professionals arising from or relating to such holder's status as a Creditor of
the Debtors on account of a financial transaction, such Noteholder's
transactions with the Debtors, or such Noteholder's purchase or sale of any
portion of the Notes, or which arise pursuant to the terms of the respective
Indenture Agreement or Memorandum under which such Notes were issued.
9
<PAGE> 10
A Noteholder may elect not to assign his Individual Claims to the
Litigation Trust by checking the Non-Assignment Election on the Ballot. Absent
checking the Non-Assignment Election on the Ballot, including if a Noteholder
does not return a Ballot, the Noteholder will be deemed to have chosen to
assign his Individual Claims to the Litigation Trust. In the event a Noteholder
does not return a Ballot, the Confirmation Order shall be deemed the operative
document for assignment of such Noteholder's Individual Claims."
19. Article XI. Section 11.02 is amended by deleting the original
text and substituting the following: "Neither the Debtors, the Creditors'
Committee, Search, the Interim Trustee (should one be appointed) nor any of
their respective members, officers, directors, employees, agents, or
professionals shall have or incur any liability to any holder of a Claim or
Interest for any act, event, or omission in connection with, or arising out of,
the Chapter 11 Cases (including the activities and deliberations of the
Creditors' Committee), the confirmation and consummation of the Joint Plan,
preparation or contents of the Joint Disclosure Statement or any supplements
thereof or the administration of the Joint Plan or the property to be
distributed under the Joint Plan, except for willful misconduct or gross
negligence."
20. Article XIII is amended by adding a new paragraph S and
relettering the original paragraph S to T. New paragraph S will read as
follows: "To approve any settlements reached by the Interim Trustee; and."
21. Article XIV, Section 14.02 is amended by deleting the original
text and substituting the following: "All Creditors, other than creditors
having Administrative Claims or Rejection Claims with be required to file
proofs of claim, if necessary, by the Bar Date. Rejection Claims must be filed
In accordance with Article X of this Joint Plan. Administrative Claims, other
than those made
10
<PAGE> 11
pursuant to Section 330 of the Bankruptcy Code, must be filed within five (5)
days before the Confirmation Hearing. Any Administrative Claim not filed by the
time specified will be barred."
Except as specifically amended and modified above, the remainder of
the Third Amended Joint Plan of Reorganization shall remain fully effective and
enforceable.
Respectfully submitted this today of February 1996.
By: /s/ MICHAEL R. ROCHELLE
----------------------------------
Michael R. Rochelle
Stephen T. Hutcheson
Rochelle & Hutcheson
2929 Carlisle, Suite 222
Dallas, TX 75204
(212) 953-0182
ATTORNEYS FOR DEBTORS
Search Capital Group, Inc.
By /s/ JOE B. DORMAN
-----------------------------------------
Joe B. Dorman
State Bar No.06003500
Senior Vice President and General
Counsel Search Capital Group, Inc.
700 N. Pearl Street, Ste. 400
Dallas, Texas 75201
(214) 965-6007 (tel.)
(214) 965-6098 (fax)
COUNSEL FOR SEARCH CAPITAL GROUP, INC.
11
<PAGE> 1
EXHIBIT 2.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: Section CHAPTER 11
Section
Section CASES 395-34981-RCM-11
AUTOMOBILE CREDIT FUND Section THROUGH 395-34988-SAF-11
1991-III, INC., ET AL. Section
Section JOINTLY ADMINISTERED UNDER
Section CASE NO. 395-34981-RCM-11
Debtors. Section
ORDER CONFIRMING THIRD AMENDED AND
SUPPLEMENTED JOINT PLAN, PURSUANT TO 11 U.S.C. Section 1129
Automobile Credit Fund 1991-III, Inc., Automobile Credit Finance,
Inc., Automobile Credit Partners, Inc., Automobile Credit Finance 1992-II,
Inc., Automobile Credit Finance III, Inc., Automobile Credit Finance IV, Inc.,
Automobile Credit Finance V, Inc., and Automobile Credit Finance VI, Inc.,
(collectively the "Debtors"), as debtors in possession, and Search Capital
Group, Inc. ("Search") (the Debtors and Search collectively are referred to
herein as the "Proponents") filed a Third Amended Joint Plan of Reorganization
with this Court on December 11, 1995; filed a supplement thereto on December
22, 1995; and on February 12, 1996 filed Motion For Order (1) Approving
Modification To The Third Amended And Supplemented Joint Plan Under Bankruptcy
Rule 3019; (2) Directing Procedure For Further Opportunity To Elect Equity Or
Collateral Option; (3) Directing Procedure For Certain Creditors To Complete
And Return Previously Unexecuted
<PAGE> 2
Ballot Portions; (4) Approving Supplemental Disclosure (the "Motion For
Order").(1) The Plan(2) was transmitted to the creditors and parties in
interest of the Debtors; after due and sufficient notice and hearing, the Court
hereby makes the following FINDINGS OF FACT AND CONCLUSIONS OF LAW:
1. On August 14, 1995, the Debtors filed voluntary petitions
under Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code").
2. On December 22, 1995 the Proponents filed their Third Amended
And Supplemented Joint Disclosure Statement ("Disclosure Statement") which
contained the Plan as an exhibit.
3. The Court approved the Disclosure Statement on December 27,
1995, as containing adequate information as such term is defined in Section
1125 of the Bankruptcy Code.
4. January 29, 1996 was established as the last day to file
objections to the Plan and to file a ballot regarding the Plan. As of January
29, 1996, no objections to the confirmation of the Plan were filed.
5. The Plan has been accepted by all impaired classes of each
Debtor.
6. On February 12, 1996, the Proponents filed their Motion For
Order, and on or about February 12, 1996 the Court approved it. The Court
found that the modifications included in the Motion For Order did not change
the treatment of any claim against or interest in the Debtors.
__________________________________
(1) The Third Amended Joint Plan of Reorganization and the supplement
thereto along with the modifications to the Third Amended And
Supplemented Joint Plan as included in the Motion For Order, shall be
referred to herein as the "Plan".
(2) Capitalized terms used herein without definition are defined as set
forth in the Plan, the Noteholders Trust Agreement or the Litigation
Trust Agreement, as the case may be.
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<PAGE> 3
7. Copies of the Plan and the Disclosure Statement were mailed to
all creditors and parties in interest. Copies of the modifications to the Plan
were mailed to all affected creditors and parties in interest. Appropriate
ballots were also mailed to the holders of claims and interests to which the
modifications applied. Timely notice of the hearing on confirmation of the
Plan and of the time for filing objections thereto was given to all creditors
under Fed. R. Bankr. P. 2002(b) and (d).
8. As to each Debtor, the Plan has been accepted in writing by
the requisite majorities of creditors and equity security holders whose
acceptance is required by law.
9. As to each Debtor, at least one class of claims has accepted
the Plan, determined without including any acceptance of the Plan by any
insider holding a claim of such class.
10. As to each Debtor, the preconditions to Confirmation, as
defined in the Plan, have been satisfied.
11. The Proponents have complied with the applicable provisions of
the Bankruptcy Code.
12. As to each Debtor the Plan complies with the applicable
provisions of Chapter 11 of the Bankruptcy Code, and has been proposed in good
faith and not by any means forbidden by law.
13. All payments made or promised by the Proponents, or by a
person issuing securities or acquiring property under the Plan, or by any other
person for services or for costs and expenses in, or in connection with, the
Plan and incident to the Cases, have been or will be fully disclosed to the
Court and remain subject to the approval of this Court for reasonableness.
14. Each holder of a Claim or Interest of each class will receive
or retain under the Plan on account of such Claim or Interest property of a
value, as of the Confirmation Date, that is not less
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<PAGE> 4
than the amount that such holder would receive or retain if the Debtors were
liquidated under Chapter 7 of the Bankruptcy Code on such date.
15. Pursuant to Section 1145 of the Bankruptcy Code, the
securities issued under the Plan or issued pursuant to the exercise of the
Warrants issued under the Plan are exempt from the registration requirements of
the Securities Act of 1933, as amended, and any state or local law requiring
registration for the offer or sale of a security.
16. All securities to be issued pursuant to the Plan are being
issued in exchange for a Claim against, and Interest in or a Claim for an
administrative expense concerning the Debtors in these Chapter 11 Cases, within
the meaning of Section 1145 of the Bankruptcy Code.
17. The terms and conditions of the Plan are incorporated in this
Order.
18. These findings of fact and conclusions of law shall be
considered orders of this Court and vice-versa.
19. This Court reserves the right to make further findings of fact
and conclusions of law and orders as may be appropriate.
In consideration of the foregoing findings of fact and
conclusions of law, it is hereby ORDERED, ADJUDGED, AND DECREED:
A. The Plan is confirmed.
B. The findings set forth above are ratified and
approved.
C. Any objections to Confirmation are overruled.
D. The Debtors, Search and all other relevant parties
shall perform their respective duties and
obligations as set forth in the Plan.
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<PAGE> 5
E. All approvals and consents of the equity owner, and
officers and directors of the Debtors, as may be
necessary to carry out the Plan and the actions
authorized by this Order be, and they hereby are
deemed made or done.
F. Susan A. Brown and Fred Hammer (the "Noteholder
Directors") are hereby appointed as the directors of
Search Capital Group, Inc. from and after 8:00 a.m.,
C.S.T., on the Effective Date or such other date
thereafter as may be selected by each such
Noteholder Director, but not later than seventy-five
(75) days following the Effective Date, or following
such seventy-five (75) day period replacement
Noteholder Directors as selected by the Creditors'
Committee and approved by Search in accordance with
the Plan shall be appointed.
G. In accordance with Section 1141(c) of the Bankruptcy
Code, all assets of the Debtors are free and clear of
all claims and interests of creditors and equity
security holders, and all property to be assigned,
transferred or conveyed by the Debtors to Search, the
Noteholders' Trust and the Litigation Trust in
accordance with the terms of the Plan shall be
assigned, transferred or conveyed free and clear of
all liens, Claims, and Interests of creditors and
equity security holders of the Debtors and shall be
deemed: (i) legally, validly and effectively
transferred in accordance with the provisions of the
Plan; (ii) to have been transferred without violating
any fraudulent transfer or conveyance law of the
United States, any state, territory, possession or
the District of Columbia, applicable to the Debtors
or Search; and (iii) deemed
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<PAGE> 6
to have been transferred under the Plan without
subjecting the Debtors, Search, the Noteholders'
Trustee and the Litigation Trustee to any liability
to a creditor or party-in-interest of the Debtors'
Estates by reason of such transfer under the laws of
the United States, any state, territory, possession
or District of Columbia based, in whole or in part,
directly or indirectly, on any theory of law
including, without limitation, any theory of
transferee or successor liability.
H. In accordance with the provisions of the Plan and
Sections 365 and 1123(b)(2) of the Bankruptcy Code,
the deemed rejection of executory contracts and
unexpired leases shall be, and hereby is, approved in
all respects. Only those executory contracts or
unexpired leases which each Debtor has assumed prior
to the date of this Order or with respect to which a
motion to reject is pending are not deemed rejected.
I. All persons having Claims arising from the rejection
of executory contracts or unexpired leases shall have
ten (10) days after the earlier of the entry of this
Order or, if applicable, entry of a Final Order
rejecting such executory contract or unexpired lease
within the meaning of Section 365 of the Bankruptcy
Code to file such Claims.
J. All Noteholders that failed timely to elect a Plan
Option are deemed to have elected the Search Equity
Option.
K. Objections to proofs of claim against the Debtors'
Estates may be filed (by the Debtors, the Creditors'
Committee or other parties in interest in
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<PAGE> 7
accordance with the Bankruptcy Code) for a period of
thirty (30) days after the Effective Date, unless
otherwise ordered by this Court.
L. The Creditors' Committee shall cease to exist upon
the earlier to occur of (a) ninety (90) days after
the Effective Date or (b) Substantial Consummation of
the Plan. Neither Search nor the Noteholders' Trust
shall be obligated to pay fees of the Creditors'
Committee professionals for services rendered or
costs incurred beyond ninety (90) days after the
Effective Date.
M. Prior to the Effective Date, the Debtors shall
deposit in a new separate interest-bearing account,
the amount of $2,000,000 or such additional amount as
is estimated to be sufficient to pay all
administrative, priority tax, and priority non-tax
Claims, including those of the professionals in the
Cases. The account shall not be subject to any lien,
claim or security interest created by Search or any
other party. The distribution of such funds shall be
made only upon Court order approving such
administrative, priority tax and priority non-tax
Claims. Any amounts remaining in such account
following the final disposition of all
administrative, priority tax and priority non-tax
Claims shall be returned to the Debtors in the
pro-rata amount corresponding to the amount such
Debtor contributed to the payment of such
administrative, priority tax and priority non-tax
Claims. All such amounts returned to the Debtors
pursuant hereto shall then be transferred to Search
or the Noteholders' Trust in an amount corresponding
to those Noteholders electing the Search Equity
Option for the former and the Collateral Option for
the
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<PAGE> 8
latter. On the Effective Date, the Debtors shall
each transfer their proportionate share of $350,000
to the Litigation Trust as provided in Section 9.03
of the Plan.
N. A copy of this Order shall be sent to all creditors
of the Debtors and the cost of doing so shall be an
expense of administration of the Estates.
O. This Court hereby retains, after the date hereof,
jurisdiction:
1. To determine all controversies relating to or
concerning the classification, allowance or
satisfaction of Claims;
2. To liquidate all disputed, contingent or
unliquidated Claims;
3. To determine any and all application for the
rejection or assumption and\or assignment, as
the case may be, of executory contracts and
unexpired leases to which any of the Debtors
are party or with respect to which any of the
Debtors may be liable, and to determine and,
if necessary, to liquidate, any and all
Claims arising therefrom;
4. To determine any and all applications,
adversary proceedings, and contested or
litigated matters properly before the Court,
including, without limitation, any proceeding
commenced for the purposes of avoiding,
recovering or preserving for the benefit of
the Estates any transfer of property,
obligation incurred by the Debtor, lien or
set-off;
5. To determine any dispute arising under the
Plan and to make such orders as are necessary
or appropriate to carry out the provisions of
the Plan;
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<PAGE> 9
6. To grant extensions of any deadlines set
herein;
7. To hear and determine all requests for
compensation and/or reimbursement of expenses
which may be made after Confirmation;
provided, however, this paragraph shall not
be construed as limiting the Debtors' ability
to pay their attorneys and other
professionals for services performed after
the Confirmation Date, including services
performed in connection with the Cases;
8. To enforce all provisions of the Confirmation
Order;
9. To hear and determine all issues with respect
to the accounts, if any, filed by the
Noteholders' Trustee and the Litigation
Trustee;
10. In addition, and at any time, the Court may
make such orders or give such direction as
may be appropriate under Sections 105 or
1142 of the Bankruptcy Code;
11. If the need arises, to enforce the rights of
Noteholders to receive cash dividends and
elect a supermajority of board of directors
under the terms of the Plan;
12. To enter and implement such orders as may be
appropriate in the event the Confirmation
Order is for any reason stayed, revoked,
modified, reversed, or vacated;
13. To enter and implement such orders as may be
necessary or appropriate to execute,
interpret, implement, consummate, or enforce
the Plan and the transactions contemplated
thereunder;
-9-
<PAGE> 10
14. To consider any modification of the Plan
pursuant to Section 1127 of the Bankruptcy
Code, to cure any defect or omission, or
reconcile any inconsistency in any order of
the Bankruptcy Court, including, without
limitation, the Confirmation Order;
15. To recover all assets of the Debtors and
property of the Estates, wherever located;
16. To hear and determine matters concerning
state, local, and federal taxes in accordance
with Sections 346, 505, and 1146 of the
Bankruptcy Code;
17. To hear and determine any settlements
submitted pursuant to Fed. R. Bankr. P. 9019
proposed by the Interim Litigation Trustee or
by the Litigation Trustee, if appointed
thereafter;
18. To hear and determine any other matter not
inconsistent with the Bankruptcy Code and
title 28 of the United States Code that may
arise in connection with or related to the
Plan; and
19. To enter a final decree closing the Chapter
11 Cases.
P. The Effective Date shall not occur unless and until
all of the conditions precedent set forth in Section
5.02 of the Plan have occurred or been satisfied.
Q. Each and every federal, state, commonwealth, local,
foreign or other governmental agency or department is
hereby directed to accept any and all documents and
instruments necessary, useful or appropriate to
effectuate, implement or consummate the transactions
contemplated by the Plan or this Order.
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<PAGE> 11
R. The Debtors, Search, Texas Commerce Bank, N.A. as
Indenture Trustee or custodian (collectively, the
"Indenture Trustee"), and their respective officers,
directors, agents and employees, be, and they hereby
are, required, authorized and empowered to issue,
execute and deliver such documents and instruments
and to take such actions as may be necessary to carry
out the Plan and the actions authorized by this
Order, including, without limitation, such actions
necessary to assign, transfer and convey to the
Noteholders' Trust, to the Litigation Trust and to
Search, the Debtors' assets which are being assigned,
transferred and conveyed pursuant to the Plan and to
acknowledge satisfaction and discharge of the
Indentures and the Memoranda.
S. The fees, costs, and out-of-pocket expenses,
including attorneys' fees of the Indenture Trustee,
including without limitation such fees, costs, and
expenses incurred prior to the Petition Date are
Administrative Claims in the Cases, subject to review
of this Court as to their reasonableness.
T. On the Effective Date, the Debtors shall execute the
Litigation Trust Agreement and Noteholders' Trust
Agreement in substantially the forms thereof filed as
Plan Documents together with such changes thereto as
are acceptable to the Debtors and the Creditors'
Committee, which Litigation Trust Agreement and
Noteholders' Trust Agreement are hereby approved in
all respects.
U. The Litigation Trust is the "successor" to the
Debtors for purposes of Section 1145(a)(1) of the
Bankruptcy Code, but only with respect to the Estate
Claims under Section 9.04 of the Plan and not for any
other purpose.
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<PAGE> 12
V. Pursuant to Section 1123(b)(3)(B) of the Bankruptcy
Code and Section 9.04 of the Plan, the Litigation
Trust shall be the representative of both the
Debtors' Estates and the Assigning Noteholders for
purposes of pursuing any Estate Claims or Individual
Claims, as the case may be, in accordance with the
terms of the Plan; notwithstanding the foregoing, any
potential cause of action that is assigned to the
Litigation Trust shall be subject to any rights of
set-off or other defenses as existed immediately
prior to such assignment except as otherwise provided
in this Order.
W. If a Noteholder did not check the Non-Assignment
Election on the Ballot or if a Noteholder did not
return a Ballot, the Noteholder will be deemed to
have assigned his Individual Claims to the Litigation
Trust. In the event a Noteholder did not return a
Ballot, this Order shall be deemed the operative
document for assignment of such Noteholder's
Individual Claims.
X. The Creditors' Committee or such members thereof as
determined by the Creditors' Committee are hereby
appointed as Interim Litigation Trustee with full
power and authority of the Litigation Trustee in
accordance with the terms of the Plan and the
Litigation Trust Agreement to take all actions with
respect to the Litigation Trust Assets (including but
not limited to negotiating and implementing
settlements of Estate Claims or assigned Individual
Claims) which could have been taken by the Litigation
Trustee for a period not to exceed ninety (90) days
after the Effective Date, at which time the
Litigation Trustee shall be appointed unless there
has been such substantial resolution of the
Litigation Trust Assets that the Interim Litigation
Trustee determines that dissolution of the Litigation
Trust and disbursement of the
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<PAGE> 13
liquidated Estate Claims or assigned Individual
Claims is appropriate and such determination is
approved by this Court.
Y. Upon the Effective Date and thereafter, to the extent
requested by the Noteholders' Trustee or Noteholders'
Trust Committee, Mr. Robert Idzi or other appropriate
officer of the Debtors, shall execute on their
behalf, powers of attorney in substantially the same
form as attached as Exhibit "D" to the Noteholders'
Trust Agreement in favor of the Noteholders' Trustee
or Noteholders' Trust Committee in order to deal in
all respects with the Collateral(3) and all related
title, contract or other rights. Such powers of
attorney for each Debtor shall fully authorize the
Noteholders' Trustee or Noteholders' Trust Committee
to execute appropriate documents to, among other
things, (a) assign all right, title and interest in
the Collateral to the Noteholders' Trust, or if
appropriate, a Successful Bidder or (b) have all or a
portion of the Collateral serviced under new contract
arrangements with a New Servicer.
Z. All rights of holders of Claims or Interests of all
classes under the Plan, including, without
limitation, the right to receive distributions on
account of such Claims or Interests, hereafter shall
be limited solely to the right to receive such
distributions
__________________________________
(3) Collateral shall mean: (i) cash (including existing sinking fund
accounts, other than that set aside for payment of Administrative
Claims in accordance with paragraph M hereof); (ii) automobile
loans and related contract rights and insurance proceeds, together
with underlying future streams of cash that secure the Notes; (iii)
repossessed automobiles, related rights and pending liquidation
proceeds; (iv) charge-offs and inactive automobile loan contracts;
and (v) all other assets of the Debtors not dealt with in the Plan
that are attributable to Noteholders.
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<PAGE> 14
exclusively as provided in the Plan, and after the
date hereof, the holders of such Claims or Interests
shall have no other or further rights against the
Debtors.
AA. The Noteholders' Trust Committee created under the
Noteholders' Trust Agreement shall include initially
representatives of The Boston Company (William
Reilly), Rousseau Mortgage Corp. (Ted Louie) and
Accredited Investors, Inc. (Duel Glass) who
collectively shall act as the initial Noteholders'
Trustee, with the right to employ Mr. Stephen Fisher
of 6054 Northwood, Dallas, Texas 75225 as either a
consultant to the Noteholders' Trustee or to act as
the Noteholders' Trustee and be paid such
compensation as the Noteholders' Trust Committee
deems appropriate under the circumstances taking into
account the value of the Collateral, the Noteholders'
Trustee's need to preserve it for the benefit of all
beneficiaries of the Noteholders' Trust and to effect
a sale, collection of underlying automobile loan
accounts through a New Servicer, or other Collateral
disposition attributable to those Noteholders having
selected the Collateral Option under the Plan.
BB. Through and beyond the Effective Date, Search will
permit interested parties, subject to entering into
appropriate confidentiality agreements, to perform
appropriate due diligence with respect to the
Collateral and each Debtor's and Search's records
pertaining thereto in order to reduce, if
appropriate, their bids to a definitive written
contract for servicing or sale with respect to those
Noteholders having selected the Collateral Option.
The Collateral attributable to Noteholders having
selected the Collateral Option will be segregated as
of the Confirmation Date on the books and records of
Search, on a Debtor-by-Debtor basis, until a sale of
the Collateral is
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<PAGE> 15
achieved, transfer to a New Servicer is arranged or
other disposition occurs. Search will permit an
authorized representative of the Noteholders' Trust
to, during normal business hours, inspect and make
copies of the records, documents, and computer
records concerning such segregated Collateral.
CC. The proportionate amount of all cash, deposits and
funds in any accounts held by or for the benefit of
the Debtors which is determined to be allocated to
the Noteholders' Trust shall be transferred to the
Noteholders' Trustee on the Effective Date, which
monies shall be maintained exclusively for the
purposes set forth in the Plan.
DD. Pending transfer of the Collateral attributable to
Noteholders having selected the Collateral Option,
Search will continue servicing such Collateral for so
long as requested by the Noteholders' Trust Committee
or the Noteholders' Trustee for the same
consideration and under the same terms as provided
under the Servicing Agreements. Search's employees,
officers, directors, consultants and other personnel
shall assist in the orderly transition of the
Collateral attributable to Noteholders having
selected the Collateral Option to either the
Noteholders' Trust, New Servicer, or Successful
Bidder in a timely, meaningful and cooperative
manner.
EE. The allocation of Collateral to Search and to the
Noteholders' Trust, as determined by Boston Portfolio
Advisors, Inc., the Collateral Consultant appointed
as contemplated by the Plan, based upon the criteria
set forth in Exhibit "E" to the Noteholders' Trust
Agreement, shall be agreed upon by Search and the
Noteholders' Trust, or absent such agreement
determined by this Court and thereafter shall be
-15-
<PAGE> 16
binding upon Search and the Noteholders' Trust, and
all other parties in interest under Section 1141 of
the Bankruptcy Code.
FF. Any judgment at any time obtained, to the extent that
such judgment is a determination of the personal
liability of the Debtors, Search, the Litigation
Trust or the Noteholders' Trust with respect to any
discharged debt, whether or not discharge of such
debt is waived, be, and it is hereby void.
GG. This Order shall forever bar Claims for contribution,
reimbursement, subrogation or indemnity against the
Debtors or the Litigation Trust and their successors
by any holder of an indemnity Claim or any Person or
entity who was named as a defendant, who could have
been named as a defendant, or who otherwise may claim
contribution, reimbursement, subrogation or indemnity
rights in the future against a Debtor in connection
with the facts and Claims asserted, or that could
have been asserted within the scope of any lawsuit
that was pending or could have been pending on the
Effective Date.
HH. The Plan and its provisions shall bind the Debtors,
any entity acquiring property under the Plan, and any
Creditors, their agents, employees, officers,
directors and other representatives, whether or not
the Claim or Interest of such Creditors or Interest
Holders is impaired under the Plan and whether or not
such Creditors or Interest Holders have accepted the
Plan.
II. All of the Debtors' Creditors and Interest Holders
are hereby permanently enjoined pursuant to Section
524 and precluded from (a) asserting, commencing or
continuing in any manner any action against the
Debtors, for recovery of any debt, Claim or Interest
-16-
<PAGE> 17
against the Debtors' assets or properties, or any
other or further debt or Claim, right or Interest
based upon any documents, executory contracts,
unexpired leases, instrument or act, omission,
transaction or other activity of any kind or nature
that occurred prior to the Confirmation Date, (b) the
enforcement, attachment, collection or recovery, by
any manner or means of any judgment, award or decree
or order against any of the Debtors or any property
or assets of any of the Debtors, (c) creating,
perfecting or enforcing any encumbrance or
contractual right of any kind against the Debtors
which arises from or is related to any fact in
existence prior to the Confirmation Date, (d)
asserting any set-off, right of subrogation or
recoupment of any kind against any obligation due the
Debtors and (e) any action, in any manner, in any
place whatsoever, that does not conform to or comply
with the provisions of the Plan.
JJ. In accordance with Section 1141(d) of the Bankruptcy
Code, the Debtors are hereby discharged of and from
any and all debts, Claims and Interests of any nature
whatsoever against the Debtors and their respective
Estates that arose or could have been asserted
against any or all of them before the Effective Date,
including, without limitation, any claim which in any
way arises from their supervision, operation,
control, ownership or contemplated conveyance of
property of any of the Debtors or is based upon any
asserted environmental protection law or cause or
action arising from the same, and any debt or Claim
of a kind specified in Sections 502(g), 502(h) or
502(i) of the Bankruptcy Code, whether or not (i) a
proof of claim based on such a debt is filed or
deemed filed under Section 501 of the Bankruptcy
Code, (ii) such Claim is
-17-
<PAGE> 18
allowed under Section 502 of the Bankruptcy Code, or
(iii) the holder of such Claim has accepted the Plan.
KK. The Debtors, Search, members of the Creditors'
Committee, and their affiliates, directors, officers,
employees, attorneys, agents, financial advisors, or
other representatives, and any or all of their
assigns, shall hereby be mutually released and
discharged each from the others, from any
post-petition Claims arising in connection with the
Chapter 11 Cases. Neither the Debtors, the Creditors'
Committee, nor any of their respective members,
officers, directors, employees, agents, attorneys or
other professionals shall have or incur any liability
to any holder of a Claim or Interest or any other
Person or entity for any act, event, or omission in
connection with, or arising out of the Chapter 11
Cases (including the activities and deliberations of
the Creditors' Committee), or in connection with the
Confirmation of the Plan, the negotiations for and
the motions to approve any third party settlements
prior to Substantial Consummation which are approved
pursuant to Fed. Bankr. R. P. 9019(a), the
consummation of the Plan, the administration of the
Plan or the property to be distributed under the
Plan, except for willful misconduct or gross
negligence.
LL. Pursuant to Section 1145(a) of the Bankruptcy Code,
the issuance of the Common Stock, Convertible
Preferred Stock and Warrants pursuant to the Plan to
holders of Allowed Claims, and the subsequent
exercise of the Warrants to purchase the securities
issuable thereunder or the conversion of the
Convertible Preferred Stock into the underlying
Common Stock (collectively "Plan Securities") by such
holders or their transferees shall be exempt from
registration under the Securities Act of 1933, as
-18-
<PAGE> 19
amended; any state or local law requiring
registration under the Securities Act of 1933, as
amended; and any state or local law requiring
registration for offer or sale of a security or
registration or licensing of an issuer or underwriter
of, or broker or dealer in, a security. All such
securities to be so issued shall be freely
transferable by the initial recipients thereof,
except for any such securities received by an
underwriter within the meaning of Section 1145(b) of
the Bankruptcy Code, subject to any restriction
contained in the terms of such securities themselves,
in the Plan, or in the Plan Documents.
MM. Pursuant to Section 1146 of the Bankruptcy Code, the
issuance, distribution, transfer or exchange of the
Plan Securities, and the creation, modification,
consolidation, recording, making or delivery of any
instrument of transfer (including deeds, security
agreements, financing statements and other
instruments of transfer) or the making, assignment or
recording of any document required in order to
implement the transactions set forth in the Plan or
the provisions respecting the vesting of the
Collateral in the Noteholders' Trust and Search set
forth in Sections 4.03 and 4.04 of the Plan or
otherwise required in order to effectuate, implement
or consummate the Plan or this Order, shall not be
subject to any tax under any law imposing a document
recording tax, intangibles or other similar tax,
mortgage tax, stamp tax or similar tax, and the
appropriate governmental officials or agents shall
be, and hereby are, directed to forego the collection
of any such tax and to accept for filing and
recordation any of the foregoing instruments without
the payment of any such tax.
-19-
<PAGE> 20
NN. The Convertible Preferred Stock and Common Stock to
be issued to the Noteholders that elected the Search
Equity Option shall equal the percentage (which is
the product of .75 times a fraction the numerator of
which is the Allowed Noteholder Secured Claims of
Noteholders that selected or were assigned the Search
Equity Option and the denominator of which is all
Allowed Noteholder Secured Claims) on a fully diluted
basis of the value of all shares of Convertible
Preferred Stock, Common Stock, Warrants, outstanding
12% Search Preferred Stock, existing Search Common
Stock, other warrants and stock options, and rights,
then outstanding, issued or agreed to be issued by
Search. The calculation made pursuant to this
paragraph NN and Section 4.03 of the Plan shall be
determined by agreement of Alex. Brown & Sons, as
financial advisor for Search and Gordian Group, L.P.
as financial advisor for the Creditors' Committee, or
absent such agreement by this Court.
OO. Search will amend by the Effective Date its
Certificate of Incorporation and bylaws as provided
for in Section 6.07 of the Plan.
DATED: March 4, 1996.
ORIGINAL SIGNED BY
/s/ ROBERT C. MCGUIRE
------------------------------------
ROBERT C. McGUIRE
CHIEF UNITED STATES BANKRUPTCY JUDGE
-20-
<PAGE> 1
EXHIBIT 2.4
MAR 5, 1996
TAWANA C. MARSHALL, CLERK
By
-----------------------
Deputy
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: SECTION
SECTION
Automobile Credit Fund 1991-III, SECTION CASE NO. 395-34981-RCM-11
Inc. SECTION
SECTION
SECTION
DEBTOR(S).
CHAPTER 11 POST-CONFIRMATION ORDER
The court entered an order confirming a plan in this case. Pursuant to 11
U.S.C. SECTION 1106(a)(7) and Bankruptcy Rule 3022, to provide a schedule for
final action in this case, it is
ORDERED that the debtor or plan proponent shall pay forthwith unpaid
notice charges and claim charges incurred to date to the Clerk, U.S. Bankruptcy
Court, and it is further
ORDERED that all applications for the award of compensation or expenses,
if any, for professional persons in this case and motions for administrative
expenses, if any, shall be filed and served within 30 days after entry of this
order, unless the confirmation order provides otherwise. Objections to any
application or motion must be filed within 20 days of service, and it is further
ORDERED the all objections to claims, if any, shall be filed and served
within 30 days after entry of this order, unless the confirmation order
provides otherwise. Responses to the objections must be filed within 30 days of
service, and it is further
ORDERED that the debtor or plan proponent shall obtain settings for
hearings on all applications for the award of compensation or expenses and
motions for administrative expenses, and, consistent with the notice
requirements of Bankruptcy Rule 3007, to determine objections to claims, and it
is further
ORDERED that, within 20 days after the hearings described in the previous
paragraph, a post-confirmation report shall be filed by the party responsible
for distribution under the plan, and it is further
ORDERED that the debtor, plan proponent or other responsible party,after
substantial consummation, as defined under 11 U.S.C. SECTION 1101(2), shall
file an application for final decree and obtain a setting on the application
within 180 days of the entry of this Oder, and it is further ORDERED that if
the application for final decree is not filed within 180 days of the entry of
this Order, a status conference will be held on 9-30, 1996, at 9 a.m., and it
is further
ORDERED that if the debtor, plan proponent or other responsible party does
not appear at the status conference, the court, on its own motion, may enter a
final decree closing the case, Bankruptcy Rule 3022, or dismiss the case, and
it is further
ORDERED that the debtor or plan proponent shall certify that copies of
this order were mailed to all creditors and other parties in interest within 10
days of entry of this order.
SIGNED this 4th day of March, 1996.
ORIGINAL SIGNED BY
/s/ ROBERT C. MCGUIRE
------------------------------
United States Bankruptcy Judge
<PAGE> 1
EXHIBIT 2.5
MAR 6, 1996
TAWANA C. MARSHALL, CLERK
By
-----------------------
Deputy
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
Dallas Division
IN RE: SECTION Bankruptcy Case
SECTION No.395-34981-RCM-11
AUTOMOBILE CREDIT FUND SECTION Through 395-34988-SAF-11
1991-III. INC. ET AL. SECTION
Debtor SECTION JOINTLY ADMINISTERED UNDER
SECTION CASE NO. 395-34981-RCM-11
ORDER REGARDING ENTRY DATE OF ORDER CONFIRMING THIRD
AMENDED AND SUPPLEMENTAL JOINT PLAN PURSUANT TO 11 U.S.C. 1129
- --------------------------------------------------------------------------------
After consideration of matters pertaining to the entry of the ORDER
CONFIRMING THIRD AMENDED AND SUPPLEMENTAL JOINT PLAN, PURSUANT TO 11 U.S.C.
1129, the Court determines that in the interest of economy and equity, the
Order was presented for entry on March 4, 1996 and said date is proper and right
for entry of this Order, it is therefore,
ORDERED that the ORDER CONFIRMING THIRD AMENDED AND SUPPLEMENTAL JOINT
PLAN, PURSUANT TO 11 U.S.C. 1129 shall be deemed to be entered nunc pro tunc on
March 4, 1996.
This Order shall be served on all parties to whom the ORDER CONFIRMING
THIRD AMENDED AND SUPPLEMENTAL JOINT PLAN, PURSUANT TO 11 U.S.C. 1129 in the
manner and as set forth in the ORDER CONFIRMING THIRD AMENDED AND SUPPLEMENTAL
JOINT PLAN, PURSUANT TO 11 U.S.C. 1129.
Dated: March 5, 1996
/s/ ROBERT C. MCGUIRE
----------------------------------
Honorable Robert C. McGuire, Chief
United States Bankruptcy Judge
<PAGE> 1
EXHIBIT 2.6
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: Section CHAPTER 11
Section
AUTOMOBILE CREDIT FUND Section CASES 395-34981-RCM-11
1991-III, INC., ET AL., Section THROUGH 395-34988-SAF-11
Section
Section JOINTLY ADMINISTERED UNDER
Debtors. Section CASE NO. 395-34981-RCM-11
ORDER GRANTING SECOND MOTION FOR TECHNICAL, NON-MATERIAL
MODIFICATION TO THE THIRD AMENDED AND SUPPLEMENTED
JOINT PLAN OF REORGANIZATION
On March 8, 1996, the Debtors and the Official Creditors' Committee
brought on for hearing a Second Motion for Technical, Non-Material Modification
to the Third Amended and Supplemented Joint Plan of Reorganization. Notice had
been given on a limited basis, only to the members of the Committee and their
counsel, as well as to the Office of the United States Trustee. The pleadings
of the parties were considered. The following constitute the Court's Findings
of Fact and Conclusions of Law:
Findings of Fact and Conclusions of Law
1. On March 1, 1996, this Court confirmed the Third Amended and
Supplemented Joint Plan proposed by the Debtors and Search Capital Group, Inc.,
(the "Plan"). The order confirming the Plan was entered on March 4, 1996.
2. The Plan provided two basic options. Noteholders could either
accept preferred and common stock in Search Capital Group (the "Search Equity
Option"), or they could take their
1
<PAGE> 2
pro rata share of the Collateral securing the Notes (the "Collateral Option").
Under the Collateral Option, the Notes would be sold or serviced out under the
supervision of a Noteholders' Trust. Approximately twenty per cent of the
Noteholders elected the Collateral option; those Notes total approximately
$12.5 million in estimated face amount, as summarized below for each Debtor and
as identified in Exhibit "A" attached to this Order:
<TABLE>
<S> <C> <C>
(a) ACF-1991 $145,000
(b) ACF $411,000
(c) ACP $122,000
(d) ACF-1992 $2,035,000
(e) ACF-III $2,162,000
(f) ACF-IV $1,181,000
(g) ACF-V $2,883,000
(h) ACF-VI $3,500,000
</TABLE>
3. Under Section 4.04(b) of the Plan, the Committee can sell the
Collateral for those Noteholders having selected the Collateral Option (the
"Electing Noteholders"), if the Committee receives a bona-fide offer in an
amount equal to or exceeding the liquidation value of the corresponding
Collateral prior to the Plan's Effective Date. In accordance with the Plan, a
sub-committee of the full Committee (the "Trust Committee") has negotiated with
third parties to sell the Electing Noteholders' Notes and/or Collateral for the
net purchase price set forth below for each $1,000 in original face amount of
the Notes/Collateral:
<TABLE>
<S> <C> <C>
(a) ACF-1991 $200
(b) ACF $200
(c) ACP $250
(d) ACF-1992 $650
(e) ACF-III $650
(f) ACF-IV $680
(g) ACF-V $700
(h) ACF-VI $780
</TABLE>
2
<PAGE> 3
4. A copy of the letter agreement between the Committee and the
Purchasers is attached to this Order as Exhibit "B".
5. The sale is conditioned upon the following items from the
Noteholders/Sellers perspective:
a. Court approval;
b. Such sale being completed on a "block" basis, meaning
that all of the Collateral or Notes, will be sold together, or none shall be
sold.
c. Purchasers will have committed in writing, in a form
acceptable to the Committee, and in a binding fashion, to purchase all such
Collateral or Notes for each Debtor fund by no later than March 11, 1996, at
5:00 p.m. CST.
d. The sale will be closed by March 13, 1996; if closed
later, such closing shall in no event be later than the Plan's Effective Date.
The physical exchange of the Notes and related instruments for cash shall occur
no later than March 20, 1996.
e. An escrow arrangement satisfactory to the Committee
and the Purchasers will be implemented to assure the availability of the cash
purchase price by March 13, 1996; if closed later than March 13, such escrow
shall be created no later than the Plan's Effective Date.
f. The sale of the Collateral/Notes will exclude the
treatment provided such Noteholders' Allowed Unsecured Claims, including (a)
all interests of Noteholders having selected either the Collateral Option in
the Litigation Trust with respect to "Estate Claims" and "Individual Claim"
either assigned to the Litigation Trust or withheld by individual Noteholders
from being
3
<PAGE> 4
assigned to the Litigation Trust under Article IX of the Plan, and (b)
Noteholders' rights to receive Warrants under the Plan.
g. The Purchasers will represent and warrant that such
purchase of securities issued by Search has not been made with a view toward
redistribution within the meaning of Section 1145(b) of the Bankruptcy Code.
6. The sale is conditioned upon the following items from the
Purchasers' perspective:
a. Court approval of a Plan Amendment providing for the
Purchasers of the Collateral/Notes, having the opportunity for fifteen (15)
days following the closing of sale of the Collateral/Notes (and exchange of
note instruments for the cash consideration), to change such Noteholders'
original election of the Collateral Option to the Search Equity Option, as such
elections are described in Sections 4.03 and 4.04 of the Plan; and
b. the sale's taking place prior to the Plan's Effective
Date.
7. The price to be realized by the Noteholders will equal or
exceed the ultimate estimated recoveries set out on page 11 of the Disclosure
Statement under both the low and middle case recovery rates for all funds; such
prices also exceed the recovery rates posited in the highest case for four of
the eight funds. The Disclosure Statement assumed that the recovery would be
obtained over the remaining life of the Notes; the proposed purchases provide
for immediate cash payment. While the recoveries forecast in the Disclosure
Statement were discounted to a present value, the sale eliminates the vagaries
and uncertainties of future collections.
8. The proposed purchase opportunity is open for only a brief
period. The Purchasers wish to acquire freely-tradeable Search stock under the
Plan.
4
<PAGE> 5
9. In order to effect a prompt sale and "settlement" within three
(3) days thereafter, as typically required of securities transactions by the
Securities and Exchange Acts, the Debtors will issue new Notes in the name of
each Purchaser for its respective amount of purchased Collateral/Notes and
deliver such Notes to the Committee for its exchanging them with the Purchasing
Agent for cash.
10. All existing Note certificates issued by the Debtors and held
by Noteholders having selected this Collateral Option will become null and void
once this order becomes final and non-appealable. Nonetheless, in order to
avoid any confusion over the continuing validity of such certificates,
Noteholders will be required to submit them to the Committee, for ultimate
transmission to the Plan Transfer Agent, in order to receive their cash
payments.
11. The Plan in its present form does not contemplate or deal with
the current situation, in two ways:
a. Although Claims are freely transferrable under Bankruptcy
Rule 3001(e), the Plan is silent regarding whether a Claim purchaser may change
the Equity/Collateral Option election already made by the previous holder of an
Allowed Secured Noteholder Claim as part of the balloting process.
b. As to those Noteholders who have elected the Collateral
Option, the Plan provides only for the sale of the Collateral before the
Effective Date; there is no explicit mechanism or authority for the acceptance
and approval of a sale of the Notes before the Effective Date. Without such
authority, the Collateral-electing Noteholders may lose a significant and
beneficial opportunity which they otherwise may not have, since no other offers
to buy the collateral have come forward at so high a price.
5
<PAGE> 6
12. The members of the Trust Committee -- the entity created by
the Noteholders Trust Agreement to deal with the matter of Note/Collateral sale
- -- believe that this purchase proposal should be accepted, if there is clear
authority to do so.
13. Because the Offers are likely to exceed the payout to those
electing the Collateral Option under the Plan, the changes proposed are merely
technical, non-material modifications which may be made ex parte, without a
generalized notice to creditors.
14. It is in the best interest of the Estates that the Plan be
modified and supplemented as requested by the Movants.
WHEREFORE, PREMISES CONSIDERED, it is therefore
ORDERED THAT All existing Note certificates issued by the Debtors and
held by Noteholders having selected this Collateral Option will become null and
void once this order becomes final and non-appealable. Nonetheless, in order
to avoid any confusion over the continuing validity of such certificates,
Noteholders will be required to submit them to the Committee, for ultimate
transmission to the Plan Transfer Agent, in order to receive their cash
payments.
ORDERED that the Plan be, and it hereby is, modified and supplemented
in the follows ways:
a. By adding the bolded, underlined language to the
currently-existing Section 4.02 of the Plan, which is set out in normal type:
4.02 Selection of Options by Classes 1 Through 8. Each Noteholder
voting "Yes" on the Joint Plan may select either the Search Equity
Option or the Collateral Option. Any Noteholder voting "No" on the
Joint Plan will not be given the right to select either the Search
Equity Option or the Collateral Option. If the Joint Plan is
confirmed as to the applicable Debtor, those who voted "No" on the
Joint Plan shall receive treatment under the Search Equity Option. IF
A PERSON PURCHASES A NOTEHOLDER CLAIM BEFORE THE EFFECTIVE DATE BUT
AFTER EITHER THE SEARCH EQUITY OR THE COLLATERAL OPTION HAS BEEN
SELECTED BY THE NOTEHOLDER, SUCH NEW
6
<PAGE> 7
PURCHASER MAY ALTER THE OPTION SELECTED, IF SUCH ALTERATION IS DONE
BEFORE THE EFFECTIVE DATE.
b. By adding the bolded, underlined language to
the currently-existing first paragraph of Section 4.04.B. of the Plan, which is
set out in normal type:
4.04.B. Sale of Assets
If, prior to the Effective Date, the Creditors' Committee receives a
bona fide offer to purchase the respective NOTES AND/OR Collateral at
a price, net of selling costs and after taking into account risks
associated with other alternatives which exceeds the ESTIMATED
liquidation value of the Collateral (as determined by the Committee
AND ITS EXPERTS or, if necessary, determined by the Bankruptcy Court),
the Noteholders' Trust may not be formed. Instead, the net proceeds
of the NOTE OR Collateral sale shall, after providing appropriate
escrows for the payment of the Administrative Claims and other
contingency expenses or claims, be distributed BY THE COMMITTEE OR ITS
DESIGNEES to all Noteholders selecting the Collateral Option within
thirty (30) days following the closing of such sale.
Dated: March 8, 1996
/s/ ROBERT C. MCGUIRE
-------------------------------
ROBERT C. McGUIRE, CHIEF
UNITED STATES BANKRUPTCY JUDGE
7
<PAGE> 8
After entry, please return to:
Van Oliver
Andrews & Kurth, LLP
4400 Thanksgiving Tower
Dallas, Texas 75201
Counsel for the Official Creditors' Committee
8
<PAGE> 1
EXHIBIT 4.1
SEARCH CAPITAL GROUP, INC.
CERTIFICATE OF DESIGNATION
9%/7% CONVERTIBLE PREFERRED STOCK
A series of preferred stock of the Corporation be is hereby created and
the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of shares of such
series, and the qualifications, limitations, or restrictions thereof are as
follows:
SECTION 1. Designation of Series. The series shall be designated as
"9%/7% Convertible Preferred Stock" (hereinafter called "Convertible Preferred
Stock").
SECTION 2. Number of Shares. The number of shares of Convertible
Preferred Stock is 17,500,000 with the par value of $0.01 per share and a
liquidation preference of $3.50 per share plus any declared but unpaid
dividends, after payment of all debts of the Company, which number of shares
the Board of Directors may increase or decrease but may not decrease below the
number of shares of the series then outstanding.
SECTION 3. Dividends. The holders of the Convertible Preferred Stock
shall be entitled to receive, out of any funds legally available,
non-cumulative dividends at the annual rate of $0.315 (9%) per share per annum
payable from July 1, 1995, to the end of the 12th full calendar quarter
following payment of the first dividend ("End Date") and thereafter, at the
rate of $0.245 per share (7%) per annum from the day following the End Date
until conversion pursuant to Section 10(g) of this Certificate of Designation
(the "Conversion Date"), but no later than the seventh anniversary of the End
Date.
Convertible Preferred Stock dividends will begin to accrue from July 1,
1995. The first payment of Convertible Preferred Stock dividends will be made
in conjunction with the initial distribution of the Convertible Preferred Stock
as soon as practicable thereafter, and will be based on the accrual period of
July 1, 1995 to the date the confirmation order is finalized. This dividend
payment will be made in cash. Thereafter, quarterly dividends will be paid in
cash (the first quarter's payment being based on the accrual period beginning
the day the confirmation order is finalized and ending on the last day of the
quarter) to the holders of record on or about the 15th day of the month
following the end of each quarter, until one full years dividends have been
paid in cash by the Corporation following the Effective Date. After one full
year of Cash dividends have been paid by the Corporation, dividends will
continue to be paid entirely in cash unless the Corporation is prohibited from
paying the dividends entirely in cash by Delaware law (the state of its
incorporation ) or by the terms of any loan agreement of $5,000,000 or more. If
the Corporation is prevented from paying a dividend entirely in cash, it will
pay a dividend in the form of a mixture of cash and common stock of the
Corporation ("Common Stock") to the extent possible under Delaware law and any
applicable loan agreement, or if necessary, entirely in Common Stock, provided
the average closing price of the Common
CERTIFICATE OF DESIGNATION - PAGE 1
<PAGE> 2
Stock is $.50 or greater for the 20 trading day period ending 5 days prior to
the date of payment of the Common Stock dividend.
If a dividend upon any shares of the Convertible Preferred Stock, or any
other outstanding stock of the Corporation ranking on a parity with the
Convertible Preferred Stock, or any other outstanding stock of the Corporation
ranking on a parity with the Convertible Preferred Stock as to dividends, is in
arrears, no stock of the Corporation standing on a parity with the Convertible
Preferred Stock as to dividends may be purchased or otherwise acquired for any
consideration by the Corporation except pursuant to an acquisition made
pursuant to the terms of one or more offers to purchase all of the outstanding
shares of the Convertible Preferred Stock and all stock of the Corporation
ranking on a parity with the Convertible Preferred Stock as to dividends (which
offers shall describe such proposed acquisition of all such parity stock).
Unless otherwise declared by the Board of Directors or required by this
Certificate of Designation, no dividends shall accrue or cumulate for any
calendar quarter (or portion thereof) during which a liquidation, dissolution
or winding up of the Corporation occurs.
SECTION 4. Dividend Payment Dates; Cumulation Date. Dividends on the
Convertible Preferred Stock will accrue from July 1, 1995 to the date the
confirmation order is becomes a final order. Thereafter, quarterly Convertible
Preferred Stock dividends will accrue beginning on the first day of each
quarter and ending on the last day of each quarter. Quarterly dividends will
be paid (the first quarter's payment being based on the accrual period
beginning the first day following Effective Date and ending with the last day
of the quarter) to the holders of record on or about the 15th day of the month
following the end of each quarter.
SECTION 5. Redemption. The Convertible Preferred Stock shall not be
subject to redemption by the Corporation or at the election of the holders
thereof.
SECTION 6. Liquidation Rights. If Search is liquidated, the Convertible
Preferred Stock will have a preference as to liquidation proceeds (proceeds
from the disposition of assets less payment of all debts) in the amount of
$3.50 per share plus all accrued and unpaid dividends, if any, after payment of
all debts of the Company. If upon any liquidation of the Corporation, the
assets available for distribution to the holders of the Convertible Preferred
Stock and any other stock of the Corporation which shall then be outstanding
and which shall be on a parity with the Convertible Preferred Stock upon
liquidation (hereinafter in this paragraph called the "Total Amount Available")
shall be insufficient to pay the holders of all outstanding shares of the
Convertible Preferred Stock and all other such parity stock the full amounts
(including all dividends accrued and unpaid) to which they shall be entitled by
reason of such liquidation of the Corporation, then there shall be paid to the
holders of the Convertible Preferred Stock in connection with such liquidation
of the Corporation, an amount equal to the product derived by multiplying the
Total Amount Available times a fraction, the numerator of which shall equal the
number of outstanding shares of the Convertible Preferred Stock multiplied by
$3.50 plus any accrued and unpaid dividends thereon and a denominator of which
shall be
CERTIFICATE OF DESIGNATION - PAGE 2
<PAGE> 3
the total amount which would have been distributed by reason of such
liquidation of the Corporation with respect to the Convertible Preferred Stock
and all other stock ranking on a parity with the Convertible Preferred Stock
upon liquidation then outstanding had the Corporation possessed sufficient
assets to pay the full amount which the holders of all such stock would be
entitled to receive in connection with such liquidation of the Corporation.
The merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or the sale, lease
or conveyance of all or substantially all the property or business of the
Corporation, shall not be deemed to be a dissolution or winding up, voluntary
or involuntary, for the purposes of this Section 6.
SECTION 7. Ranking. The Convertible Preferred Stock shall rank, in
right of payment of dividends and as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, senior and superior to the Corporation's currently
authorized Common Stock (collectively, the "Junior Capital Stock").
The Convertible Preferred Stock may be, at the Corporation's sole
discretion, either superior or pari passu (i.e. the two classes of preferred
stock will share proportionately as to their respective interest in any
liquidation proceeds or dividends) in dividend rights and liquidation
preferences to all other subsequently issued preferred stock. However, no
other preferred stock, whether or not convertible, may be issued in the future
that will be pari passu with the Convertible Preferred Stock unless at the time
of such issuance all dividends due the Convertible preferred Stockholders have
been paid in full. In no event shall convertible preferred stock be issued
which is senior in rights to that of the Convertible Preferred Stock, other
than that such pari passu convertible preferred stock may carry the
then-current market interest rate, which may be higher or lower than that of
the Convertible Preferred Stock.
The Convertible Preferred Stock will be pari passu with the existing 12%
Preferred Stock, and pari passu or senior in rights to future issues of
straight, convertible and all other forms of preferred stock with the exception
of the rate of interest for such future issues of preferred stock, which shall
be no greater than the prevailing market rate for similar such issues.
Whenever reference is made to shares "ranking on a parity with the
Convertible Preferred Stock," such reference shall mean and include all shares
of the Corporation in respect of which the rights of the holders thereof as to
the payment of dividends or as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation rank on an equality with the rights of the holders of the
Convertible Preferred Stock. Whenever reference is made to shares "ranking
junior to the Convertible Preferred Stock," such reference shall mean and
include all shares of the Corporation in respect of which the rights of the
holders thereof as to the payment of
CERTIFICATE OF DESIGNATION - PAGE 3
<PAGE> 4
dividends and as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation are
junior and subordinate to the rights of the holders of the Convertible
Preferred Stock.
The rights of the Convertible Preferred Stock will be subordinate to the rights
of all existing and future holders of the Corporation's debt.
SECTION 8. Dividends on Junior Stock. In no event so long as any
Convertible Preferred Stock shall be outstanding shall any dividends, except a
dividend payable in Common Stock or other shares ranking Junior to the
Convertible Preferred Stock, be paid or declared or any distribution be made on
any junior Capital Stock, nor shall any Junior Capital Stock be purchased,
retired or otherwise acquired by the Corporation (except out of the proceeds of
the sale of Junior Capital Stock) unless all accrued and unpaid dividends on
the Convertible Preferred Stock shall have been declared and paid or a sum
sufficient for payment thereof set apart.
SECTION 9. Voting Rights. Each share of the Convertible Preferred
Stock shall be entitled to exercise the same voting rights as holders of the
Corporation's Common Stock and shall have one vote per share. If the
Corporation fails to pay a Convertible Preferred Stock dividend (i) in cash for
either of the first two quarterly dividends following the Effective Date or
(ii) in cash or Common Stock for any four consecutive quarters, the Convertible
Preferred Stock shall automatically be vested with an additional one vote per
share, and the holders of the Convertible Preferred Stock will be given the
right to elect immediately at an emergency meeting of the shareholders which
the Corporation shall hold within thirty (30) days after any such failure, such
additional members as equals two-thirds (2/3) of Search's Board of Directors
determined after such election.
At any meeting at which the holders of the Convertible Preferred Stock
shall be entitled to elect a Director, the holders of fifty percent (50%) of
the then outstanding shares of the Convertible Preferred Stock, present in
person or by proxy, shall be sufficient to constitute a quorum, and the vote of
the holders of a majority of such shares so present at any such meeting at
which there shall be such a quorum shall be sufficient to elect the members of
the Board of Directors which the holders of the Convertible Preferred Stock are
entitled to elect as hereinabove provided.
Upon the Conversion Date, the number of persons constituting the Board of
Directors shall be reduced by the number of Directors then in office elected
pursuant to this Section 9, the term of office of said Directors so elected
shall end, and the holders of the Convertible Preferred Stock shall be divested
of their special class voting rights in respect of subsequent elections of
Directors.
Prior to the seventh anniversary of the Effective Date, the Corporation
will not, without the affirmative vote or consent of the holders of at least 66
2/3% of all outstanding shares of Convertible Preferred Stock, voting as a
single class, (i) amend, alter
CERTIFICATE OF DESIGNATION - PAGE 4
<PAGE> 5
or repeal any provision of this Certificate of Designation to adversely affect
the relative rights, preferences, qualifications, limitations or restrictions
of the Convertible Preferred Stock or (ii) effect any reclassification of the
Convertible Preferred Stock (other than by virtue of the mandatory conversion
set forth herein).
Prior to the seventh anniversary of the Effective Date, the Corporation
will not, without the affirmative vote or consent of holders of at least 50% of
all outstanding shares of Convertible Preferred Stock, voting as a single class
(i) merge with another company when thereafter the Corporation is not the
controlling entity, and (ii) sell more that 50% of the Corporation's assets.
Other than those set forth in this Section 9, the holders of the
Preferred Shares shall have no further voting rights.
SECTION 10. Conversion Rights.
(a) Optional Conversion. Shares of the Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time or from
time to time at the office of this Corporation or of any transfer agent of the
Convertible Preferred Stock, into fully paid and nonassessable shares of Common
Stock at the rate of two shares of Common Stock for each share of Convertible
Preferred Stock.
(b) Mechanics of Conversion. Before any holder of the Convertible
Preferred Stock shall be entitled to convert the same into Common Stock
pursuant to this Section 10, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of the transfer
agent for the Convertible Preferred Stock, and shall give written notice by
mail, postage prepaid, to the Corporation, at its principal corporate office,
of the election to convert the same and shall state therein the name or names
in which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of the Convertible Preferred Stock, or to
the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid together with a check for any declared and unpaid dividends on such
Convertible Preferred Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
Convertible Preferred Stock to be converted, and the person or persons entitled
to receive this Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of Common Stock on such date. Any
holder of the Convertible Preferred Stock who elects to convert his shares to
Common stock waives any and all rights to any accrued and cumulated, but
undeclared, dividends with respect to the Convertible Preferred Stock, but
shall retain the right to any dividends declared and accrued during the time
such holder was a holder of record of the Convertible Preferred Stock.
CERTIFICATE OF DESIGNATION - PAGE 5
<PAGE> 6
(c) Adjustments to Conversion Ratio. In the event of any stock
dividend (except a Common Stock dividend that may be paid pursuant to Section 3
of this Certificate of Designation) on the Common Stock, any stock split,
reverse stock split, stock combination or reclassification of the Common Stock
or any merger, consolidation or combination of the Corporation with any other
entity or entities, the conversion rate shall be proportionately adjusted so
that the holders of the Convertible Preferred Stock after such event shall be
entitled to receive upon conversion the number and kind of shares which such
holders would have owned or been entitled to receive had such Convertible
Preferred Stock been converted immediately prior to such event. Such
adjustment shall be made successively upon the occurrence of the events listed
in this paragraph. Any adjustments shall be determined by the Board of
Directors.
(d) No Fractional Shares. No fractional shares shall be issuable upon
conversion; and the number of shares of Common Stock to be issued shall be
rounded down to the nearest whole share, and the Corporation shall, at its
option, issue script representing such fractional share or pay cash in lieu of
such fractional share based upon the market price (if traded over-the-counter,
the average of the bid and asked prices) of the Common Stock as reported at the
close of business on the day such conversion is effected or, if there is no
established market for the Common Stock, the fair value of the Common Stock as
determined by the good faith judgment of the board of Directors.
(e) Reservation of Common Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Convertible Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Convertible Preferred Stock, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
the Convertible Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common stock to such number of shares as will
be sufficient for such purpose.
(f) Status of Converted Stock. In case any shares of Convertible
Preferred Stock shall be converted into Common Stock, the shares so converted
shall, after any filings required by law, assume the statues of authorized but
unissued shares of Convertible Preferred Stock.
(g) Mandatory Conversion. The Corporation may, at its option, call for
the conversion, in whole or in part, of up to one-half (50%) of the number of
shares of Convertible Preferred Stock issued as of the Effective Date under the
following conditions: (i) the Corporation's Common Stock trades at $4.25 or
higher on each of any 20 trading days in a period of 30 consecutive trading
days, beginning with the first day following the second anniversary of the
Effective Date and ending on the third anniversary of the Effective Date, or
(ii) the Corporation's Common Stock trades at $3.50 per share
CERTIFICATE OF DESIGNATION - PAGE 6
<PAGE> 7
on each of any 20 trading days in a period of 30 consecutive trading days,
beginning with the first day following the third anniversary of the Effective
Date and ending on the day immediately preceding the Conversion Date. For
purposes of this section , price of the Corporation's Common Stock shall be
determined by using the closing bid price as reported by NASDAQ or comparable
national exchange. The conversion prices shall be subject to adjustment in the
same manner as the conversion rate is adjusted, as discussed herein.
Any previously unconverted Convertible Preferred Stock (which shall be a
minimum of fifty percent (50%) of the Convertible Preferred Stock ) shall be
convertible by Search on the seventh anniversary of the Effective Date. The
Convertible Preferred Stock shall be convertible into Common stock at a
fraction which has as its denominator the market price of the Common Stock at
the time of conversion, and which has as its numerator the $3.50 liquidation
value of the convertible Preferred Stock; provided, however, that in no event
shall the ratio so expressed be higher than 3 to1.
The Corporation would be obligated to pay, thirty days after the
Conversion Date, any accrued and unpaid dividends, to the holders who, on the
Conversion Date, held Convertible Preferred Stock.
The Corporation shall cause a notice of such mandatory conversation to be
mailed, postage prepaid, to the holders of record of the Convertible Preferred
Stock at their respective addresses appearing on the share transfer records of
the Corporation. The Board of Directors may elect to specify an effective date
for such conversion, which date may be no later than sixty (60) days after the
Board meeting or consent at which the Corporation's election to convert was
duly adopted. If no effective date is specified by the Board of Directors, the
effective date shall be the date of the initial mailing of the required notice.
Such notice shall set forth a statement that all outstanding shares of the
Convertible Preferred Stock shall be automatically and mandatorily converted as
of the Conversion Date and the address of the place where such shares of the
Convertible Preferred Stock shall be exchanged, upon presentation and surrender
of the certificates representing such shares, and the certificates representing
the shares of Common Stock shall be delivered. The dividends on such shares
shall cease to accrue on the Conversion Date. Any notice which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder of the shares of the Convertible Preferred
Stock receives such notice, and failure to duly give such notice by mail, or
any defect in such notice, to any holder of shares of the Convertible Preferred
Stock shall not affect the validity of the conversion thereof into Common
Stock. Consequently, all issued shares of the Convertible Preferred Stock, as
of the Conversion Date, regardless of whether notice of conversion is actually
received by the holder, shall automatically be deemed to be the shares of
Common Stock into which such shares could have been voluntarily converted by
the holders thereof. As of the close of business on the Conversion Date, the
Convertible Preferred Stock shall be deemed to cease to be outstanding or to
accrue dividends, the persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the registered holders of
such
CERTIFICATE OF DESIGNATION - PAGE 7
<PAGE> 8
Common Stock and all rights of any holders of the Convertible Preferred Stock
shall thereupon be extinguished except the right to receive the Common Stock in
exchange therefor. Holders of the Convertible Preferred Stock must surrender
such stock in order to receive the Common Stock for which such Convertible
Preferred Stock has been converted. As a condition to the effectiveness of the
foregoing mandatory conversion, the Corporation shall be required to declare
and pay all cumulated unpaid dividends that accrue through the Conversion Date
as soon as practicable following the Conversion Date.
After the conversion of all issued shares of the Convertible Preferred
Stock, all shares of the Convertible Preferred Stock shall be canceled, the
Convertible Preferred Stock shall not be reissued and shall be deemed canceled
and shall revert to authorized but unissued Convertible Preferred Stock of the
Corporation, undesignated as to series, and the number of shares of Convertible
Preferred Stock which the Corporation shall have authority to issue shall not
be decreased by such conversion.
SECTION 11. Other Rights. The Corporation will not be obligated to
redeem the Convertible Preferred Stock, thus will not be required to establish
a redemption or sinking fund.
SECTION 12. Effects of Conversion on Capital and Surplus. Upon
conversion of the Convertible Preferred Stock the stated capital of the Common
Stock issued upon such conversion shall be the aggregate par value thereof, and
the stated capital and capital surplus (capital in excess of par of stated
value) of the Corporation shall be correspondingly increased or reduced to
reflect the difference between stated capital of the Convertible Preferred
Stock so converted and the par or stated value of the Common Stock issued upon
conversion.
SECTION 13. Anti-Dilution. The Corporation shall be prohibited from
issuing preferred or common stock or warrants or any other form of security to
an affiliate for consideration that does not equal or exceed the fair market
value of such security (as determined by an independent third party); provided,
that Search may issue options or warrants to new or existing directors or
management, so long as such warrants or options are approved by the
Compensation Committee of the board of Directors. The Corporation may also
issue Common Stock upon the exercise of warrants or options presently
outstanding; provided, that such warrants or options are not amended or
modified without the approval of the Compensation Committee. In the event that
the corporation issues any security not expected above for consideration that
is less than the fair market value (as determined above) of such security, the
number of shares Convertible Preferred Stock shall be immediately and
appropriately adjusted (and the conversion price of the Convertible Preferred
Stock adjusted downward on a full ratchet basis) to take into account the
dilution in value of the securities holdings of the Noteholders caused by such
below-market issuance of the Corporation's securities.
CERTIFICATE OF DESIGNATION - PAGE 8
<PAGE> 9
SECTION 14. Other Limits. In addition, the Corporation will not (a)
declare any cash or other form of dividend on or with respect to any issue of
common stock unless all dividends on the Convertible Preferred Stock have been
paid, nor (b) issue common stock that is convertible into convertible or other
preferred stock.
Dated as of February 1, 1996.
SEARCH CAPITAL GROUP, INC.
BY: /s/ Robert D. Idzi
------------------------------
Its: EVP & CFO
-----------------------------
ATTESTED TO:
/s/ Joe B. Dorman
- ------------------------------
CERTIFICATE OF DESIGNATION - PAGE 9
<PAGE> 10
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this date personally appeared
Robert D. Idzi, the EVP & CFO of Search Capital Group, Inc., a Delaware
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 1st day of February,
1996.
Robin K. Brem
- ------------------------- ROBIN K. BREM
NOTARY PUBLIC IN AND FOR [SEAL] NOTARY PUBLIC
THE STATE OF TEXAS State of Texas
Comm. Exp. 11-02-99
CERTIFICATE OF DESIGNATION - PAGE 10
<PAGE> 1
EXHIBIT 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of this 27th day of March, 1996, by SEARCH
CAPITAL GROUP, INC., a Delaware corporation (the "Company"), and American
Securities Transfer, Inc., as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates (the "Warrant Certificates") pursuant to Section 1145 of the
Bankruptcy Code evidencing warrants (the "Warrants") to purchase up to
5,000,000 shares, subject to adjustment, of its Common Stock, which purchase
shall also be pursuant to Section 1145 of the Bankruptcy Code in connection
with the Plan of Reorganization (as defined below); and
WHEREAS, the Company proposes to issue and deliver additional Warrant
Certificates evidencing Warrants to purchase 676,178 additional shares, subject
to adjustment, of its Common Stock;
WHEREAS, the aggregate number of shares, subject to adjustment, to be
purchased pursuant to this Warrant Agreement shall be up to 5,676,178 shares of
Common Stock.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, and transfer of the Warrants, the issuance of
certificates representing the Warrant Certificates, the exercise of the
Warrants and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the Warrant Certificates and the respective rights and
obligations thereunder of the Company, the holders of Warrant Certificates and
the Warrant Agent, the parties hereto agree as follows:
<PAGE> 2
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Business Day" shall mean a day which is not a Saturday,
Sunday or a day on which banking institutions are legally authorized to close
in the City of New York.
(b) "Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.
(c) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 938 Quail
Street, Suite 101, Lakewood, Colorado 80215.
(d) "Effective Date" shall means March 15, 1996.
(e) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant is duly exercised pursuant to Section 4.
(f) "Exercise Price" shall mean the price to be paid upon
exercise of each Warrant in accordance with the terms hereof.
(g) "Expiration Time" shall mean 5:00 P.M., New York time, on
March 14, 2001, or if such date falls on a day that is not a Business Day, then
the next succeeding Business Day, subject to extension pursuant to Section 5(b)
hereof.
(h) "NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor thereto.
(i) "Person" shall mean any individual or any corporation,
partnership (general or limited), joint stock company, business trust, limited
liability company or any other type of entity, organization or association.
(j) "Plan of Reorganization" shall mean that Third Amended Joint
Plan of Reorganization of Automobile Credit Fund 1991 - III, Inc. et al.
2
<PAGE> 3
(k) "Registered Holder" shall mean the Person in whose name any
certificate representing Warrants shall be registered on the books maintained
by the Warrant Agent pursuant to Section 6.
(l) "Transfer Agent" shall mean American Securities Transfer,
Inc., as the Company's transfer agent, or its authorized successor, as such.
(m) "Warrant Agent" shall mean American Securities Transfer,
Inc., or its authorized successor appointed pursuant to Section 14 hereof.
Capitalized terms used herein, but not otherwise defined in this
Section 1, shall have the meanings ascribed to them throughout this Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall entitle the Registered Holder thereof to
purchase from the Company one share of Common Stock in accordance with the
terms hereof and subject to adjustment as provided herein.
(b) As promptly as practicable after the Effective Date, Warrant
Certificates representing the number of Warrants to which holders of claims
shall be entitled pursuant to the Plan of Reorganization shall be executed by
the Company and delivered to the Warrant Agent for distribution to such
holders. Upon written order of the Company signed by its Chairman of the
Board, President or a Vice President and by its Secretary or an Assistant
Secretary, the Warrant Certificates shall be countersigned, issued and
delivered by the Warrant Agent.
(c) As promptly as practical after the Effective Date, Warrant
Certificates representing 676,178 Warrants to be issued to Hall Financial
Group, Inc. ("Hall") shall be executed by the Company and delivered to the
Warrant Agent for distribution to Hall, subject to the restrictions on transfer
required by law and appropriately legended to reflect such restrictions and
with the corresponding stop transfer instructions in place.
3
<PAGE> 4
(d) From time to time, through the Expiration Time, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 5,676,178 shares, subject to
adjustment, of Common Stock upon the exercise of Warrants in accordance with
the terms of this Agreement.
(e) From time to time, through the Expiration Time, the Warrant
Agent shall countersign and deliver Warrant Certificates in required
denominations to the Persons entitled thereto in connection with any transfer
or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Effective Date, upon the exercise of fewer than
all Warrants represented by any Warrant Certificate, to evidence any
unexercised Warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 7, and (iv) those
issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 8.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed
or engraved thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or quotation system on which
the Warrants may be listed or quoted (as the case may be) or to conform to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
4
<PAGE> 5
lost, stolen or destroyed Warrant Certificates) and issued in registered form.
Warrants shall be numbered serially with the prefix W.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of the Company. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4 hereof.
SECTION 4. Exercise.
(a) Each Warrant shall entitle the Registered Holder thereof,
subject to the provisions of this Agreement, to purchase one share of Common
Stock (subject to adjustment pursuant to Section 9 below) at the Exercise Price
indicated below if the Warrant is exercised
5
<PAGE> 6
during the twelve-month period beginning on March 15th of the years indicated
below.
<TABLE>
<CAPTION>
Twelve Months
Beginning March 15 Exercise Price
------------------ --------------
<S> <C>
1996 $2.00
1997 $2.25
1998 $2.50
1999 $2.75
2000 $3.00
</TABLE>
After the Expiration Time, the Warrants shall no longer be exercisable.
(b) A Registered Holder of one or more Warrants may exercise all
or a portion of such Warrants at any time and from time to time prior to the
Expiration Time by:
(i) presenting and surrendering to the Warrant Agent the
Warrant Certificate representing all or a portion of the Warrants desired
to be exercised;
(ii) duly executing and delivering the subscription form on
the reverse side of the Warrant Certificate (the "Subscription Form"),
indicating the number of Warrants being exercised and the number of
shares of Common Stock being purchased upon exercise; and
(iii) paying in full the Exercise Price for each Warrant
being exercised by check or postal, telegraphic or express money order
drawn on a commercial bank, trust company or savings and loan having an
office or correspondent in the United States and made payable to the
order of "Search Capital Escrow Account."
A Warrant will be deemed to have been exercised on the date
that the Warrant Agent receives the Warrant Certificate, Subscription Form and
payment in full of the Exercise Price of the Warrants being exercised. The
Exercise Price shall be deemed to have
6
<PAGE> 7
been received by the Warrant Agent upon (i) clearance of any uncertified check
or (ii) receipt by the Warrant Agent of (A) a cashier's check, (B) certified
check, (C) a check made payable by a member firm of a national securities
exchange or a member of the NASD or (D) of any postal, telegraphic or express
money order.
(c) After a Warrant has been duly exercised by the holder
thereof, the Company shall cause the Transfer Agent to issue certificates for
the total number of whole shares of Common Stock for which the Warrants were
duly exercised, and the Registered Holder shall be deemed to be the holder of
record of such shares of Common Stock on the Exercise Date, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to the Warrant Holder.
(d) If less than all of the Warrants represented by a Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
remaining number of Warrants.
(e) Upon the exercise of any Warrant and clearance of the funds
received, the Warrant Agent shall promptly remit the payment received for the
exercise of the Warrant to the Company or as the Company may direct in writing.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants and the payment of the Exercise Price shall, at the time of
delivery, be duly and validly issued, fully paid, non-assessable, not subject
to pre-emptive rights and free from all taxes, liens and charges with respect
to the issue thereof (other
7
<PAGE> 8
than those placed thereon by the Registered Holder), and that upon issuance the
Company shall use commercially reasonable efforts to cause such shares to be
listed on each national securities exchange or automated quotation system, if
any, on which the other shares of outstanding Common Stock of the Company are
then listed.
(b) The Company shall pay all documentary, stamp or similar taxes
or other governmental charges that may be imposed with respect to the issuance
of Common Stock, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if any shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the Person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(c) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the Warrants and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent (if the Transfer Agent is not
also the Warrant Agent or an affiliate thereof) of the Company for shares of
Common Stock issuable upon exercise of the Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. The Warrants are transferable only on the
registry books of the Warrant Agent by the Registered Holder thereof in person
or by his attorney duly authorized in writing and only if the Warrant
Certificates representing such Warrants are surrendered at the office of the
Warrant Agent, duly
8
<PAGE> 9
endorsed or accompanied by a proper instrument of transfer satisfactory to the
Warrant Agent and the Company in their sole discretion, together with payment
of any applicable transfer taxes. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute and
the Warrant Agent shall countersign, issue and deliver in exchange therefor a
Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer or partial
transfer of any Warrant Certificate at such office, the Company shall execute
and the Warrant Agent shall issue and deliver to the transferee or transferees
(and to the transferor, in the case of a partial transfer) a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in a form satisfactory
to the Company and the Warrant Agent, duly executed by the Registered Holder or
his attorney-in-fact duly authorized in writing.
(d) If a service charge is imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates, the Company will
pay such service charge. In addition, the Company may require payment by such
holder of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in the case of mutilated Warrant Certificates shall be promptly
cancelled by the Warrant Agent and
9
<PAGE> 10
thereafter retained by the Warrant Agent until termination of this Agreement or
resignation as Warrant Agent or disposed of or destroyed, at the direction of
the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice of the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to the Company, and (in
the case of mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall (in the absence of appropriate notice
to the Company and/or Warrant Agent that the Warrant Certificate has been
acquired by a bona fide purchaser) countersign and deliver to the Registered
Holder in lieu thereof a new Warrant Certificate of like tenor representing an
equal aggregate number of Warrants. Applicants for a substitute Warrant
Certificate shall comply with such other reasonable regulations and pay such
other reasonable charges as the Warrant Agent may prescribe.
SECTION 8. Redemption. (a) Within 90 days following the Expiration
Time, the Company shall redeem all Warrants remaining unexercised at the
Expiration Time at a redemption price (the "Redemption Price") of $0.25 per
Warrant; provided, however, that in the event the funds of the Company legally
available for redemption of such Warrants are insufficient to redeem all such
Warrants, then the funds of the Company, to the extent legally available for
such purpose, shall be used to redeem the number of Warrants which may be
10
<PAGE> 11
redeemed. At any time and from time to time thereafter as additional funds of
the Company are legally available for the redemption of Warrants, such funds
shall promptly be used to redeem additional Warrants until all Warrants have
been redeemed.
(b) Notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 10 days nor more than 60 days prior to
the date of the redemption (the "Redemption Date"), to each Record Holder at
such holder's address as the same appears on the Warrant registry. Each such
notice shall state: (i) the Redemption Date; (ii) the number of Warrants to be
redeemed and, if less than all the Warrants held by such holder are to be
redeemed from such holder, the number of Warrants to be redeemed from such
holder; (iii) the Redemption Price and (iv) the place where Warrant
Certificates are to be surrendered for payment of the Redemption Price. Any
notice given in such manner shall be conclusively deemed to have been duly
given whether or not such notice is in fact received.
(c) From and after the Redemption Date the Company shall, at the
place specified in the notice of redemption, upon presentation and surrender to
the Company by or on behalf of the Registered Holder thereof of one or more
Warrants to be redeemed, deliver or cause to be delivered to or upon the
written order of such Holder a sum in cash equal to the Redemption Price of
each such Warrant. From and after the Redemption Date, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price,
shall cease.
SECTION 9. Adjustments to Shares of Common Stock Purchasable.
The number of shares of Common Stock purchasable upon exercise of a
Warrant shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Section 9.
11
<PAGE> 12
9.1 Mechanical Adjustments.
(a) If at any time prior to the termination of this Agreement
pursuant to Section 18 the Company shall (i) pay a dividend or make a
distribution on the Common Stock in shares of Common Stock, other than a
dividend paid in the form of Common Stock that is paid to the holders of the
Company's 9%/7% Convertible Preferred Stock, (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, then
immediately after the occurrence of such event the number of shares of Common
Stock for which a Warrant is exercisable shall be adjusted to equal the number
of shares of Common Stock which a record holder of the same number of shares of
Common Stock for which a Warrant is exercisable immediately prior to the
occurrence of such event would own or be entitled to receive after the
happening of such event.
(b) In the event of a (i) recapitalization or reclassification of
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination of the Common Stock that is accounted for elsewhere
herein), (ii) consolidation or merger of the Company with or into another
person or any merger of another person into the Company (other than a merger
that does not result in a reclassification, conversion, exchange or
cancellation of Common Stock), (iii) sale or transfer of all or substantially
all of the assets of the Company (other than a sale-leaseback, farm-out,
collateral assignment, mortgage or other similar financing transaction), or
(iv) compulsory share exchange, pursuant to any of which holders of Common
Stock shall be entitled to receive other securities, cash or other property,
then there shall be no adjustment in the Exercise Price but appropriate
provision shall be made so that each holder of a Warrant shall
12
<PAGE> 13
have the right thereafter, upon exercise of such Warrant, to receive the kind
and amount of the securities, cash or other property that would have been
receivable upon such recapitalization, reclassification, consolidation, merger,
sale, transfer, or share exchange by a holder of the number of shares of Common
Stock issuable upon exercise of such Warrant immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange assuming such holder of Common Stock exercised such holder's
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange as elected by a
plurality of the electing shares. The Company shall not enter into any such
merger, consolidation or sale unless the company formed by such consolidation
or resulting from such merger or that acquires such assets or that acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments that, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the relevant adjustments provided for in this Section 9.
9.2 Issuance of Additional Shares of Common Stock. If at any
time prior to the termination of this Agreement pursuant to Section 18, the
Company shall issue or sell any additional shares of Common Stock (other than
pursuant to employee stock options granted in good faith by the Board of
Directors) for consideration in an amount per additional share of Common Stock
less than the then current market price per share of the Common Stock, then (i)
the number of shares of Common Stock for which this Warrant is exercisable
shall be adjusted to equal the product obtained by multiplying the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale by a fraction (A) the
13
<PAGE> 14
numerator of which shall be the then current market price per share of Common
Stock, and (B) the denominator of which shall be the per share consideration at
which such additional shares of Common Stock are issued or sold.
9.3 Notices of Adjustment. Whenever the number of shares of
Common Stock is adjusted as herein provided, the Company shall promptly mail or
cause to be mailed to the Registered Holder a notice setting forth the adjusted
number of shares purchasable upon the exercise of this Warrant, setting forth
in reasonable detail the facts requiring such adjustment and the calculation on
which adjustment is based, which notice shall be conclusive evidence of the
correctness of such adjustment.
9.4 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends other than extraordinary or liquidating dividends shall
be made during the term of this Warrant or upon the exercise of this Warrant.
9.5 Other Action Affecting Common Stock. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, which action will have an adverse effect upon the rights of the
Registered Holders, then upon the request of Registered Holders holding more
than 50% of the Warrants, the number of shares of Common Stock or other stock
for which this Warrant is exercisable and/or the purchase price thereof shall
be adjusted in such manner as may be equitable in the circumstances.
9.6 Form of Warrant After Adjustments. The form of this Warrant
need not be changed because of any adjustments in the number or kind of the
shares of Common Stock, and Warrants theretofore or thereafter issued may
continue to express the same number and kind of shares as are stated in this
Warrant, as initially issued.
9.7 Treatment of Registered Holder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Registered Holder as the
14
<PAGE> 15
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for all purposes and shall not be affected by any notice
to the contrary.
9.8 Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by
the same Holder, the number of full shares of Common Stock which shall be
issuable upon such exercise thereof shall be computed on the basis of the
aggregate number of shares of Common Stock purchasable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would,
except for the provisions of this Section be issuable on the exercise of a
Warrant, the Company shall pay an amount in cash calculated by it to be equal
to the then current market value per share of Common Stock multiplied by such
fraction computed to the nearest whole cent.
SECTION 10. Registered Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights.
SECTION 11. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in
15
<PAGE> 16
his own behalf and for his own benefit, enforce against the Company his right
to exercise his Warrants for the purchase of shares of Common Stock in the
manner provided in the Warrant Certificate and this Agreement.
SECTION 12. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and cancelled by it and retired. The Warrant Agent shall also
cancel Warrant Certificates following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split up, combination or
exchange.
SECTION 13. Information. The Company will deliver to each Registered
Holder promptly upon their becoming available one copy of each report, notice
or proxy statement sent by the Company to its stockholders generally.
SECTION 14. Limitation of Liability. No provision hereof, in the absence
of affirmative action by a Registered Holder to purchase shares of Common
Stock, shall give rise to any liability of such Holder as a stockholder of the
Company.
SECTION 15. Concerning the Warrant Agent. By the execution of this
Agreement, the Company hereby appoints American Securities Transfer, Inc. to
act as Warrant Agent pursuant to the terms hereof and American Securities
Transfer, Inc. hereby accepts such appointment. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise or conversion of
any Warrant or whether any stock issued upon exercise of any Warrant is fully
paid and nonassessable.
16
<PAGE> 17
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment provided in this Agreement, or to determine whether any
fact exists which may require any such adjustments, or with respect to the
nature or extent of any such adjustment, when made, or with respect to the
method employed in making the same. It shall not (i) be liable for any recital
or statement of facts contained herein or for any action taken, suffered or
omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties, (ii) be responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
The Warrant Agent may, at its own expense, at any time consult with
counsel satisfactory to it (who may be counsel for the Company) and shall incur
no liability or responsibility for any action taken, suffered or omitted by it
in good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, or its Secretary (unless
other evidence in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in accordance with such notice, statement, instruction, request, direction,
order or demand believed by it to be genuine and signed or given by an
authorized person.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder, other than legal fees and expenses incurred by the Warrant Agent as
provided above; it further agrees to indemnify the
17
<PAGE> 18
Warrant Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder except losses, expenses and liabilities arising as a result of the
Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or willful misconduct), after
giving 30 days prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to each Registered Holder at
the Company's expense. Upon such resignation or any inability of the Warrant
Agent to act as such hereunder, the Company shall appoint a new warrant agent
in writing. If the Company shall fail to make such appointment within a period
of 15 days after it has been notified in writing of such resignation by the
resigning Warrant Agent, then any Registered Holder may apply to any court of
competent jurisdiction for the appointment of a new Warrant Agent. Any new
Warrant Agent, whether appointed by the Company or by such a court, shall be a
bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company. After acceptance in writing of such appointment by the new
Warrant Agent is received by the Company, such new Warrant Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning
18
<PAGE> 19
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
each Registered Holder.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding by operation of law to the trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor Warrant Agent shall promptly cause notice of its succession
as Warrant Agent to be mailed to the Company and to each Registered Holder.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. The Warrant Agent and the Company
may by supplemental agreement make any changes or corrections in this Agreement
(i) that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained, or (ii) that they may deem necessary or desirable and which shall
not materially adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented, altered or amended in any other respect except with the
consent in writing of Registered Holders holding not less than 50% of the
Warrants then outstanding; and provided, further, that no change in the number
or nature of the securities purchasable upon the exercise of any Warrant, or
the Exercise Price therefor, or the acceleration of the Expiration Time shall
be made without the consent in writing of Registered Holders holding not less
than 50% of the Warrants then outstanding.
19
<PAGE> 20
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class mail, postage prepaid as follows: if
to the Registered Holder of a Warrant Certificate, at the address of such
holder as shown on the registry books maintained by the Warrant Agent; if to
the Company, at 700 N. Pearl Street, LB 401, Dallas, Texas 75201, attention:
Secretary, or at such other address as may have been furnished to the Warrant
Agent in writing by the Company; if to the Warrant Agent, at its Corporate
Office.
SECTION 18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law,
or to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at such time at
which all of the Warrants are redeemed by the Company pursuant to Section 8
hereof or such earlier date upon which all Warrants have been exercised, except
that the Warrant Agent shall account to the Company for cash held by it and the
provisions of Section 4 hereof shall survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SEARCH CAPITAL GROUP, INC.
By: /s/ ROBERT D. IDZI
-----------------------------------
Printed Name: Robert D. Idzi
-------------------------
Title: EVP & CFO
--------------------------------
AMERICAN SECURITIES TRANSFER, INC.
WARRANT AGENT:
By: /s/ FRED BORRIGS, JR.
-----------------------------------
Printed Name: Fred Borrigs, Jr.
-------------------------
Title: Vice President
--------------------------------
21
<PAGE> 1
EXHIBIT 4.3
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
NO. W________ ________ WARRANTS
SEARCH CAPITAL GROUP, INC.
WARRANT CERTIFICATE
This Warrant Certificate certifies that FOR VALUE RECEIVED
_________________________________________________ or registered assigns thereof
(the "Registered Holder") is the holder of the number of Search Capital Group,
Inc. (the "Company") warrants ("Warrants") specified above. Each Warrant
entitles the Registered Holder, but only subject to the terms and conditions
set forth herein and in the Warrant Agreement referred to below, to purchase
from the Company one share of Common Stock, par value $0.01 per share (the
"Common Stock") of the Company on or before the Expiration Time (as defined
herein), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the Corporate
Office of ______________________________________, as Warrant Agent, or its
authorized successor (the "Warrant Agent"), at ____________________________, or
such other address as the Warrant Agent may specify in writing to the
Registered Holder of the Warrants evidenced hereby, accompanied by payment of a
price (the "Exercise Price") per Warrant in lawful money of the United States
of America in cash or by check or postal, telegraphic or express money order
drawn on a commercial bank, trust company or savings and loan having an office
or correspondent in the United States and made payable to the order of the
"Search Capital Escrow Account." A Warrant shall be exercisable at the
Exercise Price indicated below if the Warrant is exercised during the
twelve-month period beginning on _________________ of the years indicated
below.
<TABLE>
<CAPTION>
Twelve Months
Beginning , Exercise Price
---------------------- --------------
<S> <C>
1996 $2.00
1997 $2.25
1998 $2.50
1999 $2.75
2000 $3.00
</TABLE>
After the Expiration Time, the Warrants shall no longer be exercisable.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated
________________, 1996, by and between the Company and the Warrant Agent.
The term "Expiration Time" shall mean 5:00 P.M., New York time, on
______________, 2001, subject to extension as provided herein. If such date
shall fall on a day that is a Saturday or Sunday or a day on which banking
institutions are legally authorized to close in the City of New York, then such
expiration time shall mean the next following day which in the City of New York
is not a holiday or a day on which banking institutions are legally authorized
to close ("Business Day").
In the event of certain contingencies provided in the Warrant
Agreement, the number of shares of Common Stock subject to purchase upon the
exercise of each Warrant represented hereby is subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all of the Warrants represented hereby,
this Warrant Certificate shall be cancelled and a new Warrant Certificate or
Warrant Certificate of like tenor, which the Warrant Agent shall countersign,
shall be delivered as directed by the Registered Holder for the balance of such
Warrants.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the Corporate Office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment, and payment of any
tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Any Warrants not exercised prior to the Expiration Time will be
redeemed by the Company at a redemption price of $0.25 per Warrant, subject to
the Company's having funds legally available therefor.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
<TABLE>
<S> <C>
SEARCH CAPITAL GROUP, INC.
Dated: By:
-------------------- ------------------------------------------------------------------------------------
----------------------------------------------------------------------
Chairman of the Board
By:
---------------------------------------------------------------------------
----------------------------------------------------------------------
Chief Financial Officer and Secretary
[seal]
Countersigned:
- -------------------------------------------
as Warrant Agent
By:
----------------------------------------
Authorized Officer
</TABLE>
<PAGE> 2
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The Undersigned Registered Holder hereby irrevocably elects to
exercise a total of __________ Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
[please print or type name and address]
and be delivered to
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:
-------------------- ----------------------------------------------
-------------------------------------
-------------------------------------
Address
-------------------------------------
Taxpayer Identification Number
-------------------------------------
Signature Guaranteed
-------------------------------------
<PAGE> 1
EXHIBIT 99.1
AGREEMENT REGARDING CONVERSION OF NOTES
1.0 DATE AND PARTIES
1.1 DATE. This Agreement Regarding Conversion of Notes ("Agreement")
is dated and effective April 2, 1996.
1.2 PARTIES. The parties to this Agreement are as follows:
A. Hall Phoenix/Inwood, Ltd., assignee of Hall Financial Group,
Inc. ("HFG")
750 N. St. Paul
Suite 200
Dallas, TX 75201-3247
B. Search Capital Group, Inc. ("Search")
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
C. Search Funding Corp. ("SFC")
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
D. Automobile Credit Acceptance Corp. ("ACAC")
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
E. Newsearch, Inc. ("Newsearch")
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
F. Automobile Credit Holdings, Inc. ("ACHI")
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
AGREEMENT REGARDING CONVERSION OF NOTES - PAGE 1
<PAGE> 2
2.0 PURPOSE AND CONSIDERATION
2.1 PURPOSE: The purpose of this Agreement is to amend and supersede
certain provisions of those certain promissory notes entered into between HFG,
Search, and SFC being that certain Convertible Promissory Note (Note I) int he
original principal amount of $1,284,487.28 ("Note 1") and that certain
Convertible Promissory Note (Note III) in the original principal amount of
$1,000,000 ("Note 3") (collectively the "Notes"). The parties agree that,
except as specifically amended and superseded below, Note 1 and Note 3 remains
fully enforceable.
2.2 DEFINITIONS: All terms defined in the Notes shall have the same
meanings herein as ascribed to them in the Notes.
2.3 CONSIDERATION: In consideration of the parties agreeing to release
each other from certain of the provisions of the Notes, the parties have
entered into this Agreement.
3.0 BACKGROUND
3.1 CONVERSION OF NOTES: The Notes provide for their conversion by HFG
into fully paid and nonassessable shares of the common stock of Search. The
total number of shares into which the Notes are convertible is capped at
2,500,000. Note 1 is convertible into the balance of shares remaining after
the conversion of Note 3. Consequently, until Note 3 is converted the number of
shares into which Note 1 can be converted cannot be calculated nor can the
amount that will then be owed on Note 1 be determined.
3.2 CONVERSION PRICE: The Notes contain provisions for determining the
value of the shares into which the Notes are convertible. One of the provisions
relates to an Implied Common Stock Price as determined by Alex. Brown. The
Implied Common Stock Price however has not yet been determined. The provisions
also provide for differing values based on whether the Notes are converted
within 30 days after entry of the order confirming the plan for the Search
subsidiaries (the order was entered on March 4, 1996) or after such period.
3.3 EXERCISE OF CONVERSION OPTION: HFG timely gave notice of its
intent to convert as much of Note 1 as possible into stock.
3.4 PAYOFF ON NOTE 1: Note 1 has matured according to its term and
Search and SFC desire to pay Note 1 in full. However, the amount of cash and
stock required to satisfy Note 1 cannot be calculated until HFG converts Note 3
which HFG is not required to do at this time.
AGREEMENT REGARDING CONVERSION OF NOTES - PAGE 2
<PAGE> 3
4.0 MODIFICATION OF NOTES
4.1 INITIAL CONVERSION PRICE: The parties agree that both Notes will
be converted into a total of 2,500,000 shares of the common stock of Search
effective as of April 2, 1996. The initial conversion price will be 65% of
$1.013 or $0.6585 per share.
4.2 PAYMENT OF BALANCE OF NOTE 1: The parties agree that the balance
to be paid on Note 1 in cash on April 2, 1996 is $356,705.34 plus interest
through April 2, 1996.
4.3 FINAL CONVERSION PRICE: The parties agree that once the Implied
Common Stock Price has been determined by Alex. Brown as required by the Notes,
the conversion price for the shares will be adjusted to the price most
favorable to HFG whether that be 65% of the Implied Common Stock Price as of
March 4, 1996, 65% of $1.43, or 60% of the average bid price as determined by
Alex. Brown for the 30 trading days after March 4, 1996.
4.4 PAYMENT OR REFUND: If the final conversion price of the shares is
greater than the initial conversion price then HFG will refund to Search and
SFC the amount of the overpayment of Note 1 as calculated based on the final
conversion price. If the final conversion price is less than the initial
conversion price then Search and SFC will pay to HFG the balance due on Note 1
as calculated based on the final conversion price.
4.5 STOCK: The 2,500,000 shares to be delivered to HFG on April 2,
1996 will be issued in the name of Hall Phoenix/Inwood, Ltd., the assignee of
HFG.
4.6 RELEASE OF NOTES AND COLLATERAL: On April 2, 1996, HFG will
release to Search and SFC the original of Note 3. Upon payment of any monies
owed to HFG in accordance with paragraph 4.4, HFG shall release to Search and
SFC Note 1 and all collateral securing Note 1 whether pledged by Search, SFC,
ACAC, Newsearch, or ACHI. HFG shall execute any documents necessary to effect
the release of the collateral.
5.0 OTHER PROVISIONS
5.1 GOVERNING LAW: Texas law governs the effect and construction of
this Agreement. With respect to arbitration matters, the Federal
Arbitration Act shall govern. Delaware corporate law governs
corporate matters with respect to all parties incorporated in
Delaware.
5.2 BINDING AGREEMENT: This Agreement binds and benefits all parties
and their respective successors and permitted assigns.
5.3 CAPTIONS: Captions, titles and headings are only for convenient
reference and are not to be construed in interpretation.
AGREEMENT REGARDING CONVERSION OF NOTES - PAGE 3
<PAGE> 4
5.4 COUNTERPARTS: This Agreement may be signed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same instrument.
HALL PHOENIX/INWOOD, LTD.
By: /s/ LARRY LEVEY
-----------------------------------
Printed Name: Larry Levey
-------------------------
Its: Vice President
Phoenix/Inwood Corp.
General Manager
----------------------------------
SEARCH CAPITAL GROUP, INC.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Executive Vice President
SEARCH FUNDING CORP.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Senior Vice President
AUTOMOBILE CREDIT ACCEPTANCE CORP.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Senior Vice President
AGREEMENT REGARDING CONVERSION OF NOTES - PAGE 4
<PAGE> 5
NEWSEARCH INC.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Senior Vice President
AUTOMOBILE CREDIT HOLDINGS, INC.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Senior Vice President
AGREEMENT REGARDING CONVERSION OF NOTES - PAGE 5
<PAGE> 1
EXHIBIT 99.2
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into effective as of
this 2nd day of April, 1996, by and among Hall Phoenix/Inwood, Ltd., assignee
of Hall Financial Group, Inc. ("HFG"), Search Funding corp. ("SFC"), and Search
Capital Group, Inc. ("SEARCH"), collectively referred to as the "PARTIES"; and
Burke, Wright & Keiffer, P.C. ("AGENT").
PARTIES
A. Hall Phoenix/Inwood, Ltd., assignee of Hall Financial Group,
Inc. ("HFG")
750 N. St. Paul
Suite 200
Dallas, TX 75201-3247
B. Search Capital Group, Inc.
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
C. Search Funding Corp.
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
D. Burke, Wright & Keiffer, P.C.
2900 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
RECITALS
A. WHEREAS, the Parties entered into a Funding Agreement and
subsequently, the First Amendment to Funding Agreement, whereby Search granted
HFG the right and option to purchase (i) Search common stock and convertible
preferred stock of the same class, and having the same
ESCROW AGREEMENT - Page 1
<PAGE> 2
rights, privileges and priority, as that issuable under the Plan (defined
below) to Noteholders electing the Search Equity Option in consideration for
their Allowed Noteholder Secured Claims, and (ii) Warrants of the same
character and tenor as those to be distributed to Allowed Unsecured Claimants
under the Plan in amounts equal to the number of each type of security that HFG
would be entitled to receive if HFG were a Noteholder with a $6,000,000 present
value of the Notes who elected the Search Equity Option under the Plan
(hereinafter, the "Stock Purchase Option").
B. WHEREAS, the Stock Purchase Option was incorporated in the Third
Amended Joint Plan of Reorganization, as supplemented and modified (the
"Plan"), which Plan was confirmed by the bankruptcy court on March 5, 1996 in
the matters styled In re Automobile Credit Fund 1991-III, Inc., et al., Cases
395-34981-RCM-11 through 395-34988-SAF-11, Jointly Administered under case No.
395-34981-RCM-11.
C. WHEREAS, the First Amendment to the Funding Agreement and the Plan
provided that HFG's Stock Purchase Option would expire ten days following the
Effective Date of the Plan.
D. WHEREAS, the Parties entered into the Second Amendment to the
Funding Agreement whereby the Parties agreed to extend the deadline for HFG to
exercise its Stock Purchase Option to April 1, 1996 and the Third Amendment to
Funding Agreement whereby the Parties agreed to extend the deadline for HFG to
exercise its Stock Purchase Option to April 2, 1996.
E. WHEREAS, the Plan provides that 25% of the shares of Common Stock
to be distributed to Search Equity Option Noteholders will be reserved pending
final closing on the settlement of a class action suit brought on behalf of
shareholders of Search in Case No. 3:94-CV-1428-J in the United States District
Court for the Northern District of Texas, Dallas Division
ESCROW AGREEMENT - Page 2
<PAGE> 3
("O'SHEA MATTER"), which final settlement could affect the number of securities
to be issued to the Search Equity Option Noteholders.
F. WHEREAS, HFG intends to exercise its Stock Purchase Option and has
agreed that Search will issue to HFG 75% of the securities to which HFG is
entitled pursuant to its Stock Purchase Option and Search will reserve 25% of
the securities to which HFG is entitled until final determination of the number
of securities to be issued to the Search Equity Option Noteholders.
G. WHEREAS, the Parties have agreed that HFG will escrow $250,000 of
the total amount payable by HFG to exercise its Stock Purchase Option until
final determination is made regarding the number of securities to be issued to
HFG.
H. WHEREAS, on November 30, 1995 Search and SFC executed those certain
promissory notes payable to HFG being Convertible Promissory Note (Note I) in
the original principal amount of $1,284,487.28 ("NOTE 1") and Convertible
Promissory Note (Note III) in the original principal amount of $1,000,000
("NOTE 3") (collectively the "NOTES").
I. WHEREAS, the Parties have, of even date herewith, entered into an
Agreement Regarding Conversion of Notes that provides for the conversion of all
of Note 3 and a portion of Note 1 into 2,500,000 shares of common stock of
Search at an initial conversion price agreed to by the Parties with the final
conversion price to be determined once the Alex. Brown Implied Common Stock
Price has been determined in accordance with the Notes which determination will
occur when the notice is sent to the Search Equity Option Noteholders by Search
and the Creditor's Committee in the bankruptcy cases referenced in paragraph B
above advising as to whether the O'Shea Matter will be settled with stock or a
cash payment ("O'SHEA SETTLEMENT NOTICE").
ESCROW AGREEMENT - Page 3
<PAGE> 4
J. WHEREAS, the Parties have agreed that Search will escrow $281,880
and a stock certificate representing 552,211 shares of the common stock of
Search ("STOCK CERTIFICATE") until such time as the O'Shea Settlement Notice
has been sent to the Search Equity Option Noteholders.
NOW THEREFORE, in consideration of the foregoing recitals, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
all parties to this agreement, the Parties covenant and agree as follows:
1. Delivery to Agent. Simultaneous with its execution of this
Agreement, HFG agrees that the sum of $250,000 shall be delivered to the Agent.
Simultaneous with the execution of this Agreement, Search agrees that the Stock
Certificate and the sum of $281,880 will be delivered to the Agent.
2. Acceptance by Agent. By signing below, Agent hereby acknowledges
timely receipt of the sum of $250,000.00, the sum of $281,880, and the Stock
Certificate.
3. Delivery of $250,000 by Agent. Agent agrees to hold the $250,000
until such time as both parties deliver written notice to the agent as follows:
(i) that the United States District Court has entered a final order
approving the settlement in the O'Shea Matter and such order has
not been stayed pending appeal;
(ii) that the final determination has been made by Search and the
Creditors' Committee regarding the number of securities to be
issued to the Search Equity Option Noteholders;
(iii) that HFG has received all the securities to which it is entitled
after the final determination described in (ii) above; and
(iv) that the Agent is expressly authorized to disburse the $250,000 to
Search.
ESCROW AGREEMENT - Page 4
<PAGE> 5
4. Delivery of $281,880 and the Stock Certificate. Agent agrees to
hold the $281,880 and the Stock Certificate until such time as both parties
deliver written notice to the Agent that the O'Shea Settlement Notice has been
sent to the Search Equity Option Noteholders. If the O'Shea Matter will be
closed with a cash payment by Search, the Agent will deliver the $281,880 and
the Stock Certificate to Search. If the O'Shea Matter will be closed with the
delivery of stock of Search, the Agent shall deliver the $281,880 and the Stock
Certificate to HFG.
5. Modification and Termination. This Agreement shall not be
modified, revoked, released, or terminated, except upon the mutual consent of
the Parties and the Agent, given in writing and delivered to Agent. This
Agreement shall automatically terminate at such time as Agent has disbursed the
funds pursuant to this Agreement.
6. Disagreement. Except as otherwise provided herein, Agent shall
have the absolute right to rely on the contents of any notice, or copy of any
notice between and among the Parties or addressed to the Agent which purports
to be a notice provided for in this Agreement and which appears to be signed by
the party sending such notice. Should any controversy arise between the
parties with respect to this Agreement or with respect to Agent's compliance
with any notice, each party hereby agrees that Agent shall be held harmless
from any liability, damages, claim, or cause of action arising from Agent
acting in accordance with this Agreement in reliance on the notice. Should
Agent become involved in litigation in any manner whatsoever on account of this
Agreement as a result of complying with its obligations under this Agreement in
reliance on a notice it receives, the Parties hereto agree, and bind their
heirs, legal representatives, successors, and assigns, to pay Agent's
reasonable attorneys' fees incurred and any other reasonable disbursements,
expenses, losses, costs, and damages in connection with or arising from such
litigation to the extent that such party is the
ESCROW AGREEMENT - Page 5
<PAGE> 6
author of the notice. Agent shall have no obligation to take any legal action
in connection with this Agreement or towards its enforcement, or to appear in,
prosecute, or defend any action or legal proceeding which would or might
involve it in any cost, expense, loss, or liability, unless security and
indemnity shall be furnished.
7. Binding Effect. This Agreement contains the entire understanding
between and among the parties hereto, and shall be binding upon and inure to
the benefit of such parties, and subject to its terms, their respective
successors, heirs, assigns, and legal representatives.
8. Governing Law. This Agreement is being executed and delivered in
and shall be governed by and construed and enforced in accordance with the laws
of the State of Texas.
9. Notices. Any notices required or permitted to be given hereunder
shall be given by (i) facsimile transmission, (ii) hand delivery, or (iii)
certified or registered mail, return receipt requested, to the addresses set
forth below each party's signature block, or to such other single address as
either party hereto shall notify the other, and shall be considered to be
received only upon actual receipt by the party to whom the notice is sent (or
at the time of refusal of delivery if the addressee refuses delivery of the
notice).
EXECUTED on the date and year first above written.
HALL PHOENIX/INWOOD, LTD.
By: /s/ LARRY LEVEY
-----------------------------------
Printed Name: Larry Levey
-------------------------
Its: Vice President
Phoenix/Inwood Corp.
General Manager
----------------------------------
ESCROW AGREEMENT - Page 6
<PAGE> 7
SEARCH CAPITAL GROUP, INC.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Executive Vice President
SEARCH FUNDING CORP.
By: /s/ ROBERT D. IDZI
-----------------------------------
Robert D. Idzi,
Senior Vice President
BURKE, WRIGHT & KEIFFER, P.C.
By: /s/ FRANK J. WRIGHT
-----------------------------------
Frank J. Wright
Vice President
ESCROW AGREEMENT - Page 7
