UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the fiscal year ended March 31, 1996 Commission File Number 2-95465-S
Westar Financial Services Incorporated
(successor to Republic Leasing Incorporated)
(Exact name of registrant as specified in its charter)
Washington 91-1715252
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
The Republic Building, Suite 300, Olympia, WA 98501
(address of principal executive office, zip code)
Registrant's telephone number, including area code (360) 754-6227
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing require-
ments for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Aggregate market value of voting stock held
by non-affiliates of the registrant at May 31, 1996
$10,335,116
1,435,300 shares of no par value Common Stock outstanding as of May 31, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement relating to its July 22, 1996,
Annual Meeting of Shareholders are incorporated into Parts II and III of this
annual report on Form 10-K.
Total of Sequentially Numbered Pages:
Exhibit Index is Located at Page:
PART I
ITEM 1. BUSINESS
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General
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Westar Financial Services Incorporated ("Westar"), successor to Republic Leasing
Incorporated ("RLI"), was originally formed in 1985 as Republic Leasing VI, a
limited partnership, and incorporated in 1989 in the state of Delaware. At a
special shareholders' meeting held on March 25, 1996, the shareholders of RLI
approved a plan of merger between Westar and RLI (see Item 4). The merger
effected the reincorporation of RLI in the state of Washington and the change of
name to Westar.
In March 1994, the Company began acquiring leases from automobile dealers under
its new Dealer-Direct Retail Leasing ("DDRL") program. DDRL provides automobile
dealers a financing alternative to the traditional loan and lease programs
offered by financial institutions and auto manufacturers and other captive
finance companies. Throughout fiscal 1994 and 1995 and the first half of fiscal
1996, Company management was identifying key personnel, developing marketing
strategy and information systems and identifying the necessary capital markets
needed to fund such a program. In addition to DDRL, the Company continued to
service leases of equipment and vehicles sold to other financial institutions
(see Lease Servicing). It is management's intent to focus future business
growth efforts on DDRL. The Company launched full-scale DDRL operations in
October 1995.
In July 1995, three new companies were formed constituting a structure designed
to better facilitate lease securitizations. The companies consist of Westar
Auto Holding Company, Inc. ("WestAH"), a 100% owned subsidiary of RLI; Westar
Auto Finance, LLC ("WestAF"), a limited liability company owned 99% by RLI and
1% by WestAH; and Westar Lease Origination Trust ("WestLOT"), a Washington state
business trust beneficially owned by WestAF. The accompanying financial state-
ments represent the consolidated results of Westar, RLI, WestAH, WestAF and
WestLOT which are collectively referred to as the "Company".
The Company conducted business as an operating company under the trade name of
"Republic Leasing" registered in the state of Washington. In April 1996, the
Company began using the tradename "Westar Leasing" in addition to Republic
Leasing. Westar Leasing is also registered in the state of Washington.
The Company's business activities are currently concentrated in the Pacific
Northwest, but may take place in other areas of the United States.
Forward-Looking Statements
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Although most of the information contained in this report is historical, certain
of the statements contain forward-looking information. To the extent these
statements involve, without limitation, product development and introduction
plans, the Company's expectations for growth, estimates of future revenues,
expenses, profit, cash flow, balance sheet items, forecasts of demand or market
trends for the Company's products and for the auto finance industry or any other
guidance on future periods, these statements are forward-looking and involve
matters which are subject to a number of risks and uncertainties that could
cause actual results to differ materially from those expressed in such forward-
looking statements. Readers of this report should consider, along with other
relevant information, the risks identified in this report, and other risks
identified from time to time in the Company's filings with the Securities and
Exchange Commission, press releases and other communications.
Business Strategy
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DDRL Leases
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The Company's primary strengths are its existing dealer network, its financing
capabilities and its 18 years in the leasing industry. The Company's strategy
for growth is to utilize its strengths to (i) increase lease acquisitions by
continuing to develop existing dealer relationships within its existing geogra-
phic market and by expanding into new geographic markets and (ii) expand and
further develop its servicing and used automobile remarketing operations.
The Company's business strategy is to (i) provide personal and attentive service
to the manufacture-franchised automobile dealers in its network, (ii) lease
primarily to high quality credit applicants in order to build a lease portfolio
with low delinquency and credit loss rates, (iii) finance its lease portfolio in
the short-term through warehouse credit facilities and in the long-term through
asset-back securitizations and (iv) manage its residual value risk through the
initial utilization of primary residual value insurance policies and tax benefit
transactions and ultimately through residual estimation strategy and remarketing
expertise.
The Company offers its DDRL program to selected automobile dealers based on
their reputation, location and size. Each dealer that chooses to participate is
required to sign a nonexclusive Dealer Agreement. The Company attempts to meet
the needs of its dealers through responsive customer service, extended hours,
rapid funding, consistent buying practices and competitive pricing. The Company
currently offers the DDRL program to automobile dealers in the states of
Washington, Oregon and Idaho. At March 31, 1996, the Company had 101 signed
dealers.
Leases acquired from dealers through DDRL are pre-approved by the Company's
experienced Lease Production Officers ("LPO") and must meet the Company's credit
and documentation standards prior to funding. Lessees must not exceed
established debt/income and payment ratios and must possess a credit history
exhibiting their willingness to pay creditors on an as agreed basis. The
Company has implemented a proprietary credit scoring system which further
enables the Company to control the consistency of the credit quality of the
applications approved.
Commercial Leases
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Although the Company has ceased marketing its commercial lease product, the
Company continues to service the leases sold to other financial institutions.
The Company's previous commercial client relationships have all been referred
to T&W Leasing, Inc., a preferred stock shareholder.
Lease Servicing
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Over the last ten years the Company has sold, primarily to financial institu-
tions with servicing retained, approximately $14 million of leases and the
underlying assets for purposes of managing its credit exposure and to provide a
source of capital for funding new lease acquisitions. Services provided by the
Company to purchasers of its leases include, but are not limited to, monthly
billing, collecting and remarketing. At March 31, 1996, leased assets out-
standing which are not held in the Company's portfolio but are serviced by the
Company for others approximated $2,000,000.
Competition
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The retail automobile leasing industry within Washington, Oregon and Idaho is
dominated by large banks and captive finance companies of the vehicle manufac-
turers. The banks currently dominate the overall market for new vehicle leases.
Vehicle manufacturers, each of which sponsors either a subsidiary finance
program or a bank-sponsored program, can and do compete extremely aggressively
on price, but on a very selective basis, typically promoting one model or
another at price levels roughly equivalent to, or even below, their cost of
funds (these are known as "subvention" programs); while their other dealer
models are priced at competitive, rather than super-competitive, levels. Manu-
facturer's subvention programs typically restrict, often substantially, the
profit margin available to the selling dealer. The remaining competitors --
dealer-affiliated leasing companies, independent leasing companies, other banks,
credit unions -- split the remaining market among themselves, exercising neither
significant leadership nor dominance. Through the use of lower costs made
possible by securitization and lower overhead, lack of regulatory burden, and
lower transaction costs, management believes it can position the Company to be
fully price competitive with its largest competitors and to surpass them with
better service and responsiveness.
Credit Practices and Delinquency and Credit Loss Experience
- -----------------------------------------------------------
The Company's success is, in part, dependent on its ability to develop a port-
folio of prime-credit quality leases so as to minimize its delinquency and
credit loss experience. The Company's operating performance, financial
condition, liquidity and capital resources are materially affected by the per-
formance of the leases acquired by the Company. Each lease applicant must pass
the scrutiny of the Company's automated credit evaluation system and the review
of our experienced lease production personnel.
In connection with the servicing of leases, the Company is responsible for
managing delinquent accounts, repossessing the underlying collateral in the
event of default and selling repossessed collateral. The Company provides an
allowance for lease credit losses at a rate, which in the opinion of management,
provides adequately for current and probable future losses that may be incurred
by the Company.
The Company considers a lease delinquent when the lessee fails to make an
installment payment by the due date. A delinquent lease may result in the
repossession and foreclosure of the collateral underlying the lease contract.
Losses resulting from repossession and foreclosure of leases are charged against
applicable allowances. The Company had $5,417,000 and $772,000 in DDRL leases
outstanding, at March 31, 1996 and 1995, respectively. At March 31, 1996 and
1995, none of the leases were delinquent for 31 or more days and there were no
leases in repossession.
Although we expect our delinquency and credit loss experience to be at or below
other prime-credit producers, the loss experience rate depicted in the table
below is much higher than management's expectation for future periods. The
leases contributing to the losses in 1996 and 1995 were all acquired during the
Company's development and test phase and were not approved using the credit
policies, guidelines and procedures currently in place and which the Company has
been using since full-scale operations began in October 1995.
The credit loss and repossession experience of the Company's DDRL lease port-
folio for the years ended March 31, 1996 and 1995 was as follows:
Credit Loss/Repossession Experience (1) 1996 1995
- --------------------------------------- ----------- ---------
Average amount outstanding during period $ 3,094,000 $ 386,000
Average number of contracts outstanding 141 23
Number of repossessions 4 1
Repossessions as a percentage of average
number of leases outstanding 2.85% 4.44%
Gross charge-offs (2) $ 85,000 $ 12,000
Recoveries (57,000) (8,000)
------ ------
Net losses $ 28,000 $ 4,000
====== ======
Net losses as a percentage of average
DDRL lease portfolio .90% 1.04%
(1) All amounts and percentages are based on the net investment amount scheduled
to be paid on each lease.
(2) Amount charged off includes the remaining net investment balance in the
lease, but not unearned income.
Financing
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DDRL
- ----
The Company's plan provides for the securitization of leases acquired through
the DDRL program as asset-backed securities. The Company intends to service the
securitized leases. Various forms of financing are used to fund leases until a
sufficient "pool" has been generated for securitization. Forms of financing in-
clude traditional wholesale lease lines from banks, repurchase arrangements with
banks and internal capital.
In March 1995, the Company entered into an agreement with The Industrial Bank of
Japan, Limited ("IBJ") whereby IBJ agreed to assist the Company in arranging the
placement of up to $100 million in securities backed by auto lease receivables
generated through the DDRL program. In July 1995, the Company entered into an
agreement with Bank One, Columbus, NA ("Bank One") for a $12 million revolving
credit facility to be utilized as interim financing for the acquisition of auto
leases until sufficient volume is achieved to securitize such leases through the
IBJ facility. The IBJ facility has been structured to allow for securitized
transactions in $10 million pools. Initial funding under the Bank One facility
began in November, 1995. The Company must comply with quarterly debt/equity
ratios and net worth requirements.
In June 1994, the Company entered into an arrangement with a bank for the pur-
pose of financing leases acquired through the DDRL program pursuant to which
the bank agreed to purchase from the Company up to $1.5 million of leases so
acquired. The Company has the right under this arrangement to repurchase such
leases at anytime and may do so, in whole or in part, prior to entering into its
first securitization transaction. Leases sold under this arrangement are
recorded as lease repurchase agreements at their amortized cost basis using the
rate implicit in the underlying lease contract. Proceeds received upon sale of
the lease contracts are recorded as amounts payable under repurchase agreements,
which bear interest at rates between 7.5% and 8%, and are subsequently reduced
for principal payments received by the bank on such contracts.
Commercial
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Until July 1994, the Company utilized wholesale lines of credit with financial
institutions for financing the purchase of assets for lease. The Company bor-
rowed from 90% to 100% of the cost of the asset purchased. Beginning in July
1994, the Company began selling all of it's commercial lease production to T & W
Leasing, Inc. ("T&W"), a preferred stock shareholder, and management has
referred its commercial relationships to T&W. During the year ended March 31,
1996, total revenues from leases sold to T&W approximated $892,000. Leases sold
are serviced by the Company.
Regulatory Matters
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The Company's operations are subject to regulation under federal, state and
local laws, rules and regulations. In addition, the Company is required to
obtain and maintain certain licenses and qualifications in the states in which
it operates and is subject to laws, rules and regulations in each state.
Several states and the federal government have enacted "lemon laws" and similar
statutes containing warranty protections for consumers who purchase or lease new
or used motor vehicles. The application of these statutes may give rise to a
claim or defense by a consumer against the manufacturer of a purchased vehicle
or the dealer from or through whom such consumer leased such vehicle. The Com-
pany may be required to cancel a lease contract with a consumer who successfully
asserts such a claim or defense, and while the Company would have a claim
against the manufacturer or such dealer, there can be no assurance that the
Company will be made whole in every case in which the consumer successfully
asserts such rights.
The Company is also subject to numerous federal laws, including the Consumer
Leasing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act
and the rules and regulations promulgated thereunder, and certain rules of the
Federal Trade Commission. These laws require the Company to provide certain
disclosures to prospective lessees, prohibit misleading advertising and protect
against discriminatory financing or unfair credit practices.
Violations of the federal and state laws, rules and regulations described above
may result in actions for damages, claims for refunds of payments made, certain
fines and penalties, injunctions against certain practices, license revocation
and the potential forfeiture of rights to repayment of amounts due under leases.
The Company maintains internal controls to ensure that all legal and regulatory
requirements which apply to its business are complied with. Further, the
Company maintains internal systems and controls to monitor, respond to and
resolve informal and formal complaints raised by the lessees of its vehicles.
Employees
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As of March 31, 1996 the Company had 18 employees. Many of Westar's employees
are highly skilled and the Company's continued success depends in part upon its
ability to attract and retain employees who are in great demand within our
industry. At times, the Company may experience difficulty in hiring and
retaining experienced personnel. To date, the Company believes it has been suc-
cessful in its efforts to recruit qualified employees, but there is no assurance
that it will continue to be as successful in the future. None of the Company's
employees are represented by a collective bargaining unit and the Company
believes relations with its employees are favorable.
Executive Officers
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Set forth below is certain information concerning the executive officers of the
Company as of March 31, 1996:
Name Age Position
- -------------------------- --- ------------------------------------
Robert W. Christensen, Jr. 47 President and CEO
Cathy L. Carlson 40 Vice President, Operations
Chief Finance and Accounting Officer
Steven R. Murphy 56 Vice President
National Marketing Director
R.W. Christensen, Jr., age 47, is the President (since 1978) and Chairman of
the Board of Directors (since 1995) of the Company. Prior to 1978 he held posi-
tions as a financial analyst with Olympia Brewing Company, Assistant to the
President of Pacific Hide & Fur, a natural resources and steel distribution
firm, and as Corporate Pilot with Buttrey Food Stores. Mr. Christensen served
as Vice Chairman (1989-1990) and a member of the Board of Directors (1987-1990)
of Heritage Federal Savings & Loan Association. He is President and director of
Mud Bay Holdings Ltd., a privately held investment firm. Mr. Christensen has
previously served as an officer, director and President of the National Vehicle
Leasing Association (1981-1988) in which capacities he presented dozens of
articles and scores of speeches on the state and future of the automobile
leasing industry, subjects in which he is regarded as expert. He was awarded
the industry's most prestigious recognition, the Clemens-Pender Award, in 1988.
He has served as director of Washington Independent Bankshares (1982). Mr.
Christensen serves as the court-appointed Trustee of CASR Trust, a multi-year,
multi-million dollar fund established by the bankruptcy court for the benefit of
the creditors of All Seasons Resorts. He graduated from the College of Great
Falls (B.A. with Honors, Management and Economics) and received an MBA from the
University of Puget Sound.
Cathy L. Carlson, age 40, is a director of the Company (since 1992), Vice
President-Operations with responsibilities for Dealer Support, Lease Servicing,
Operations and Management Information Systems (since 1996), Vice President-
Finance with responsibility for accounting, finance and administration (since
1991) and has also served as Controller and Chief Financial Officer (since
1987). Ms. Carlson is a Certified Public Accountant and was with Coopers &
Lybrand from 1980 to 1987. She is a member of the Washington Society of CPAs
and the American Institute of CPAs. Ms. Carlson graduated from Seattle
University (B.A., Accounting.)
Steven R. Murphy, age 56, is the Vice President - National Marketing Director of
the Company with responsibility for all aspects of marketing, including the
recruitment, training and supervision of local, regional and national marketing
representatives (since 1995). Prior to joining the Company, he was Vice
President, National Marketing Director of Credit Union Leasing of San Diego,
California (since 1992). Prior to joining Credit Union Leasing, Mr. Murphy was
found and CEO of Bank Inventory Disposal Systems, Inc. of Ontario, California
(since 1989) which he sold in 1991. Previously he was with First Leasing
Corporation of Alameda, California, and its successor, Marine Midland Automotive
Financial Corp. for fourteen years, where he was responsible for the creation of
$1.9 billion of outstanding consumer lease assets from 1,500 dealers in 22
western states (since 1970). Mr. Murphy is a past president of the National
Vehicle Leasing Association, recipient of the Clemens-Pender Award, and is the
namesake of the "Murphy Cup," an award which recognizes the NVLA's most
competitive chapter's marketing success.
ITEM 2. PROPERTIES
The general and administrative offices of the Company are located at The
Republic Building, Olympia, Washington 98501, on leased premises with approx-
imately 4,400 square feet. The lease expired March 31, 1996. The Company is
currently in negotiations for renewal of the lease. The facilities are ade-
quate for the Company's current and planned operations.
ITEM 3. LEGAL PROCEEDINGS
There are no reportable events.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special shareholders' meeting on March 25, 1996. The matters
voted upon at the meeting were (i) the proposal to reincorporate the Company in
Washington and (ii) a proposal for an increase in the Company's authorized
shares to 35,000,000. The tabulation of votes was as follows:
Reincorporation Increase in Shares
--------------------- ------------------------
In Favor Against In Favor Against
466,701 4,710 444,676 26,735
Pursuant to the Merger Agreement, RLI was merged with and into Westar. As of
the effective date of the Merger Agreement, the owner of each outstanding share
of common stock of RLI owns one common share of Westar. Similarly, the owner of
each outstanding share of preferred stock of RLI owns one Westar preferred share
of the corresponding series. Each outstanding certificate representing a RLI
common or preferred share represents the same classification and number of
shares in Westar. All outstanding warrants and options of RLI are warrants and
options of Westar.
PART II
ITEM 5. MARKET FOR THE COMPANY'S STOCK AND DIVIDEND POLICY
Trading of the Company's common stock began on November 28, 1995, and is facili-
tated through the NASDAQ OTC Bulletin Board (OTC:WEST). As of March 31, 1996,
the Company had 382 stockholders of record. The Company has not paid any divi-
dends on the common stock. The borrowing agreement with Bank One, discussed
previously, and the redeemable preferred stock agreements (see Note 10 to the
Financial Statements) restricts the payment of dividends on the common stock.
Management does not expect to pay dividends on the common stock in fiscal 1997.
The following table summarizes the high and low bid prices of the Company's
stock for the quarters ended December 31, 1995 and March 31, 1996, adjusted for
the two-for-one stock split declared on May 10, 1996 (see Note 15 to the
Financial Statements).
March 31, 1996 December 31, 1995
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High $ 4.312 $ 3.50
Low $ 3.50 $ 3.00
The above over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data as of and for the five years ended March 31, 1996 are as
follows (all amounts in thousands except per share data):
Years Ended March 31
---------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------- ------- -------
Total revenues $1,629 $2,138 $ 1,054 $ 4,903 $ 5,557
Income (loss) before cumulative
effect of change in accounting
principle and extraordinary item (895) (468) (649) (159) 15
Income (loss) per common share (.82) (.43) (.48) (.12) .01
Total assets 8,210 4,311 4,059 7,050 12,450
Total liabilities 5,814 3,263 3,283 6,521 11,761
Redeemable preferred stock 4,250 1,800 925
The loss per common share for 1996, 1995 and 1994 has been calculated on a basis
after giving effect to preferred stock dividends of approximately $275,000,
$120,000 and $14,000, respectively and have been adjusted for the 2-for-1 stock
split (see Note 15 to the Financial Statements).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
- --------------------------
See the similarly captioned section in Item 1 regarding the existence of
forward-looking statements herein.
Results of Operations and Changes in Financial Position
- -------------------------------------------------------
After approximately two and a half years of planning and development, the
Company began full-scale operations under its Dealer-Direct Retail Leasing
("DDRL") program in October 1995. This new program is a significant change in
the way the Company markets, performs credit analysis, finances and services
leases. As a result, the Company committed significant personnel time and
resources to its development. Throughout most of the last three fiscal years,
management was identifying key personnel, developing internal policies and
procedures, enhancing data processing systems, developing the marketing and
pricing literature for the dealers, obtaining the necessary financing, and
testing system capability and capacities. While the Company's statement of
operations reports a net loss of approximately $852,000, $468,000 and $679,000
in fiscal 1996, 1995 and 1994, respectively, it is management's opinion, that
DDRL is one of the most sophisticated and marketable retail leasing programs
currently available and represents an investment in the Company's future
operations.
The increase in revenues of $1,084,000 (103%) from fiscal 1994 to 1995 was due
to renewed activity in sales from its commercial lease portfolio and the
beginning of the final phase of its transition from commercial direct lease
originations to the DDRL program. The subsequent decline in revenues of
$509,000 (24%) from fiscal 1995 to fiscal 1996 is due to the hiatus between the
beginning of full-scale DDRL operations in October 1995 and the completion of
the sale of the remaining commercial direct lease portfolio in the first quarter
of fiscal 1996.
Direct costs as a percentage of revenues (88% in 1996, 90% in 1995 and 100% in
1994) have been declining over the three year period. There are two primary
contributors to this decline. First, the Company expects an improvement in the
credit performance of its portfolio with the change from commercial lessees to
prime-credit consumer lessees which can be translated into a lesser amount of
credit losses. With the disposition of significantly all of its commercial
direct portfolio, the Company realized a significant reduction in the provision
for credit losses in fiscal 1996. The second major contributor to the decline
in direct costs as a percentage of revenues is the decline in interest expense
($91,000 (36%) in 1996 and $156,000 (38%) in 1995). This decline is caused
primarily by the decline in the amount of outstanding bank debt on which the
Company was paying interest and by a decrease in the rate of interest. It is
expected that this decrease in interest as a percentage of revenues will not
continue with the significant expansion of the DDRL program as the earnings
spread (the difference between the rate implicit in the lease and the Company's
interest cost of funds) on leases acquired through the DDRL program is less than
that earned on the commercial leases. However, the smaller spread to be
realized in the DDRL portfolio is expected to be offset by the significantly
greater volumes achievable through the program and by the ability to reduce its
interest cost of funds through asset-backed securitizations of the leases
generated through the program.
General and administrative expenses increased $622,000 (55%) and $239,000 (27%)
during fiscal 1996 and 1995, respectively, primarily as a result of the start-up
costs of developing the DDRL program and additional recurring expenses incurred
to administer the program such as additional personnel, system maintenance
contracts, and marketing. Management expects the current level of general and
administrative expense, designed to support increased operations as additional
dealers are signed to the program, will begin to level off as we continue to
operate in its current market area, but will increase further as geographic
expansion occurs.
The provision for Federal income taxes as a percentage of the net loss has
fluctuated significantly over the three year period primarily due to a net
deferred tax asset resulting from net operating loss carryforwards generated in
1994, 1995 and 1996. The net deferred tax asset was reduced by a valuation
allowance of $107,000 at March 31, 1994, as it was not concluded that it was
more likely than not that future tax benefits would be realized. However, at
March 31, 1995 it was determined that with the addition of the IBJ and Bank One
financing facilities and available tax planning strategies which include port-
folio sales, revised lease structures where the tax benefits do not accrue to
the benefit of the lessor and sales of tax benefits, it is more likely than not
that the Company has the ability to provide funding for the lease volumes
necessary to generate sufficient taxable income for realization of the net
deferred tax assets resulting in the net deferred tax asset being recorded with
no valuation allowance. Realization of the deferred tax asset is dependent upon
the ability of the Company to produce minimum future taxable income of
approximately $3,200,000 or $250,000 annually on average over the next 13 years.
Operating loss carryforwards do not begin to expire until fiscal 2009. The
Company generated net taxable income of approximately $1 million during the
eight years prior to 1994 (an average of $125 thousand per year). Approximately
$1,200,000 of future taxable income will result from reversal of existing
temporary differences during the next five years and $2,200,000 of future
taxable income will result from the excess of cash rents received over tax
deductions (remaining depreciable tax basis) for existing leases.
Inflation and Changing Prices
- -----------------------------
The Company's leases are written with fixed-terms and at fixed-rates. Interim
financing for the leases is provided through the Bank One revolving credit
facility until sufficient volumes are pooled for securitization through the IBJ
facility. The Company is at risk from interest rate fluctuation during the time
it is pooling leases for securitization. Management has various tools available
such as interest rate swaps and rate caps to minimize the risks associated with
the effect of changing prices.
The effect of inflation on general and administrative expenses over the last
three years has been negligible.
Liquidity and Capital Resources
- -------------------------------
The Company's business requires substantial cash to support its activities. The
principal cash requirements include (i) amounts necessary to acquire leases,
(ii) general and administrative expenses, (iii) debt service and (iv) preferred
stock dividends. For the foreseeable future, the Company expects to continue to
use financing activities as its primary source of funds for operating and
investing activities.
Acquisitions of automobile leases, general and administrative expenses and
interest on debt represent the Company's primary uses of cash in its operating
and investing activities. As discussed previously, general and administrative
costs have increased substantially in 1996 as compared to prior years, primarily
due to the development and start-up of the DDRL program.
Lease rentals are a primary source of cash. At March 31, 1996, the Company had
future lease payments and residuals of approximately $6,600,000. The net
proceeds from securitizations in the IBJ facility will provide cash for future
operating and investing activities. As the Company will retain the servicing of
leases securitized, it will also be receiving servicing income from the
securitized pool.
The revolving credit facility provided by Bank One provides the primary source
of cash to finance the acquisition of automobile leases until securitization
through the IBJ facility. After repayment of the related borrowings from Bank
One, the net proceeds from the IBJ securitizations will provide a source of cash
for future acquisition of automobile leases and general and administrative
expenses.
Since 1994, the Company has raised $4,250,000 from redeemable preferred stock
offerings. The proceeds from which were used for the development of DDRL and to
fund current operations and initial lease acquisitions.
It is the opinion of management that, as of March 31, 1996, the liquidity
sources discussed above are sufficient to meet the Company's immediate cash flow
needs for operations and for the acquisition of leases in the normal course of
business. It will be necessary, however, to obtain additional capital through
both private and public financings to provide for the Company's anticipated
growth over the next several years.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reports of Independent Certified Public Accountants
- --------------------------------------------------------------------------------
Report of BDO Seidman, LLP
- --------------------------------------------------------------------------------
Board of Directors and Stockholders
Westar Financial Services Incorporated
We have audited the accompanying consolidated balance sheet of Westar Financial
Services Incorporated (successor to Republic Leasing Incorporated) as of March
31, 1996 and 1995, and the related consolidated statements of operations, common
stock equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our responsi-
bility is to express an opinion on these financial statements based on our
audits. The financial statements as of March 31, 1994, and for the year then
ended were audited by other auditors whose report dated June 20, 1994 expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Westar Financial
Services Incorporated (successor to Republic Leasing Incorporated) as of March
31, 1996 and 1995, and the consolidated results of their operations and their
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
As disclosed in Note 8, the Company changed its method of accounting for income
taxes during the year ended March 31, 1994.
BDO SEIDMAN, LLP
(Signature)
BDO Seidman, LLP
Seattle, Washington
May 31, 1996
- --------------------------------------------------------------------------------
Report of Coopers & Lybrand
- --------------------------------------------------------------------------------
Board of Directors and Stockholders
Westar Financial Services Incorporated
We have audited the statements of operations, cash flows and common stock equity
for the year ended March 31, 1994 of Republic Leasing Incorporated (predecessor
to Westar Financial Services Incorporated). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Republic
Leasing Incorporated for the year ended March 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 8 of the financial statements, the Company changed its
method of accounting for income taxes effective April 1, 1993.
COOPERS & LYBRAND
(Signature)
Seattle, Washington
June 20, 1994
WESTAR FINANCIAL SERVICES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of March 31, 1996 and 1995
1996 1995
----------- -----------
Cash and cash equivalents $ 190,841 $ 55,277
Accounts and other receivables, net of allowance
for credit losses of $400 and $7,700 178,585 157,370
Due from affiliate 34,291 43,526
Lease receivables (Notes 3 and 7) 124,233
Lease repurchase agreements (Note 4) 948,537 1,133,992
Net investment in direct
financing leases (Notes 5, 6 and 7) 5,477,866 1,789,712
Equipment held for lease, net of accumulated
depreciation of $29,088 and $136,308
(Notes 5, 6 and 7) 31,977 199,157
Deferred tax asset (Note 8) 1,094,407 451,664
Other 253,681 356,077
--------- ---------
$ 8,210,185 $ 4,311,008
========= =========
Accounts payable $ 409,681 $ 123,027
Notes Payable to banks:
Recourse (Note 6) 4,357,929 1,485,773
Nonrecourse (Note 7) 394,835
Amounts payable under lease repurchase
agreements (Note 4) 941,224 1,129,031
Other liabilities 104,797 129,907
--------- ---------
5,813,631 3,262,573
--------- ---------
Commitments and Contingencies (Note 4)
Redeemable preferred stock (Note 10) 4,250,000 1,800,000
Preferred stock (Note 11)
Common Stock (Note 12):
Common stock, no par value; 35,000,000 shares
authorized; 1,430,500 and 1,380,500 shares
issued and outstanding (Note 15) 820,195 795,195
Accumulated deficit (2,673,641) (1,546,760)
--------- ---------
(1,853,446) (751,565)
--------- ---------
$ 8,210,185 $ 4,311,008
========= =========
WESTAR FINANCIAL SERVICES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended March 31, 1996, 1995 and 1994
1996 1995 1994
--------- --------- ---------
Revenues:
Earned income on direct financing leases $ 191,746 $ 255,403 $ 242,095
Earned income from lease receivables 2,913 32,615 109,575
Operating leases 27,068 215,923 269,935
Proceeds from sale of equipment
and leases (Note 14) 1,299,809 1,503,439 261,022
Other 106,990 130,254 171,498
--------- --------- ---------
1,628,526 2,137,634 1,054,125
--------- --------- ---------
Direct costs:
Depreciation of equipment held for lease 13,633 134,609 193,592
Interest 159,180 250,484 406,828
Provision for credit losses 5,944 6,260 120,000
Cost of equipment and leases sold 1,247,023 1,459,257 223,100
Other 11,984 26,649 30,409
--------- --------- ---------
1,437,764 1,877,259 973,929
--------- --------- ---------
190,762 260,375 80,196
General and administrative expenses (Note 14) 1,751,297 1,129,677 890,404
--------- --------- ---------
Loss before income tax, cumulative effect
of change in accounting principle and
extraordinary item (1,560,535) (869,302) (810,208)
Income tax benefit (Note 8) 665,263 401,664 160,735
--------- --------- ---------
Loss before cumulative effect of change in
accounting principle and extraordinary item (895,272) (467,638) (649,473)
Cumulative effect on prior years of change
in accounting for income taxes (Note 8) (29,334)
--------- --------- ---------
Loss before extraordinary item (895,272) (467,638) (678,807)
Gain on early extinguishment of debt (net of
income tax of $22,520) (Note 7) 43,715
--------- --------- ---------
Net loss (851,557) (467,638) (678,807)
Dividends on redeemable preferred stock (275,324) (120,441) (14,108)
Net loss applicable to common stock $(1,126,881) $ (588,079) $ (692,915)
========= ========= =========
Loss per common share before extraordinary item $ (.85) $ (.43) $ (.48)
=== === ===
Loss per common share $ (.82) $ (.43) $ (.48)
=== === ===
WESTAR FINANCIAL SERVICES INCORPORATED AND SUBSIDIARIES
CONSOLDIATED STATEMENT OF COMMON STOCK EQUITY
for the years ended March 31, 1996, 1995 and 1994
Common Stock
-------------------- Accumulated
Shares Amount Deficit Total
--------- -------- ----------- -----------
Balance, April 1, 1993 1,380,500 $795,195 $ (265,766) $ 529,429
Net loss (678,807) (678,807)
--------- ------- ---------- ----------
Balance, March 31, 1994 1,380,500 795,195 (944,573) (149,378)
Dividends on redeemable
preferred stock (134,549) (134,549)
Net loss (467,638) (467,638)
--------- ------- ---------- ----------
Balance, March 31, 1995 1,380,500 795,195 (1,546,760) (751,565)
Exercise of common
stock warrants 50,000 25,000 25,000
Dividends on redeemable
preferred stock (275,324) (275,324)
Net loss (851,557) (851,557)
--------- ------- ---------- ----------
Balance, March 31, 1996 1,430,500 $820,195 $(2,673,641) $(1,853,446)
========= ======= ========== ==========
WESTAR FINANCIAL SERVICES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended March 31, 1996, 1995 and 1994
1996 1995 1994
------------ ---------- ---------
Cash flows from operating activities:
Net loss $ (851,557) $(467,638) $(678,807)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Early extinguishment of debt, net of tax (43,715)
Depreciation and amortization 206,947 246,327 213,641
Provision for and write-off of
credit losses 5,944 6,260 120,000
Decrease (increase) in accounts receivable (19,863) 50,836 83,232
Increase (decrease) in accounts payable 49,060 17,839 (144,997)
Increase (decrease) in other liabilities (25,110) 18,290 (43,198)
Increase in deferred income tax benefit (665,263) (401,664) (131,401)
Other 77,268 34,504 45,471
---------- --------- ---------
Net cash used in operating activities (1,266,289) (495,246) (536,059)
---------- --------- ---------
Cash flows from investing activities:
Recovery of equipment costs and
residual interests 1,598,216 2,235,187 2,841,715
Purchases of equipment for lease (5,088,286) (2,993,721) (1,817,590)
Reduction of lease receivables
(recovery of principal) 124,233 426,030 899,757
Other (89,245) (158,653) (106,165)
---------- --------- ---------
Net cash provided by (used in)
investing activities (3,455,082) (491,157) 1,817,717
---------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of redeemable
preferred stock 2,450,000 875,000 925,000
Additions to notes payable to banks 5,128,878 1,135,205 1,739,303
Proceeds from lease repurchase agreements 115,849 1,283,685
Proceeds from issuance of common stock 25,000
Payments on notes payable to banks (2,585,323) (2,339,220) (4,688,636)
Dividends paid on redeemable
preferred stock (221,814) (96,842)
Debt origination costs (55,655)
---------- --------- ---------
Net cash provided by (used in)
financing activities 4,856,935 857,828 (2,024,333)
---------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 135,564 (128,575) (742,675)
Cash and cash equivalents:
Beginning of year 55,277 183,852 926,527
---------- --------- ---------
End of year $ 190,841 $ 55,277 $ 183,852
========== ========= =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies:
- ---------------------------------------------------------------------------
Consolidation
- -------------
The consolidated financial statements include the results of operations of
Westar Financial Services Incorporated (successor to Republic Leasing
Incorporated), its 100% owned subsidiary Westar Auto Holding Company, Inc.,
their 100% owned subsidiary Westar Auto Finance, LLC and the Westar Lease
Origination Trust, a Washington business trust, beneficially owned by Westar
Auto Finance, LLC. All intercompany transactions have been eliminated.
Lease Operations
- ----------------
The Company specializes in producing lease products that meet the needs of its
customers. Prior to 1994, the Company offered lease products, on a direct-
origination basis, to commercial clients only. In December 1993, the Company
expanded its product line by introducing its Dealer Direct Retail Leasing
("DDRL") program to a select group of dealers through which the first leases
were acquired from the program in March 1994. Through DDRL, the Company
acquires leases from selected automobile dealers which have been pre-approved by
the Company's experienced retail lease personnel. The Company attempts to meet
the needs of its dealers through responsive customer service, extended hours,
rapid funding, consistent buying practices and competitive pricing. The Company
currently offers the DDRL program to automobile dealers in the states of
Washington, Oregon and Idaho.
The Company's plan provides for the securitization of leases acquired through
the DDRL program as asset-backed securities. The Company intends to service the
securitized leases. Various forms of financing are used to fund leases until a
sufficient "pool" has been generated for securitization. Forms of financing
include traditional wholesale lease lines from banks, repurchase arrangements
with banks and internal capital.
Over the last ten years, the Company has sold, with servicing retained,
approximately $14 million of leases and the underlying assets to various third
parties, primarily financial institutions, for purposes of managing its credit
exposure and to provide a source of capital for funding new lease acquisitions.
Services provided by the Company to purchasers of its leases include, but are
not limited to, monthly billing, collecting and remarketing. At March 31, 1996,
leased assets outstanding which are not held in the Company's portfolio but are
serviced by the Company for others totaled approximately $2,000,000.
Concentration of Credit and Financial Instrument Risk
- -----------------------------------------------------
The Company controls its credit risk through credit standards, limits on
exposure, and by monitoring the financial condition of its lessees. The Company
uses a proprietary credit scoring system in evaluating the credit risk of
applicants in the DDRL program. The Company generally requires the leased
asset, consisting primarily of autos, to serve as collateral for the leases.
Additionally, the Company controls its credit exposure to any one client or
industry through sales of leases. The Company generally retains the servicing
of the leases sold.
Inherent to leasing is the residual value risk associated with closed-end lease
contracts. Traditionally, the Company has managed this residual risk through
adherence to a residual valuation procedure at lease inception which has
historically resulted in net gains at scheduled lease termination. In
anticipation of selling the lease receivables (including the residual interest)
acquired through the DDRL program to the asset-backed securities markets,
management decided to manage the residual value risk through the purchase of
residual value insurance on all DDRL contracts.
The Company requires all lessees to provide adequate collateral protection and
liability insurance throughout the term of the lease contracts. The Company
also has contingent collateral and liability insurance which protects the
Company from lapses in the lessee's insurance and maintains lease value
deficiency insurance on all DDRL contracts which protects the lessee and the
Company from casualty losses associated with deficiencies between an insured
collateral's value and the balance on the related lease contract.
A significant portion of the Company's business activity is with customers and
businesses located in Washington. In 1994, one lessee contributed approximately
10% to the Company's total revenue. There were no other significant regional,
industrial or group concentrations at March 31, 1996.
Fair Value of Financial Instruments
- -----------------------------------
The Company's financial instruments as defined by Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments," including cash
and cash equivalents, lease repurchase agreements, notes payable to banks and
amounts payable under lease repurchase agreements, are accounted for on a
historical cost basis which, due to the nature of these financial instruments,
approximates fair value.
Cash and Cash Equivalents
- -------------------------
The Company considers all investments with a maturity of three months or less
when purchased to be cash equivalents.
Leases
- ------
For contracts determined to be direct financing leases, unearned lease income
(representing total minimum lease payments receivable, including the residual
value of the leased equipment, in excess of the cost of leased equipment) is
amortized to income using the interest method over the term of the lease.
Equipment associated with lease contracts determined to be operating leases is
accounted for as equipment held for lease. Lease revenue related to these
contracts is recognized over the lease term as earned and the cost of the leased
equipment, less estimated residual value, is depreciated on the straight-line
method over the term of the lease.
Initial incremental costs directly associated with the acquisition of new leases
are capitalized and classified with the related leased asset. Initial
incremental costs are amortized over the related lease term.
At the end of the lease term or upon premature termination of the lease, the
leased equipment is either sold or released under a new lease contract.
Proceeds from the sales of leased equipment are included under revenues and the
carrying costs of the leased equipment at time of sale are included under direct
costs. Gains resulting from rewriting leases at a value in excess of the
carrying amount of the leased equipment are included in other revenues.
Furniture, Fixtures and Equipment
- ---------------------------------
At March 31, 1996, furniture, fixtures and equipment of $77,313 (net of
accumulated depreciation of $105,227) are included in other assets and stated
at cost less accumulated depreciation and are depreciated on a straight-line
basis over their estimated useful lives.
Intangible Assets
- -----------------
At March 31, 1996, intangible assets of $63,119 (net of accumulated
amortization of $13,914) are included in other assets, and consist of
unamortized debt origination costs and organization costs. The debt
origination costs (incurred in relation to the revolving credit agreement with
Bank One) are amortized on a straight-line basis over the three-year term of the
revolving credit agreement and the organization costs (associated with the
reincorporation of the Company into the state of Washington) are amortized on a
straight-line basis over five years.
Federal Income Taxes
- --------------------
Deferred taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by applying
current statutory tax rates to the periods in which the differences are expected
to reverse and by giving effect to any available net operating loss
carryforwards.
Earnings Per Share
- ------------------
Earnings per share are computed using the weighted-average number of common
shares outstanding and have been retroactively adjusted to give effect to the
2-for-1 stock split declared on May 10, 1996 (see Note 15). Net loss used in
the computation of earnings per share has been increased to include the
required amount of dividends on the redeemable preferred stock of $275,324,
$120,441 and $14,108 for the years ended March 31, 1996, 1995 and 1994,
respectively. Earnings per share does not include common stock warrants or
common stock options as the effect would be anti-dilutive.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge of current events
and actions it may undertake in the future, actual results could differ from
these estimates.
Effect of Recently Issued Accounting Standards
- ----------------------------------------------
Recently issued accounting standards having relevant applicability to the
Company consist primarily of Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), which establishes accounting standards for, among other
things, the impairment of long-lived assets and certain identifiable
intangibles, and Statement of Financial Accounting Standards No. 123 ("SFAS No.
123"), which establishes standards for accounting for stock-based compensation.
SFAS No. 121 will be effective for financial statements reporting on fiscal
years beginning after December 15, 1995, and is not expected to have a
significant effect, if any, on the Company's financial condition or results of
operations. SFAS No. 123 will also be effective for financial statements
reporting on fiscal years beginning after December 15, 1995, and requires pro
forma disclosures to be included in such statements. It is not expected that
the Company will adopt the "fair value based method" of accounting for stock
options, which is encouraged by SFAS No. 123, but rather will continue to
account for such stock-based compensation, utilizing the "intrinsic value based
method" as is allowed by that statement.
Reclassifications
- -----------------
Certain amounts in the March 31, 1995 and 1994, financial statements have been
reclassified to conform to current year classifications. Such reclassifications
had no effect on previously reported net loss.
2. Accounts Receivable:
- ------------------------
Under terms of its leases, the Company, as lessor, is entitled to recover from
the lessee certain costs incurred upon termination of such leases prior to
expiration of the initial lease term. It is the Company's policy to
aggressively pursue collection under these provisions. Those costs include past
due lease payments, late charges and applicable taxes, losses realized on
disposition of repossessed equipment, and legal and administrative costs
incurred to pursue recovery. Such costs are included in accounts receivable.
If successful recovery of an amount is uncertain, a provision is made in the
allowance for credit losses.
At March 31, 1996 and 1995, accounts receivable includes a remaining balance of
approximately $166,000 associated with a client which is now operating under
Chapter 11 of the Federal Bankruptcy Act. The court-appointed Trustee managing
that company proposed to the Unsecured Creditors' Committee a plan which
provides for full recovery of the Company's remaining balance plus interest over
an extended term. That plan was approved on October 15, 1993. A trust was
formed on behalf of the unsecured creditors benefiting from the plan (of which
the Company is a participating beneficiary) and payments to the trust have
generally been made on a timely basis since the effective date of the plan. The
Company expects full recovery as a result of the plan.
3. Lease Receivables:
- ----------------------
Lease receivables consisted of the discounted value of remaining lease payments
and end of term residuals which were purchased from a bank in 1991. Title to
the property subject to the leases remained with the bank. The Company's
interest in the lease receivables was unsecured. The lease contracts
collateralized the nonrecourse term note obtained from the bank to finance the
purchase. Income was earned using the interest method over the remaining term
of the lease at the discount rate used in determining the present value of the
contracts at time of purchase. Gains on sale of lease receivables and
remarketing fees earned upon disposition of the underlying equipment are
included in other revenues.
4. Lease Repurchase Agreements:
- --------------------------------
In June 1994, the Company entered into an arrangement with a bank for the
purpose of financing leases acquired through the DDRL program pursuant to which
the bank agreed to purchase from the Company up to $1,500,000 of leases so
acquired. The Company has the right under this arrangement to repurchase such
leases at anytime, and may do so in whole or in part, prior to entering into a
securitization transaction. Leases sold under this arrangement are recorded as
lease repurchase agreements at their amortized cost basis using the rate
implicit in the underlying lease contract. Proceeds received upon sale of the
lease contracts are recorded as amounts payable under repurchase agreements,
which bear interest at rates between 7.5% and 8%, and are subsequently reduced
for principal payments received by the bank on such contracts. The market
value of such lease contracts approximates the recorded value of the lease
repurchase agreements.
5. Leases:
- -----------
Components of the net investment in direct financing leases as of March 31, 1996
and 1995, as well as the future minimum lease payments receivable, including
residual values, are as follows:
1996 1995
---------- ----------
1996 $ 760,037
1997 $1,180,307 539,656
1998 1,322,229 356,940
1999 1,648,080 325,044
2000 1,206,762 183,652
2001 1,206,820
Thereafter 51,320
--------- ---------
Total minimum lease payments receivable 6,615,518 2,165,329
Initial direct costs, net of amortization 69,769 28,743
Unearned income (1,161,021) (337,060)
Provision for net credit losses (46,400) (67,300)
--------- ---------
Net investment in direct financing leases $5,477,866 $1,789,712
========= =========
At March 31, 1996 and 1995, total future minimum lease rentals receivable under
noncancelable operating leases approximated $11,000 and $99,000, respectively.
Certain of the leases have options to purchase the underlying equipment at the
end of the lease term at fair value or the stated residual which is not less
than the book value at termination.
A summary of activity in the Company's allowance for credit losses, which
relates to direct financing leases and other receivables for each of the years
in the three year period ended March 31, 1996 is as follows:
1996 1995 1994
------- ------- --------
Balance, beginning of year $75,000 $93,516 $120,000
Provision charged to expense 5,944 6,260 120,000
Charge offs, net of recoveries (34,144) (24,776) (146,484)
------ ------ -------
Balance, end of year $46,800 $75,000 $ 93,516
====== ====== =======
6. Notes Payable to Banks, Recourse:
- -------------------------------------
In July 1995, the Company entered into an agreement with Bank One for a $12
million revolving credit facility (the "Credit Agreement") to be utilized as
interim financing for the acquisition of auto leases until sufficient volume is
achieved to securitize. The amount borrowed under the Credit Agreement
generally may not exceed 90% of the outstanding principal amount of eligible
auto leases collateralizing the notes. The Credit Agreement expires in July
1998. Initial funding under the Credit Agreement occurred in November 1995.
The Credit Agreement calls for principal reductions on amounts borrowed
corresponding to the payment due dates of the underlying lease contracts.
Repayment of amounts borrowed is required from the proceeds upon securiti-
zation of the underlying lease contracts, but generally not later than six
months from the date of borrowing. The Credit Agreement originally called for
interest, payable quarterly, at four percent (4%) above the 30-day LIBOR rate,
but declines in .5% decrements upon the acquisition of 250 and 500 leases,
respectively. The weighted-average rate of interest paid under the Credit
Agreement was 9.58% (calculated using the number of days each rate was
outstanding since borrowings began in November 1995). The Credit Agreement
requires the Company to comply with quarterly debt/equity ratios and net worth
minimums of which the Company is in compliance. At March 31, 1996, $4,032,785
was outstanding under the line and was the highest amount outstanding during the
period. Amounts borrowed under the Credit Agreement averaged $2,140,000 since
November 1995. Additionally, the Credit Agreement requires payment of a
quarterly non-utilization fee of .125% on the unused portion of the line which
at March 31, 1996 was $7,967,215.
In November 1995, the Company entered into a term loan agreement for $363,832
with Bank One collateralized by certain lease contracts and the underlying
vehicles not intended to be included in a securitization. The notes are due in
monthly installments including interest at 15% and matures February 28, 1999.
Future obligations due under the agreement are $63,660, $90,897 and $170,587 for
the years ending March 31, 1997, 1998 and 1999, respectively.
At March 31, 1995, notes payable to banks consisted of notes collateralized by
equipment held for lease, equipment under direct financing leases, and the
underlying leases. The notes were due in monthly installments including
interest at rates ranging from 7.5% to 12.5% and were guaranteed by Republic
Management, Inc. (now known as Mud Bay Holdings, Ltd.), an affiliated company
which owns approximately 30% of the Company's common stock, and individually by
an officer of the Company, who is a significant shareholder of Mud Bay Holdings,
Ltd. The debt was retired in August 1995.
The Company paid cash for interest on recourse notes of $163,817, $171,039 and
$237,039 for the years ended March 31, 1996, 1995 and 1994, respectively.
7. Notes Payable to Bank, Nonrecourse:
- --------------------------------------
At March 31, 1995, the Company had certain nonrecourse notes payable to banks
collateralized solely by the lease contracts. The notes carried interest rates
ranging from 7% to 12%, per annum. The balance outstanding of $394,835 was
retired in August 1995 at a gain of $43,715 (net of deferred income taxes of
$22,520).
The Company paid cash for interest on nonrecourse notes of $24,753, $71,422 and
$191,167 for the years ended March 31, 1996, 1995 and 1994.
8. Federal Income Taxes:
- -------------------------
The components of the deferred tax asset were as follows for the years ended
March 31, 1996 and 1995:
1996 1995
---------- --------
Deferred tax assets:
NOL Carryforward $1,449,149 $529,282
Bad debt allowance 15,912 25,500
Investment tax credit carryforward 12,165 12,165
Alternative minimum tax
credit carryforward 31,515 31,515
Other 119 1,339
--------- -------
Total deferred tax assets 1,508,860 599,801
--------- -------
Deferred tax liabilities:
Accelerated depreciation (12,344) (18,204)
Direct financing leases (362,834) (105,395)
Initial direct costs (23,735) (10,440)
Other (15,540) (14,098)
--------- -------
Total deferred tax liabilities (414,453) (148,137)
--------- -------
$1,094,407 $451,664
The income tax benefit is as follows for the years ended March 31, 1996, 1995
and 1994:
1996 1995 1994
-------- -------- --------
Deferred $665,263 $294,290 $268,109
Change in valuation allowance 107,374 (107,374)
------- ------- -------
Total Federal income tax benefit $665,263 $401,664 $160,735
The Federal income tax benefit for the years ended March 31, 1996, 1995 and
1994, differs from the Federal income tax benefit computed by applying the
statutory corporate income tax rate of 34% to the loss before Federal income
taxes. Principal causes of the differences are as follows:
1996 1995 1994
-------- -------- --------
Computed "expected" tax benefit $508,062 $295,563 $275,471
Tax effect of:
Valuation allowance 107,374 (107,374)
Preferred stock dividends 126,637
Other 30,564 (1,273) (7,362)
------- ------- -------
Federal income tax benefit $665,263 $401,664 $160,735
======= ======= =======
In fiscal 1994, due primarily to the net operating loss, the Company realized a
net deferred tax benefit of $268,109 resulting in a net deferred tax asset of
$157,374. The net deferred tax asset was reduced by a valuation allowance of
$107,374 at March 31, 1994, as it was not concluded that it was more likely than
not that future tax benefits would be realized. During the first three quarters
of fiscal 1995, the Company continued to provide a valuation allowance against
the net deferred tax asset generated during that period.
It is management's opinion that with the addition of the IBJ and Bank One
facilities and available tax planning strategies which include portfolio sales,
revised lease structures where the tax benefits do not accrue to the benefit of
the lessor and sales of tax benefits, it is more likely than not that the
Company has the ability to provide funding for the lease volumes necessary to
generate sufficient taxable income for realization of the net deferred tax
assets within their carryforward period. The net deferred tax asset is recorded
with no valuation allowance provided at March 31, 1996 and 1995.
At March 31, 1996, for regular tax purposes, the Company has an NOL carryforward
of approximately $4,262,000, an ITC carryforward of approximately $12,100 and an
AMT credit carryforward of approximately $31,500 available to offset future
Federal income taxes. The ITC carryforward expires through 2001. The NOL
carryforward expires in 2009, 2010 and 2011. The AMT credit carryforward has no
expiration date.
The Company received a Federal income tax refund of $11,857 during the year
ended March 31, 1994.
Effective April 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes." This change in
accounting increased fiscal 1994 net loss by $29,334 ($.02 per share) which
represents the cumulative effect on prior years' deferred income tax liability.
9. Securitization:
- -------------------
In March 1995, the Company entered into an agreement with The Industrial Bank of
Japan, Limited ("IBJ") whereby IBJ agreed to assist the Company in arranging the
placement of up to $100 million in securities backed by auto lease receivables
generated through the DDRL program. The IBJ facility has been structured to
allow for securitized transactions in $10 million pools. The agreement entitles
IBJ to warrants for the purchase of 4% of the Company's common stock (approx-
imately 71,000 shares) at no less than $.50 per share.
10. Redeemable Preferred Stock
- -------------------------------
The redeemable preferred stock series have a $1,000 per share face value and pay
a cumulative quarterly dividend of $23.125 per share. There are 1,500, 300,
1,200 and 1,250 shares authorized, issued and outstanding of the Series 1
Preferred Stock ("Series 1"), the Series 2 Preferred Stock ("Series 2"), the
Series 3 Preferred Stock ("Series 3") and the Series 4 Preferred Stock
("Series 4"), respectively and collectively the "Redeemable Preferred Stock."
All series of preferred stock may be redeemed at any time by the Company, but
must be redeemed at its face value beginning in fiscal 1998. At March 31, 1996,
future redemptions of the Redeemable Preferred Stock consist of $900,000 in each
of the years ending March 31, 1998 and 1999 and $1,225,000 in each of the years
ending March 31, 2000 and 2001.
At March 31, 1996 and 1995, the following represents the Company's preferred
stock activity:
Series 1 Series 2 Series 3 Series 4
---------- --------- ---------- ----------
Balance, April 1, 1995 $ 925,000
Shares issued at face value 575,000 $300,000
Balance, March 31, 1995 1,500,000 300,000
Shares issued at face value $1,200,000 $1,250,000
--------- ------- --------- ---------
Balance, March 31, 1996 $1,500,000 $300,000 $1,200,000 $1,250,000
========= ======= ========= =========
In the event of any liquidation, dissolution or winding up of the Company, the
holders of the outstanding shares of Redeemable Preferred Stock shall be
entitled to be paid an amount equal to the face value per share held before any
sums shall be paid or assets distributed to the holders of the common stock. If
assets are insufficient to fully liquidate the Redeemable Preferred Stock, then
a pro-rata liquidation will be made.
Holders of Redeemable Preferred Stock are not entitled to vote on matters
submitted to the common shareholders unless required by Washington state law, a
proposed amendment to the Company's Articles of Incorporation that materially
alters the Redeemable Preferred Stock shareholders' rights or authorizes a class
of stock senior to the Redeemable Preferred Stock, or any proposed amendment to
the Company's By-Laws which materially alters the rights and preferences of the
Redeemable Preferred Stock shareholders. As long as 25% of the Series 4 remains
issued and outstanding, the holders of the outstanding Series 4, voting as a
class, are entitled to elect one member to the Company's board of directors.
11. Preferred Stock
- --------------------
The Company's authorized capital stock includes 2,000,000 shares of preferred
stock and current designations consist of the Redeemable Preferred Stock.
12. Common Stock:
- ------------------
The Company has issued warrants for the purchase of the 480,000 shares of the
Company's common stock which were attached to the Series 1, 2 and 3 Preferred
Stock offerings (see Note 10). The warrants carry an exercise price of $.50 per
common share. Warrants to purchase 50,000 shares of common stock were exercised
in March 1996. The Board of Directors determined that the exercise prices
approximated or exceeded fair market value on date of grant.
At March 31, 1996, the Company had warrants outstanding for 288,000 shares and
142,000 shares which expire in 1999 and 2001, respectively.
At the option of the holder, 60 shares of the Series 4 Preferred Stock are
convertible into 10% of the outstanding common stock of the Company. The shares
are convertible at any time and will automatically be converted at such time
that the Company participates in a public offering.
The Company has also committed to the issuance of warrants for the purchase of
4% of the Company's common stock (approximately 71,000 shares) by The Industrial
Bank of Japan, Limited (see Note 9).
13. Stock Option Plan:
- -----------------------
In April 1994, the Board of Directors approved the adoption of the 1994 Stock
Option Plan (the "Plan") for employees, outside directors and independent
contractors of the Company. A total of 360,000 shares of the Company's common
stock were reserved for issuance under the Plan. Exercise prices approximated
or exceeded fair market value on date of grant. There were no options exercised
during the years ended March 31, 1996 and 1995. The following summarizes the
stock options granted at March 31, 1996:
Date Granted Date Exercisable Expiration Date Exercise Price Shares Granted
------------ ---------------- --------------- -------------- --------------
Fiscal 1995 Fiscal 1995 Fiscal 2000 $2.00 160,000
Fiscal 1995 Fiscal 1996 Fiscal 2001 $.50 20,000
Fiscal 1995 Fiscal 1997 Fiscal 2002 $2.00 20,000
Fiscal 1996 Fiscal 1997 Fiscal 2002 $.50 20,000
Fiscal 1996 Fiscal 1998 Fiscal 2003 $2.00 20,000
Fiscal 1996 Fiscal 1996 Fiscal 2001 $2.00 40,000
Fiscal 1996 Fiscal 1996 Fiscal 1999 $2.00 36,000
Fiscal 1996 Fiscal 1997 Fiscal 1999 $2.00 2,800
-------
318,800
=======
14. Related Party Transactions:
- --------------------------------
During the years ended March 31, 1996 and 1995, the Company sold leases to T & W
Leasing, Inc. ("T&W"), a Preferred Stock shareholder. Revenues from the sales
which are included in total revenues were approximately $892,000 (54% of total
revenues) and $650,000 (30%) in 1996 and 1995, respectively.
The Company leased office space from a limited partnership in which it has a 10%
interest. The lease expired in March 1996 and the Company is currently renting
the office space on a month-to-month basis. Management is in negotiations for
renewal of the lease. Annual rental expense was approximately $60,000 in 1996,
1995 and 1994.
The Company had a management agreement with Mud Bay Holdings, Ltd. ("Mud Bay"),
formerly known as Republic Management Incorporated, which provided management
services necessary for the leasing activities of the Company. The management
agreement provided for a monthly management fee equal to a percentage of gross
revenues. The management fee is included in general and administrative expenses
and totaled $13,088 and $64,189 for the years ended March 31, 1995 and 1994,
respectively.
In June 1994, the respective boards of directors of Mud Bay and the Company
agreed to terminate the management agreement and Mud Bay agreed to sell the
Republic Leasing trade name to the Company and agreed to a non-compete agreement
in consideration for a combined purchase price of $200,000. The Company
obtained a report from an independent valuation expert in support of the
purchase price. Mud Bay used the proceeds from the sale to repay the amount due
affiliate. The amount due from affiliate at March 31, 1996 and 1995 represents
advances made to Mud Bay for normal operating expenses and were repaid in full
in May, 1996.
15. Subsequent Event:
- ----------------------
On May 10, 1996, the Board of Directors declared a 2-for-1 stock split for
holders of record as of May 31, 1996. Certificates will be issued on or about
June 14, 1996. Total shares outstanding as of the record date was 717,650.
Holders of options and warrants also benefit from the split through a 50%
reduction in their exercise price and a 2-for-1 increase in the exercisable
shares. The shares issued, outstanding and reserved for issuance presented in
these Financial Statements and Notes hereto have been retroactively adjusted to
give effect to the stock split.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Information called for by Part II, Item 9, is included in the Company's Proxy
Statement relating to the Company's annual meeting of shareholders to be held on
July 22, 1996, and is incorporated herein by reference. The information appears
in the Proxy Statement under the caption "Other Matters." Such Proxy Statement
will be filed within 120 days of the Company's year end.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information regarding the Company's directors is set forth under "Information
About the Board of Directors and Committes of the Board" in the Company's Proxy
Statement relating to the Company's annual meeting of shareholders to be held on
July 22, 1996, and is incorporated herein by reference. Such Proxy Statement
will be filed within 120 days of the Company's year end. Information regarding
the Company's executive officers is set forth in Item 1 of Part I herein under
the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information called for by Part III, Item 11, is included in the Company's Proxy
Statement relating to the Company's annual meeting of shareholders to be held on
July 22, 1996, and is incorporated herein by reference. The information appears
in the Proxy Statement under the caption "Executive Compensation." Such Proxy
Statement will be filed within 120 days of the Company's year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by Part III, Item 12, is included in the Company's Proxy
Statement relating to the Company's annual meeting of shareholders to be held on
July 22, 1996, and is incorporated herein by reference. The information appears
in the Proxy Statement under the caption "Security Ownership of Certain
Beneficial Owners and Management." Such Proxy Statement will be filed within
120 days of the Company's year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 14 to the Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14 (a) Documents filed as part of this report:
(1) Financial Statements (Pages 10 to 22)
Reports of Independent Certified Public Accountants
Consolidated Balance Sheet as of March 31, 1996 and 1995
Consolidated Statement of Operations for the years ended March 31,
1996, 1995 and 1994
Consolidated Statement of Common Stock Equity for the years ended
March 31, 1996, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended March 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) Index to Financial Statement Schedules
All schedules are omitted since the required information is not
present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
financial statements and notes thereto.
(3) Index to Exhibits
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Plan and Agreement of Merger between Westar Financial
Services Incorporated and Republic Leasing Incorporated.
3. Articles of Incorporation and Bylaws
3.1 The Articles of Incorporation of Westar Financial Services
Incorporated filed on February 13, 1996.
3.2 The Bylaws of Westar Financial Services Incorporated
adopted on February 21, 1996.
4. Instruments defining the rights of security holders, including
indentures.
4.1 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 1 Preferred Stock.
4.2 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 2 Preferred Stock.
4.3 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 3 Preferred Stock.
4.4 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 4 Preferred Stock.
10. Material Contracts.
10.1 Republic Leasing Incorporated 1994 Stock Option Plan.
10.2 The Letter Agreement between Republic Leasing
Incorporated and The Industrial Bank of Japan, Limited
dated March 3, 1995.
10.3 Revolving Credit Agreement among Westar Auto Finance,
L.L.C. as Borrower, Republic Leasing Incorporated as
Guarantor and Bank One, Columbus, N.A., as Lender dated
July 12, 1995.
10.4 Amendment, dated February 15, 1996, to the Revolving
Credit Agreement with Bank One, Columbus, N.A., dated
July 12, 1995.
16. Letter re Change in Certifying Account
16.1 Letter dated February 3, 1995, incorporated by reference
to the Exhibit to the Current Report on Form 8-K dated
February 1, 1995
21. Subsidiaries of the Registrant
21.1 Schedule of Subsidiaries
14 (b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Westar Financial Services Incorporated
(successor to Republic Leasing Incorporated)
June 11, 1996 R.W. Christensen, Jr.
(Dated) (Signature)
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
June 11, 1996 R.W. Christensen, Jr.,
Director and Principal Executive Officer
(Dated) (Signature)
June 11, 1996 Cathy L. Carlson
Director and Vice President, Operations
Chief Financial and Accounting Officer
(Dated) (Signature)
June 11, 1996 Joel I. Davis
Director and Assistant Secretary
(Dated) (Signature)
June 11, 1996 Robert L. Lovely, Director
(Dated) (Signature)
PLAN AND AGREEMENT OF MERGER
BETWEEN
WESTAR FINANCIAL SERVICES INCORPORATED
AND
REPUBLIC LEASING INCORPORATED
This Plan and Agreement of Merger (this "Agreement") is entered into this
21st day of February 1996, by and between Westar Financial Services
Incorporated, a Washington corporation (the "Surviving Corporation"), and
Republic Leasing Incorporated, a Delaware corporation ("Republic"). The
Surviving Corporation and Republic are sometimes referred to jointly as the
"Constituent Corporations."
RECITALS
A. Each of the Constituent Corporations are corporations organized and
existing under the laws of the respective states as indicated in the first
paragraph of this Agreement of Merger.
B. The shareholders and directors of each of the Constituent Corporations
have deemed it advisable for the mutual benefit of the Constituent Corporations
and their respective shareholders that Republic be merged into the Surviving
Corporation pursuant to the provisions of the Washington Business Corporation
Act and the Delaware General Corporation Law.
NOW, THEREFORE, in accordance with the laws of the states of Washington and
Delaware, the Constituent Corporations agree that, subject to the following
terms and conditions, (i) Republic shall be merged into the Surviving
Corporation, (ii) the Surviving Corporation shall continue to be governed by the
laws of the state of Washington, and (iii) the terms of the Merger, and the mode
of carrying them into effect, shall be as follows:
ARTICLE I
ARTICLES OF SURVIVING CORPORATION
The Articles of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time of the Merger shall constitute the
"Articles" of the Surviving Corporation within the meaning of Section
23B.01.400(1) of the Washington Business Corporation Act and Section 104 of the
Delaware General Corporation Law.
ARTICLE II
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS
Pursuant to Section 252(d) of the Delaware General Corporation Law, the
Surviving Corporation irrevocably appoints the Secretary of State of Delaware to
accept service of process in any proceeding to enforce against the Surviving
Corporation any obligation of Republic as well as for enforcement of any
obligation of the Surviving Corporation arising from the merger. The Delaware
Secretary of State shall mail a copy of such process to Richard G. Phillips, Jr.
at Owens Davies Mackie, Attorneys at Law, P.O. Box 187, Olympia, Washington
98507.
ARTICLE III
CONVERSION OF SHARES
3.1 REPUBLIC COMMON SHARES. At the Effective Time of the Merger each
outstanding share of the common stock of Republic shall automatically convert to
one share of Westar Financial Services Incorporated. It will not be necessary
for shareholders of Republic to exchange their existing stock certificates for
stock certificates of the Surviving Corporation.
3.2 REPUBLIC PREFERRED SHARES - SERIES 1. At the Effective Time of the
Merger each outstanding share of Series 1 preferred stock of Republic will
automatically convert to one share of Westar Financial Services Incorporated
Series 1 preferred stock.
3.3 REPUBLIC PREFERRED SHARES - SERIES 2. At the Effective Time of the
Merger each outstanding share of Series 2 preferred stock of Republic will
automatically convert to one share of Westar Financial Services Incorporated
Series 2 preferred stock.
3.4 REPUBLIC PREFERRED SHARES - SERIES 3. At the Effective Time of the
Merger each outstanding share of Series 3 preferred stock of Republic will
automatically convert to one share of Westar Financial Services Incorporated
Series 3 preferred stock.
3.5 REPUBLIC PREFERRED SHARES - SERIES 4. At the Effective Time of the
Merger each outstanding share of Series 4 preferred stock of Republic will
automatically convert to one share of Westar Financial Services Incorporated
Series 4 preferred stock.
3.6 REPUBLIC OPTIONS AND WARRANTS. At the Effective Time of the Merger
each outstanding warrant and option of Republic will automatically convert to
the corresponding warrant and option of Westar Financial Services Incorporated.
3.7 SURVIVING CORPORATION SHARES. At the Effective Time of the Merger
each outstanding share of the common stock of the Surviving Corporation shall be
automatically cancelled and returned to the status of authorized but unissued
shares.
ARTICLE IV
BYLAWS
The Bylaws of the Surviving Corporation shall be the governing Bylaws.
ARTICLE V
EFFECT OF THE MERGER
The effect of the Merger shall be as provided by the applicable provisions
of the laws of Washington and Delaware. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time of the Merger: the
separate existence of Republic shall cease; the Surviving Corporation shall
possess all assets and property of every description, and every interest
therein, wherever located, and the rights, privileges, immunities, powers,
franchises, and authority, of a public as well as a private nature, of all of
the Constituent Corporations; all obligations belonging to or due any of the
Constituent Corporations shall be vested in and become the obligations of, the
Surviving Corporation without further act or deed; title to any real estate or
any interest therein vested in any of the Constituent Corporations shall be
vested in and become the obligations of the Surviving Corporation without
further act or deed; title to any real estate or any interest therein shall not
revert or in any way be impaired by reason of the Merger; all rights of
creditors and all liens upon any property of any of the Constituent Corporations
shall be preserved unimpaired; and the Surviving Corporation shall be liable for
all the obligations of the Constituent Corporations and any claim existing, or
action or proceeding pending, by or against any of the Constituent Corporations
may be prosecuted to judgment with right of appeal, as if the Merger had not
taken place.
If at any time after the Effective Time of the Merger the Surviving
Corporation shall consider it to be advisable that any further conveyances,
agreements, documents, instruments, and assurances of law or any other things
are necessary or desirable to vest, perfect, confirm, or record in the Surviving
Corporation the title to any property, rights, privileges, powers, and
franchises of the Constituent Corporations or otherwise to carry out the
provisions of this Agreement, the proper directors and officers of the
Constituent Corporations last in office shall execute and deliver, upon the
Surviving Corporation's request, any and all proper conveyances, agreements,
documents, instruments, and assurances of law, and do all things necessary or
proper to vest, perfect, or confirm title to such property, rights, privileges,
powers, and title to such property, rights, privileges, powers, and franchises
in the Surviving Corporation, and otherwise to carry out the provisions of this
Agreement.
ARTICLE VI
EFFECTIVE TIME OF THE MERGER
As used in this Agreement, the "Effective Time of the Merger" shall mean
the time at which executed counterparts of this Agreement or conformed copies
thereof, together with duly executed Certificates or Articles of Merger have
been duly filed by the Constituent Corporations in the office of the Washington
Secretary of State pursuant to Section 23B.11.250 of the Washington Business
Corporation Act and the Office of the Delaware Secretary of State pursuant to
Section 252 of the Delaware General Corporation Law or at such time thereafter
as is provided in such Certificate of Articles of Merger.
ARTICLE VII
TERMINATION
This Agreement may be terminated and the Merger abandoned by mutual consent
of the directors of the Constituent Corporations at any time prior to the
Effective Time of the Merger.
ARTICLE VIII
NO THIRD PARTY BENEFICIARIES
Except as otherwise specifically provided herein, nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm, or corporation, other than the Constituent Corporations
and their respective shareholders, any rights or remedies under or by reason of
this Agreement or Merger.
IN WITNESS WHEREOF, the parties hereto have caused this Plan and Agreement
of Merger to be executed as of the date first above written.
WESTAR FINANCIAL SERVICES INCORPORATED
A Washington Corporation
By____________________________________
R.W. Christensen, Jr.,
Chairman
ATTEST:
__________________________
Charles S. Seel, Secretary
REPUBLIC LEASING INCORPORATED
A Delaware Corporation
By____________________________________
R.W. Christensen, Jr.,
Chairman
ATTEST:
__________________________
Charles S. Seel, Secretary
CERTIFICATE OF SECRETARY
OF
REPUBLIC LEASING INCORPORATED
I, Charles S. Seel, the Secretary of Republic Leasing Incorporated, a
Delaware corporation, hereby certify that at the special meeting of shareholders
of Republic Leasing Incorporated the Agreement and Plan of Merger between
Republic Leasing Incorporated and Westar Financial Services Incorporated was
adopted by a majority of the outstanding common stock of Republic Leasing
Incorporated entitled to vote thereon, and was also adopted by 70% of the
outstanding shares of Series 4 preferred stock.
Dated: March 25, 1996
______________________________________
Charles S. Seel
CERTIFICATE OF SECRETARY
OF
WESTAR FINANCIAL SERVICES INCORPORATED
I, Charles S. Seel, the Secretary of Westar Financial Services
Incorporated, a Washington corporation, hereby certify that at the special
meeting of shareholders of Westar Financial Services Incorporated the Agreement
and Plan of Merger between Westar Financial Services Incorporated and Republic
Leasing Incorporated was adopted by a majority of the outstanding common stock
of Westar Financial Services Incorporated entitled to vote thereon.
Dated: March 25, 1996
______________________________________
Charles S. Seel
ARTICLES OF INCORPORATION
OF
WESTAR FINANCIAL SERVICES INCORPORATED
ARTICLE 1. NAME
The name of the corporation is Westar Financial Services Incorporated,
("Corporation").
ARTICLE 2. REGISTERED OFFICE AND AGENT
The address of the initial registered office of the Corporation is 926 -
24th Way SW, Olympia, Washington 98502, and the name of its initial registered
agent is Richard G. Phillips, Jr.
ARTICLE 3. PURPOSES
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Washington Business
Corporation Act.
ARTICLE 4 CAPITAL STOCK
4.1 Authorized Stock. The total authorized stock of the Corporation
shall consist of 35,000,000 shares of common stock having no par value; 1,500
shares of Series 1 preferred stock having no par value; 300 shares of Series 2
preferred stock having no par value; 1,200 shares of Series 3 preferred stock
having no par value; 1,250 shares of Series 4 preferred stock having no par
value composed of 1,190 shares of Series 4A and 60 Shares of Series 4B
preferred stock; and 1,995,750 additional shares of preferred stock having no
par value.
4.2 Issuance of Shares of Common and Preferred Stock. The Corporation
may from time to time issue and dispose of any of the authorized and unissued
shares of the common and preferred stock for such consideration as may be
fixed from time to time by the Board of Directors. The Board of Directors may
provide for payment therefor to be received by the Corporation in cash,
property or services. Any and all such shares of the common and preferred
stock of the Corporation, the issuance of which has been so authorized, and
for which consideration so fixed by the Board of Directors has been paid or
delivered, shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon.
4.3 Issuance of Preferred Stock in Series. The additional preferred
stock may be issued from time to time in one or more series, the shares of
each series to have such designations, preferences and relative participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed herein or in the resolution
or resolutions providing for the issuance of such series adopted by the Board
of Directors.
4.4 Authority of the Board of Directors. Authority is hereby expressly
granted to the Board of Directors of the Corporation, subject to the
provisions of this Section and to the limitations prescribed by law to
authorize the issuance of one or more series of additional preferred stock,
and with respect to each such series to fix by resolution or resolutions
providing for the issuance of such series, the number of shares of such
series, the designations, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions
thereof. The authority of the Board of Directors with respect to each series
of preferred stock shall include, but not be limited to, the determination or
fixing of the following:
(a) The number of shares of such series;
(b) The designation of such series;
(c) The dividend of such series, the conditions and dates upon which
such dividends shall be payable, the relation which such dividends shall
bear to the dividends on any other class or classes of stock and whether
such dividends shall be cumulative or non-cumulative;
(d) Whether the shares of such series shall be subject to redemption
by the Corporation and, if made subject to such redemption, the times,
prices, rates, adjustments, and other terms and conditions of such
redemption;
(e) The terms and amounts of any sinking fund provided for the
purchase or redemption of the shares of such series;
(f) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes or of any
other series of any class or classes of stock of the Corporation and, the
times, prices, rates, adjustments, and other terms and conditions of such
conversion or exchange;
(g) The restrictions, if any, on the issue or reissue of any
preferred stock;
(h) The rights of the holders of the shares of such series upon the
dissolution of, or upon the distribution of the assets of, the
Corporation; and
(i) The extent, if any, to which any committee of the Board of
Directors may fix the designations and any of the preferences or rights of the
shares of such series relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into or exchange
of such shares for shares of any other class or classes of stock of the
Corporation or any other series of the same or any other class or classes of
stock of the Corporation, or fix the number of shares of any such series or
authorize the increase or decrease in the shares of such series.
4.5 Dividends. The holders of shares of additional preferred stock
shall be entitled to receive dividends to the extent provided by the Board of
Directors in designating the particular series of preferred stock. The
holders of each share of Series 1, Series 2, Series 3, and Series 4 preferred
stock shall be entitled to receive a cumulative, quarterly cash dividend of
Twenty-Three and 125/1000 Dollars ($23.125) per share, out of funds legally
available for that purpose, such dividend to be payable on the last day of
March, June, September, and December of each year (the "Dividend Payments
Dates"). No dividends shall be paid on or set aside for shares of common
stock at such time preferred stock is outstanding. The holders of shares of
the preferred stock shall not be entitled to receive any dividends thereon
other than the dividends referred to in this Section.
4.6 Voting Rights of Preferred Stock. The holders of shares of the
preferred stock (including Series 1, Series 2, Series 3, and Series 4
preferred stock) shall not be entitled to vote on any matter submitted to a
vote of the shareholders except:
(a) as may from time to time be mandatorily required by the laws of
the State of Washington;
(b) on any proposed amendment to the Articles of Incorporation of
the Corporation which materially alters any of the designations, relative
rights, preferences or limitations of the shares of preferred stock or
which creates or increases the authorized shares of any class of stock
having rights or preferences ranking senior to or on a parity with the
preferred stock, approval of any such amendment to require the
affirmative vote of the holders of at least seventy percent (70%) of the
then outstanding shares of preferred stock, voting separately as a class;
(c) on any proposed amendment to the Bylaws of the Corporation which
materially alters any of the rights of the holders of preferred stock, as
a class, and not the rights of the holders of any classes of stock of the
Corporation generally, approval of any such amendment to require the
affirmative vote of the holders of at least seventy percent (70%) of the
then outstanding shares of preferred stock, voting separately as a class;
(d) with respect to Series 4 preferred stock only, on any proposed
merger or consolidation of the Corporation, or any proposed sale of all
or substantially all of its assets, approval of any such proposed action
to require the affirmative vote of at least seventy percent (70%) of the
then outstanding shares of Series 4 preferred stock, voting separately as
a class;
(e) if, at the time any election of directors is held or to be held,
the Corporation has failed to pay in full the two most recent quarterly
dividends due on Series 1, Series 2, Series 3, or Series 4 preferred
stock or has failed to pay two out of the four most recent quarterly
dividends due on any series of preferred stock, the holders of the
preferred stock, as a group and without regard to series and to the
exclusion of all other classes of stock of the Corporation, shall be
entitled to nominate and elect all directors of the Corporation except
for any director elected solely by a designated series of preferred
stock. Such right shall continue until the earlier of (i) a majority of
the Board of Directors having been elected by the holders of the
preferred stock (including any director elected solely by a designated
Series of preferred stock) or (ii) the dividend arrearages described
above having been paid. Thereafter, so long as such dividend
arrearages have not been paid, the holders of preferred stock shall be
entitled to nominate and elect such number of directors at each election
of directors as may be necessary to maintain, as a majority of the Board
of Directors (including any director elected solely by a designated
Series of preferred stock), directors elected by the holders of preferred
stock. Upon payment of any such dividend arrearages, the right of the
holders of preferred stock to nominate and elect any directors of the
Corporation pursuant to this Section shall cease until there exist new
dividend arrearages meeting the conditions described above; provided,
however, that such cessation shall not affect the right of the holders to
fill any vacancy with respect to a director elected by the holders of
preferred stock (as provided below), nor shall such cessation prevent any
director elected by the holders of preferred stock from completing its
unexpired term or constitute cause for removal of any such director. If
a vacancy arises on the Board of Directors in respect of any director
elected by the holders of preferred stock, for any cause, including, but
not limited to, the death, disability, removal, disqualification,
resignation, or refusal to act of any such director (but excluding the
expiration of such director's term), then the holders of preferred stock,
to the exclusion of the holders of all other classes of stock of the
Corporation, may nominate and elect a director to fill the vacancy so
created for the unexpired term thereof; and
(f) so long as not less than 25% of Series 4 preferred stock remains
issued and outstanding, the holders of Series 4 preferred stock, voting
as a class, shall be entitled to elect one (1) member of the Board of
Directors, by majority vote of such Series 4 preferred stock.
4.7 Rights on Liquidation, Dissolution or Winding Up.
(a) Payment. In the event of any liquidation, dissolution or
winding up of the Corporation, the holders of shares of Series 1, Series
2, Series 3, and Series 4 preferred stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders before any payment shall be made to the
holders of common stock, an amount equal to One Thousand ($1,000) per
share of preferred stock, plus any amount equal to accrued but unpaid
dividends, if any, to the date of payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to its shareholders shall be
insufficient to pay the holders of shares of preferred stock the full
amount to which they shall be entitled, such holders shall share ratably
in any distribution of assets according to the respective amounts which
would be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to said shares
were paid in full. In the event of any liquidation, dissolution or
winding up of the Corporation and after payment shall have been made to
the holders of shares of preferred stock of the full amount to which they
shall be entitled as aforesaid, the holders of common stock shall be
entitled, to the exclusion of the holders of shares of preferred stock,
to share in all remaining assets of the Corporation available for
distribution to its shareholders.
(b) Treatment of Consolidations, Mergers and Sale of Assets. A
consolidation or merger of the Corporation into or with another
corporation (as a result of which the holders of more than 50% of the
shares of common stock receive cash, stock or other property in exchange
for their shares of such stock) or a sale of all or substantially all of
the assets of the Corporation shall be regarded as a liquidation,
dissolution or winding up of the affairs of the Corporation within the
meaning of this Section.
(c) Distribution Other Than Cash. Whenever the distribution
provided for in this Section shall be payable in property other than
cash, the value of such distribution shall be the fair market value of
such property as determined in good faith by the Board of Directors.
4.8 Redemption.
(a) Redemption Events. Shares of Series 1, Series 2, Series 3, and
Series 4 preferred stock shall be redeemable by the Corporation as
follows:
(i) All outstanding shares of Series 1 and Series 2 preferred
stock shall be redeemed by the Corporation redeeming one-fourth of
the outstanding shares on the last day of June and December 1997 and
1998; all outstanding shares of Series 3 and Series 4 shall be
redeemed by the Corporation redeeming one-fourth of the outstanding
shares on the last day of June and December 1999 and 2000.
(ii) Prior to any redemption date set forth above, the
Corporation, at its option at any time from time to time, upon ten
(10) days advance notice pursuant to Section 4.8(c) below, may redeem
in whole or in part Series 1, Series 2, Series 3, and Series 4
preferred stock. Each date fixed for redemption pursuant to this
subsection (ii) is hereinafter referred to as a "Preferred Redemption
Date." If less than all of the shares of a series are being redeemed
at any time, such redemption shall be ratably among all holders of
the series in proportion to the number of shares held by all holders
thereof. No optional redemption under this subsection (ii) shall
relieve the Corporation of its mandatory redemption obligation under
subsection (i) unless and until all shares of each series has been
redeemed.
(b) Redemption Price. The total sum payable per share of Series 1,
Series 2, Series 3, and Series 4 preferred stock being redeemed shall be
$1,000 plus cumulative or accrued but unpaid dividends, if any, payable
with respect to such share. The total sum payable with respect to any
such share to be redeemed is hereinafter referred to as the "Preferred
Redemption Price." The Preferred Redemption Price is payable on the
Preferred Redemption Date established pursuant to Section 4.8(a)(ii), and
the payment is hereinafter referred to as a "Preferred Redemption
Payment." On and after the Preferred Redemption Date (unless default
shall be made by the Corporation in the payment of the Preferred
Redemption Price as hereinafter provided), all rights in respect of the
shares of preferred stock to be redeemed, except the right to receive the
Preferred Redemption Price as hereinafter provided, shall cease and
terminate, and such shares shall no longer be deemed to be outstanding,
whether or not the certificates representing such shares have been
received by the Corporation.
(c) Notice of Redemption. Notice of the redemption pursuant to this
Section shall be sent by first-class mail, postage prepaid, to the
holders of record of the shares of Series 1, Series 2, Series 3, and
Series 4 preferred stock to be redeemed at their respective addresses as
the same shall appear on the books of the Corporation. Such notice shall
set forth the number of shares of such series to be redeemed, the
Preferred Redemption Date, the Preferred Redemption Price, and the date
and place at which the holder may obtain the Preferred Redemption Payment
upon the surrender of such holder's certificate.
(d) Surrender of Certificates. On or after the Preferred Redemption
Date stated in a notice delivered pursuant to Section 4.8(c), each holder
of shares of Series 1, Series 2, Series 3, and Series 4 preferred stock
to be redeemed shall surrender his or her certificate or certificates
evidencing such shares to the Corporation at the place designated in such
notice and shall, upon surrender of such certificate or certificates,
receive the Preferred Redemption Payment therefor. In case less than all
the shares of preferred stock represented by any such surrendered
certificate or certificates are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares.
4.9 Conversion.
(a) Conversion to Common Stock. Series 4B preferred stock shall be
designated as convertible. Series 4B preferred stock is convertible, at
the option of the holder thereof, into a number of fully paid and
nonassessable shares of common stock of the Corporation equal to 10% of
the outstanding common stock, on a fully-diluted basis, and including all
shares subject to stock incentive plans for service providers, following
such conversion. The convertible shares may be converted at any time.
(b) Process of Conversion. In order to exercise conversion rights,
the holder thereof shall surrender (in person or by mail) such holder's
certificate(s) of convertible stock to the Corporation at its home office
together with a written notice that the holder elects to convert such
stock, or a specified portion thereof. Such notice shall also state the
name(s) and address and taxpayer identification numbers in which the
certificate(s) for common stock shall be issued.
(c) Issuance of Certificates. Promptly after the receipt of the
written notice and surrender of such stock certificate(s) as aforesaid,
the Corporation shall issue and deliver to such holder, registered in
such name or names as such holder may direct in writing, a certificate or
certificates for the number of full shares of common stock issuable upon
the conversion of such stock (or specified portion thereof), bearing any
required restrictive legend. To the extent permitted by law, such
conversion shall be deemed to have been effected as of the close of
business on the date by which both of the following have occurred: (i)
such written statement shall have been received by the Corporation; and
(ii) such certificate(s) shall have been surrendered as aforesaid. At
such time the rights of the holder of such stock (or specified portion
thereof) shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of common stock shall then be
issuable upon such exercise shall be deemed to have become the holder or
holders of record of the shares of common stock represented thereby.
(d) Automatic Conversion. In the event of an underwritten public
offering of shares of common stock of the Corporation at a public
offering price per share of $1.50 or more (prior to underwriter
commissions and expenses) in an offering of more than $8,400,000, the
Series 4B preferred stock shall (if not previously converted) be
automatically converted into a number of shares of common stock as
calculated pursuant to Section 4.9(a); provided, however, that in
determining the number of shares of common stock outstanding on a fully
diluted basis, the number of newly issued shares offered in such public
offering shall be excluded.
ARTICLE 5. NO PREEMPTIVE RIGHTS
No preemptive rights shall exist with respect to shares of stock or
securities convertible into shares of stock of the Corporation.
ARTICLE 6. DIRECTORS
6.1 Number. The Board of Directors shall consist of not fewer than six
(6) nor more than nine (9) members. The exact number shall be fixed and
determined by a resolution approved by at least a sixty percent (60%) vote of
the total number of Directors.
6.2 Classes. The Board of Directors shall be divided into three
classes, with each class to be as equal in number as may be possible. A
Director's basic term shall be three years, but initially the term of the
Directors in the first class shall expire at the first annual shareholders'
meeting after the filing of these Articles, the term of Directors in the
second class shall expire at the second annual shareholders' meeting after the
filing of these Articles, and the term of Directors in the third class shall
expire at the third annual shareholders' meeting after the filing of these
Articles. So long as not less than 25% of the authorized Series 4 preferred
stock remains outstanding, one Director position shall be reserved for
election solely by the holders of Series 4 preferred stock, voting as a class,
pursuant to Section 4.6(f). So long as not less than 25% of the authorized
Series 4 preferred stock remains issued and outstanding, one of the Director's
positions shall be designated "Series 4 Director" by the Board of Directors.
Election to the Series 4 Director position shall be by the vote of the holders
of the Series 4 preferred stock, voting as a class.
6.3 Nominations to the Board. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. Nominations, other than those made by
the Board of Directors, shall be made in writing and delivered to or mailed
and received by the Secretary not less than fourteen (14) days nor more than
fifty (50) days prior to the annual meeting of stockholders; provided,
however, that in the event that less than 65 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by a shareholder to be timely must be so received no later than the close of
business on the 15th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. Such
notification shall contain the following information:
(a) The name and address of the nominee(s);
(b) Each nominee's principal occupation;
(c) The total number of shares of stock of the corporation that will
be voted for each proposed nominee;
(d) The name and address of the proposing stockholder and the number
of shares the proposing stockholder owns;
(e) Such other information regarding each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been
nominated by the Board of Directors.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the Chairman of the meeting, and upon his instruction, all
votes cast for such nominee shall be disregarded.
6.4 Vacancies. Vacancies and newly created directorships resulting from
any increase in the authorized number of Directors shall be filled only by a
majority of the Directors then in office, although less than a quorum, or by a
sole remaining Director, unless for any reason there are no Directors in
office in which case they shall be filled by a special election by
shareholders. The term of a Director elected to fill a vacancy expires at the
next shareholders' meeting at which Directors are elected. Vacancy of the
Series 4 position shall be filled by a special election of the holders of the
Series 4 preferred stock, voting as a class.
6.5 Cumulative Voting. Shareholders of the Corporation shall not have
the right to cumulate votes in the election of Directors.
6.6 Removal of Directors. At a meeting of shareholders called expressly
for that purpose, any Director, any class of Directors, or the entire Board of
Directors may be removed from office as a Director at any time for cause by
the affirmative vote at a duly called meeting of shareholders of at least
seventy-five percent (75%) of the votes which are entitled to be cast at an
annual election of the director or directors. Notwithstanding the foregoing,
the Director occupying the Series 4 Director position may be removed only by
the affirmative vote of a majority vote of the holders of Series 4 preferred
stock.
ARTICLE 7. MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS
Except as otherwise expressly provided in these Articles of Incorporation
and provided the Board of Directors adopts an affirmative resolution
recommending such action, a merger, share exchange, sale of substantially all
of the Corporation's assets, or dissolution must be approved by the
affirmative vote of a majority of the Corporation's outstanding shares
entitled to vote, or if separate voting by voting groups is required, then by
not less than a majority of all the votes entitled to be cast by that voting
group. In the absence of an affirmative recommendation by the Board of
Directors, a merger, consolidation, conveyance of all or substantially all of
the assets, or dissolution of the Corporation shall require an affirmative
vote of the holders of seventy-five percent (75%) of the outstanding shares
entitled to vote thereon.
ARTICLE 8. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
Washington Business Corporation Act, the Board of Directors is expressly
authorized to make, adopt, repeal, alter, amend, and rescind the Bylaws of the
Corporation by a resolution adopted by a majority of the Directors.
ARTICLE 9. NO SHAREHOLDER ACTION WITHOUT MEETING
No action shall be taken by any shareholder except at an annual or
special meeting of shareholders.
ARTICLE 10. SPECIAL SHAREHOLDER MEETINGS
Special meetings of the shareholders of the Corporation for any purpose
or purposes may be called at any time by the Board of Directors, but such
special meetings may not be called by any other person or persons.
ARTICLE 11. RESTRICTIONS ON CERTAIN AMENDMENTS
The provisions set forth in this Article and in Articles 6, 7, 8, 9, 10,
12, 13, 14, and 15 herein may not be repealed or amended in any respect,
unless such action is approved by the affirmative vote of the holders of not
less than seventy-five percent (75%) of the outstanding common stock.
ARTICLE 12. LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a
director, except for:
(a) Acts or omissions involving intentional misconduct by the
director or a knowing violation of law by the director;
(b) Conduct violating Section 23B.08.310 of the Washington Business
Corporation Act (which involves certain distributions by the
Corporation);
(c) Any transaction from which the director will personally receive
a benefit in money, property, or services to which the director is not
legally entitled.
If the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent not prohibited by the Washington
Business Corporation Act, as so amended. The provisions of this Article shall
be deemed to be a contract with each Director of the Corporation who serves as
such at any time while such provisions are in effect, and each such Director
shall be deemed to be serving as such in reliance on the provisions of this
Article. Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation with respect to any acts or
omissions of such director occurring prior to such repeal or modification.
ARTICLE 13. INDEMNIFICATION
13.1 Definitions. As used in this Article:
(a) "Agent" means an individual who is or was an agent of the
Corporation or an individual who, while an agent of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise. "Agent" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of an
Agent.
(b) "Corporation" means the Corporation, and any domestic or foreign
predecessor entity which, in a merger or other transaction, ceased to
exist.
(c) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise. "Director" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of a
Director.
(d) "Employee" means an individual who is or was an employee of the
Corporation or an individual, while an employee of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. "Employee" includes, unless the context requires otherwise,
the spouse, heirs, estate and personal representative of an Employee.
(e) "Expenses" include counsel fees.
(f) "Indemnitee" means an individual made a party to a proceeding
because the individual is or was a Director, Officer, Employee, or Agent
of the Corporation, and who possesses indemnification rights pursuant to
these Articles or other corporate action. "Indemnitee" includes, unless
the context requires otherwise, the spouse, heirs, estate, and personal
representative of such individuals.
(g) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, (including an excise tax assessed with respect to an
employee benefit plan) or reasonable Expenses incurred with respect to a
Proceeding.
(h) "Officer" means an individual who is or was an officer of the
Corporation (regardless of whether or not such individual was also a
Director) or an individual who, while an officer of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise. "Officer" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of an
Officer.
(i) "Party" includes an individual who was, is, or is threatened to
be named as a defendant, respondent, directly or by cross-claim or
counterclaim, or witness in a proceeding.
(j) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, derivative, criminal, administrative,
or investigative, and whether formal or informal.
13.2 Indemnification Rights of Directors and Officers. The Corporation
shall indemnify its Directors and Officers to the full extent not prohibited
by applicable law now or hereafter in force against Liability arising out of a
Proceeding to which such individual was made a Party because the individual is
or was a Director or an Officer. However, such indemnity shall not apply on
account of:
(a) Acts or omissions of a Director or Officer finally adjudged to
be intentional misconduct or a knowing violation of law;
(b) Conduct of a Director or Officer finally adjudged to be in
violation of Section 23B.08.310 of the Washington Business Corporation
Act relating to distributions by the Corporation; or
(c) Any transaction with respect to which it was finally adjudged
that such Director or Officer personally received a benefit in money,
property, or services to which the Director or Officer was not legally
entitled.
Subject to the foregoing, it is specifically intended that Proceedings
covered by indemnification shall include Proceedings brought by the
Corporation (including derivative actions) and Proceedings by government
entities, governmental officials or other third parties.
13.3 Indemnification of Employees and Agents of the Corporation. The
Corporation may, by action of its Board of Directors from time to time,
provide indemnification and pay Expenses in advance of the final disposition
of a Proceeding to Employees and Agents of the Corporation who are not also
Directors, in each case to the same extent as to a Director with respect to
the indemnification and advancement of Expenses pursuant to rights granted
under, or provided by, the Washington Business Corporation Act or otherwise.
13.4 Partial Indemnification. If an Indemnitee is entitled to
indemnification by the Corporation for some or a portion of a Liability
actually and reasonably incurred by the Indemnitee but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify Indemnitee
for the portion of such Liability to which Indemnitee is entitled.
13.5 Procedure for Seeking Indemnification and/or Advancement of
Expenses. The following procedures shall apply in the absence of (or at the
option of the Indemnitee, in lieu thereof), specific procedures otherwise
applicable to an Indemnitee pursuant to a contract, trust agreement, or
general or specific action of the Board of Directors:
(a) Notification and Defense of Claim. Indemnitee shall promptly
notify the Corporation in writing of any Proceeding for which
indemnification could be sought under this Article. In addition,
Indemnitee shall give the Corporation such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
With respect to any such Proceeding as to which Indemnitee has notified
the Corporation:
(i) The Corporation will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Corporation, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense thereof,
with counsel satisfactory to Indemnitee. Indemnitee's consent to
such counsel may not be unreasonably withheld.
After notice from the Corporation to Indemnitee of its election to assume
the defense, the Corporation will not be liable to Indemnitee under this
Article for any legal or other Expenses subsequently incurred by
Indemnitee in connection with such defense. However, Indemnitee shall
continue to have the right to employ its counsel in such proceeding, at
Indemnitee's expense, and if:
(i) The employment of counsel by Indemnitee has been authorized
by the Corporation;
(ii) Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Corporation and Indemnitee in
the conduct of such defense; or
(iii) The Corporation shall not in fact have employed counsel
to assume the defense of such proceeding,
the Expenses of Indemnitee's counsel shall be at the expense of the
Corporation.
The Corporation shall not be entitled to assume the defense of any
proceeding brought by or on behalf of the Corporation or as to which
Indemnitee shall reasonably have made the conclusion that a conflict of
interest may exist between the Corporation and the Indemnitee in the
conduct of the defense.
(b) Information to be Submitted and Method of Determination and
Authorization of Indemnification. For the purpose of pursuing rights to
indemnification under this Article, the Indemnitee shall submit to the
Board a sworn statement requesting indemnification and reasonable
evidence of all amounts for which such indemnification is requested
(together, the sworn statement and the evidence constitute an
"Indemnification Statement").
Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification
hereunder, and the Corporation shall, within sixty (60) calendar days
thereafter, make the payments requested in the Indemnification Statement
to or for the benefit of the Indemnitee, unless: (i) within such sixty
(60) calendar day period it shall be determined by the Corporation that
the Indemnitee is not entitled to indemnification under this Article;
(ii) such determination shall be based upon clear and convincing evidence
(sufficient to rebut the foregoing presumption); and (iii) the Indemnitee
shall receive notice in writing of such determination, which notice shall
disclose with particularity the evidence upon which the determination is
based.
The foregoing determination may be made: (i) by the Board of
Directors by majority vote of a quorum of Directors who are not at the
time parties to the proceedings; (ii) if a quorum cannot be obtained, by
majority vote of a committee duly designated by the Board of Directors
(in which designation Directors who are parties may participate)
consisting solely of two (2) or more Directors not at the time parties to
the proceeding; (iii) by special legal counsel; or (iv) by the
shareholders, all as provided by Section 23B.08.550 of the Washington
Business Corporation Act.
Any determination that the Indemnitee is not entitled to
indemnification, and any failure to make the payments requested in the
Indemnification Statement, shall be subject to judicial review by any
court of competent jurisdiction.
(c) Special Procedure Regarding Advance for Expenses. An Indemnitee
seeking payment of Expenses in advance of a final disposition of the
proceeding must furnish the Corporation, as part of the Indemnification
Statement:
(i) A written affirmation of the Indemnitee's good faith belief
that the Indemnitee has met the standard of conduct required to be
eligible for indemnifications; and
(ii) A written undertaking, constituting an unlimited general
obligation of the Indemnitee, to repay the advance if it is
ultimately determined that the Indemnitee did not meet the required
standard of conduct.
Upon satisfaction of the foregoing the Indemnitee shall have a
contractual right to the payment of such Expenses.
(d) Settlement. The Corporation is not liable to indemnify
Indemnitee for any amounts paid in settlement of any Proceeding without
the Corporation's written consent. The Corporation shall not settle any
Proceeding in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Corporation
nor Indemnitee may unreasonably withhold its consent to a proposed
settlement.
13.6 Contract and Related Rights.
(a) Contract Rights. The right of an Indemnitee to indemnification
and advancement of Expenses is a contract right upon which the Indemnitee
shall be presumed to have relied in determining to serve or to continue
to serve in his or her capacity with the Corporation. Such right shall
continue as long as the Indemnitee shall be subject to any possible
proceeding. Any amendment to or repeal of this Article shall not
adversely affect any right or protection of an Indemnitee with respect to
any acts or omissions of such Indemnitee occurring prior to such
amendment or repeal.
(b) Optional Insurance, Contracts, and Funding. The Corporation
may:
(i) Maintain insurance, at its expense, to protect itself and
any Indemnitee against any liability, whether or not the Corporation
would have power to indemnify the individual against the same
liability under Sections 23B.08.510 or .520 of the Washington
Business Corporation Act;
(ii) Enter into contracts with an Indemnitee in furtherance of
this Article and consistent with the Washington Business Corporation
Act; and
(iii) Create a trust fund, grant a security interest, or use
other means (including without limitation a letter of credit) to
ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
(c) Severability. If any provision or application or this Article
shall be invalid or unenforceable, the remainder of this Article and its
remaining applications shall not be affected thereby, and shall continue
in full force and effect.
(d) Right of Indemnitee to Bring Suit. If (i) a claim under this
Article for indemnification is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the
Corporation; or (ii) a claim under this Article for advancement of
Expenses is not paid in full by the Corporation within twenty (20) days
after a written claim has been received by the Corporation, then the
Indemnitee may, but need not, at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. To the extent
successful in whole or in part, the Indemnitee shall be entitled to also
be paid the expense (to be proportionately prorated if the Indemnitee is
only partially successful) of prosecuting such claim. Neither (i) the
failure of the Corporation (including its Board of Directors, its
shareholders, or independent legal counsel) to have made a determination
prior to the commencement of such proceeding that indemnification or
reimbursement or advancement of Expenses to the Indemnitee is proper in
the circumstances; nor (ii) an actual determination by the Corporation
(including its Board of Directors, its shareholders, or independent legal
counsel) that the Indemnitee is not entitled to indemnification or to the
reimbursement or advancement of Expenses, shall be a defense to the
proceeding or create a presumption that the Indemnitee is not so
entitled.
(e) Nonexclusivity of Rights. The right to indemnification and the
payment of Expenses incurred in defending a Proceeding in advance of its
final disposition granted in this Article shall not be exclusive of any
other right which any Indemnitee may have or hereafter acquire under any
statute, provision of this Article or the Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise. The Corporation
shall have the express right to grant additional indemnity without
seeking further approval or satisfaction by the shareholders. All
applicable indemnity provisions and any applicable law shall be
interpreted and applied so as to provide an Indemnitee with the broadest
but nonduplicative indemnity to which he or she is entitled.
13.7 Contribution. If the indemnification provided in Section 13.2 of
this Article is not available to be paid to Indemnitee for any reason other
than those set forth in Sections 13.2(a), 13.2(b), and 13.2(c) of this Article
(for example, because indemnification is held to be against public policy even
though otherwise permitted under Section 13.2) then in respect of any
proceeding in which the Corporation is jointly liable with Indemnitee (or
would be if joined in such proceeding), the Corporation shall contribute to
the amount of loss paid or payable by Indemnitee in such proportion as is
appropriate to reflect:
(a) The relative benefits received by the Corporation on the one
hand and the Indemnitee on the other hand from the transaction from which
such proceeding arose; and
(b) The relative fault of the Corporation on the one hand and the
Indemnitee on the other hand in connection with the events which resulted
in such loss, as well as any other relevant equitable consideration.
The relative benefits received by a fault of the Corporation on the one
hand and the Indemnitee on the other shall be determined by a court of
appropriate jurisdiction (which may be the same court in which the proceeding
took place) with reference to, among other things, the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent the circumstances resulting in such loss. The Corporation agrees that
it would not be just and equitable if a contribution pursuant to this Article
was determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
13.8 Exceptions. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms
of these Articles to indemnify or advance Expenses to Indemnitee with respect
to any proceeding:
(a) Claims Initiated by Indemnitee. Initiated or brought
voluntarily by Indemnitee and not by way of defense, but such
indemnification or advancement of Expenses may be provided by the
Corporation in specific cases if the Board of Directors finds it to be
appropriate. Notwithstanding the foregoing, the Corporation shall
provide indemnification including the advancement of Expenses with
respect to Proceedings brought to establish or enforce a right to
indemnification under these Articles or any other statute or law or as
otherwise required under the statute.
(b) Lack of Good Faith. Instituted by Indemnitee to enforce or
interpret this Article, if a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or that any such assertion was
frivolous.
(c) Insured Claims. For which any of the Expenses or liabilities
for indemnification is being sought have been paid directly to Indemnitee
by an insurance carrier under a policy of officers' and directors'
liability insurance maintained by the Corporation.
(d) Prohibited by Law. If the Corporation is prohibited by the
Washington Business Corporation Act or other applicable law as then in
effect from paying such indemnification and/or advancement of Expenses.
For example, the Securities and Exchange Commission ("SEC") has taken the
position that indemnification is not possible for liabilities arising
under certain federal securities laws. The Corporation has undertaken or
may be required in the future to undertake with the SEC to submit the
question of indemnification to a court in certain circumstances for a
determination of the Corporation's right to indemnify Indemnitee.
13.9 Successors and Assigns. All obligations of the Corporation to
indemnify any Director or Officer shall be binding upon all successors and
assigns of the Corporation (including any transferee of all or substantially
all of its assets and any successor by merger or otherwise by operation of
law). The Corporation shall not effect any sale of substantially all of its
assets, merger, consolidation, or other reorganization, in which it is not the
surviving entity, unless the surviving entity agrees in writing to assume all
such obligations of the Corporation.
ARTICLE 14. TRANSACTIONS INVOLVING INTERESTED SHAREHOLDERS
The provisions of the Washington Business Corporation Act, Revised Code
of Washington, Section 23B.17.020, shall be applicable to the Corporation.
ARTICLE 15. SIGNIFICANT BUSINESS TRANSACTIONS
The Corporation shall not engage in any Significant Business Transaction
for a period of five (5) years following the Acquiring Person's share
acquisition date unless the Significant Business Transaction or the purchase
of shares made by the Acquiring Person on the share acquisition date is
approved prior to the Acquiring Person's share acquisition date by a majority
of the members of the Board of Directors of the Corporation. All definitions
for this Article shall be pursuant to Section 23B.19.020 of the Revised Code
of Washington.
ARTICLE 16. INCORPORATOR
The name and address of the incorporator are:
Richard G. Phillips, Jr.
926 24th Way SW
Olympia, WA 98502
The undersigned Incorporator has signed these Articles of Incorporation as
of February 13th, 1996.
/s/ Richard G. Phillips, Jr.
-------------------------------
Richard G. Phillips, Jr.
Incorporator
BYLAWS
OF
WESTAR FINANCIAL SERVICES INCORPORATED
SECTION 1. OFFICES
The principal office of the corporation shall be located at the principal
place of business or such other place as the Board of Directors ("Board") may
designate. The corporation may have such other offices, either within or
without the State of Washington, as the Board may designate or as the
business of the corporation may require from time to time.
SECTION 2. SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders shall be
held on the last Monday of July of each year, or such other date set by the
Board of Directors at a location selected by the Board of Directors for the
purpose of electing Directors and transacting such other business as may
properly come before the meeting. If the day fixed for the annual meeting is a
legal holiday at the place of the meeting, the meeting shall be held on the next
succeeding business day. If the annual meeting is not held on the date
designated therefor, the Board shall cause the meeting to be held as soon
thereafter as may be convenient. The order of business at the annual meeting of
shareholders shall be as follows:
(a) Call to order;
(b) Proof of notice of meeting, or filing of waivers of notice;
(c) Reading of minutes of the last annual meeting;
(d) Reports from officers;
(e) Reports from committees;
(f) Election of Directors; and
(g) Other business.
2.2 Special Meetings. The Board, but no other person or persons, may call
special meetings of the share-holders for any purpose. No business shall be
transacted at any special meeting of shareholders except as specified in the
notice calling for said meeting.
2.3 Meetings by Communication Equipment. Shareholders may participate in
a meeting of the shareholders by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other during the meeting. Participation by such means
shall constitute presence in person at a meeting.
2.4 Place of Meeting. All meetings shall be held at the principal office
of the corporation or at such other place within or without the State of
Washington, designated by the Board, or in a waiver of notice signed by all of
the shareholders entitled to notice of the meeting.
2.5 Notice of Meeting. The Board, calling an annual or special meeting of
shareholders as provided for herein, shall cause to be delivered to each
shareholder entitled to notice of or to vote at the meeting, not less than ten
(10) days (or in the case of a meeting to act on an amendment to the Articles of
Incorporation, a plan of merger or share exchange, a proposed sale, lease,
exchange or other disposition of all or substantially all of the assets of the
corporation other than in the usual and regular course of business, or the
dissolution of the corporation (collectively, an "Extraordinary Act"), not less
than twenty (20) days) nor more than sixty (60) days before the meeting, written
notice stating the place, day and hour of the meeting and, in the case of a
special meeting or a meeting to consider an Extraordinary Act, the purpose or
purposes for which the meeting is called. Notice of a meeting to consider a
proposed Extraordinary Act shall describe the proposed action with reasonable
clarity and include a copy of any proposed amendment, plan of merger or share
exchange or agreement of sale, lease, exchange or disposition, as the case may
be. Notice may be transmitted by mail, electronic mail, private carrier or
personal delivery; telegraph or teletype; telephone, facsimile or other wire or
wireless equipment. If such notice is mailed, it shall be deemed delivered when
deposited in the official government mail properly addressed to the shareholder
at his or her address as it appears on the stock transfer books of the
corporation with first class postage prepaid. If the notice is telegraphed or
teletyped, it shall be deemed delivered when the content of the telegram is
delivered to the telegraph company. If the notice is provided by facsimile or
other wire or wireless equipment, including electronic mail, it shall be deemed
delivered if it is transmitted to a number provided by a shareholder for that
purpose from time to time and the successful transmission thereof is confirmed.
In all other cases, notice shall be deemed delivered upon the shareholder's
receipt thereof.
2.6 Waiver of Notice. Whenever any notice is required to be given to any
shareholder under the provisions of these Bylaws, the Articles of Incorporation
or the Washington Business Corporation Act, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, and delivered to the corporation for inclusion in the
minutes or filing in the corporate records, shall be deemed equivalent to the
giving of such notice. In addition, notice shall be deemed waived by any
shareholder by its attendance at a meeting in person or by proxy, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting and by any shareholder as to consideration
of a particular matter at a special meeting not within the purpose or purposes
described in the meeting notice unless the shareholder objects to considering
the matter when it is presented. Any shareholder so waiving shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
2.7 Fixing of Record Date for Determining Shareholders. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend or other distribution, or in order to make a
determination of shareholders for any other purpose, the Board may fix in
advance a date as the record date for any such determination. Such record date
shall be not more than seventy (70) days, and in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination is to be taken. If no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting or to receive payment of a dividend or other distribution, the day
before the date on which the notice of meeting is mailed or the date on which
the resolution of the Board declaring such dividend or distribution is adopted,
as the case may be, shall be the record date and time for such determination.
Such a determination shall apply to any adjournment of the meeting unless the
Board fixes a new record date, which it must do if the meeting is adjourned more
than one hundred twenty (120) days after the date fixed for the original
meeting. If no notice of meeting is given because all shareholders entitled to
notice have waived notice, then the record date shall be the date on which the
last waiver of notice becomes effective.
2.8 Voting Record. After fixing a record date for a meeting, a complete
record of the shareholders entitled to notice of such meeting, or any
adjournment thereof, shall be made, arranged in alphabetical order and by voting
group and class or series of shares within each voting group, with the address
of and number of shares held by each shareholder. This record shall be kept on
file at the principal office of the corporation, or at a place identified in the
meeting notice in the city where the meeting will be held, for ten days prior to
such meeting or any adjournment and shall be kept open at such meeting, for the
inspection of any shareholder, its agent or attorney, at such shareholder's
expense.
2.9 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of the shareholders; provided however, that shares entitled to vote
as a separate voting group may take action on a matter at a meeting only if a
quorum of those shares exists with respect to that matter, and such quorum shall
exist only if a majority of the votes entitled to be cast on the matter by the
voting group is represented in person or by proxy at such meeting. If less than
a majority of the outstanding shares entitled to vote are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. If a quorum is present or represented at a
reconvened meeting following such an adjournment, any business may be transacted
that might have been transacted at the meeting as originally called. The
shareholders present at a duly organized meeting may continue to transact
business at such meeting and at any adjournment of such meeting (unless a new
record date is or must be set for the adjourned meeting), notwithstanding the
withdrawal of enough shareholders from either meeting to leave less than a
quorum.
2.10 Manner of Acting. Except as otherwise provided in the Articles of
Incorporation or in these Bylaws, every shareholder of record shall have the
right at every shareholders' meeting to one vote for every share standing in its
name on the books of the corporation. If a quorum exists, action on a matter,
other than election of directors, is approved by a voting group of shareholders
if the votes cast within the voting group favoring the action exceed the votes
cast within the voting group opposing the action, unless the Articles of
Incorporation or the Washington Business Corporation Act require a greater
number of affirmative votes. Directors shall be elected by a plurality of the
votes of the shares present and personally represented by proxy at the meeting
and entitled to vote on the election of directors.
2.11 Proxies. A shareholder may vote by proxy executed in writing by the
shareholder or by his or her attorney-in-fact or agent. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the meeting
and shall become effective upon receipt. A proxy shall become invalid eleven
months after the date of its execution, unless otherwise provided in the proxy.
A proxy with respect to a specified meeting shall entitle the holder thereof to
vote at any reconvened meeting following adjournment of such meeting but shall
not be valid after the final adjournment thereof.
2.12 Voting for Directors. Each shareholder entitled to vote at an
election of Directors may vote, in person or by proxy, the number of shares
owned by such shareholder for as many persons as there are Directors to be
elected and for whose election such shareholder has a right to vote.
2.13 Action by Shareholders Without a Meeting. No action shall be taken
by any shareholder except at an annual or special meeting of shareholders.
2.14 Ratification. Any action taken by the corporation, the directors or
the officers which is subsequently authorized, approved, or ratified by the vote
of the number of shares that would have been sufficient to approve the action in
the first instance, shall be valid and binding as though ratified by every
shareholder of the corporation.
2.15 Notice of Stockholder Proposals.
(a) At an annual meeting, only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been brought before
the annual meeting (i) by, or at the direction of, the Board of Directors
or (ii) by any shareholder of the corporation who complies with the notice
procedures set forth in this section of these bylaws. For a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder
must be given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a shareholder's notice must be delivered to, or
mailed and received at the principal executive offices of the Corporation
not less than fifty (50) days nor more than sixty-five (65) days prior to
the scheduled annual meeting, regardless of any postponements, deferrals or
adjournments of that meeting to a later date provided, however, that in the
event that less than sixty-five (65) days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders,
such shareholder proposal to be timely must be so delivered or received not
less than the close of business on the tenth (10th) day following the
earlier of the day on which such notice of the date of the meeting was
mailed or the day on which such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address,
as they appear on the Corporation's books, of the shareholder proposing
such business and any other shareholders known by such shareholder to be
supporting such proposal, (iii) the class and number of shares of the
Corporation's stock which are beneficially owned by the shareholder on the
date of such shareholder notice and by any other shareholders known by such
shareholder to be supporting such proposal on the date of such shareholder
notice, and (iv) any financial interest of the shareholder in such
proposal.
(b) If the Chairman determines that a shareholder proposal was not
made in accordance with the terms of this Section, he shall so declare at
the annual meeting and any such proposal shall not be acted upon at the
annual meeting.
(c) This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports,
no business shall be acted upon at such annual meeting unless stated, filed
and received as herein provided.
SECTION 3. BOARD OF DIRECTORS
3.1 General Powers. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board, except as may be otherwise provided
in the Articles of Incorporation or the Washington Business Corporation Act.
3.2 Number and Tenure.
3.2.1 The Board of Directors shall consist of not fewer than six (6) nor
more than nine (9) members. The exact number shall be fixed and determined by a
resolution approved by at least a sixty (60) percent vote of the total number of
directors. The number of Directors may be changed from time to time by
amendment to these Bylaws, but no decrease in the number of Directors shall have
the effect of shortening the term of any incumbent Director.
3.2.2 CLASSES. The Board of Directors shall be divided into three
classes, with each class to be as equal in number as may be possible. A
Director's basic term shall be three years, but initially the term of the
Directors in the first class shall expire at the first annual shareholders'
meeting after the filing of the Articles of Incorporation, the term of Directors
in the second class shall expire at the second annual shareholders' meeting
after the filing of the Articles of Incorporation, and the term of Directors in
the third class shall expire at the third annual shareholders' meeting after the
filing of the Articles of Incorporation. Unless a Director dies, resigns, or is
removed and despite the expiration of its term, he or she shall hold office
until the next annual meeting of shareholders or until his or her successor is
elected and qualified, whichever is later. Directors need not be shareholders of
the corporation or residents of the State of Washington. The directors to be
elected each year shall be elected by the shareholders at their annual meeting
each year; and if, for any reason, the directors shall not have been elected at
an annual meeting, they may be elected at a special meeting of shareholders
called for that purpose in the manner provided by these Bylaws.
3.2.3 Nominations for election to the Board of Directors may be made by
the Board of Directors or by any shareholder entitled to vote for the election
of directors. Nominations, other than those made by the Board of Directors,
shall be made in writing and delivered to or mailed and received by the
Secretary not less than fourteen (14) days nor more than fifty (50) days prior
to the annual meeting of shareholders; provided, however, that in the event that
less than 65 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by a shareholder to be timely must be
so received no later than the close of business on the 15th day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. Such notification shall contain the following
information:
(a) The name and address of the nominee(s);
(b) Each nominee's principal occupation;
(c) The total number of shares of stock of the corporation that
will be voted for each proposed nominee;
(d) The name and address of the proposing stockholder and the
number of shares the proposing stockholder owns;
(e) Such other information regarding each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been
nominated by the Board of Directors.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the Chairman of the meeting, and upon his instruction, all votes
cast for such nominee shall be disregarded.
3.3 Annual and Regular Meetings. An annual Board meeting shall be held
without notice immediately after and at the same place as the annual meeting of
shareholders. By resolution the Board, or any committee thereof, may specify
the time and place either within or without the State of Washington, for holding
regular meetings thereof without other notice than such resolution. At any
meeting of the Board, any business may be transacted, and the Board may exercise
all of its powers.
3.4 Special Meetings. Special meetings of the Board or any committee
designated by the Board may be called by or at the request of the Chairman of
the Board, the President, the Secretary or, in the case of special Board
meetings, any Director and, in the case of any special meeting of any committee
designated by the Board, by the Chairman thereof. The person or persons
authorized to call special meetings may fix any place either within or without
the State of Washington as the place for holding any special Board or committee
meeting called by them.
3.5 Meetings by Communications Equipment. Members of the Board or any
committee designated by the Board may participate in a meeting of such Board or
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
during the meeting. Participation by such means shall constitute presence in
person at a meeting.
3.6 Notice of Special Meetings. Notice of a special Board or committee
meeting stating the place, day and hour of the meeting shall be given to a
Director in writing or orally, by mail, private carrier or personal delivery;
telegraph or teletype; telephone, facsimile or other wire or wireless equipment.
Neither the business to be transacted at, nor the purpose of, and special
meeting need be specified in the notice of such meeting. Notice shall be
effective on the earlier of actual receipt or as follows:
3.6.1 Personal Delivery. If notice is given by personal delivery or
private carrier, the notice shall be effective if delivered to a Director at
least two (2) days before the meeting.
3.6.2 Delivery by Mail. If notice is delivered by mail, the notice shall
be deemed effective if deposited in the official government mail at least five
days before the meeting properly addressed to a Director at his or her address
shown on the records of the corporation with first class postage prepaid.
3.6.3 Delivery by Telegraph or Teletype. If notice is delivered by
telegraph, the notice shall be deemed effective if the content thereof is
delivered to the telegraph company for delivery to a Director at his or her
address shown on the records of the corporation at least three days before the
meeting.
3.6.4 Delivery by Electronic Mail or Facsimile. If notice is delivered by
electronic mail, facsimile or other wire or wireless equipment, the notice shall
be deemed effective if it is transmitted to a facsimile number provided by a
Director for that purpose from time to time and the successful transmission
thereof is confirmed at least three days before the meeting.
3.6.5 Oral Notice. If notice is delivered orally, by telephone, radio, in
person or otherwise, the notice shall be deemed effective if personally given to
the Director at least two days before the meeting.
3.7 Waiver of Notice; Presumption of Assent.
3.7.1 In Writing. Whenever any notice is required to be given to any
Director under the provisions of these Bylaws, the Articles of Incorporation or
the Washington Business Corporation Act, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, and delivered to the corporation for inclusion in the minutes or
filing with the corporate records, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board or any committee designated by the Board
need be specified in the waiver of notice of such meeting.
3.7.2 By Attendance. The attendance of a Director at a Board or committee
meeting shall constitute a waiver of notice of such meeting, except where a
Director, at the beginning of the meeting or promptly upon its arrival, objects
to the holding of the meeting or to the transaction of any business and does not
thereafter vote for or assent to action taken at the meeting.
3.8 Quorum. A majority of the number of Directors fixed by or in the
manner provided in these Bylaws shall constitute a quorum for the transaction of
business at any Board meeting but, if less than a majority are present at a
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice. If the meeting is adjourned for more than
forty-eight (48) hours, the Secretary shall give notice of the time and place of
the adjourned meeting to the directors who were not present at the time the
meeting was adjourned.
3.9 Manner of Acting. If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present is the act of the Board,
unless the vote of a greater number is required by these Bylaws, the Articles of
Incorporation or the Washington Business Corporation Act.
3.10 Presumption of Assent. A Director of the corporation who is present
at a meeting of the Board in which action on any matter is taken shall be
presumed to have assented to the action taken unless:
(a) The Director objects at the beginning of the meeting, or
promptly upon the Director's arrival, to holding it or transacting business
at the meeting; or
(b) The Director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
(c) The Director delivers written notice of the Director's dissent
or abstention to the presiding officer of the meeting before its
adjournment or to the corporation within a reasonable time after
adjournment of the meeting.
The right of dissent or abstention is not available to a Director who votes in
favor of the action taken.
3.11 Action by Board or Committees Without a Meeting;. Any action which
could be taken at a meeting of the Board or of any committee designated by the
Board may be taken without a meeting if a written consent (including
counterparts thereof) setting forth the action so taken is signed by each of the
Directors or by each committee member either before or after the action taken.
Any such written consent shall be delivered to the corporation and shall be
inserted in the minute book as if it were the minutes of a Board or a committee
meeting. Such action shall be effective when the last Director signs the
consent, unless the consent specifies a later effective date.
3.12 Resignation. Any Director may resign at any time by delivering
written notice to the Chairman of the Board, the President, the Secretary or the
Board. Any such resignation shall take effect upon delivery thereof, or if a
later effective date is specified in the notice, on such later effective date
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. A resignation shall not affect the
rights of the corporation under any contract with the resigning director.
3.13 Removal. At a special meeting of shareholders called expressly for
that purpose, any Director, any class of Directors, or the entire Board of
Directors may be removed from office as a Director at any time for cause by the
affirmative vote of shareholders of at least seventy-five percent (75%) of the
votes which are entitled to be cast at an annual election of the director or
directors. Notwithstanding the foregoing, the Director occupying the Series 4
Director position may be removed only by the affirmative vote of a majority vote
of the holders of Series 4 preferred stock.
3.14 Vacancies. Any vacancy occurring on the Board, including a vacancy
resulting from an increase in the number of Directors, may be filled only by the
Board of Directors, or, if the Directors in office constitute fewer than a
quorum of the Board, by the affirmative vote of a majority of all the Directors
in office unless for any reason there are no Directors in office, in which case
they shall be filled by election at a special meeting of the shareholders. If
the vacant office was held by a Director elected by holders of one or more
authorized classes or series of shares, only the holders of those classes or
series of shares are entitled to vote to fill the vacancy. Any vacancy that
will occur at a specific later date, by reason of a resignation effective at a
later date or otherwise, may be filled before the vacancy occurs, but the new
Director may not take office until the vacancy occurs. A Director elected to
fill a vacancy shall be elected for the unexpired term of his or her predecessor
in office. Any directorship to be filled by reason of an increase in the number
of Directors may be filled for a term of office continuing only until the next
election of Directors by the shareholders.
3.15 Executive and Other Committees.
3.15.1 Creation of Committees. The Board, by resolution adopted by a
majority of the number of Directors fixed by or in the manner provided in these
Bylaws, may appoint standing or temporary committees of two or more members
each, including an Executive Committee, Audit Committee and Compensation
Committee from its own number and invest such committees with such powers as it
may see fit, subject to such conditions as may be prescribed by the Board, these
Bylaws and applicable law.
3.15.2 Authority of Committees. Each committee shall have and may
exercise all of the authority of the Board to the extent provided in the
resolution of the Board designating the committee and any subsequent resolutions
pertaining thereto and adopted in like manner, except that no such committee
shall have the authority to:
(a) authorize or approve a distribution except according to a general
formula or method prescribed by the Board;
(b) approve or propose to shareholders action required by the
Washington Business Corporation Act to be approved by shareholders;
(c) fill vacancies on the Board or on any of its committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend, or repeal these Bylaws;
(f) approve any plan of merger not requiring shareholder approvals;
or
(g) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except that the Board may
authorize a committee to do so within limits specifically prescribed by the
Board.
3.15.3 Quorum and Manner of Acting. A majority of the number of Directors
composing any committee of the Board, as established and fixed by resolution of
the Board, shall constitute a quorum for the transaction of business at any
meeting of such committee but, if less than a majority are present at a meeting,
a majority of such Directors present may adjourn the meeting from time to time
without further notice. Except as may be otherwise provided in the Washington
Business Corporation Act, the affirmative vote of a majority of the members of a
committee present at a meeting at which a quorum is present when the vote is
taken shall be the act of the committee.
3.15.4 Minutes of Meetings. All committees shall keep regular minutes of
their meetings for that purpose and shall cause them to be recorded in books
kept for that purpose and in the corporate minute book.
3.15.5 Resignation. Any member of any committee may resign at any time by
delivering written notice thereof to the Chairman of the Board, the President,
the Board, or the Chairman of such committee, or by giving oral notice at any
meeting of such committee. Any such resignation shall take effect at the time
specified therein, or if the time is not specified, upon delivery thereof and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
3.15.6 Removal. The Board may remove from office any member of any
committee elected or appointed by it but only by the affirmative vote of not
less than a majority of the number of Directors fixed by or in the manner
provided in these Bylaws.
3.15.7 Application of Other Provisions. The provisions of these Bylaws
regarding meetings, action without meetings and notice and waiver of notice
applicable to the Board of Directors shall apply to each committee.
3.16 Compensation. By Board resolution, Directors and committee members
may be paid their expenses, if any, of attendance at each Board or committee
meeting, or a fixed sum for attendance at each Board or committee meeting, or a
stated salary as Director or a committee member, or a combination of the
foregoing. No such payment shall preclude any Director or committee member from
serving the corporation in any other capacity and receiving compensation
therefore.
SECTION 4. OFFICERS
4.1 Number. The officers of the corporation shall be a Chairman of the
Board, a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board. One or more Vice Presidents and such other officers and assistant
officers, may be elected or appointed by the Board, such officers and assistant
officers to hold office for such period, have such authority and perform such
duties as are provided in these Bylaws or as may be provided by resolution of
the Board. Any officer may be assigned by the Board any additional title that
the Board deems appropriate. The Board may delegate to any officer or agent the
power to appoint any subordinate officers or agents and to prescribe their
respective terms of office, authority and duties. Any two or more offices may
be held by the same person.
4.2 Election and Term of Office. The officers of the corporation shall be
elected annually by the Board at the Board meeting held after the annual meeting
of the shareholders. If the election of officers is not held at such meeting,
such election shall be held as soon thereafter as a Board meeting conveniently
may be held. Unless an officer dies, resigns, or is removed from office, he or
she shall hold office until the next annual meeting of the Board or until his or
her successor is elected.
4.3 Resignation. Any officer may resign at any time by delivering written
notice to the Chairman of the Board, the President, or the Board, or by giving
oral notice at any meeting of the Board. Any such resignation shall take effect
at the time specified therein, or if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. A resignation shall
not affect the rights of the corporation under any contract with the resigning
officer.
4.4 Removal. Any officer or agent elected or appointed by the Board may
be removed by the Board, with or without cause, whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any subordinate officer or agent may be removed by any officer
authorized to appoint such subordinate officer or agent.
4.5 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, creation of a new office or any other cause may be
filled by the Board for the unexpired portion of the term or for a new term
established by the Board.
4.6 Chairman of the Board. The Chairman of the Board shall perform such
duties as shall be assigned to him or her by the Board from time to time and
shall preside over meetings of the Board and shareholders unless another officer
is appointed or designated by the Board as Chairman of such meeting.
4.7 President. The President shall be the chief executive officer of the
corporation unless some other officer is so designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of a Chairman
of the Board, and, subject to the Board's direction and control, shall supervise
and control all of the assets, business and affairs of the corporation. The
President may sign certificates for shares of the corporation, deeds, mortgages,
bonds, contracts, or other instruments, except when the signing and execution
thereof have been expressly delegated by the Board or by these Bylaws to some
other officer or agent of the corporation or are required by law to be otherwise
signed or executed by some other officer or in some other manner. In general,
the President shall perform all duties incident to the office of President and
such other duties as are prescribed by the Board from time to time.
4.8 Vice President. In the event of the death of the President or his or
her inability to act, the Vice President (or if there is more than one Vice
President, the Vice President who was designated by the Board as the successor
to the President, or if no Vice President is so designated, the Vice President
first elected to such office) shall perform the duties of the President, except
as may be limited by resolution of the Board, with all the powers of and subject
to all the restrictions upon the President. Any Vice President may sign, with
the Secretary or any Assistant Secretary, certificates for shares of the
corporation. Vice Presidents shall have, to the extent authorized by the
President or the Board, the same powers as the President to sign deeds,
mortgages, bonds, contracts, or other instruments. Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
President or by the Board.
4.9 Secretary. The Secretary shall: (a) keep the minutes of meetings of
the shareholders and the Board in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and seal of the corporation; (d) keep registers of the post office address of
each shareholder and Director; (e) sign, with the President or a Vice President,
certificates for shares of the corporation; (f) have general charge of the stock
transfer books of the corporation; (g) sign, with the President or other officer
authorized by the President or the Board, deeds, mortgages, bonds, contracts, or
other instruments; and (h) in general perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
or her by the President or by the Board. In the absence of the Secretary, an
Assistant Secretary may perform the duties of the Secretary.
4.10 Treasurer. If required by the Board, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such amount and with such
surety or sureties as the Board shall determine. Subject to the direction and
control of the Board, the Treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in banks,
trust companies or other depositories selected in accordance with the provisions
of these Bylaws; and in general perform all of the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
or her by the President or by the Board. In the absence of the Treasurer, an
Assistant Treasurer may perform the duties of the Treasurer.
4.11 Salaries. The salaries of the officers shall be fixed from time to
time by the Board or by any person or persons to whom the Board has delegated
such authority. No officer shall be prevented from receiving such salary by
reason of the fact that he or she is also a Director of the corporation.
4.12 Bonds. The Board may require any officer to post a bond to ensure
that the officer faithfully performs the duties of the office, and that in the
case of the death, resignation, retirement or removal of the officer, the
officer returns all books, papers, vouchers, money and other property in the
officer's possession or under the officer's control which belongs to the
corporation. The bond shall be in the amount and with any sureties required by
the Board.
4.13 Delegation. In the event any officer is absent or otherwise unable
to perform the duties of such officer, the Board may temporarily delegate the
powers and duties of such officer to any other officer, director or other
person.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 Contracts. The Board may authorize any officer or officers, or agent
or agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the corporation. Such authority may be general or
confined to specific instances.
5.2 Loans to the Corporation. No loans shall be contracted on behalf of
the corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board. Such authority may be general
or confined to specific instances.
5.3 Checks and Drafts. All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, or agent or agents, of
the corporation and in such manner as is from time to time determined by
resolution of the Board.
5.4 Deposits. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the Board may select.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Issuance of Shares. No shares of the corporation shall be issued
unless authorized by the Board, or by a committee designated by the Board and
empowered to do so, which authorization shall include the maximum number of
shares to be issued the consideration to be received for each share, the value
of noncash consideration, and a statement that the Board has determined that
such consideration is adequate.
6.2 Certificates for Shares. Certificates representing shares of the
corporation shall be signed by two officers of the corporation and shall include
on their face or back written notice of any restrictions which may be imposed on
the transferability of such shares. Any or all the signatures on a certificate
may be a facsimile. All certificates shall be consecutively numbered or
otherwise identified. Certificates for shares of the corporation shall be in
such form as is consistent with the provisions of the Washington Business
Corporation Act and shall state at a minimum (a) the name of the corporation and
that the corporation is organized under the laws of the State of Washington; (b)
the name of the person to whom issued; and (c) the number and class of shares
and the designation of the series, if any, which such certificate represents.
If there is more than one class of stock, each certificate must contain a
statement that the corporation will furnish to any shareholder, upon request and
without charge, a full written statement of the designations, preferences,
limitations, and relative rights of the shares of each class authorized by the
corporation, and the variation in rights, preferences, and limitations
determined for each series. Each certificate shall also contain a complete
description or a reference to the existence and general nature of any
restrictions on the ownership or transfer of the shares which the certificate
represents.
6.3 Restriction on Transfer. Except to the extent that the corporation
has obtained an opinion of counsel acceptable to the corporation that transfer
restrictions are not required under applicable securities laws, or has otherwise
satisfied itself that such transfer restrictions are not required, all
certificates representing shares of the corporation shall bear a legend on the
face of the certificate, or on the reverse of the certificate if a reference to
the legend is contained on the face, which reads substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE LAW, AND NO
INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY
SUCH TRANSACTION INVOLVING SAID SECURITIES OR (B) THIS CORPORATION RECEIVES
AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES (CONCURRED
IN BY LEGAL COUNSEL FOR THIS CORPORATION) STATING THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION OR THIS CORPORATION OTHERWISE SATISFIES ITSELF
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION. NEITHER THE OFFERING OF
THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER THE SECURITIES ACT OF 1933, OR ANY APPLICABLE STATE
LAW."
6.4 Transfer of Shares. The transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation upon surrender of
the certificate therefor and pursuant to authorization or document of transfer
made by the holder of record thereof or by his or her legal representative, who
shall furnish proper evidence of authority to transfer, or by his or her
attorney-in-fact authorized by power of attorney duly executed and filed with
the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and canceled.
6.5 Lost or Destroyed Certificates. In the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such terms
and indemnity to the corporation as the Board may prescribe, including but not
limited to the filing of an indemnity bond.
6.6 Stock Records. The secretary shall keep the stock transfer books at
the registered office or principal place of business of the corporation, or at
the office of the corporation's transfer agent or registrar. The secretary, or
the transfer agent or registrar, shall enter on the stock transfer books the
name and address of each shareholder, together with the class, number of shares,
and date on which the shares were issued or transferred to the shareholder.
Each shareholder shall keep the shareholder's current address on file with the
secretary.
6.7 Record Owners. The corporation shall treat a shareholder of record as
the owner of the shares for all purposes. The corporation shall not be bound to
recognize any claim to or interest in any share on the part of any other person,
whether or not it has notice of such claim or interest, until that person's name
has been entered on the transfer books as the shareholder of record.
SECTION 7. BOOKS AND RECORDS
7.1 Books of Account, Minutes and Share Register. The corporation shall
keep as permanent records minutes of all meetings of its shareholders and Board,
a record of actions taken by the shareholders or Board without a meeting, and a
record of all actions taken by a committee of the Board exercising the authority
of the Board on behalf of the corporation. The corporation shall maintain
appropriate accounting records prepared in accordance with generally accepted
accounting principles consistently applied. The corporation or its agent shall
maintain a record of its shareholders, in a form that permits preparation of a
list of names and addresses of all shareholders in alphabetical order showing
the number and class of shares held by each. All such records shall be
maintained in written form or in another form capable of conversion into written
form within a reasonable time. The corporation shall keep a copy of the
following records at its principal office: (a) the Articles or Restated
Articles of Incorporation and all amendments to them currently in effect; (b)
the Bylaws or Restated Bylaws and all amendments to them currently in effect;
(c) the minutes of all shareholders' meetings and records of all action taken
by shareholders without a meeting for the past three years; (d) its financial
statements for the past three years, including balance sheets showing in
reasonable detail the financial condition of the corporation as of the close of
each fiscal year, and an income statement showing the results of its operations
during each fiscal year prepared on the basis of generally accepted accounting
principles or, if not, prepared on a basis explained therein; (e) all written
communications to shareholders generally within the past three years; (f) a list
of the names and business addresses of its current Directors and officers; and
(g) its most recent annual report delivered to the Secretary of State of
Washington. The foregoing financial statements shall be prepared not less than
four (4) months after the close of each fiscal year, and in any event prior to
the annual meeting of shareholders.
7.2 Copies of Resolutions. Any person dealing with the corporation may
rely upon a copy of any of the records of the proceedings, resolutions, or votes
of the Board or shareholders when certified by the President or Secretary.
SECTION 8. FISCAL YEAR
The fiscal year of the corporation shall be from April 1st to March 31st.
SECTION 9. SEAL
The seal of the corporation, if any, shall consist of the name of the
corporation, the state of its incorporation and the year of its incorporation.
SECTION 10. RULES OF ORDER
10.1 Robert's Rules Govern. The rules contained in the most recent
edition of Robert's Rules of Order, Revised, shall govern all meetings of
shareholders and directors where those rules do not conflict with the Articles
or the Bylaws.
10.2 Chairman of Meeting. The Chairman of the meeting shall have absolute
authority over matters of procedure. There shall be no appeal from a procedural
ruling by the chairman of the meeting. The Chairman of the meeting may dispense
with the rules of parliamentary procedure for any meeting or any part of a
meeting. The Chairman shall clearly state the rules under which any meeting or
part of a meeting will be conducted.
10.3 Adjournment Due to Disorder. If disorder should arise which prevents
continuation of the legitimate business of any meeting, the Chairman of the
meeting may adjourn the meeting. Any meeting so adjourned may be reconvened in
accordance with Sections 2.9 and 3.8 of these Bylaws.
10.4 Removal of Persons Not Shareholders. The Chairman may require anyone
who is not a bona fide shareholder of record or the proxy of a shareholder of
record to leave any shareholders' meeting.
SECTION 11. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board.
The foregoing Bylaws were adopted by the Board of Directors on February 21,
1996.
/s/ Charles S. Seel
--------------------------
Charles S. Seel, Secretary
Attest:
/s/ Robert W. Christensen, Jr.
- -------------------------------
Robert W. Christensen, Jr., Chairman
DESIGNATION OF RIGHTS AND PREFERENCES
OF REPUBLIC LEASING INCORPORATED SERIES 1 PREFERRED STOCK
Pursuant to a duly adopted resolution of the Board of Directors of Republic
Leasing Incorporated (the "Corporation") and in accordance with the authority
granted in the corporation's Articles of Incorporation, the Board of Directors
has, and hereby does, designate 1,500 shares of the corporation's authorized
preferred stock as Series 1 Preferred Stock, with the following rights and
preferences.
1. DIVIDENDS. The holders of each share of Series 1 Preferred Stock shall
be entitled to receive a cumulative, quarterly cash dividend of $23.125 per
share, out of funds legally available for that purpose, such dividend to be
payable on the last day of March, June, September and December of each year (the
"Dividend Payment Dates"). No dividends shall be paid on or set aside for shares
of common stock until all accrued dividends payable on the shares of issued and
outstanding Series 1 Preferred Stock have been paid. No dividend may be
declared and paid on shares of common stock if the net assets of the corporation
after such event would be insufficient to make the redemption payments described
in Section 4.
2. VOTING RIGHTS OF PREFERRED STOCK. The holders of shares of Series 1
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
of the stockholders except:
(a) as may from time to time be mandatorily required by the laws of the
State of Delaware;
(b) on any proposed amendment to the Certificate of Incorporation of the
corporation which materially alters any of the designations, relative rights,
preferences or limitations of the shares of Series 1 Preferred Stock or which
creates or increases the authorized shares of any class of stock having rights
or preferences ranking senior to or on a parity with the Series 1 Preferred
Stock, approval of any such amendment to require the affirmative vote of the
holders of at least seventy (70) percent of the then outstanding shares of
Series 1 Preferred Stock, voting separately as a class; and
(c) on any proposed amendment to the By-Laws of the corporation which
materially alters any of the rights of the holders of Series 1 Preferred Stock,
as a class, and not the rights of the holders of all classes of stock of the
corporation generally, approval of any such amendment to require the affirmative
vote of the holders of at least seventy (70) percent of the then outstanding
shares of Series 1 Preferred Stock, voting separately as a class.
3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) in the event of any liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the holders of shares of Series 1
Preferred Stock then outstanding shall be entitled to be paid before any sums
shall be paid or any assets distributed to the holders of common stock, out of
the assets of this corporation available for distribution to holders of this
corporation's stock of all classes, whether such assets are capital, surplus or
earnings, an amount equal to $1,000 per share, plus an amount equal to accrued
but unpaid dividends, if any, to the date of payment. If, upon any liquidation,
dissolution or winding up of this corporation, the assets of this corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of shares of Series 1 Preferred Stock the full amount to which they
shall be entitled, such holders shall share ratably in any distribution of
assets according to the respective amounts which would be payable in respect of
the shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. In the event of any liquidation,
dissolution or winding up of this corporation and after payment shall have been
made to the holders of shares of Series 1 Preferred Stock of the full amount to
which they shall be entitled as aforesaid, the holders of common stock shall be
entitled, to the exclusion of the holders of shares of Series 1 Preferred Stock,
to share in all remaining assets of this corporation available for distribution
to its stockholders.
(b) TREATMENT OF CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. A
consolidation or merger of this corporation into or with another corporation (as
a result of which the holders of more than 50% of the shares of common stock
receive cash, stock or other property in exchange for their shares of such
stock) or a sale of all or substantially all of the assets of this corporation
shall be regarded as a liquidation, dissolution or winding up of the affairs of
this corporation within the meaning of this Section 3.
(c) DISTRIBUTION OTHER THAN CASH. Whenever the distribution provided for
in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors.
4. REDEMPTION.
(a) REDEMPTION EVENTS. Shares of Series 1 Preferred Stock shall be
redeemable by this corporation as follows:
(i) One-fourth of the outstanding shares of Series 1 Preferred Stock
shall be redeemed by this corporation on the last day of each June and December
in 1997 and 1998.
(ii) Prior to any redemption date set forth above, this corporation,
at its option at any time or from time to time, upon at least ten (10) days
advance notice pursuant to Article (c) below, may redeem, in whole or in part,
outstanding shares of Series 1 Preferred Stock. Each date fixed for redemption
pursuant to this Section 4 is hereinafter referred to as a "Preferred Redemption
Date." If less than all of the shares of Series 1 Preferred Stock are being
redeemed at any time, such redemption shall be ratably among all holders of
Series 1 Preferred Stock in proportion to the number of shares of Series 1
Preferred Stock held by all holders thereof. No optional redemption under this
subsection (ii) shall relieve the corporation of its mandatory redemption
obligations under subsection (i) unless and until all of the Series 1 Preferred
Stock has been redeemed.
(b) REDEMPTION PRICE. The total sum payable per share of Series 1
Preferred Stock being redeemed shall be $1,000 plus accrued but unpaid
dividends, if any, payable with respect to such share. The total sum payable
with respect to any such share to be redeemed is hereinafter referred to as the
"Preferred Redemption Price." The Preferred Redemption Price is payable on the
Preferred Redemption Date established pursuant to Section 4(a), and the payment
is hereinafter referred to as a "Preferred Redemption Payment." On and after
the Preferred Redemption Date (unless default shall be made by this corporation
in the payment of the Preferred Redemption Price as hereinafter provided), all
rights in respect of the shares of Series 1 Preferred Stock to be redeemed,
except the right to receive the Preferred Redemption Price as hereinafter
provided, shall cease and terminate, and such shares shall no longer be deemed
to be outstanding, whether or not the certificates representing such shares have
been received by this corporation.
(c) NOTICE OF REDEMPTION. Notice of the redemption pursuant to this
Section 4 shall be sent by first-class mail, postage prepaid, to the holders of
record of the shares of Series 1 Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of this corporation.
Such notice shall set forth the number of shares of Series 1 Preferred Stock to
be redeemed, the Preferred Redemption Date, and the Preferred Redemption Price,
and the date and place at which the holder may obtain the Preferred Redemption
Payment upon the surrender of such holder's certificate.
(d) SURRENDER OF CERTIFICATES. On or after the Preferred Redemption
Date stated in a notice delivered pursuant to Section 4(c), each holder of
shares of Series 1 Preferred Stock to be redeemed shall surrender his or her
certificate or certificates evidencing such shares to this corporation at the
place designated in such notice and shall, upon surrender of such certificate or
certificates, receive the Preferred Redemption Payment therefor. In case less
than all the shares of preferred stock represented by any such surrendered
certificate or certificates are redeemed, a new certificate or certificates
shall be issued representing the unredeemed shares.
DESIGNATION OF RIGHTS AND PREFERENCES
OF REPUBLIC LEASING INCORPORATED SERIES 2 PREFERRED STOCK
Pursuant to a duly adopted resolution of the Board of Directors of Republic
Leasing Incorporated (the "Corporation") and in accordance with the authority
granted in the corporation's Articles of Incorporation, the Board of Directors
has, and hereby does, designate 300 shares of the corporation's authorized
preferred stock as Series 2 Preferred Stock, with the following rights and
preferences.
1. DIVIDENDS. The holders of each share of Series 2 Preferred Stock shall be
entitled to receive a cumulative, quarterly cash dividend of $23.125 per share,
out of funds legally available for that purpose, such dividend to be payable on
the last day of March, June, September and December of each year (the "Dividend
Payment Dates"). No dividends shall be paid on or set aside for shares of common
stock until all accrued dividends payable on the shares of issued and
outstanding Preferred Stock have been paid. No dividend may be declared and
paid on shares of common stock if the net assets of the corporation after such
event would be insufficient to make the redemption payments described in Section
4.
2. VOTING RIGHTS OF PREFERRED STOCK. The holders of shares of Series 2
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
of the stockholders except:
(a) as may from time to time be mandatorily required by the laws of the
State of Delaware;
(b) on any proposed amendment to the Certificate of Incorporation of the
corporation which materially alters any of the designations, relative rights,
preferences or limitations of the shares of Series 2 Preferred Stock or which
creates or increases the authorized shares of any class of stock having rights
or preferences ranking senior to the Series 2 Preferred Stock, approval of any
such amendment to require the affirmative vote of the holders of at least
seventy (70) percent of the then outstanding shares of Series 2 Preferred Stock,
voting separately as a class; and
(c) on any proposed amendment to the By-Laws of the corporation which
materially alters any of the rights of the holders of Series 2 Preferred Stock,
as a class, and not the rights of the holders of all classes of stock of the
corporation generally, approval of any such amendment to require the affirmative
vote of the holders of at least seventy (70) percent of the then outstanding
shares of Series 2 Preferred Stock, voting separately as a class.
3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) in the event of any liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the holders of shares of Series
2 Preferred Stock then outstanding shall be entitled to be paid before any sums
shall be paid or any assets distributed to the holders of common stock, out of
the assets of this corporation available for distribution to holders of this
corporation's stock of all classes, whether such assets are capital, surplus or
earnings, an amount equal to $1,000 per share, plus an amount equal to accrued
but unpaid dividends, if any, to the date of payment. If, upon any liquidation,
dissolution or winding up of this corporation, the assets of this corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of shares of Preferred Stock the full amount to which they shall be
entitled, such holders shall share ratably in any distribution of assets
according to the respective amounts which would be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. In the event of any liquidation,
dissolution or winding up of this corporation and after payment shall have been
made to the holders of shares of Preferred Stock of the full amount to which
they shall be entitled as aforesaid, the holders of common stock shall be
entitled, to the exclusion of the holders of shares of Preferred Stock, to share
in all remaining assets of this corporation available for distribution to its
stockholders.
(b) TREATMENT OF CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. A
consolidation or merger of this corporation into or with another corporation (as
a result of which the holders of more than 50% of the shares of common stock
receive cash, stock or other property in exchange for their shares of such
stock) or a sale of all or substantially all of the assets of this corporation
shall be regarded as a liquidation, dissolution or winding up of the affairs of
this corporation within the meaning of this Section 3.
(c) DISTRIBUTION OTHER THAN CASH. Whenever the distribution provided for
in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors.
4. REDEMPTION.
(a) REDEMPTION EVENTS;. Shares of Series 2 Preferred Stock shall be
redeemable by this corporation as follows:
(i) One-fourth of the outstanding shares of Series 2 Preferred Stock
shall be redeemed by this corporation on the last day of each June and December
in 1997 and 1998.
(ii) Prior to any redemption date set forth above, this corporation,
at its option at any time or from time to time, upon at least ten (10) days
advance notice pursuant to Article (c) below, may redeem, in whole or in part,
outstanding shares of Series 2 Preferred Stock. Each date fixed for redemption
pursuant to this Section 4 is hereinafter referred to as a "Preferred Redemption
Date." If less than all of the shares of Series 2 Preferred Stock are being
redeemed at any time, such redemption shall be ratably among all holders of
Series 2 Preferred Stock in proportion to the number of shares of Series 2
Preferred Stock held by all holders thereof. No optional redemption under this
subsection (ii) shall relieve the corporation of its mandatory redemption
obligations under subsection (i) unless and until all of the Series 2 Preferred
Stock has been redeemed.
(b) REDEMPTION PRICE. The total sum payable per share of Series 2
Preferred Stock being redeemed shall be $1,000 plus accrued but unpaid
dividends, if any, payable with respect to such share. The total sum payable
with respect to any such share to be redeemed is hereinafter referred to as the
"Preferred Redemption Price." The Preferred Redemption Price is payable on the
Preferred Redemption Date established pursuant to Section 4(a), and the payment
is hereinafter referred to as a "Preferred Redemption Payment." On and after
the Preferred Redemption Date (unless default shall be made by this corporation
in the payment of the Preferred Redemption Price as hereinafter provided), all
rights in respect of the shares of Series 2 Preferred Stock to be redeemed,
except the right to receive the Preferred Redemption Price as hereinafter
provided, shall cease and terminate, and such shares shall no longer be deemed
to be outstanding, whether or not the certificates representing such shares have
been received by this corporation.
(c) NOTICE OF REDEMPTION. Notice of the redemption pursuant to this
Section 4 shall be sent by first-class mail, postage prepaid, to the holders of
record of the shares of Series 2 Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of this corporation.
Such notice shall set forth the number of shares of Series 2 Preferred Stock to
be redeemed, the Preferred Redemption Date, and the Preferred Redemption Price,
and the date and place at which the holder may obtain the Preferred Redemption
Payment upon the surrender of such holder's certificate.
(d) SURRENDER OF CERTIFICATES. On or after the Preferred Redemption
Date stated in a notice delivered pursuant to Section 4(c), each holder of
shares of Series 2 Preferred Stock to be redeemed shall surrender his or her
certificate or certificates evidencing such shares to this corporation at the
place designated in such notice and shall, upon surrender of such certificate or
certificates, receive the Preferred Redemption Payment therefor. In case less
than all the shares of preferred stock represented by any such surrendered
certificate or certificates are redeemed, a new certificate or certificates
shall be issued representing the unredeemed shares.
DESIGNATION OF RIGHTS AND PREFERENCES
OF REPUBLIC LEASING INCORPORATED SERIES 3 PREFERRED STOCK
Pursuant to a duly adopted resolution of the Board of Directors of Republic
Leasing Incorporated (the "Corporation") and in accordance with the authority
granted in the corporation's Articles of Incorporation, the Board of Directors
has, and hereby does, designate 300 shares of the corporation's authorized
preferred stock as Series 3Preferred Stock, with the following rights and
preferences.
1. DIVIDENDS. The holders of each share of Series 3 Preferred Stock shall
be entitled to receive a cumulative, quarterly cash dividend of $23.125 per
share, out of funds legally available for that purpose, such dividend to be
payable on the last day of March, June, September and December of each year (the
"Dividend Payment Dates"). No dividends shall be paid on or set aside for shares
of common stock until all accrued dividends payable on the shares of issued and
outstanding Preferred Stock have been paid. No dividend may be declared and
paid on shares of common stock if the net assets of the corporation after such
event would be insufficient to make the redemption payments described in Section
4.
2. VOTING RIGHTS OF PREFERRED STOCK. The holders of shares of Series 3
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
of the stockholders except:
(a) as may from time to time be mandatorily required by the laws of the
State of Delaware;
(b) on any proposed amendment to the Certificate of Incorporation of the
corporation which materially alters any of the designations, relative rights,
preferences or limitations of the shares of Series 3 Preferred Stock or which
creates or increases the authorized shares of any class of stock having rights
or preferences ranking senior to the Series 3 Preferred Stock, approval of any
such amendment to require the affirmative vote of the holders of at least
seventy (70) percent of the then outstanding shares of Series 3 Preferred Stock,
voting separately as a class; and
(c) on any proposed amendment to the By-Laws of the corporation which
materially alters any of the rights of the holders of Series 3Preferred Stock,
as a class, and not the rights of the holders of all classes of stock of the
corporation generally, approval of any such amendment to require the affirmative
vote of the holders of at least seventy (70) percent of the then outstanding
shares of Series 3 Preferred Stock, voting separately as a class.
(d) if, at the time any election of directors is held or to be held, the
Corporation has failed to pay in full the two most recent quarterly dividends
due on this or any other series of Preferred Stock or has failed to pay two out
of the four most recent quarterly dividends due on this or any other series of
Preferred Stock, the holders of the Preferred Stock, as a group and without
regard to series and to the exclusion of all other classes of stock of the
Corporation, shall be entitled to nominate and elect all directors of this
Corporation. Such right shall continue until the earlier of (i) a majority of
the board of directors having been elected by the holders of the Preferred Stock
or (ii) the dividend arrearages described above having been paid. Thereafter,
so long as such dividend arrearages have not been paid, the holders of Preferred
Stock shall be entitled to nominate and elect such number of directors at each
election of directors as may be necessary to maintain, as a majority of the
Board of Directors, directors elected by the holders of Preferred Stock. Upon
payment of any such dividend arrearages, the right of the holders of Preferred
Stock to nominate and elect any directors of the Corporation shall cease until
there exist new dividend arrearages meeting the conditions described above;
provided, however, that such cessation shall not affect the right of the holders
to fill any vacancy with respect to a director elected by the holders of
Preferred Stock (as provided below), nor shall such cessation prevent any
director elected by the holders of Preferred Stock from completing its unexpired
term or constitute cause for removal of any such director. If a vacancy arises
on the Board of Directors in respect of any director elected by the holders of
Preferred Stock, for any cause, including, but not limited to, the death,
disability, removal, disqualification, resignation, or refusal to act of any
such director (but excluding the expiration of such director's term), then the
holders of Preferred Stock, to the exclusion of the holders of all other classes
of stock of the Corporation, may nominate and elect a director to fill the
vacancy so created for the unexpired term thereof.
3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) in the event of any liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the holders of shares of Series
3 Preferred Stock then outstanding shall be entitled to be paid before any sums
shall be paid or any assets distributed to the holders of common stock, out of
the assets of this corporation available for distribution to holders of this
corporation's stock of all classes, whether such assets are capital, surplus or
earnings, an amount equal to $1,000 per share, plus an amount equal to accrued
but unpaid dividends, if any, to the date of payment. If, upon any liquidation,
dissolution or winding up of this corporation, the assets of this corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of shares of Preferred Stock the full amount to which they shall be
entitled, such holders shall share ratably in any distribution of assets
according to the respective amounts which would be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. In the event of any liquidation,
dissolution or winding up of this corporation and after payment shall have been
made to the holders of shares of Preferred Stock of the full amount to which
they shall be entitled as aforesaid, the holders of common stock shall be
entitled, to the exclusion of the holders of shares of Preferred Stock, to share
in all remaining assets of this corporation available for distribution to its
stockholders.
(b) TREATMENT OF CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. A
consolidation or merger of this corporation into or with another corporation (as
a result of which the holders of more than 50% of the shares of common stock
receive cash, stock or other property in exchange for their shares of such
stock) or a sale of all or substantially all of the assets of this corporation
shall be regarded as a liquidation, dissolution or winding up of the affairs of
this corporation within the meaning of this Section 3.
(c) DISTRIBUTION OTHER THAN CASH. Whenever the distribution provided for
in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors.
4. REDEMPTION.
(a) REDEMPTION EVENTS. Shares of Series 3 Preferred Stock shall be
redeemable by this corporation as follows:
(i) One-fourth of the outstanding shares of Series 3 Preferred Stock
shall be redeemed by this corporation on the last day of each June and December
in 1999 and 2000.
(ii) Prior to any redemption date set forth above, this corporation,
at its option at any time or from time to time, upon at least ten (10) days
advance notice pursuant to Article (c) below, may redeem, in whole or in part,
outstanding shares of Series 3 Preferred Stock. Each date fixed for redemption
pursuant to this Section 4 is hereinafter referred to as a "Preferred Redemption
Date." If less than all of the shares of Series 3 Preferred Stock are being
redeemed at any time, such redemption shall be ratably among all holders of
Series 3 Preferred Stock in proportion to the number of shares of Series 3
Preferred Stock held by all holders thereof. No optional redemption under this
subsection (ii) shall relieve the corporation of its mandatory redemption
obligations under subsection (i) unless and until all of the Series 3 Preferred
Stock has been redeemed.
(b) REDEMPTION PRICE. The total sum payable per share of Series 3
Preferred Stock being redeemed shall be $1,000 plus accrued but unpaid
dividends, if any, payable with respect to such share. The total sum payable
with respect to any such share to be redeemed is hereinafter referred to as the
"Preferred Redemption Price." The Preferred Redemption Price is payable on the
Preferred Redemption Date established pursuant to Section 4(a), and the payment
is hereinafter referred to as a "Preferred Redemption Payment." On and after
the Preferred Redemption Date (unless default shall be made by this corporation
in the payment of the Preferred Redemption Price as hereinafter provided), all
rights in respect of the shares of Series 3 Preferred Stock to be redeemed,
except the right to receive the Preferred Redemption Price as hereinafter
provided, shall cease and terminate, and such shares shall no longer be deemed
to be outstanding, whether or not the certificates representing such shares have
been received by this corporation.
(c) NOTICE OF REDEMPTION. Notice of the redemption pursuant to this
Section 4 shall be sent by first-class mail, postage prepaid, to the holders of
record of the shares of Series 3 Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of this corporation.
Such notice shall set forth the number of shares of Series 3 Preferred Stock to
be redeemed, the Preferred Redemption Date, and the Preferred Redemption Price,
and the date and place at which the holder may obtain the Preferred Redemption
Payment upon the surrender of such holder's certificate.
(d) SURRENDER OF CERTIFICATES. On or after the Preferred Redemption
Date stated in a notice delivered pursuant to Section 4(c), each holder of
shares of Series 3 Preferred Stock to be redeemed shall surrender his or her
certificate or certificates evidencing such shares to this corporation at the
place designated in such notice and shall, upon surrender of such certificate or
certificates, receive the Preferred Redemption Payment therefor. In case less
than all the shares of preferred stock represented by any such surrendered
certificate or certificates are redeemed, a new certificate or certificates
shall be issued representing the unredeemed shares.
DESIGNATION OF RIGHTS AND PREFERENCES
OF REPUBLIC LEASING INCORPORATED SERIES 4 PREFERRED STOCK
Pursuant to a duly adopted resolution of the Board of Directors of Republic
Leasing Incorporated (the "Corporation") and in accordance with the authority
granted in the corporation's Articles of Incorporation, the Board of Directors
has, and hereby does, designate 1,190 shares the corporation's authorized
preferred stock as Series 4A Preferred Stock, and 60 shares of the Corporation's
authorized preferred stock as Series 4B Preferred Stock (collectively Series 4A
and Series 4B shall be known as "Series 4 Preferred Stock") with the following
rights and preferences.
1. DIVIDENDS. The holders of each share of Series 4 Preferred Stock shall
be entitled to receive a cumulative, quarterly cash dividend of $23.125 per
share, out of funds legally available for that purpose, such dividend to be
payable within thiry days of the last day of March, June, September and December
of each year (the "Dividend Payment Dates"). No dividends shall be paid on or
set aside for shares of common stock at such time Preferred is outstanding.
2. VOTING RIGHTS OF PREFERRED STOCK. The holders of shares of Series 4
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
of the stockholders except:
(a) as may from time to time be mandatorily required by the laws of the
State of Delaware;
(b) on any proposed amendment to the Certificate of Incorporation of the
corporation which alters any of the designations, relative rights, preferences
or limitations of the shares of Series 4 Preferred Stock, or which creates or
increases the authorized shares of any class of stock having rights
or preferences ranking senior to the Series 4 Preferred Stock, or which
increases the number of authorized shares of Series 4 Preferred Stock, approval
of any such amendment to require the affirmative vote of the holders of at least
seventy (70) percent of the then outstanding shares of Series 4 Preferred Stock,
voting separately as a class;
(c) on any proposed amendment to the By-Laws of the corporation which
materially alters any of the rights of the holders of Series 4 Preferred Stock,
as a class, and not the rights of the holders of all classes of stock of the
corporation proportionately, approval of any such amendment to require the
affirmative vote of the holders of not less than seventy (70) percent of the
then outstanding shares of Series 4 Preferred Stock, voting separately as a
class;
(d) on any proposed merger or consolidation of the Corporation, or any
proposed sale of all or substantially all of its assets, approval of any such
proposed action to require the affirmative vote of not less than seventy percent
(70%) of the then outstanding shares of Series 4 Preferred Stock voting
separately as a class;
(e) at or prior to the next annual meeting of shareholders of the
Corporation held after August 1, 1995, the Corporation shall submit to a vote of
its shareholders an amendment to the Corporation's Certificate of Incorporation
which amendment provides that the holders of any of the outstanding Preferred
Stock for which dividends have not been paid as set for the herein or for which
a required redemption has not been made ("Defaulted Preferred Holders") shall be
entitled to elect all of the Corporation's Board of Directors (by majority vote
of such holders) from and after each date as of which either (a) the Corporation
has failed to pay in full the two most recent quarterly dividends when due or
(b) failed so to pay two out of the four most recent quarterly dividends when
due, to such date, if any, as of which all such arrearages and any arrearages in
redemption of any of the Preferred Stock shall have been fully paid (from and
after which, commencing with the next annual meeting of shareholders of the
Corporation, the shareholders of the Corporation shall again be entitled to
elect all of the members of the Board of Directors unless and until the
Corporation shall again default in the payment of quarterly dividends as
specified herein). In furtherance of the foregoing sentence, such amendment
shall provide the Defaulted Preferred Holders with the right, subject to the
applicable law, to call a special meeting of the defaulted Preferred Holders
and, if applicable, other stockholders of the Corporation, for the purposes of
conducting such election. The Corporation shall recommend that its stockholders
adopt such amendment and shall use its best efforts to secure the adoption
thereof in accordance with applicable law; and
(f) so long as not less than 25% of Series 4 Preferred Stock remains
issued and outstanding, the holders of outstanding Series 4 Preferred Stock,
voting as a class, shall be entitled to elect one (1) member of the Board of
Directors, by majority vote of the holders of such Series 4 Preferred Stock.
3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) PAYMENT. In the event of any liquidation, dissolution or winding up
of this corporation, whether voluntary or involuntary, the holders of shares of
Series 4 Preferred Stock then outstanding shall be entitled to be paid before
any sums shall be paid or any assets distributed to the holders of common stock,
out of the assets of this corporation available for distribution to holders of
this corporation's stock of all classes, whether such assets are capital,
surplus or earnings, an amount equal to $1,000 per share, plus an amount equal
to the cumulative or accrued but unpaid dividends, if any, to the date of
payment. If, upon any liquidation, dissolution or winding up of this
corporation, the assets of this corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Preferred
Stock the full amount to which they shall be entitled, such holders shall share
ratably in any distribution of assets according to the respective amounts which
would be payable in respect of the shares held by them upon such distribution if
all amounts payable on or with respect to said shares were paid in full. In the
event of any liquidation, dissolution or winding up of this corporation and
after payment shall have been made to the holders of shares of Preferred Stock
of the full amount to which they shall be entitled as aforesaid, the holders of
common stock shall be entitled, to the exclusion of the holders of shares of
Preferred Stock, to share in all remaining assets of this corporation available
for distribution to its stockholders.
(b) TREATMENT OF CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. A
consolidation or merger of this corporation into or with another corporation (as
a result of which the holders of more than 50% of the shares of common stock
receive cash, stock or other property in exchange for their shares of such
stock) or a sale of all or substantially all of the assets of this corporation
shall be regarded as a liquidation, dissolution or winding up of the affairs of
this corporation within the meaning of this Section 3.
(c) DISTRIBUTION OTHER THAN CASH. Whenever the distribution provided for
in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors.
4. REDEMPTION.
(a) REDEMPTION EVENTS. Shares of Series 4 Preferred Stock shall be
redeemable by this corporation as follows:
(i) One-fourth of the outstanding shares of Series 4 Preferred Stock
shall be redeemed by this corporation on the last day of each June and December
in 1999 and 2000.
(ii) Prior to any redemption date set forth above, this corporation,
at its option at any time or from time to time, upon at least ten (10) days
advance notice pursuant to Article (c) below, may redeem, in whole or in part,
outstanding shares of Series 4 Preferred Stock. Each date fixed for redemption
pursuant to this Section 4 is hereinafter referred to as a "Preferred Redemption
Date." If less than all of the shares of Series 4 Preferred Stock are being
redeemed at any time, such redemption shall be ratably among all holders of
Series 4 Preferred Stock in proportion to the number of shares of Series 4
Preferred Stock held by all holders thereof. No optional redemption under this
subsection (ii) shall relieve the corporation of its mandatory redemption
obligations under subsection (i) unless and until all of the Series 4 Preferred
Stock has been redeemed.
(b) REDEMPTION PRICE. The total sum payable per share of Series 4
Preferred Stock being redeemed shall be $1,000 plus cumulative or accrued but
unpaid dividends, if any, payable with respect to such share. The total sum
payable with respect to any such share to be redeemed is hereinafter referred to
as the "Preferred Redemption Price." The Preferred Redemption Price is payable
on the Preferred Redemption Date established pursuant to Section 4(a), and the
payment is hereinafter referred to as a "Preferred Redemption Payment." On and
after the Preferred Redemption Date (unless default shall be made by this
corporation in the payment of the Preferred Redemption Price as hereinafter
provided), all rights in respect of the shares of Series 4 Preferred Stock to be
redeemed, except the right to receive the Preferred Redemption Price as
hereinafter provided, shall cease and terminate, and such shares shall no longer
be deemed to be outstanding, whether or not the certificates representing such
shares have been received by this corporation.
(c) NOTICE OF REDEMPTION. Notice of the redemption pursuant to this
Section 4 shall be sent by first-class mail, postage prepaid, to the holders of
record of the shares of Series 4 Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of this corporation.
Such notice shall set forth the number of shares of Series 4 Preferred Stock to
be redeemed, the Preferred Redemption Date, and the Preferred Redemption Price,
and the date and place at which the holder may obtain the Preferred Redemption
Payment upon the surrender of such holder's certificate.
(d) SURRENDER OF CERTIFICATES. On or after the Preferred Redemption
Date stated in a notice delivered pursuant to Section 4(c), each holder of
shares of Series 4 Preferred Stock to be redeemed shall surrender his or her
certificate or certificates evidencing such shares to this corporation at the
place designated in such notice and shall, upon surrender of such certificate or
certificates, receive the Preferred Redemption Payment therefor. In case less
than all the shares of preferred stock represented by any such surrendered
certificate or certificates are redeemed, a new certificate or certificates
shall be issued representing the unredeemed shares.
5. CONVERSION
(a) CONVERSION TO COMMON STOCK. Series 4B Preferred Stock shall be
designated as convertible. Series 4B Preferred Stock is are convertible, at the
option of the holder thereof, into a number of fully paid and nonassessable
shares of Common Stock of the Corporation equal to 10% of the outstanding Common
Stock, on a fully-diluted basis, and including all shares subject to stock
incentive plans for service providers, following such conversion. The
convertible shares may be converted at any time.
(b) PROCESS OF CONVERSION. In order to exercise conversion rights, the
holder thereof shall surrender (in person or by mail) such holder's
certificate(s) of convertible stock to this Corporation at its home office
together with a written notice that the holder elects to convert such stock, or
a specified portion thereof. Such notice shall also state the name(s) and
address and taxpayer identification numbers in which the certificate(s) for
Common Stock shall be issued.
(c) ISSUANCE OF CERTIFICATES. Promptly after the receipt of the written
notice and surrender of such stock certificate(s) as aforesaid, the Corporation
shall issue and deliver to such holder, registered in such name or names as such
holder may direct in writing, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such stock (or
specified portion thereof), bearing any required restrictive legend. To the
extent permitted by law, such conversion shall be deemed to have been effected
as of the close of business on the date by which both of the following have
occurred: (i) such written statement shall have been received by the
Corporation; and (ii) such certificate(s) shall have been surrendered as
aforesaid. At such time the rights of the holder of such stock (or specified
portion thereof) shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall then be
issuable upon such exercise shall be deemed to have become the holder or holders
of record of the shares of Common stock represented thereby.
(d) AUTOMATIC CONVERSION. In the event of an underwritten public
offering of shares of Common Stock of this Corporation at a public offering
price per share of $1.50 or more (prior to underwriter commissions and expenses)
in an offering of more than $8,400,000, the Series 4B Preferred Stock shall (if
not previously converted) be automatically converted into a number of shares of
Common Stock as calculated pursuant to Section 5(c); provided, however, that in
determining the number of shares of Common Stock outstanding on a fully diluted
basis, the number of newly issued shares offered in such public offering shall
be excluded.
REPUBLIC LEASING INCORPORATED
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1994 Stock Option Plan (the "Plan") is to promote the
interests of Republic Leasing Incorporated, a Delaware corporation (the
"Company"), by providing employees and non-employee directors of the Company and
certain independent contractors with an opportunity to acquire a proprietary
interest in the Company, and thereby develop a stronger incentive to contribute
to the Company's continued success and growth. In addition, the opportunity to
acquire a proprietary interest in the Company by the offering and availability
of stock options will assist the Company in attracting and retaining key
personnel and consultants of outstanding ability.
2. DEFINITIONS
Wherever used in the Plan, the following terms have the meaning set forth
below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
2.3 "Committee" means the Committee which may be designated from time to
time by the Board to administer the Plan pursuant to Section 3.5.
2.4 "Incentive Stock Option" or "ISO" means a stock option which is
intended to qualify as an Incentive Stock Option as defined in Section 422A of
the Code.
2.5 "Non-Statutory Stock Option" or "NSO" means a stock option that is
not intended to, or does not, qualify as an Incentive Stock Option as defined in
Section 422A of the Code.
2.6 "Option" means, where required by the context of the Plan, an ISO
and/or NSO granted pursuant to the Plan.
2.7 "Optionee" means a Participant in the Plan who has been granted one
or more Options under the Plan.
2.8 "Participant" means an individual described in Section 5 of the Plan
who may be granted Options under the Plan.
2.9 "Stock" means the Common Stock, $.001 par value, of the Company.
2.10 "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns 50% or
more of the voting stock in one of the other corporations in such chain.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Board, which shall have full
power, subject to the provisions of the Plan, to grant Options, construe and
interpret the Plan, establish rules and regulations with respect to the Plan and
Options granted hereunder, and perform all other acts, including the delegation
of administrative responsibilities, that it believes reasonable and necessary.
3.2 The Board shall have the sole discretion, subject to the provisions of
the Plan, to determine the participants eligible to receive Options pursuant to
the Plan and the amount, type, and terms of any Option and the terms and
conditions of option agreements relating to any Option.
3.3 The Board may correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or in any Option granted hereunder in the manner
and to the extent it shall deem necessary to carry out the terms of the Plan.
3.4 Any decision made, or action taken, by the Board arising out of or in
connection with the interpretation and administration of the Plan shall be
final, conclusive and binding upon all Optionees.
3.5 The Board may designate a Committee from time to time to administer
the Plan. If designated, the Committee shall be composed of not less than two
persons (who need not be members of the Board) who are appointed from time to
time by the Board. If the Board has appointed a Committee pursuant to this
Section 3.5 of the Plan, then the Committee may administer the Plan and exercise
all of the rights and powers granted to the Board in this Plan, including,
without limitation, the right to grant Options pursuant to the Plan and to
establish the Option price as provided in the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER. The total number of shares of Stock reserved for issuance
upon exercise of Options under the Plan is 180,000. Such shares shall consist
of authorized but unissued Stock. If any Option granted under the Plan lapses
or terminates for any reason before being completely exercised, the shares
covered by the unexercised portion of such Option may again be made subject to
Options under the Plan.
4.2 CHANGES IN CAPITALIZATION. In the event of any change in the
outstanding shares of Stock of the Company by reason of any stock dividend,
split, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, or rights offering to purchase stock at a price
substantially below fair market value, or other similar corporate change, the
aggregate number of shares which may be subject to Options under the Plan and
the terms of any outstanding Option, including the number and kind of shares
subject to such Options and the purchase price per share thereof, shall be
appropriately adjusted by the Board, consistent with such change and in such
manner as the Board, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to or available for
Optionees. Notwithstanding the preceding sentence, in no event shall any
fraction of a share of Stock be issued upon the exercise of an Option.
5. ELIGIBLE PARTICIPANTS
The following persons are Participants eligible to participate in the Plan:
5.1 INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only
to employees of the Company or any Subsidiary, including officers and directors
who are also employees of the Company or any Subsidiary.
5.2 NON-STATUTORY STOCK OPTIONS. Non-statutory stock options may be
granted to (i) any employee of the Company or any Subsidiary, including any
officer or director who is also an employee of the Company or any Subsidiary;
(ii) any non-employee director of the Company or any Subsidiary; and (iii) any
consultant to, or other independent contractor of the Company.
6. GRANT OF OPTIONS
Subject to the terms, conditions, and limitations set forth in this Plan,
the Company, by action of its Board, may from time to time grant Options to
purchase shares of the Company's Stock to those eligible Participants as may be
selected by the Board, in such amounts and on such other terms as the Board in
its sole discretion shall determine. Such Options may be (i) Incentive Stock
Options" so designated by the Board and which, when granted, are intended to
qualify as Incentive Stock Options as defined in Section 422A of the Code; (ii)
"Non-Statutory Stock Options" so designated by the Board and which, when
granted, are not intended to, or do not, qualify as Incentive Stock Options
under Section 422A of the Code; or (iii) a combination of both. The date on
which the Board approves the granting of an Option shall be the date of grant of
such Option, unless a different date is specified by the Board on such date of
approval. Notwithstanding the foregoing, with respect to the grant of any
Incentive Stock Option under the Plan, the aggregate fair market value of Stock
(determined as of the date the Option is granted) with respect to which
Incentive Stock Options are exercisable for the first time by an Optionee in any
calendar year (under all such stock option plans of the Company or Subsidiaries)
shall not exceed $100,000. Each grant of an Option under the Plan shall be
evidenced by a written stock option agreement between the Company and the
Optionee setting forth the terms and conditions, not inconsistent with the Plan,
under which the Option so granted may be exercised pursuant to the Plan and
containing such other terms with respect to the Option as the Board in its sole
discretion may determine.
7. OPTION PRICE AND FORM OF PAYMENT
The purchase price for a share of Stock subject to an Option granted
hereunder shall not be less than 100% of the fair market value of the Stock as
of the date of grant. For purposes of this Section 7, the "fair market value"
of the Stock shall be determined as follows:
(a) if the Stock of the Company is listed or admitted to unlisted
trading privileges on a national securities exchange, the fair market
value on any given day shall be the closing sale price for the Stock, or if
no sale is made on such day, the closing bid price for such day on such
exchange;
(b) if the Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange, the fair market value on any
given day shall be the closing sale price for the Stock as reported on the
NASDAQ National Market System on such day, or if no sale is made on such
day, the closing bid price for such day as entered by a market maker for the
Stock;
(c) if the Stock is not listed on a national securities exchange, is
not admitted to unlisted trading privileges on any such exchange, and is not
eligible for inclusion in the NASDAQ National Market System, the fair market
value on any given day shall be the average of the closing representative
bid and asked prices as reported by the National Quotation Bureau, Inc. or,
if the Stock is not quoted on the National Association of Securities Dealers
Automated Quotations System, then as reported in any publicly available
compilation of the bid and asked prices of the Stock in any over-the-counter
market on which the Stock is traded; or
(d) if there exists no public trading market for the Stock, the fair
market value on any given day shall be an amount determined in good faith by
the Board in such manner as it may reasonably determine in its discretion,
provided that such amount shall not be less than the book value per share as
reasonably determined by the Board as of the date of determination or less
than the par value of the Stock.
Notwithstanding the foregoing, in the case of an Incentive Stock Option
granted to any Optionee then owning more than 10% of the voting power of all
classes of the Company's stock, the purchase price per share of the Stock
subject to such Option shall not be less than 110% of the fair market value of
the Stock on the date of grant of the Incentive Stock Option, determined as
provided above.
Except as provided herein, the purchase price of each share of Stock
purchased upon the exercise of any Option shall be paid:
(a) in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company; or
(b) at the discretion of the Board, through the delivery of shares of
Stock, having initially or as a result of successive exchanges of shares, an
aggregate fair market value (as determined in the manner provided under this
Plan) equal to the aggregate purchase price for the Stock as to which the
Option is being exercised; or
(c) at the discretion of the Board, by a combination of both (a) and
(b) above; or
(d) by such other method as may be permitted in the written stock
option agreement between the Company and the Optionee.
If such form of payment is permitted, the Board shall determine procedures
for tendering Stock as payment upon exercise of an Option and may impose such
additional limitations and prohibitions on the use of Stock as payment upon the
exercise of an Option as it deems appropriate.
If the Board in its sole discretion so agrees, the Company may finance the
amount payable by an Optionee upon exercise of any Option upon such terms and
conditions as the Board may determine at the time such Option is granted under
this Plan.
8. EXERCISE OF OPTIONS
8.1 MANNER OF EXERCISE. An Option, or any portion thereof, shall be
exercised by delivering a written notice of exercise to the Board and paying to
the Company the full purchase price of the Stock to be acquired upon the
exercise of the Option. Until certificates for the Stock acquired upon the
exercise of an Option are issued to an Optionee, such Optionee shall not have
any rights as a shareholder of the Company.
8.2 Limitations and Conditions on Exercise of Options. In addition to any
other limitations or conditions contained in this Plan or that may be imposed by
the Board from time to time or in the stock option agreement to be entered into
with respect to Options granted hereunder, the following limitations and
conditions shall apply to the exercise of Options granted under this Plan:
8.2.1 No Incentive Stock Option may be exercisable by its terms after
the expiration of ten years from the date of the grant thereof.
8.2.2 No Incentive Stock Option granted pursuant to the Plan to an
eligible Participant then owning more than 10% of the voting power of all
classes of the Company's stock may be exercisable by its terms after the
expiration of five years from the date of the grant thereof.
9. INVESTMENT PURPOSES
Unless a registration statement under the Securities Act of 1933 is in
effect with respect to Stock to be purchased upon exercise of Options to be
granted under the Plan, the Company shall require that an Optionee agree and
represent to the Company in writing that he or she is acquiring such shares of
Stock for the purpose of investment and with no present intention to transfer,
sell or otherwise dispose of such shares of Stock other than by transfers which
may occur by will or by the laws of descent and distribution, and no shares of
Stock may be transferred unless, in the opinion of counsel to the Company, such
transfer would be in compliance with applicable securities laws. In addition,
unless a registration statement under the Securities Act of 1933 is in effect
with respect to the Stock to be purchased under the Plan, each certificate
representing any shares of Stock issued to an Optionee hereunder shall have
endorsed thereon a legend in substantially the following form:
THE SHARES PREPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND WITHOUT
REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTION(S) CONTAINED THEREIN. NO TRANSFER OF THESE SHARES OR ANY INTEREST
THEREIN MAY BE MADE EXCEPT PURSUANT TO EFFECTIVE REGISTRATION STATEMENTS
UNDER SAID LAWS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT SUCH TRANSFER OR DISPOSITION DOES NOT REQUIRE
REGISTRATION UNDER SAID LAWS AND, FOR ANY SALES UNDER RULE 144 OF THE ACT,
SUCH EVIDENCE AS IT SHALL REQUEST FOR COMPLIANCE WITH THAT RULE, OR
APPLICABLE STATE SECURITIES LAWS.
10. TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be transferable by an Optionee
(whether by sale, assignment, hypothecation or otherwise) other than by will or
the laws of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee.
11. TERMINATION OF EMPLOYMENT
11.1 GENERALLY. Except as otherwise provided in this Section 11, if an
Optionee's employment (including service as a member of the Board of Directors)
with the Company or Subsidiary is terminated (hereinafter "Termination") other
than by death or Disability (as hereinafter defined), the Optionee may exercise
any Option granted under the Plan, only to the extent the Optionee was entitled
to exercise the Option at the date of Termination, for a period of three months
after the date of Termination or until the term of the Option has expired,
whichever date is earlier.
11.2 DEATH OR DISABILITY OF OPTIONEE. In the event of the death or
Disability of an Optionee prior to expiration of an Option held by him or her,
the following provisions shall apply:
11.2.1 If the Optionee is at the time of his or her Disability
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Board in its sole discretion) since the
date of grant of the Option, then the Option may be exercised by the
Optionee until the earlier of one year following the date of such Disability
or the expiration date of the Option, but only to the extent the Optionee
was entitled to exercise such Option at the time of his or her Disability.
For the purpose of this Section 11, the Term "Disability" shall mean a
permanent and total disability as defined in Section 22(e)(3) of the Code.
The determination of whether an Optionee has a Disability within the meaning
of Section 22(e)(3) shall be made by the Board in its sole discretion.
11.2.2 If the Optionee is at the time of his or her death employed by
the Company or a Subsidiary and has been in continuous employment (as
determined by the Board in its sole discretion) since the date of grant of
the Option, then the Option may be exercised by the Optionee's estate or by
a person who acquired the right to exercise the Option by will or the laws
of descent and distribution, until the earlier of one year from the date of
the Optionee's death or the expiration date of the Option, but only to the
extent the Optionee was entitled to exercise the Option at the time of
death.
11.2.3 If the Optionee dies within three months after Termination,
the Option may be exercised until the earlier of nine months following the
date of death or the expiration date of the Option, by the Optionee's estate
or by a person who acquires the right to exercise the Option by will or the
laws of descent or distribution, but only to the extent the Optionee was
entitled to exercise the Option at the time of Termination.
11.3 TERMINATION FOR CAUSE. If the employment of an Optionee is terminated
by the Company or a Subsidiary for cause, then the Board shall have the right to
cancel any Options granted to the Optionee under the Plan.
12. AMENDMENT AND TERMINATION OF PLAN
12.1 The Board, may at any time and from time to time suspend or terminate
the Plan in whole or in part or amend it from time to time in such respects as
may be in the best interests of the Company; provided, however, that no such
amendment shall be made without the approval of the shareholders if it would:
(a) materially modify the eligibility requirements for Participants as set forth
in Section 5 hereof; (b) increase the maximum aggregate number of shares of
Stock which may be issued pursuant to Options, except in accordance with Section
4.2 of the Plan; (c) reduce the minimum Option price per share as set forth in
Section 7 of the Plan, except in accordance with Section 4.2 of the Plan; (d)
extend the period of granting Options; or (e) materially increase in any other
way the benefits accruing to Optionees.
12.2 No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to him or her under the Plan.
12.3 The Board may amend the Plan, subject to the limitations cited above,
in such manner as it deems necessary to permit the granting of Incentive Stock
Options meeting the requirements of future amendments to the Code.
12.4 Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation, acquisition of property or stock, or reorganization as a result
of which the Company is not the surviving corporation or upon a sale of
substantially all the property or stock of the Company to another corporation,
any option granted hereunder shall terminate and no such event shall cause any
option to be exercisable for any shares other than those as to which it was
exercisable prior to such termination in accordance with its terms; provided,
however, that the Company may in its discretion and immediately prior to any
such transaction, cause a new option to be substituted for such option or cause
such old option to be assumed, by an employer corporation, or a parent or
subsidiary of such corporation; and such new or substituted option shall apply
to all shares issued in addition to or in substitution, replacement or
modification of the shares theretofore covered by such option; provided that:
(a) the excess of the aggregate fair market value of the shares
subject to the option immediately after the substitution or assumption over
the aggregate option price of such shares shall not be more than the excess
of the aggregate fair market value of all shares subject to the option
immediately before such substitution or assumption over the aggregate option
price of such shares,
(b) the new option or the assumption of the existing option shall not
give the optionee additional benefits which he did not have under the old
option or prior to such assumption, and
(c) a propriety adjustment of the original option price shall be made
among original shares subject to the option and any additional share or
shares issued in substitution, replacement or modification thereof.
13. MISCELLANEOUS PROVISIONS
13.1 RIGHT TO CONTINUED EMPLOYMENT. No person shall have any claim or
right to be granted an Option under the Plan, and the grant of an Option under
the Plan shall not be construed as giving an Optionee the right to continued
employment with the Company. The Company further expressly reserves the right
at any time to dismiss an Optionee or reduce an Optionee's compensation with or
without cause, free from any liability, or any claim under the Plan, except as
provided herein or in a stock option agreement.
13.2 WITHHOLDING TAXES. The Company shall have the right to require that
payment or provision for payment of any and all withholding taxes due upon the
grant or exercise of an Option hereunder or the disposition of any Stock or
other property acquired upon exercise of an Option be made by an Optionee. In
connection therewith, the Board shall have the right to establish such rules and
regulations or impose such terms and conditions in any agreement relating to an
Option granted hereunder with respect to such withholding as the Board may deem
necessary and appropriate.
13.3 GOVERNING LAW. The Plan shall be administered in the State of
Washington, and the validity, construction, interpretation, and administration
of the Plan and all rights relating to the Plan shall be determined solely in
accordance with the laws of such state, unless controlled by applicable federal
law, if any.
14. EFFECTIVE DATE
The effective date of the Plan is April 27, 1994. No Option may be granted
after April 26, 1999, provided, however, that the Plan and all outstanding
Options shall remain in effect until such outstanding Options have expired or
been canceled.
THE INDUSTRIAL BANK OF JAPAN, LIMITED
New York Branch
245 Park Avenue
New York, N.Y. 10167
Head Office Telephone
Tokyo, Japan (212) 557-3500
March 3, 1995
Mr. Robert Christensen
President
Republic Leasing Incorporated
The Republic Building
Olympia, WA 98507
Dear Bob,
The Industrial Bank of Japan, Limited, New York Branch (the "Advisor") will use
their best efforts in assisting Republic Leasing Incorporated ("RLI") in raising
senior securitized debt or certificates of interest in a trust or special
purpose entity, the proceeds of which are to be used in securitizing RLI's or
it's affiliates auto leases on terms substanitally similar to the terms outlined
in Attachment I (the "Transaction"). Among the activities that the Advisor will
assist RLI in will be 1) obtaining a rating on the securities issued pursuant to
the Transaction (the "Bonds"), 2) attempting to obtain bond insurance on a
commercially reasonable basis from a mono-line financial insurance company, 3)
reviewing the legal documents of the Transaction, 4) structuring the
Transaction, and 5) in the event that the Prime Purchaser, as defined below,
elects not to purchase the Bonds, finding an alternative purchaser. It is
understood that the Advisor may utilize an affiliate or an entity sponsored by
the Advisor in assisting RLI hereunder.
Our fee for assisting RLI on the Transaction will be equal to the sum of 1)
$100,000 payable upon the successful completion of the first Transaction,
$75,000 upon completion of the second Transaction, and $75,000 upon completion
of the third Transaction during the term hereof as such term may be extended in
accordance with the terms hereof (the "Closing"), 2) .25% of the Bond amount
drawn payable upon each draw, and 3) warrants, payable at Closing directly to an
affiliate of the Advisor or entity sponsored by the Advisor, (with an exercise
price equal to the lesser of the then current market or book value of RLI's
common stock, but in no event less than $1) for 4% of the common stock of RLI
(collectively, the "Advisor Fee"). In addition, RLI shall pay to the Advisor
within ten days of a written request, up to an aggregate of $10,000 and any
additional amounts that are authorized in writing by RLI for reasonable out-of-
pocket expenses, whether or not a Transaction closes.
RLI shall give the Advisor, an affiliate of the Advisor or an entity sponsored
by the Advisor (the "Prime Purchaser") the right of first refusal during the
term hereof as such term may be extended in accordance with the terms hereof to
purchase the Bonds, based on the terms outlined in Attachment I or substantially
similar terms. The Advisor agrees that it is not an agent of RLI and may not
bind or obligate RLI. RLI agrees to use its best efforts to negotiate and
conclude the Transaction by September 1, 1995.
RLI and the Advisor both agree to allow the other to advertise, make
announcements and/or publicize each other's involvement in the transaction
subject to the approval of the other party, such approval shall not be
unreasonably withheld; provided, however, that announcement of the purchase of
any Securities by the Prime Purchaser may only be made upon the express written
consent of the Advisor.
Unless this agreement is extended by the mutal agreement of both parties, this
agreement will expire on November 30, 1995. RLI agrees that it will extend the
term of this agreement for three months, provided substantial progress has been
made toward completing a rated Transaction. The undertakings herein are subject
to a standard of commercial reasonableness.
Sincerely,
Peter Nagykery
(Signature)
Peter Nagykery
Senior Vice President
Agreed and Accepted:
By: R.W. Christensen
(Signature)
Name: R. W. Christensen, Jr., President
Date: 03/10/95
Attachment I
Program Size: $100,000,000
Minimum Inital Amount: $10,000,000
Minimum
Committed Amount: $30,000,000
Maximum
Committed Amount: $100,000,000
Rating: A or better by S&P, Moody's, Fitch or Duff &
Phelps (S&P, Moody's, Fitch or Duff & Phelps,
collectively, the "Rating Agencies)
Price: 100%
Coupon: The fixed rate equivalent of one month LIBOR plus
the Base Spread plus the Credit Spread
Base Spread: .50% if the average life is equal to 1 years; .70%
if the average life is equal to three years; if
the average life is between 1 and 3 years the
interpolated rate depending on the average life
(i.e. if the average life were two years the
spread would be equal to .60%)
Credit Spread: If Duff & Phelps is not the only rating agency 0%
if AAA, .25% if AA, .50% if A. If Duff & Phelps is
the only rating agency .10% if AAA, .35% if AA,
.75% if A.
Facility Fee: .20% per annum payable monthly on the amount by
which the actual Committed Amount is in excess of
the bonds outstanding
Good Faith
Initial Deposit: Republic shall pay the Advisor a Good Faith Inital
Deposit of $25,000 upon the signing of this
agreement. Such fee will be credited toward the
Advisory Fee payable at Closing.
Agreed and Accepted: Agreed and Accepted:
By: R.W. Christensen By: Peter Nagykery
(Signature) (Signature)
Name: R. W. Christensen, Jr., President Name: Peter Nagykery
Date: 3/10/95 Date: 3/13/95
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (this "Agreement") is entered into as of
July 12, 1995 by and among Westar Auto Finance, L.L.C., as borrower (the
"Company"), Republic Leasing Incorporated, as guarantor (the "Guarantor") and
Bank One, Columbus, N.A., a national banking association, as lender (the
"Lender").
ARTICLE 1. REVOLVING CREDIT LOANS
----------------------------------
1.1 REVOLVING CREDIT COMMITMENT. The Lender hereby agrees on the terms
and conditions of this Agreement to lend to the Company the maximum sum of
Twelve Million Dollars ($12,000,000) (the "Revolving Credit Commitment"). The
Revolving Credit Commitment shall be available to the Company, subject to the
limitations herein, in whole or part and from time to time until July 12, 1998,
and any amounts borrowed may be repaid in whole or in part and reborrowed until
such date. Each borrowing under the Revolving Credit Commitment shall be made
in accordance with the provisions of this Section 1.1 and shall be subject to
the conditions of Article 3 (each such borrowing, a "Revolving Credit Loan").
Each Revolving Credit Loan shall be made pursuant to the request of the
Company to the Lender on an advance request form furnished by the Lender to the
Borrower which request for a Revolving Credit Loan shall specify (i) the total
amount of the Revolving Credit Loan; (ii) the borrowing date (the "Borrowing
Date"), which shall be a Business Day; (iii) the Eligible Lease Amount of the
Leases being financed with the proceeds of the Revolving Credit Loan; and (iv) a
calculation which demonstrates that after giving effect to the Revolving Credit
Loan, the aggregate principal amount of the Revolving Credit Loans then
outstanding will exceed the Borrowing Base. Requests for Revolving Credit Loans
may be made on the applicable Borrowing Date. Revolving Credit Loans requested
on a Business Day on or before 12:00 p.m. shall be made by the Lender by 3:00
p.m. on the next succeeding Business Day.
1.2 REVOLVING CREDIT NOTE. The Revolving Credit Commitment shall be
evidenced by a master promissory note (the "Revolving Credit Note") of the
Company unconditionally executed by duly authorized officers thereof, which
shall be in the form of Exhibit A attached hereto. Payment of the Revolving
Credit Note shall be absolutely and unconditionally guaranteed by the Guarantor
and Westar Auto Holding Co., a wholly owned Subsidiary of the Guarantor
("WestAH") pursuant to the terms of a Guaranty Agreement (the "Guaranty") in the
form of Exhibit B attached hereto. The Revolving Credit Note shall include the
following terms:
(a) TERM. The Revolving Credit Note shall be dated as of the date of
the disbursement of the initial Revolving Credit Loan and shall be due and
payable in full on or before July 12, 1998.
(b) INTEREST RATE ON REVOLVING CREDIT LOANS. From its date, each
Revolving Credit Loan shall bear interest (computed on the basis of the actual
number of days elapsed over a Business Year) on the unpaid principal balance at
a fluctuating rate per annum equal to (i) four percent (4%) above the LIBOR Rate
if the Borrowing Date occurs during the period from the date of this Agreement
until the Trust shall have originated 250 Eligible Leases, (ii) three and one-
half percent (3.5%) above the LIBOR Rate if the Borrowing Date occurs during the
period from the date on which the Trust shall have originated more than 250
Eligible Leases until the Trust shall have originated 500 Eligible Leases, and
(iii) three percent (3.0%) above the LIBOR Rate if the Borrowing Date occurs
during the period from the date on which the Trust shall have originated more
than 500 Eligible Leases and thereafter.
The initial LIBOR Rate shall be the LIBOR Rate in effect as of the
initial Borrowing Date and thereafter shall be the LIBOR Rate in effect as of
the first Business Day of each month (the "Interest Determination Date") and
such LIBOR Rate shall be effective for all outstanding Revolving Credit Loans
until the next succeeding Interest Determination Date. Any change in the LIBOR
Rate shall be effective immediately upon and after the related Interest
Determination Date. Interest on the Revolving Credit Loans shall be payable
quarterly in arrears on the last day of each March, June, September and December
(the "Interest Payment Date"), commencing September 30, 1995.
(c) MANDATORY REPAYMENTS. (i) At no time shall (a) the amount of any
individual Revolving Credit Loan outstanding exceed the related individual
Borrowing Base, or (b) the amount of the aggregate Revolving Credit Loans
outstanding exceed the aggregate Borrowing Base. The Company shall make such
repayments of an individual Revolving Credit Loan or of the aggregate Revolving
Credit Loans as are necessary to reduce the principal amount of such individual
Revolving Credit Loan or the aggregate Revolving Credit Loans, as applicable, to
an amount which does not exceed the related individual Borrowing Base or the
aggregate Borrowing Base, as applicable.
(ii) The Company shall use the proceeds from the sale of Pooled
Interest Certificates to repay all or a portion of the principal amount of, and
accrued interest on, related outstanding Revolving Credit Loans. The Company
shall be required to repay the entire principal amount of each outstanding
Revolving Credit Loan within six months following the date on which the related
Asset-Specific Trust Interests were purchased with the proceeds of such
Revolving Credit Loan; provided, however, that the Company may elect at the time
Eligible Leases related to such Asset-Specific Trust Interests are being
reallocated to the Pooled Interest evidenced by such Pooled Interest
Certificates to reallocate Eligible Leases having an aggregate Eligible Lease
Amount of up to $500,000 to new Asset-Specific Trust Interests in which event
the principal amount of the then outstanding Revolving Credit Loans may be
reduced to an amount which does not exceed the Borrowing Base of such
reallocated Eligible Leases. In no event may an Eligible Lease be reallocated
to a new Asset-Specific Trust Interest more than once. The Lender understands
that in order for the Trust to create a Pooled Interest evidenced by such Pooled
Interest Certificates, it will be necessary for the Lender to release its
security interest in those Asset-Specific Trust Interests related to Trust
Assets being reallocated to such Pooled Interest. Except during the occurrence
and continuation of an Event of Default, the Lender's consent to the release of
such security interest shall not be unreasonably withheld.
(d) DEFAULT RATE. Overdue principal and, to the extent permitted by
law, overdue interest in respect of any Revolving Credit Loan shall bear
interest at a rate equal to the sum of the rate otherwise applicable to such
Revolving Credit Loan pursuant to Section 1.2(b) plus 3% per annum. The
application of this Section 1.2(d) shall not constitute a waiver of any Event of
Default or an agreement by the Lender to permit any later payments whatsoever.
1.3 CANCELLATION AND REDUCTION OF REVOLVING CREDIT COMMITMENT. The
Company shall be entitled to permanently reduce or cancel the Revolving Credit
Commitment from time to time with the written consent of the Lender and upon
such terms as shall be agreed upon by the Company and the Lender. In the event
of cancellation of the Revolving Credit Commitment, the principal amount of the
Revolving Credit Note shall be paid in full, together with all accrued interest
thereon, any unpaid Unused Commitment Fee accrued to the date of cancellation,
and all other amounts owing to the Lender by the Company hereunder. There shall
be no prepayment penalty or fee of any kind. In the event of the permanent
reduction of the Revolving Credit Commitment to a level which is less than the
then outstanding principal amount of the Revolving Credit Note, the Revolving
Credit Note shall be prepaid at the time of such reduction in an amount equal to
the then excess of the Revolving Credit Note over the Revolving Credit
Commitment as so reduced. Accrued interest on the principal amount of the
Revolving Credit Note repaid shall be included in the interest due and payable
on the next Interest Payment Date.
1.4 USE OF FUNDS. Proceeds of Revolving Credit Loans shall be used to
fund the purchase by the Company of Asset-Specific Trust Interests from the
Trust. The Trust will use the proceeds from the purchase of the Asset-Specific
Trust Interests to originate Eligible Leases.
ARTICLE 2. FEES, PAYMENTS, SETOFFS, SECURITY
---------------------------------------------
2.1 FEES. The Company shall pay to the Lender a fee (the "Unused
Commitment Fee") based on the daily average amount of the Revolving Credit
Commitment not drawn down in Revolving Credit Loans (the "Unused Commitment")
for the period beginning with the date hereof and ending July 12, 1998 or on the
sooner cancellation in full of the Revolving Credit Commitment. The Unused
Commitment Fee shall be payable quarterly in arrears and when the Revolving
Credit Commitment is fully terminated, on the date of such cancellation. The
amount of the Unused Commitment Fee shall be equal to one-eighth of one percent
(1/8%) per annum of the Unused Commitment (computed on the basis of the actual
number of days elapsed over a Business Year).
2.2 PAYMENTS. All payments and prepayments by the Company to be made in
respect of the Unused Commitment Fee or of principal or interest on the
Revolving Credit Note shall become due at 1:30 p.m., Columbus, Ohio time on the
day when due, and shall be made to the Lender in federal funds or other
immediately available lawful money of the United States of America. Whenever
any payment to be made hereunder shall be due other than on a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees
hereunder.
2.3 SETOFFS. Upon the occurrence of any Event of Default, the Lender
shall have the right to set off against all obligations of the Company to the
Lender under this Agreement and the Notes, whether matured or unmatured, all
amounts owing to the Company by the Lender, whether or not then due and payable,
and all funds or property of the Company on deposit with or otherwise held or in
the custody of the Lender for the beneficial account of the Company. Such funds
shall be charged against accrued interest on and/or principal of the Revolving
Credit Note as the Lender may determine in its discretion.
2.4 SECURITY. As security for the payment of the Revolving Credit Note
and for the performance of, and compliance with all of the terms, covenants,
conditions, stipulations and agreements contained in this Agreement and in the
Revolving Credit Note, (a) the Guarantor by the security agreement in the form
attached hereto as Exhibit C and incorporated herein by this reference (the
"Guarantor Security Agreement"), (b) the Company by the security agreement in
the form attached hereto as Exhibit D and incorporated herein by this reference
(the "Company Security Agreement"), (c) the Company by the Pledge of Stock in
the form attached hereto as Exhibit E and the Pledge and Assignment of
Membership Interests (collectively, the "Pledge Agreements" and, together with
the Guarantor Security Agreement and the Company Security Agreement, the
"Security Agreements") and (d) the Company and the Guarantor by other
instruments, shall, as provided in the Security Agreements, assign and grant to
the Lender a perfected security interest in all the collateral described in the
Security Agreements.
ARTICLE 3. CONDITIONS OF BORROWING
-----------------------------------
The obligation of the Lender to make the Loans to the Company provided for
hereunder shall be subject to the following conditions:
3.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING CREDIT LOAN. Prior to
the disbursement of the initial Revolving Credit Loan hereunder, the Company and
the Guarantor shall furnish to the Lender the following, each dated the date of
the disbursement of the initial Revolving Credit Loan, in form and substance
satisfactory to the Lender and counsel for the Lender:
(a) The duly executed Revolving Credit Note in the form of the
attached Exhibit A;
(b) Certified copies of the resolutions of the boards of directors of
the Company and the Guarantor, respectively, authorizing the execution,
delivery and performance of the Company's and the Guarantor's respective
obligations under this Agreement, the Guaranty, the Revolving Credit Note
and the Security Agreements;
(c) Certificates of the Secretaries or of Assistant Secretaries of
the Company and the Guarantor, respectively, which shall certify the
respective names of the officers of the Company and the Guarantor
authorized to sign this Agreement, the Guaranty, the Revolving Credit Note,
the Security Agreements and any other documents or certificates to be
delivered pursuant to this Agreement by the Company or the Guarantor or any
of their respective officers, together with the true signatures of such
officers. The Lender may conclusively rely upon such certificate until it
shall receive a further certificate of the Secretary or an Assistant
Secretary of the Company or the Guarantor, as the case may be, canceling or
amending the prior certificate and submitting the signatures of the
officers named in such further certificate;
(d) The duly executed Guaranty;
(e) Duly executed Security Agreements;
(f) The duly executed Agreement with Respect to Prevention and
Resolution of Disputes ("Dispute Resolution Agreement") in the form of the
attached Exhibit G;
(g) Opinion of counsel to the Company and the Guarantor addressed to
the Lender opining as to the matters set forth in Exhibit H hereto and as
to such other matters as the Lender may request and containing only such
qualifications as are acceptable to the Lender and its counsel;
(h) The duly executed Validity Agreement in the Form of the Attached
Exhibit I;
(i) The Company and the Trustee shall have entered into the Trust
Agreement upon terms and conditions acceptable to Lender and its counsel;
(j) The Guarantor shall have reimbursed the Lender for closing costs,
including fees and disbursements of its counsel, in an amount not to exceed
$20,000;
(k) The Guarantor shall have Tangible Net Worth of not less than
$2,200,000; and
(l) Such other opinions, certificates, affidavits, documents and
filings as the Lender may deem reasonably necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO EACH OF THE LOANS. At the time of each
Revolving Credit Loan after the initial Revolving Credit Loan, all mandatory
repayments required by Section 1.2(c) shall have been made; the Company and the
Guarantor shall be in compliance with all of the other provisions, warranties
and covenants contained in this Agreement with which they are to comply; there
shall exist no Event of Default; and no event shall exist or shall have occurred
which with the lapse of time or notice or both would constitute an Event of
Default.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
------------------------------------------
The Company and the Guarantor, jointly and severally, represent and warrant
to the Lender, which representations and warranties shall survive the execution
and delivery of this Agreement, the Guaranty and the Revolving Credit Note, as
follows.
.1 ORGANIZATION AND AUTHORITY. The Company is a limited liability company
and the Guarantor is a corporation each duly organized, validly existing and in
good standing under the laws of the jurisdictions of their respective formation,
and have all requisite power and authority to own and operate their properties
and to carry on their businesses as now conducted. The execution, delivery and
performance of this Agreement, the Guaranty, the Security Agreements and the
Revolving Credit Note have been duly authorized by the Company and the Guarantor
by all necessary corporate actions; there is no prohibition, either in law, in
their respective articles of incorporation, certificate of incorporation,
limited liability company agreement, code of regulations, bylaws, or directors'
bylaws, if any, or in any order, writ, injunction or decree of any court or
arbitrator presently in effect having applicability to the Company or the
Guarantor which in any way prohibits or would be violated by the execution and
performance of this Agreement, the Guaranty, the Security Agreements and the
Revolving Credit Note in any respect; and this Agreement, the Guaranty, the
Security Agreements and the Revolving Credit Note are and will be valid, binding
and enforceable obligations of the Company and the Guarantor, as applicable,
except as enforcement thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors rights generally and except
to the extent enforcement thereof may be limited by the application of general
principles of equity.
4.2 QUALIFICATION. The Company and the Guarantor are duly qualified or
licensed and in good standing as foreign corporations duly authorized to do
business in each jurisdiction in which the character of the properties owned or
leased or the nature of the activities conducted makes such qualification or
licensing necessary and in which the failure to be so qualified would have a
materially adverse effect on the conduct of the business of the Company or the
Guarantor.
4.3 INVESTMENTS; GUARANTEES; LIABILITIES. The Company and the Guarantor
have made no investments in, advances to or guarantees of the obligations of any
Person other than the Guaranty. Neither the Company nor the Guarantor has any
material Liabilities, direct or contingent in excess of $100,000.
4.4 TAX RETURNS AND PAYMENTS. The Company and the Guarantor have filed
all tax returns required by law to be filed and have paid all taxes, assessments
and other governmental charges of any material nature, either in amount or
effect, levied upon any of their properties, assets, income or franchises, other
than those not yet delinquent. The charges, accruals and reserves on the books
of the Company and the Guarantor in respect to income taxes for all respective
fiscal periods are adequate in the opinion of the Company and the Guarantor, and
neither the Company nor the Guarantor knows of any unpaid assessment for
additional income taxes for any fiscal period or of any basis therefor.
4.5 TITLE TO PROPERTIES; LIENS. The Company and the Guarantor have good
and marketable title to all of their respective property and assets, in each
case including, but not limited to, the property and assets reflected as being
owned by the Guarantor on the Balance Sheet except such as have been disposed of
in the ordinary course of business since the date of the Balance Sheet and all
such property and assets are free and clear of mortgages, pledges, liens,
charges or other encumbrances except such as are not prohibited by Section 6.2
hereof. The Company and the Guarantor enjoy peaceful and undisturbed possession
under all leases under which they are lessee which are material to the conduct
of the businesses of the Company or the Guarantor and all of such leases are
valid, subsisting and in full force and effect in accordance with their terms.
None of such leases contains any provision restricting incurrence of
Indebtedness by the Company or the Guarantor or any provision which materially
adversely affects or in the future might materially adversely affect the
business of the Company or the Guarantor.
4.6 LITIGATION. There is no court action, other proceeding or
investigation pending or threatened which questions the validity of this
Agreement, the Guaranty, the Security Agreements or the Revolving Credit Note or
any action taken or to be taken pursuant thereto or which might result, either
separately or in the aggregate, in any materially adverse change in the
business, operations, affairs or condition of the Company or the Guarantor.
4.7 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. Neither the Company nor
the Guarantor is in violation of, and the execution, delivery and performance of
this Agreement, the Guaranty, the Security Agreements and the Revolving Credit
Note does not and will not result in a violation of nor a conflict with or
default under any agreement, instrument, judgment, decree, order, statute or
governmental rule or regulation applicable to the Company or the Guarantor or by
which either are bound, which now or in the future may materially adversely
affect either of their businesses, operations, affairs or condition.
4.8 FINANCIAL STATEMENTS. The Guarantor has furnished to the Lender
consolidated financial statements of the Guarantor including (i) an audited
balance sheet, statement of income, statement of shareholders' equity and an
audited statement of cash flow as at and for the fiscal year ended March 31,
1995, and (ii) unaudited interim financial statements for the period ending June
30, 1995. Such financial statements are complete and correct in all material
respects and fairly reflect the financial condition of the Guarantor as at such
dates and the results of operations of the Guarantor as at such dates and for
the period ended on such dates. Since the date of such statements no materially
adverse change has occurred in the business, operations, affairs or condition
(financial or otherwise) of the Guarantor.
4.9 PATENTS; TRADEMARKS. The Company and the Guarantor possess and have
made all filings with the United States Patent and Trademark Office and
appropriate state agencies to evidence in each of them, respectively, full and
complete title to all the patents, trademarks, service marks, trade names,
copyrights and licenses and rights in respect of the foregoing which are
essential to the conduct of their businesses, without any known conflict with
the rights of others.
4.10 NO MARGIN ACTIVITY. Neither the Company nor the Guarantor is engaged
in the business of extending or obtaining credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as is now and may from time to time
hereafter be in effect) and no part of the proceeds of any Loan shall be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or to reduce or retire
any indebtedness incurred for any such purpose. No part of the proceeds of the
Loans hereunder will be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulations G, T, U or X of the Board of
Governors.
4.11 ERISA. Each Plan maintained by the Company or the Guarantor and by
each ERISA Affiliate complies with all material applicable requirements of ERISA
and of the Code and with all material applicable rulings and regulations issued
under the provisions of ERISA and the Code setting forth those requirements.
Neither the Company nor the Guarantor nor any ERISA Affiliate has engaged in any
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Code) (i) which has not been corrected within the correction period
applicable to it under Section 502(i) of ERISA or Section 4963(e) of the Code or
(ii) for which an exemption has not been obtained under Section 408 of ERISA or
Section 4975 of the Code. Neither the Company nor the Guarantor nor any ERISA
Affiliate is a participant in (i) any Multiemployer Plan, (ii) any other Plan
which is subject to Title IV of ERISA, or (iii) any money purchase pension plan.
4.12 ADVERSE CONTRACTS; DEFAULTS. Neither the Company nor the Guarantor
is a party to any agreement or instrument or subject to any charter or other
corporate restriction materially adversely affecting their respective
businesses, properties or assets, operations or condition (financial or
otherwise). Neither the Company nor the Guarantor is in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party.
4.13 ENVIRONMENTAL LAWS. No release, emission, or discharge into the
environment of hazardous substances, as defined under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or hazardous
waste as defined under the Solid Waste Disposal Act, as amended, or air
pollutants as defined under the Clean Air Act, or toxic pollutants as defined
under the Clear Air Act, or the Toxic Substances Control Act, has occurred or is
presently occurring in excess of federally permitted releases or reportable
quantities, or other concentrations, standards or limitations under, and which
would constitute a material violation of, the foregoing laws or under any other
federal, state or local laws or regulations, in connection with any aspect of
the business of the Company or the Subsidiaries. Except as previously disclosed
in writing to the Lender, the Company and the Guarantor have no knowledge of any
past or existing violations of any environmental laws, ordinances or regulations
issued by any federal, state or local governmental authority.
4.14 DISCLOSURE. No information, exhibit or report furnished by the
Company or the Guarantor to the Lender in connection with the negotiation of
this Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading. There is no fact known to the Company or the Guarantor which
materially adversely affects or in the future may (so far as the Company or the
Guarantor can now foresee) materially adversely affect the business, operations,
affairs or condition of the Company or the Guarantor or any of their respective
properties or assets which has not been set forth in this Agreement or in the
Exhibits hereto.
4.15 INSURANCE. All of the properties and operations of the Company and
the Guarantor of a character usually insured by Persons of established
reputation engaged in the same or similar businesses similarly situated are
adequately insured, by financially sound and reputable insurance companies,
against loss or damage of the kinds and in amounts customarily insured against
by such Persons and the Company and the Guarantor carry, with such insurers in
customary amounts, such other insurance, including public and product liability,
as is usually carried by Persons of established reputation engaged in the same
or similar businesses similarly situated.
4.16 EVENTS OF DEFAULT. There does not exist any Event of Default or
Default hereunder.
4.17 OWNERSHIP OF LEASES AND LEASED VEHICLES. The Trust is or will be the
legal and beneficial owner of all right, title and interest in and to the Leases
and the Leased Vehicles and any other Trust Assets.
4.18 CHARACTERISTICS OF LEASES AND LEASED VEHICLES. Each Lease and, to
the extent applicable, each Leased Vehicle will be: (a) written with respect to
a Leased Vehicle that was at the time of the origination of the related Lease a
new vehicle, a limited mileage dealer demonstrator or used vehicle or a
manufacturer's program vehicle; (b) originated by a dealer located in the states
of Idaho, Oregon or Washington (or such other states as shall be mutually agreed
to by the parties) in the ordinary course of its business and in compliance with
the Guarantor's normal lease contract underwriting policies and practices; (c)
owned by the Trustee on behalf of the Trust free of all Liens except for Liens
permitted by the Trust Agreement or the Lease Purchase Agreement; (d) originated
in compliance with, and complies with, all material applicable legal
requirements; (e) evidenced by a certificate of title registered in the name of
the Trustee; (f) a closed-end lease that (i) requires equal monthly payments to
be made within 60 months of the date of origination of such Contract and (ii)
requires such payments to be made by the lessee thereof within 30 days after the
date invoices for payments are distributed; (f) a Lease which fully amortizes to
an amount equal to the residual value of the related Leased Vehicle based on a
fixed annual percentage rate calculated on a constant yield basis; (g) fully
assignable and will not require the consent of the lessee thereof as a condition
to any transfer, sale or assignment of the rights of the originator; (h) a Lease
which has never been extended; (i) a Lease as to which the lessee thereunder is
not bankrupt or currently the subject of a bankruptcy proceeding; (j) not more
than 60 days past due; (k) a Leased Vehicle which has not been repossessed; and
(l) a Lease which satisfies the written underwriting criteria separately
delivered by the Lender to the Company which underwriting criteria may be
amended from time to time by agreement of the parties.
ARTICLE 5. AFFIRMATIVE COVENANTS
---------------------------------
Until payment in full of the Notes and performance of all other obligations
of the Company and the Guarantor hereunder:
5.1 BANK DEPOSITS. The Company and the Guarantor covenant that the Lender
shall be the principal bank of account and primary depository for the Company
and the Guarantor.
5.2 FINANCIAL STATEMENTS AND REPORTS OF THE GUARANTOR. (a) Not later than
thirty (30) days following the end of each fiscal quarter, the Guarantor shall
furnish to the Lender the following items in form and substance satisfactory to
the Lender:
(i) An unaudited income statement for the fiscal quarter and fiscal
year to date and copies of the statements for the same periods of the
previous year;
(ii) An unaudited balance sheet as of the end of such fiscal quarter
and copies of such statements for the same period of the previous year;
(iii) A certificate from the chief financial officer of the Guarantor
stating that (i) the financial statements are complete and correct in all
material respects and fairly represent the financial position of the
Guarantor as of their respective dates and the results of the Guarantor's
operations for the periods then ended; (ii) the Company and the Guarantor
have complied with and are then in compliance with all terms and covenants
of this Agreement; and (iii) there exists no Default or Event of Default;
and
(iv) An aging report of all Leases in form and substance satisfactory
to the Lender.
(b) Not later than three Business Days following the end of each
week, the Guarantor shall furnish the Lender a Borrowing Base certificate
containing (i) a calculation of the Borrowing Base for each week on a
consolidated basis in detail satisfactory to the Lender, (ii) so long as
any Revolving Credit Loans remain outstanding, an affirmative certification
from the Guarantor's chief executive officer or chief financial officer
that the Borrowing Base is equal to or greater than the amount of Revolving
Credit Loans outstanding, and (iii) in the event that any individual
Borrowing Base is less than the related individual Revolving Credit Loan or
the aggregate Borrowing Base is less than the aggregate Revolving Credit
Loans, a calculation of the amount of the repayment of the related
Revolving Credit Loan or Revolving Credit Loans required pursuant to
Section 1.2(d).
5.3 AUDITED FINANCIAL STATEMENTS.
(a) Not later than ninety (90) days following the end of each fiscal
year of the Guarantor, beginning with the fiscal year ended March 31, 1996,
the Guarantor shall furnish to the Lender, in form and substance
satisfactory to the Lender, complete consolidated financial statements for
the Guarantor for such fiscal year certified by an independent certified
public accountant acceptable to the Lender, with an opinion not
significantly qualified, accompanied by a certificate from such accountant,
certifying that in examining the Guarantor's books and records for such
period, such accountant has obtained no knowledge of any condition, event
or act which, with notice or lapse of time, or both, could constitute a
Default or an Event of Default or any condition, event or act which could
materially and adversely affect the financial condition or operations of
the Guarantor, or if any such condition, event or act exists, specifying
the nature and status thereof.
(b) Each of the financial statements delivered under this Section 5.3
shall be accompanied by a certificate of the chief financial officer of the
Guarantor stating that except as disclosed in the certificate such officer
has no knowledge of a Default or an Event of Default hereunder and setting
forth in a detailed computation in form satisfactory to the Lender the
financial status of the Guarantor (at the end of, or, in the case of
incurrence tests, during such accounting period) in respect of the
restrictions contained in Sections 6.12 and 6.13.
5.4 INSPECTION. The Lender shall have the right to review the books and
records of the Company and the Guarantor regarding their business affairs and
financial condition and to copy the same and make excerpts therefrom, and to
inspect the assets of the Company and the Guarantor which are subject to the
Security Agreements, at all times during regular business hours; so long as such
inspections do not unreasonably interfere with or impede the operations of the
Company or the Guarantor.
5.5 INSURANCE. The Guarantor and the Company shall insure and maintain
insurance upon all of their assets and business properties and product liability
insurance with responsible and reputable insurers of such character and in such
amounts as are usually maintained by companies engaged in like business. All
insurance policies shall be written for the benefit of the Guarantor, the
Company and the Lender as their interests may appear and shall contain a
provision requiring the insurance company to provide the Lender not less than
ten days' written notice prior to cancellation of any such policy. All
insurance policies or certificates evidencing the same shall be furnished to the
Lender.
5.6 PAYMENT OF TAXES AND CLAIMS. The Guarantor and the Company shall pay
all taxes, assessments and other governmental charges imposed upon their
respective properties or assets or in respect of any of their franchises,
business, income or profits before any penalty or interest accrues thereon, and
all claims (including, without limitation, claims for labor, services, materials
and supplies) for sums which have become due and payable and which by law have
or might become due and payable and which by law have or might become a lien or
charge upon any of their properties or assets, provided that (unless any
material item of property would be lost, forfeited or materially damaged as a
result thereof) no such charge or claim need be paid if the amount,
applicability or validity thereof is currently being contested in good faith and
if such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor.
5.7 COMPLIANCE WITH LAWS. The Guarantor and the Company shall comply in
all substantial respects with all applicable statutes, laws, ordinances and
governmental rules, regulations and orders to which they are subject or which
are applicable to their businesses, properties and assets if noncompliance
therewith would materially adversely affect such businesses, including, but not
limited to, all applicable Federal, state, regional, county or local laws,
statutes, rules, regulations or ordinances concerning public health, safety or
the environment; provided that (unless such contest or noncompliance would
materially adversely affect such businesses) the Guarantor or the Company need
not so comply if any such statute, law, ordinance, or governmental rule,
regulation or order is currently being contested in good faith.
5.8 ERISA. The Guarantor and the Company will furnish to Lender: (a)
promptly and in any event within 10 days after the Guarantor or the Company
knows or has reason to know of the occurrence of a Reportable Event with respect
to a Plan with regard to which notice must be provided to the PBGC, a copy of
such materials required to be filed with the PBGC with respect to such
Reportable Event and in each such case a statement of the chief financial
officer of the Guarantor or the Company, as relevant, setting forth details as
to such Reportable Event and the action which the Guarantor or the Company, as
applicable, proposes to take with respect thereto; (b) promptly and in any event
within 10 days after the Guarantor or the Company knows or has reason to know of
any condition existing with respect to a Plan which presents a material risk of
termination of the Plan, imposition of an excise tax, requirement to provide
security to the Plan or incurrence of other liability by the Guarantor or the
Company or any ERISA Affiliate a statement of the chief financial officer of the
Company or such Subsidiary describing such condition; (c) at least 10 days prior
to the filing by any plan administrator of a Plan of a notice of intent to
terminate such Plan, a copy of such notice; (d) promptly and in no event more
than 10 days after the filing thereof with the Secretary of the Treasury, a copy
of any application by the Guarantor or the Company or an ERISA Affiliate for a
waiver of the minimum funding standard under section 412 of the Code; (e)
promptly and in no event more than 10 days after the filing thereof with the
Internal Revenue Service, copies of each annual report which is filed on Form
5500 together with certified financial statements for the Plan (if any) as of
the end of such year and actuarial statements on Schedule B to such form 5500;
(f) promptly and in any event within 10 days after it knows or has reason to
know of any event or condition which might constitute grounds under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, a statement of the chief financial officer of the Company
or such Subsidiary describing such event or condition; (g) promptly and in no
event more than 10 days after receipt thereof by the Guarantor or the Company or
any ERISA Affiliate, a copy of each notice received by the Guarantor or the
Company or an ERISA Affiliate concerning the imposition of any withdrawal
liability under section 4202 of ERISA; and (h) promptly after receipt thereof a
copy of any notice the Guarantor or the Company or any ERISA Affiliate may
receive from the PBGC or the Internal Revenue Service with respect to any Plan
or Multiemployer Plan; provided, however, that this subsection (h) shall not
apply to notices of general application promulgated by the PBGC or the Internal
Revenue Service.
5.9 PRESERVATION OF CORPORATE EXISTENCE. The Guarantor shall preserve and
maintain and cause the Company to preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of their incorporation or
in any other jurisdiction they shall select, and qualify and remain qualified as
a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of their business and operations or the ownership
of their properties.
5.10 MAINTENANCE OF TANGIBLE ASSETS. The Guarantor and the Company shall
each maintain its tangible assets in good condition and repair and shall not
permit any action or omission which might materially impair the value thereof,
normal wear and tear excepted.
5.11 NOTICES OF CERTAIN EVENTS. The Guarantor and the Company shall
within five Business Days of the occurrence thereof give notice to the Lender
of:
(a) Any Default or Event of Default;
(b) Any default or event of default under any contractual obligation
of the Guarantor or the Company that would have a materially adverse effect
on the Guarantor or the Company; or
(c) A materially adverse change in the business, operations, affairs
or condition (financial or otherwise) of the Guarantor or the Company which
threatens the ability of the Company or the Guarantor to satisfy any of
their respective obligations to make payments of the principal of, or
interest on, the Revolving Credit Loans pursuant to the terms of this
Agreement, the Revolving Credit Note or the Guaranty Agreement.
Each notice pursuant to this Section 5.11 shall be accompanied by a statement of
the chief executive officer or chief financial officer of the Guarantor or the
Company, as applicable, setting forth details of the occurrence referred to
therein and stating what action the Guarantor or the Company, as applicable,
proposes to take with respect thereto.
5.12 RECORDS AND BOOKS OF ACCOUNT. The Guarantor and the Company shall
keep adequate records and books of account in which complete entries will be
made in accordance with GAAP, reflecting all financial transactions required by
GAAP to be so reflected.
5.13 PERFORMANCE OF CONTRACTS. The Guarantor and the Company shall
perform and comply with, in accordance with their terms, all material provisions
of each and every contract, agreement or instrument now or hereafter binding
upon them, except to the extent that they shall contest the provisions thereof
in good faith and by proper proceedings.
5.14 NOTICE OF MATERIAL LITIGATION. The Guarantor shall promptly notify
the Lender in writing of any litigation, arbitration proceeding or
administrative investigation, inquiry or other proceeding to which it or the
Company may hereafter become a party which may involve any risk of any judgment
or liability not fully covered by insurance or which may otherwise result in any
materially adverse change of the business, operations, affairs or condition
(financial or otherwise) of the Guarantor or the Company or which may impair the
ability of the Guarantor or the Company to perform its obligations under this
Agreement, the Guaranty, the Security Agreements, the Revolving Credit Note or
any other agreement or instrument contemplated hereby or thereby.
5.15 USE OF PROCEEDS. The Company shall use all proceeds of the Loans
disbursed pursuant to this Agreement for legal and proper purposes, and such
uses shall be consistent with all applicable laws.
ARTICLE 6. NEGATIVE COVENANTS
------------------------------
Until payment in full of the Revolving Credit Note and the performance of
all other obligations of the Guarantor and the Company hereunder, without the
prior written consent of the Lender:
6.1 INDEBTEDNESS. Neither the Guarantor, the Company nor any other
Subsidiary shall create, incur, assume or suffer to exist any Indebtedness,
except for (a) Indebtedness to the Lender, (b) trade payables incurred by the
Guarantor in the ordinary course of business, and (c) other Indebtedness of the
Guarantor which is satisfactorily subordinated in the judgment of the Lender to
the Revolving Credit Loans in an amount not to exceed 5% of the Tangible Net
Worth of the Guarantor.
6.2 LIENS AND OTHER ENCUMBRANCES. Neither the Guarantor, the Company nor
any other Subsidiary shall create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien or other encumbrance of any nature whatsoever
on any of its property or assets whether now owned or hereafter acquired, except
(i) liens securing the payment of taxes, either not yet due or the validity of
which is being contested in good faith by appropriate proceedings (so long as no
material item of property would be lost, forfeited or materially damaged as a
result thereof), and as to which the Guarantor or the Company or such other
Subsidiary, as the case may be, shall, as appropriate under GAAP, have set aside
on its books and records adequate reserves; (ii) deposits under workers'
compensation, unemployment insurance, social security and other similar laws or
to secure the performance of bids, tenders or contracts (other than for the
repayment of purchase price Indebtedness or borrowed money) or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds, all in the ordinary course of business; or
(iii) liens and security interests in favor of the Lender.
6.3 GUARANTIES AND OTHER CONTINGENT LIABILITIES. Neither the
Guarantor, the Company nor any other Subsidiary shall become an indemnitor,
guarantor or surety or otherwise become liable for any of the obligations or
liabilities of any Person except for the Guaranty.
6.4 FUNDAMENTAL CHANGES. Neither the Guarantor, the Company nor any other
Subsidiary shall (i) enter into any transaction of merger or consolidation or
amalgamation, or (ii) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or (iii) convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, whether now owned or hereafter
acquired, or (iv) acquire by purchase or otherwise all or substantially all the
business or assets of, or stock or other evidence of beneficial ownership of,
any Person, or (v) make any material change in the nature of its business or in
the methods by which it conducts business, or (vi) amend its articles of
incorporation, certificate of incorporation or limited liability company
agreement, as applicable, to create or authorize the creation of any class or
series of stock or membership interests, as applicable, other than the class or
series of stock or membership interests now authorized in its articles of
incorporation, certificate of incorporation or limited liability company
agreement, as applicable, heretofore delivered to the Lender; provided, however,
that after prior written notice to the Lender (a) any Subsidiary other than the
Company may be merged with or into or consolidated with the Guarantor, so long
as the Guarantor is the surviving entity and (b) the Guarantor may be a party to
a merger the sole purpose of which is to change the place of incorporation of
the Guarantor, so long as such merger qualifies as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(F) of the Code and the
perfection and priority of the security interest of the Lender in the collateral
created by the Guarantor Security Agreement is not adversely affected.
6.5 CREATION OF SUBSIDIARIES. Neither the Guarantor, the Company nor any
other Subsidiary shall create or acquire any additional Subsidiaries, and the
Guarantor represents and warrants that WestarAH and Westar Lease Services, Inc.
are the only Subsidiaries of the Guarantor.
6.6 LOANS OR ADVANCES. Neither the Guarantor, the Company nor any other
Subsidiary shall make loans or advances to any Person.
6.7 INVESTMENTS. Neither the Guarantor, the Company nor any other
Subsidiary shall acquire or purchase the securities of any Person.
6.8 SALE AND LEASEBACK. Neither the Guarantor, the Company nor any other
Subsidiary shall enter into any agreement with any lender or investor providing
for the leasing of (i) real or personal property which has been or is to be sold
or transferred by the Guarantor, the Company or any other Subsidiary to such
lender or investor or (ii) other real or personal property intended to be used
for substantially the same purpose as the property sold or transferred by the
Guarantor, the Company or any other Subsidiary.
6.9 SALE OF ACCOUNTS. Neither the Guarantor, the Company nor any other
Subsidiary shall sell, assign or exchange any of its Accounts or notes
receivable with or without recourse.
6.10 CAPITAL EXPENDITURES. The Guarantor shall not purchase, on a
consolidated basis, fixed or capital assets in any fiscal year in an amount in
excess of $100,000.
6.11 DIVIDENDS AND PURCHASES. Neither the Guarantor nor the Company shall
declare or pay on, or make any distribution to the holders of any shares of
capital stock of the Guarantor of any class or any membership interest of the
Company, and neither the Guarantor nor the Company shall purchase, redeem or
otherwise acquire for consideration any shares of capital stock of the Guarantor
of any class or any membership interests of the Company except as hereinafter
provided. Provided no Event of Default or Default shall have occurred and be
continuing, or would result therefrom, the Guarantor may (a) declare or pay on,
or make a distribution to the holders of (i) any shares of preferred stock now
outstanding at a dividend rate not to exceed 10% per annum, and (ii) any shares
of common stock, if after giving effect to any such payment the Tangible Net
Worth of the Guarantor would not be less than $2,200,000 and (b) purchase,
redeem or otherwise acquire for consideration any shares of capital stock of the
Guarantor if after giving effect to such payment, the Tangible Net Worth of the
Guarantor would not be less than $2,200,000.
6.12 TANGIBLE NET WORTH. The Guarantor shall not permit its consolidated
Tangible Net Worth to be less than the amount listed in column (b) of this
section at any time during the period listed opposite such amount in column (a)
of this section:
(a) (b)
For the period from Amount
------------------- ------
the date hereof through March 31, 1996 $ 750,000
April 1, 1996 through March 31, 1997 $1,000,000
April 1, 1997 and thereafter $2,000,000
6.13 RATIO OF CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED TANGIBLE NET
WORTH. The Guarantor shall not permit the ratio of consolidated total
Indebtedness to consolidated Tangible Net Worth to exceed the ratio listed in
column (b) of this section at any time during the period listed opposite such
ratio in column (a) of this section:
(a) (b)
For the period Ratio
-------------- -----
From the date hereof through March 31, 1996 5:1
From April 1, 1997 and thereafter 4:1
6.14 ELIGIBLE LEASE ORIGINATIONS. The Trust shall not have originated
less than an aggregate of (a) 50 Eligible Leases during the two months following
the Borrowing Date of the initial Revolving Credit Loan hereunder (the "Initial
Borrowing Date"), (b) 100 Eligible Leases during the three months following the
Initial Borrowing Date, (c) 150 Eligible Leases during the four months following
the Initial Borrowing Date, (d) 200 Eligible Leases during the five months
following the Initial Borrowing Date, and (e) 250 Eligible Leases during the six
months following the Initial Borrowing Date.
6.15 TRANSACTIONS WITH AFFILIATES. Neither the Guarantor, the Company,
nor any other Subsidiary shall: (i) enter into any transaction, including
without limitation, the purchase, sale or exchange of property or the rendering
of any services, with any Affiliate or any officer or director thereof, enter
into, assume or suffer to exist any employment or consulting contract with any
Affiliate or any officer or director thereof or any former or current officer or
director of the Guarantor or the Company, except any transaction or contract
which is in the ordinary course of the Guarantor's or the Company's business
and which is upon fair and reasonable terms no less favorable to the Guarantor
or the Company than it would obtain in a comparable arms-length transaction with
a Person not an Affiliate; or (ii) pay any fees or expenses to, or reimburse or
assume any obligation for the reimbursement of any expenses incurred by, any
Affiliate or any officer or director thereof except as may be permitted in
accordance with the preceding clauses of this Section.
6.16 ORGANIZATION OF COMPANY AND WESTAH. The Company will not amend its
limited liability company agreement in any manner which would (a) relax the
limitations on the Company's business set forth therein, (b) increase the number
of members of the Company or (c) change the identity of the manager and the
Guarantor will not permit WestAH to amend its articles of incorporation in any
manner which would (a) relax the limitations on WestAH's business set forth
therein, (b) relax the requirements that WestAH maintain at least one
independent director, (c) alter the duties, powers, rights and responsibilities
of such director or (d) otherwise relax the provisions contained therein which
(i) limit the indebtedness incurred by WestAH, (ii) restrict WestAH from
initiating bankruptcy proceedings or (ii) require WestAH to maintain its
existence as a corporation separate and apart from its affiliates.
ARTICLE 7. EVENTS OF DEFAULT
-----------------------------
7.1 EVENT OF DEFAULT. Event of Default shall mean the occurrence of one
or more of the following described events:
(a) The Guarantor or the Company default in the payment of any
principal of the Revolving Credit Note when the same shall become due,
either by the terms thereof or otherwise as herein provided and such
default continues for a period of five (5) Business Days;
(b) The Guarantor or the Company default in payment of any Unused
Commitment Fee or any interest on the Revolving Credit Note or of any other
payment due the Lender under this Agreement when the same shall become due,
either by the terms thereof or otherwise as herein provided and such
default continues for a period of five (5) Business Days;
(c) The Guarantor or the Company default in the payment of any amount
due to Lender pursuant to the terms of any promissory note or other
instrument and such default continues for five (5) Business Days;
(d) The Guarantor or the Company default in the performance or
observance of any covenant, condition or agreement contained in any of the
Security Agreements or there is a breach of any of the terms of the
Validity Agreement;
(e) The Guarantor or the Company shall default in the payment of any
material Indebtedness beyond any period of grace provided with respect
thereto, or the Guarantor or the Company default in the performance of any
agreement under which such Indebtedness payment obligation is created if
the effect of such default is to cause or permit the holder or holders of
such obligation (or a representative of such holder or holders) to cause,
such payment obligation to become due prior to its date of maturity and
such default continues for five (5) Business Days;
(f) Any representation or warranty made by the Guarantor or the
Company herein or in any report, certificate or writing furnished in
connection with or pursuant to this Agreement shall be false or incorrect
in any material respect on the date as of which made;
(g) The Guarantor or the Company shall default in the performance or
observation of any covenant, condition or agreement in Articles 5 and 6
hereof;
(h) The Guarantor or the Company shall default in the performance or
observation of any covenant, condition or agreement made or required to be
observed or performed by the Guarantor or the Company under this Agreement
other than any covenant, condition or agreement described in Articles and 6
hereof and such default shall continue without cure for 30 days after
written notice thereof shall have been given to the Company by the Lender;
(i) The Guarantor or the Company make an assignment for the benefit
of creditors;
(j) The Guarantor or the Company petitions or applies to any tribunal
for the appointment of a trustee or receiver of the Guarantor or the
Company or of any substantial part of the assets of the Guarantor or
Company, or commences any proceeding relating to the Guarantor or the
Company under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction
whether now or hereafter in effect;
(k) Any petition or application is filed, or any proceedings are
commenced against the Guarantor or the Company and the Guarantor or the
Company by any act indicates its approval thereof, consent thereto, or
acquiescence therein, or any order is entered appointing a trustee or
receiver, or adjudicating the Guarantor or the Company bankrupt or
insolvent, or approving the petition in any such proceedings and such order
remains unstayed or undischarged for more than 60 days; provided, however,
that the Lender shall be under no obligation to make Loans hereunder during
the period that such order is unstayed or undischarged;
(l) Any order is entered in any proceedings against the Guarantor or
the Company decreeing the dissolution of the Guarantor or the Company and
such order remains unstayed or undischarged for more than 60 days;
(m) A final judgment or judgments for the payment of money in excess
of an aggregate of $100,000 shall be rendered against the Guarantor or the
Company and such judgment or judgments shall remain undischarged for a
period of 60 consecutive days during which the execution shall not be
effectively stayed;
(n) The Company defaults in the performance or observance of any of
its covenants or agreements contained in the Trust Agreement which has a
material adverse affect on its business, properties or assets, operations
or condition (financial or otherwise); or
(o) (a) Any Reportable Event or a Prohibited Transaction shall occur
with respect to any Plan; (b) a notice of intent to terminate a Plan under
section 4041 of ERISA shall be filed; (c) a notice shall be received by the
plan administrator of a Plan that the PBGC has instituted proceedings to
terminate a Plan or appoint a trustee to administer a Plan; (d) any other
event or condition shall exist which might, in the opinion of the Lender,
constitute grounds under section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan; (e) the Guarantor,
the Company or any ERISA Affiliate shall withdraw from a Multiemployer Plan
under circumstances which the Lender determines could have a material
adverse effect on the financial condition of the Guarantor or the Company;
and in case of the occurrence of any event or condition described in
clauses (a) through (e) above, such event or condition may result in the
aggregate amount of the Guarantor's or the Company's liability to a Plan or
a Multiemployer Plan or to the PBGC under section 4062, 4063, 4064, 4201 or
4202 of ERISA as determined in good faith by the Lender to be in excess of
10% of Tangible Net Worth, and such liability of the Guarantor or the
Company shall not be covered in full, for the benefit of the Guarantor or
the Company, by insurance.
7.2 CONSEQUENCES OF EVENT OF DEFAULT. (a) If any Event of Default
specified under Section 7.1, other than subsections (a) and (b) and (i) through
(l) thereof, shall occur and be continuing the Lender shall be under no further
obligation to make Loans hereunder and the Lender may, by written notice to the
Company, declare the unpaid balance of all Unused Commitment Fees and the
principal and interest accrued on the Revolving Credit Note and all other
obligations of the Guarantor and the Company hereunder to be forthwith due and
payable, and the same shall thereupon become immediately due and payable,
without any other or further presentment, demand, protest, notice of default,
notice of intent to accelerate or other notice of any kind, all of which are
hereby expressly waived.
(b) If an Event of Default specified under subsections (a) and (b) and (i)
through (l) inclusive, of Section 7.1 shall occur, the Lender shall be under no
further obligation to make Loans hereunder and the unpaid balance of all Unused
Commitment Fees and the principal and interest accrued on the Notes and all
other obligations of the Guarantor and the Company hereunder shall be
immediately due and payable automatically without presentment, demand, protest,
notice of default, notice of intent to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby expressly waived.
ARTICLE 8. MISCELLANEOUS
-------------------------
8.1 NOTICES. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by telecopy or telex and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or when deposited in the mail, postage prepaid, or,
in the case of telegraphic notice, when delivered to the telegraph company, or
in the case of telex notice, when sent, answerback received, addressed as
follows in the case of the Guarantor or the Company and the Lender or to such
address or other address as may be hereafter notified by the parties hereto and
any future holders of the Revolving Credit Note:
The Guarantor and
the Company: Republic Leasing Incorporated
The Republic Building
505 East Union Avenue, Suite 300
P.O. Box 919
Olympia, Washington 98507
Attention: Robert W. Christensen, Jr., President
The Lender: Bank One, Columbus, N.A.
100 East Broad Street
Columbus, Ohio 43271-1012
Attention: Robert N. Kent, Jr., Vice President
8.2 TERM OF AGREEMENT; TERMINATION; SUCCESSORS AND ASSIGNS. This
Agreement and all covenants, agreements, representations and warranties made
herein and in the reports, certificates and other writings delivered pursuant
hereto shall survive the execution and delivery of this Agreement, the making by
the Lender of each Revolving Credit Loan and the execution and delivery to the
Lender of the Revolving Credit Note and shall continue in full force and effect
until terminated. The representations of the Guarantor and the Company herein
are made as of the date of this Agreement. This Agreement shall terminate at
such time as the Revolving Credit Commitment is terminated in full and the
Lender has received payment in full of all amounts owing to the Lender hereunder
and under the Revolving Credit Note. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such parties; and all terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns, whether so expressed or not;
provided, however, that neither Guarantor nor the Company may assign or transfer
its rights or duties under this Agreement to any Person without the prior
written consent of the Lender.
8.3 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on the Guarantor
or the Company in any case shall entitle the Guarantor or the Company to any
other or further notice or demand in the same, similar and other circumstances.
Neither any failure nor any delay on the part of the Lender in exercising any
right, power or privilege hereunder or under the Revolving Credit Note shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of the same or the exercise of any other
right, power or privilege.
8.4 APPLICABLE LAW. This Agreement and the Revolving Credit Note shall be
deemed to be contracts made under and shall be construed in accordance with and
governed by the laws of the State of Ohio.
8.5 MODIFICATIONS, AMENDMENTS OR WAIVERS. (a) The Lender, the Guarantor
and the Company may from time to time enter into written agreements amending or
changing any provision of this Agreement or the rights of the Lender or the
Guarantor or the Company hereunder or give waivers or consents to a departure
from the due performance of the obligations of the Guarantor and the Company
hereunder or under the Revolving Credit Note.
(b) In the case of any such waiver or consent relating to any provision
hereof, the parties shall be restored to their former positions and rights
thereunder, and any Default or Event of Default so waived or consented to shall
be deemed to be cured and not continuing; but no such waiver or consent shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
8.6 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
8.7 HEADINGS. The headings of the articles and sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
8.8 EXPENSES. The Company shall pay or cause to be paid and save the
Lender harmless against liability for the payment of all reasonable
out-of-pocket expenses, including counsel fees and disbursements, incurred or
paid by the Lender in connection with (i) the negotiation, development,
preparation, execution and performance of this Agreement, the Guaranty, the
Security Agreements and the Revolving Credit Note and the related transactions
up to an amount not to exceed $20,000; (ii) any requested amendments, waivers or
consents pursuant to the provisions hereof and thereof; and (iii) the
enforcement of this Agreement, the Guaranty, the Security Agreements and the
Revolving Credit Note including such expenses as may be incurred by the Lender
in collection of the Revolving Credit Note and all obligations of the Guarantor
and the Company hereunder.
8.9 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.
8.10 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or effecting the validity or enforceability of such
provisions in any other jurisdiction.
8.11 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto reflect the
entire understanding of the parties with respect to the subject matter thereof
and supersede all prior agreements or understandings with respect thereto in
their entirety.
8.12 CERTIFICATES, ETC. All certificates, reports and other writings
submitted by the Guarantor or the Company to the Lender hereunder shall
constitute the representations and warranties of the Guarantor or the Company,
as the case may, to the Lender as to the truth and accuracy of all facts,
calculations and other information set forth therein, as though fully set forth
and repeated in this Agreement.
ARTICLE 9. DEFINITIONS
-----------------------
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Accounts" shall have the meaning provided in the Uniform Commercial Code.
"Accumulated Funding Deficiency" shall mean a funding deficiency described
in Section 302 of ERISA.
"Affiliate" of a Person shall mean any other Person directly or indirectly
controlling, under common control with, or controlled by such Person. An
Affiliate of the Guarantor shall include any officer, director, or record or
beneficial owner of 5% or more of the outstanding capital stock of any class of
the Guarantor. For purposes of the definition of Affiliate, "control" when used
with respect to any specific Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings relative to the foregoing.
"Agreement" is defined in the preamble.
"Asset-Specific Trust Interest" shall mean an asset-specific interest
evidenced by an Asset-Specific Trust Interest Certificate which represents 100%
of the beneficial interest in a particular Trust Asset (including both a Lease
and the related Leased Vehicle) not contained in pool of Trust Assets which are
subject to a Pooled Interest which shall be issued from time to time to the
Company and redeemed by the Trust pursuant to the terms of the Trust Agreement.
"Asset-Specific Trust Interest Certificate" shall mean a certificate issued
to the Company by the Trust pursuant to the provisions of the Trust Agreement
evidencing an Asset-Specific Trust Interest.
"Balance Sheet" is defined in Section 4.8.
"Borrowing Base" shall mean 90% of the Eligible Lease Amount.
"Borrowing Date" is defined in Section 1.1.
"Business Day" shall mean any day other than Saturdays, Sundays and other
legal holidays or days on which the principal office of the Lender is closed.
"Business Year" shall mean a year of 360 days.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Company" is defined in the preamble.
"Company Security Agreement" is defined in Section 2.4.
"Default" shall mean the occurrence of an event which with the giving of
notice, passage of time, or both would become an Event of Default.
"Eligible Lease" shall mean a Lease which as of any date satisfies the
criteria set forth in Section 4.18.
"Eligible Lease Amount" shall mean, as of the date of origination, the (i)
the greater of 105% of the manufacturer's suggested retail price or 120% of
invoice for new vehicles, or (ii) 105% of Kelly Blue Book for used vehicles,
plus (i) mechanical breakdown insurance acceptable to the Lender offered by an
insurance company acceptable to the Lender for a premium not to exceed $1,200,
(ii) credit life insurance acceptable to the lender offered by an insurance
company acceptable to the Lender for a premium not to exceed $1,000, and (iii)
and any applicable luxury tax, and (iv) the Guarantor's administrative fee. The
Eligible Lease Amount shall be recalculated on a monthly basis which shall fully
amortize the Eligible Lease Amount as of the date of origination to an amount
equal to the residual value of the related Leased Vehicle over the term of the
related Lease based on the implicit annual percentage rate at which the related
Lease was originated calculated on a constant yield basis. The Eligible Lease
Amount shall be so recalculated whether or not the related lease payment is
received. Any Lease which has ceased to be an Eligible Lease shall be excluded
from the calculation of the Eligible Lease Amount.
"Equipment" shall have the meaning provided in the Uniform Commercial Code.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean each trade or business, including the
Guarantor and the Company, whether or not incorporated, which together with the
Guarantor and the Company would be treated as a single employer under Section
4001 of ERISA.
"Event of Default" is defined in Section 7.1.
"GAAP" means generally accepted accounting principles consistently applied.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code.
"Guarantor" is defined in the preamble.
"Guarantor Security Agreement" is defined in Section 2.4.
"Indebtedness" as applied to any Person, shall mean all obligations of that
Person which are included in clauses (i), (ii), (iii) and (iv) of the definition
of Liabilities below, irrespective of whether or not any such obligations also
would be included within any other clause of such definition, but including,
however, obligations properly treated as capital lease obligations or their
equivalent under GAAP, and also including any obligation of such Person or an
ERISA Affiliate to a Multiemployer Plan.
"Interest Determination Date" is defined in Section 1.2(c).
"Interest Payment Date" is defined in Section 1.2(b).
"Inventory" shall have the meaning provided in the Uniform Commercial Code.
"Lease" shall mean fixed rate retail closed-end lease contract for an
automobile or light-duty truck which shall from time to time be originated or
purchased by the Trust.
"Leased Vehicle" shall mean any new or up to two model year-old used
automobile or light-duty truck which is subject to a Lease.
"Liabilities" as applied to any Person shall mean: (i) all obligations of
that Person to repay or pay money borrowed from another Person or the deferred
portion of the purchase price of services or property (other than inventory
purchased in the ordinary course of business unless evidenced by a note
payable); (ii) all obligations of that Person under bankers acceptances; (iii)
all obligations of that Person under letters of credit; (iv) obligations of
others which that Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or sold with recourse or agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which that Person
has agreed to supply or advance funds (whether by way of loan, stock purchase,
capital contribution or otherwise) or otherwise to become directly or indirectly
liable; (v) all obligations evidenced or secured by any mortgage, pledge, lien
or conditional sale or other title retention agreement to which any property or
asset owned or held by that Person is subject, whether or not the obligation
evidenced or secured thereby shall have been assumed; and (vi) all other items
(except items of capital stock, capital surplus, general contingency reserves,
deferred income taxes, retained earnings and amounts attributable to minority
interest, if any) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of that
Person as of the date Liabilities is to be determined; excluding, however, from
the foregoing, obligations of that Person properly treated as capital lease
obligations or their equivalent under GAAP.
"LIBOR Rate" shall mean the interest rate at which deposits in immediately
available funds in U.S. dollars are offered by prime banks in the interbank
market for a thirty (30) day period as published in the Wall Street Journal.
"Multiemployer Plan" shall mean a Plan described in Section 4001(a)(3) of
ERISA to which the Company or the Subsidiaries or any ERISA Affiliate is
required to contribute on behalf of any of its employees.
"Net Income" shall mean the net income (deficit) after income taxes of the
Company and the Subsidiaries as determined in accordance with GAAP.
"Net Worth" of a Person shall, as of any date, mean the total assets of
that Person less the total liabilities of that Person as determined in
accordance with GAAP for purposes of balance sheet presentation.
"Obligor" shall mean the lessee under a Lease.
"PBGC" shall mean the Pension Benefit Guarantee Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" shall mean a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Plan" shall mean any plan (other than a Multiemployer Plan) subject to
Title IV of ERISA maintained for employees of the Company, the Subsidiaries or
any ERISA Affiliate, and any such plan no longer maintained by the Company, the
Subsidiaries or any of their ERISA Affiliates to which the Company, the
Subsidiaries or any of their ERISA Affiliates has made or was required to make
any contributions within any of the preceding five years.
"Pledge Agreements" is defined in Section 2.4.
"Pooled Interest" shall mean a beneficial interest in a pool of Trust
Assets, none of which are subject to an Asset-Specific Trust Interest, evidenced
by one or more Pooled Interest Certificates.
"Pooled Interest Certificate" or "Pooled Interest Certificates" shall mean
a certificate or certificates evidencing all or part of a Pooled Interest issued
to the Company by the Trustee pursuant to the provisions of the Trust Agreement
for sale to investors.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, a cessation of operations described in
Section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under Section 401(a)(29) of the Code, or a failure to make a payment
required by Section 412(m) of the Code and Section 302(e) of ERISA when due.
"Revolving Credit Commitment" is defined in Section 1.1.
"Revolving Credit Loan" is defined in Section 1.1.
"Revolving Credit Note" is defined in Section 1.2.
"Security Agreements" is defined in Section 2.4.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
"State" shall mean the State of Ohio.
"Subsidiaries" shall mean any corporation or limited liability company of
which more than 50% of the outstanding stock or membership interests having
ordinary voting power to elect a majority of the board of directors or managers
of such corporation or limited liability company is directly or indirectly owned
by the Guarantor.
"Tangible Net Worth" shall mean the total of capital stock (less treasury
stock), paid in surplus, general contingency reserves, subordinated Indebtedness
and retained earnings (deficit) of the Guarantor on a consolidated basis,
determined in accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus, minus the
following items (without duplication of deductions, if any, appearing on the
consolidated balance sheet of the Guarantor):
(i) The book amount of all assets which would be treated as
intangibles under GAAP, including, without limitation, goodwill,
non-compete agreements with the Subsidiaries' former owners, long-term
customer contracts, plant engineering design and set-up, trademarks, trade
names, copyrights, patents and licenses and rights with respect to the
foregoing;
(ii) The amount by which aggregate inventories or aggregate securities
appearing on the asset side of such balance sheet exceeds the lower of cost
or market value (at the date of such balance sheet) thereof; and
(iii) Any write-up in the book amount of any asset resulting from a
revaluation thereof from the book amount entered upon acquisition of such
asset.
"Trust" shall mean the Westar Lease Origination Trust formed pursuant to
the Trust Agreement.
"Trust Agreement" shall mean the Origination Trust Agreement dated as of
July 12, 1995, among the Borrower (as grantor and beneficiary), the Lender and
Westar Lease Services, Inc., as Trustee.
"Trust Assets" shall mean the Leases, the Leased Vehicles, each certificate
of title or other evidence of ownership of a Leased Vehicle and all other
defined as "Trust Assets" in the Trust Agreement.
"Trustee" shall mean Westar Lease Services, Inc., as trustee under the
Trust Agreement.
"Unused Commitment Fee" is defined in Section 2.1.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as adopted
in the State, as amended from time to time.
"Unused Commitment" is defined in Section 2.1.
"Validity Agreement" shall mean the Validity Agreement dated the date
hereof executed and delivered to the Lender by certain shareholders of the
Guarantor.
"WestAH" is defined in Section 1.2.
In Witness Whereof, the Company, the Guarantor and the Lender have caused
this Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
BANK ONE, Columbus, N.A. WESTAR AUTO FINANCE, L.L.C.
("Lender") a Washington limited liability company
("Company")
By: WESTAR AUTO HOLDING CO.,
a Washington Corporation, Manager
By ------------------------
Robert N. Kent, Jr.
Vice President
By ------------------------
Robert W. Christensen, Jr.
President
REPUBLIC LEASING INCORPORATED
a Delaware Corporation ("Guarantor")
By ------------------------
Robert W. Christensen, Jr.
President
EXHIBIT A TO THE REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT NOTE
Columbus, Ohio
$12,000,000 July 12, 1995
On or before July 12, 1998, for value received, the undersigned, Westar
Auto Finance, L.L.C., a Washington limited liability company (the "Borrower")
hereby promises to pay to the order of Bank One, Columbus, N.A. (the "Lender")
or its assigns, as further provided herein, the principal amount of Twelve
Million Dollars ($12,000,000) or, if such principal is less, the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Borrower pursuant to the Agreement (as referred to and defined in Section 1
hereof), together with interest on the unpaid principal balance of all Revolving
Credit Loans made hereunder until paid in full at a fluctuating rate of interest
and payable on the dates as determined in accordance with Article 1 of the
Agreement. Both principal and interest are payable in federal funds or other
immediately available money of the United States of America at Bank One,
Columbus, N.A., 100 East Broad Street, Columbus, Ohio 43271-1012.
Section 1. LOAN AGREEMENT. This Revolving Credit Note is the Revolving
Credit Note referred to in the Revolving Credit Agreement dated as of July 12,
1995 (the "Agreement"), by and among the Borrower, the Guarantor and the Lender,
as the same may be amended, modified or supplemented from time to time, which
Agreement, as amended, is incorporated by reference herein. All capitalized
terms used herein shall have the same meanings as are assigned to such terms in
the Agreement. This Revolving Credit Note is entitled to the benefits of and is
subject to the terms, conditions and provisions of the Agreement. The
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events, and also for
repayments and reborrowings on account of the principal hereof prior to maturity
upon the terms, conditions and provisions specified therein.
Section 2. ENDORSEMENTS. All Revolving Credit Loans made by the Lender to
the Borrower pursuant to the Agreement and all payments made on account of
principal hereof shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the schedule attached hereto which is a part of this
Revolving Credit Note; provided, however, that the failure of the Lender or any
holder to make such notation shall not limit or otherwise affect the obligations
of the Borrower hereunder or under the Agreement. Prior to any such transfer,
all Revolving Credit Loans made by the Lender to the Borrower and all payments
made on account of principal hereof may be recorded in the regularly maintained
data processing records of the Lender.
Section 3. SETOFF. Any and all moneys now or at any time hereafter owing
to the Borrower from the holder hereof, are hereby pledged for the security of
this and all other Indebtedness from the Borrower to the holder hereof, and may,
upon the occurrence of any Event of Default, be paid and applied thereon whether
such Indebtedness be then due or is to become due.
WESTAR AUTO FINANCE, L.L.C.
By: WESTAR AUTO HOLDING CO., a
Washington corporation, Manager
By ------------------------
Robert W. Christensen, Jr.
President
REVOLVING CREDIT NOTE
OF WESTAR AUTO FINANCE, L.L.C.
Schedule of Loans and Payments of Principal
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Interest Rate Payments Balance Made by
- --------- --------- ------------- --------- --------- --------
EXHIBIT B TO THE REVOLVING CREDIT AGREEMENT
GUARANTY
This Guaranty Agreement ("Guaranty") is made as of July 12, 1995 by
Republic Leasing Incorporated, a Delaware corporation ("Republic") and Westar
Holding Co., a Washington corporation ("WestAH" and together with Republic, the
"Guarantors") to Bank One, Columbus, N.A. (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters which form the basis of this Guaranty.
A. LOAN AGREEMENT. The Lender, Westar Auto Finance, L.L.C., a Washington
limited liability company (the "Borrower") and Republic have entered into a
Revolving Credit Agreement concurrently with the execution of this Guaranty (the
"Revolving Credit Agreement"), pursuant to which the Lender has agreed to lend
the maximum sum of $12,000,000 to the Borrower. The Guarantors own 100% of the
membership interests in the Borrower. Terms used herein which are defined in
the Revolving Credit Agreement shall have the meanings set forth in the
Revolving Credit Agreement, unless otherwise defined herein or the context
hereof otherwise clearly requires. Concurrently with the execution of this
Guaranty, the Borrower has executed and delivered the Revolving Credit Note and
the Company Security Agreement and Republic has executed and delivered the
Guarantor Security Agreement and the Pledge Agreements.
B. GUARANTY. The Lender is willing to enter into the Revolving Credit
Agreement upon the condition that the Guarantors execute and deliver this
Guaranty.
Statement of Agreement
The Guarantors, jointly and severally, in consideration of the premises and
for the purpose of inducing the Lender to enter into the Revolving Credit
Agreement, do hereby covenant and agree to and for the benefit of the Lender as
follows:
Section 1. GUARANTY. In order to induce the Lender to enter into the
Revolving Credit Agreement and in consideration of the mutual promises of the
Borrower, the Lender and the Guarantor, the Guarantors, jointly and severally,
hereby absolutely and unconditionally guarantee the full and prompt payment to
the Lender of all amounts owing to the Lender under the Revolving Credit
Agreement at any time, including the principal of and interest on the Revolving
Credit Note and any unpaid fees owing to the Lender (collectively, the
"Obligations").
Section 2. RESCISSION OR RETURN OF PAYMENTS. The Guarantors agree that,
if at any time all or any part of any payment theretofore applied by the Lender
to any of the Obligations is or must be rescinded or returned by the Lender for
any reason whatsoever (including without limitation the insolvency, bankruptcy
or reorganization of the Borrower), such Obligations shall, for the purposes of
this Guaranty, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such
application by the Lender, and this Guaranty shall continue to be effective or
reinstated, as the case may be, as to such Obligations, all as though such
application by the Lender had not been made.
Section 3. UNCONDITIONAL OBLIGATIONS. The obligations of the Guarantors
under this Guaranty are unconditional and shall not be impaired by any action or
omission to act, with or without notice to the Guarantors, of the Lender or any
other holder of any of the Obligations, or by reason of any other circumstance
which might otherwise constitute a discharge or defense of a guarantor including
specifically the right to cure any default of the Borrower in any third party.
Each Guarantor hereby expressly waives diligence, presentment, protest, notice
of dishonor, demand for payment or performance, extension of time of payment or
performance, notice of acceptance of this Guaranty, and indulgences and notices
of every kind under the Revolving Credit Agreement, the Revolving Credit Note
and the Security Agreements and consents to any and all forbearances and
extensions of time thereunder and to any and all changes in the terms, covenants
and conditions thereof, and agrees that no Guarantor shall be released hereunder
by any matter or things whatsoever whereby any Guarantor as guarantor and surety
otherwise would or might be released other than a written release delivered by
the Lender upon payment and satisfaction in full of all of the Obligations.
Section 4. COSTS AND EXPENSES. The Guarantors, jointly and severally,
agree to pay all the reasonable costs, expenses and fees, including all
reasonable attorneys' fees, which may be incurred by the Lender in enforcing or
attempting to enforce this Guaranty following any default on the part of any
Guarantor hereunder, whether the same shall be enforced by suit or otherwise.
If any such fees and expenses are not so reimbursed, the amount thereof shall,
to the extent permitted by law, constitute indebtedness due hereunder.
Section 5. CLAIMS AGAINST BORROWERS. The Guarantors, jointly and
severally, hereby waive any claims or rights which any Guarantor might now have
or hereafter acquire against the Borrower or any other person primarily or
contingently liable on any obligations of the Borrower, which claims or rights
arise from the existence or performance of the Guarantors' obligations under
this Guaranty or any other guaranty including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, or any
right to participate in any claim or remedy of the Lender or any other creditor
which the Guarantors now have or hereafter acquire, whether such claim or right
arises in equity, under contract or statute, at common law, or otherwise.
Section 6. ASSIGNMENT OR TRANSFER OF LIABILITIES. Subject to the
provisions of the Revolving Credit Agreement, the Lender may, from time to time,
without notice to the Guarantors, assign or transfer any or all of the
Obligations or any interest therein; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer thereof, such Obligations
shall be and remain Obligations for the purposes of this Guaranty, and each and
every immediate and successive assignee or transferee of any of the Obligations
or of any such interest therein shall, to the extent of the interest of such
assignee or transferee in the Obligations, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the
transferor.
Section 7. COVENANTS OF GUARANTORS. Each Guarantor hereby agrees that it
shall not, without the Lender's prior written consent, transfer any material
assets to any other Person; pledge, hypothecate or otherwise encumber any
material asset; or assume any material direct or contingent liability; except in
the ordinary course of business, for good and valuable consideration, in
transactions with unrelated Persons, and under no circumstances shall any
Guarantor let its net worth diminish by a material amount.
Section 8. ENFORCEMENT. The obligations of the Guarantors hereunder are
independent of the obligations of the Borrower or any other guarantor of the
Obligations, and a separate action or actions may be brought and prosecuted
against each Guarantor regardless of whether any action is brought against the
Borrower or any other Guarantor or whether the Borrower or any other Guarantor
is joined in any such action(s). The Guarantors hereby acknowledge and agree
that it shall not be a condition precedent to the enforcement of this Guaranty
by the Lender against any Guarantor that the Lender first seek recourse against
the Borrower by reason of a breach or default by the Borrower under its
obligations to the Lender nor against any other Guarantor.
Section 9. CUMULATIVE REMEDIES, DELAYS. No delay on the part of the
Lender in the exercise of any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by the Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy. No action of the Lender permitted hereunder shall in any way affect or
impair the rights of the Lender and the obligations of the Guarantors under this
Guaranty. For the purpose of this Guaranty, Obligations shall include all
Obligations, notwithstanding any right or power of the Borrower or anyone else
to assert any claim or defense as to the invalidity or unenforceability of any
such Obligations, and no such claim or defense shall affect or impair the
obligations of any Guarantor hereunder.
Section 10. SUBORDINATION. Each Guarantor hereby subordinates any and all
claims which it now has, or in the future may acquire, as a creditor of the
Borrower to the prior payment and satisfaction in full of this Guaranty. If,
prior to the payment and satisfaction of this Guaranty, a Guarantor would,
without reference to the provisions of this Section 10, be entitled to receive
any payment on account of any claim of such Guarantor against the Borrower, all
such payments shall be made instead to the Lender until the Obligations have
been paid and satisfied in full, and each Guarantor hereby so directs. If any
Guarantor receives any payment on account of any claim of such Guarantor against
the Borrower, such Guarantor shall immediately pay the same over to the Lender
to be applied to the payment or satisfaction of the Obligations, if any.
Notwithstanding the foregoing, unless an Event of Default (as defined in the
Revolving Credit Agreement) has occurred, and any such Event of Default has not
been either waived or acknowledged to have been cured in writing by the Lender,
except as otherwise provided in the Security Agreements, the Guarantors may
receive and retain payments from the Borrower.
Section 11. FINANCIAL STATEMENTS OF GUARANTORS. Each Guarantor has
delivered a copy of its most recent financial statements to the Lender and
hereby certifies to the Lender that: (a) such financial statements were true and
correct as of the date appearing on such financial statements and there existed
no material undisclosed contingent liens on or hypothecations of any of such
Guarantor's assets or any undisclosed material contingent liabilities; (b) as of
the date hereof, there have been no material changes in such Guarantor's net
worth or its assets and liabilities, direct or contingent; and (c) there have
been no material transfers of assets since the respective dates of the financial
statements.
Section 12. AMENDMENTS, MODIFICATIONS, ETC. No amendment, modification,
termination, or waiver of any provision of this Guaranty nor consent to any
departure by any Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice or demand on any Guarantor in any case shall
entitle any Guarantor to any other or further notice or demand in similar or
other circumstances.
Section 13. APPLICABLE LAW. This Guaranty shall be deemed to be a
contract made under the laws of the State of Ohio and for all purposes shall be
governed by and construed in accordance with the laws of the State of Ohio.
Section 14. SEVERABILITY. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
This Guaranty has been executed by the Guarantors as of the date first
written above.
REPUBLIC LEASING INCORPORATED,
a Delaware corporation
By_______________________________
Robert W. Christensen, Jr.
President
WESTAR AUTO HOLDING CO.
a Washington corporation
By_______________________________
EXHIBIT C TO THE REVOLVING CREDIT AGREEMENT
GUARANTOR SECURITY AGREEMENT
July 12, 1995
THIS GUARANTOR SECURITY AGREEMENT ("Security Agreement") is entered into as
of the date set forth above by and between REPUBLIC LEASING INCORPORATED (the
Guarantor") and BANK ONE, COLUMBUS, N.A. (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters which form the basis of this Security Agreement.
A. LOANS. The Guarantor, Westar Auto Finance, L.L.C. ( the "Borrower")
and the Lender have entered into an Revolving Credit Agreement of even date
herewith (the "Revolving Credit Agreement") pursuant to which the Lender has
agreed to lend to the Borrower the maximum sum of $12,000,000 (the "Revolving
Credit Commitment"). Terms used herein which are defined in the Revolving
Credit Agreement shall have the meanings set forth in the Revolving Credit
Agreement, unless otherwise defined herein or the context hereof otherwise
clearly requires. The Revolving Credit Commitment is evidenced by a master
promissory note (the "Revolving Credit Note") of the Borrower. The borrowings
under the Revolving Credit Commitment are sometimes hereinafter referred to as
the Revolving Credit Loans. Pursuant to the terms of the Revolving Credit
Agreement, the Guarantor has entered into a Guaranty of even date herewith (the
"Guaranty") agreeing to pay Lender all of the obligations of the Borrower under
the Revolving Credit Agreement and the Revolving Credit Note.
B. SECURITY INTEREST. The Lender is willing to make the Revolving Credit
Loans to the Borrower upon the condition that the Guarantor grant to and create
in favor of the Lender security interests in certain property of the Guarantor
as security for (i) the payment of the Revolving Credit Note and the Guaranty,
(ii) the payment of all amounts owing pursuant to this Security Agreement and
the Revolving Credit Agreement, and (iii) the performance by the Guarantor of,
and compliance with, all of the terms, covenants, conditions, stipulations and
agreements contained in this Security Agreement, the Revolving Credit Agreement,
the Guaranty and the Revolving Credit Note (collectively, the "Secured
Obligations").
Statement of Agreement
For and in consideration of the Revolving Credit Loans made by the Lender
to the Borrower, and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
Section 1. CREATION OF SECURITY INTERESTS. As security for the Secured
Obligations, the Guarantor agrees that there now are or shall be duly executed
and filed or recorded in all appropriate state and local offices all documents
necessary to grant and create in favor of the Lender a perfected security
interest under the Uniform Commercial Code in and to the following, whether now
owned or hereafter acquired by the Guarantor, which security interest is hereby
granted:
(i) All Accounts of the Guarantor;
(ii) All Chattel Paper of the Guarantor;
(iii) All General Intangibles of the Guarantor;
(iv) All Instruments of the Guarantor;
(v) All Inventory of the Guarantor; and
(vi) All cash and non-cash Proceeds of the foregoing, including without
limitation the Proceeds in the Cash Collateral Accounts (as hereinafter
defined).
For purposes of this Security Agreement, the terms "Accounts," "Chattel
Paper," "General Intangibles," "Instruments," and "Proceeds" shall have the
meanings provided in the Uniform Commercial Code. The property described in
this Section 1 is hereinafter collectively referred to as the "Collateral."
Section 2. LENDER HAS RIGHTS AND REMEDIES OF A SECURED PARTY. In addition
to all rights and remedies given to the Lender by this Security Agreement, the
Lender shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
Section 3. PROVISIONS APPLICABLE TO THE COLLATERAL. The parties agree
that the following provisions shall be applicable to the Collateral during the
term of this Security Agreement:
(a) CHIEF EXECUTIVE OFFICES; BOOKS AND RECORDS.
(i) The Guarantor shall keep accurate and complete books and
records concerning the Collateral.
(ii) The Guarantor represents and warrants that its chief
executive office is located at the address set forth in Section 10.1
hereof. The Guarantor shall not move its chief executive office
except to such new location as it may establish in accordance with
paragraph (iv) below.
(iii) The only original books of account and records of the
Guarantor relating to all Accounts of the Guarantor are, and shall
continue to be, kept at its chief executive office. The location
where such books of account and records are kept shall not be
changed except in accordance with paragraph (iv) below.
(iv) The Guarantor shall not establish any new location for
its chief executive office or for the place where such books of
account and records are kept until (A) it shall have given to the
Lender written notice of its intention so to do, clearly describing
each such new location and providing such other information in
connection therewith as the Lender may reasonably request and (B),
with respect to each such new location, it shall have taken such
action, satisfactory to the Lender (including without limitation all
action required by Section 4 hereof) as may be necessary to maintain
the security interest of the Lender in the Accounts granted
hereunder at all times fully perfected and in full force and effect.
(v) The Guarantor shall not invoice an account debtor or
maintain its records relating to any Account in any name other than
its own proper corporate name.
(b) INSPECTION. The Lender shall have the right to review the
books and records of the Guarantor concerning the Collateral and to copy
the same and make excerpts therefrom, and to inspect the Collateral, at all
times during regular business hours; so long as such inspections do not
unreasonably interfere with or impede the operations of the Guarantor.
(c) GUARANTOR'S RIGHT TO COLLECT ACCOUNTS. Notwithstanding the
security interest in the Accounts granted hereunder, the Guarantor shall
have the right to collect its Accounts at its own cost and expense until
such time as the Lender shall have notified the Guarantor pursuant to
paragraph (e) below that it has revoked such right.
(d) CASH COLLATERAL ACCOUNTS. If any Event of Default (as that
term is defined in the Revolving Credit Agreement) shall occur or be
continuing or shall exist, the Lender shall have the right after notice to
the Guarantor to cause to be opened and maintained with the Lender one or
more non-interest bearing bank accounts in the name of the Guarantor as
cash collateral accounts (herein called "Collateral Accounts"). Upon
receipt of notice by the Guarantor from the Lender that one or more
Collateral Accounts have been opened for the Guarantor pursuant to this
paragraph, the Guarantor shall cause all cash Proceeds collected by it to
be delivered to the Lender forthwith upon receipt, in the original form in
which received, bearing such endorsements or assignments by the Guarantor
as may be necessary to permit collection thereof by the Lender, and for
such purpose the Guarantor hereby irrevocably authorizes and empowers the
officers and employees of the Lender to endorse and sign the name of the
Guarantor on all checks, drafts, money orders or other media of payment so
delivered to it and such endorsements or assignments shall, for all
purposes, be deemed to have been made by the Guarantor prior to any
endorsement or assignment thereof by the Lender. The Lender may use any
convenient or customary means for the purpose of collecting such checks,
drafts, money orders or other media of payment. Monies in the Collateral
Accounts shall be used by the Lender to reduce the Guarantor's obligations
under the Revolving Credit Note, the Revolving Credit Agreement, the
Guaranty and this Security Agreement. At such time as the Secured
Obligations are paid in full, the requirement that cash Proceeds be
delivered to the Lender shall terminate.
(e) COLLECTION OF ACCOUNTS BY LENDER. If any Event of Default (as
that term is defined in the Revolving Credit Agreement) shall occur or be
continuing or shall exist, the Lender shall have the right at any time (i)
to revoke the right of the Guarantor to collect its Accounts pursuant to
paragraph (c) above by written notice to the Guarantor to such effect, (ii)
to take over and direct collection of the Accounts of the Guarantor, (iii)
to give notice of the Lender's security interest in the Accounts to any or
all of the account debtors or makers obligated to the Guarantor thereon,
(iv) to direct such account debtors to make payment of the Accounts
directly to the Lender (and at the request of the Lender the Guarantor
shall indicate on all billings to account debtors that payments thereon are
to be made to the Lender), and (v) to take control of the Accounts of the
Guarantor and the Proceeds thereof and to take possession of all of the
Guarantor's books and records relating thereto, with full power and
authority in the name of the Lender or of the Guarantor to enforce,
collect, sue for, receive, compromise, settle and receipt for any and all
of the Accounts. If any Account becomes evidenced by a promissory note or
other instrument for the payment of money, the Guarantor shall at the
Lender's request deliver any such instrument to the Lender duly endorsed to
the order of the Lender as additional Collateral under this Security
Agreement. It is understood and agreed by the Guarantor that the Lender
shall have no liability whatsoever to the Guarantor under this paragraph
(e) except for its own gross negligence of willful misconduct.
(f) FUNDS IN COLLATERAL ACCOUNTS; CONTROL. All cash Proceeds
received by the Lender from the Guarantor pursuant to paragraph (d) above
or by the Lender directly from account debtors pursuant to paragraph (e)
above shall be deposited in the Lender's Collateral Account as further
security for the Secured Obligations. The Lender shall have sole dominion
and control over all funds deposited in each Collateral Account and such
funds may be withdrawn therefrom only by or at the direction of the Lender.
(g) ACCOUNT VERIFICATION. The Lender may at any time, without
notice to the Guarantor, verify with any account debtor of the Guarantor
the status of any accounts payable by such account debtor. The Guarantor
from time to time shall execute and deliver such instruments and take all
such action as the Lender may reasonably request in order to effectuate the
purpose of this paragraph (g).
(h) NOTICE OF ADVERSE CHANGE. The Guarantor shall immediately
notify the Lender of any material adverse change of which it has knowledge
which affects the ultimate collectibility of any Account in excess of
$25,000.
(i) SALE OF INVENTORY. Notwithstanding the security interest in
the Guarantor's Inventory granted hereunder, the Guarantor shall have the
right to sell or otherwise dispose of its Inventory in the ordinary course
of its business free and clear of such security interest, but in such event
such security interest shall continue in the Proceeds of such sales.
Section 4. PRESERVATION AND PROTECTION OF SECURITY INTERESTS. The
Guarantor shall faithfully preserve and protect the Lender's security interest
in its Collateral and shall, at its own cost and expense, cause such security
interest to be perfected and continued perfected so long as the Secured
Obligations or any portion thereof is outstanding and unpaid, and for such
purpose the Guarantor shall from time to time at the request of the Lender file
or record, or cause to be filed or recorded, such instruments, documents and
notices, including without limitation, financing statements and continuation
statements, as the Lender may deem necessary or advisable from time to time in
order to perfect and continue perfected said security interests. The Guarantor
shall do all such other acts and things and shall execute and deliver all such
other instruments and documents, including without limitation further security
agreements, pledges, endorsements, assignments and notices, as the Lender may
deem necessary or advisable from time to time in order to perfect and preserve
the priority of said security interest as a perfected first lien security
interest in the Collateral prior to the rights of any other secured party or
lien creditor except as otherwise permitted herein. The Lender, and its
officers, employees and authorized agents, or any of them, are hereby
irrevocably appointed the attorneys-in-fact of the Guarantor to do all acts and
things which the Lender may deem necessary or advisable to preserve, perfect and
continue perfected the Lender's security interest in the Collateral upon the
occurrence of an Event of Default or upon the Guarantor's refusal to do any such
act or thing, including without limitation the signing of financing,
continuation or other similar statements and notices on behalf of the Guarantor.
Section 5. APPLICATION OF MONEYS. Except as otherwise provided herein, if
any Event of Default (as that term is defined in the Revolving Credit Agreement)
shall occur or be continuing or exist, all moneys in all Collateral Accounts and
all moneys which the Lender shall receive upon realization of the security or
otherwise may be applied by or at the direction of the Lender in the following
manner:
(a) First, to the payment or reimbursement of all reasonable
advances, expenses and disbursements of the Lender (including, without
limitation, the reasonable fees and disbursements of its counsel and
agents) incurred in connection with the administration and enforcement of,
or the preservation of any rights under, this Security Agreement or the
Revolving Credit Agreement or in the collection of the obligations of the
Guarantor under the Revolving Credit Note; and
(b) Second, to be applied in any manner desired by the Lender to
the satisfaction of the Secured Obligations.
Section 6. CERTAIN REPRESENTATIONS AND COVENANTS. The Guarantor agrees,
subject to its right as provided in paragraph (c) of Section 3 hereof, from and
after the date of this Security Agreement and until payment in full of the
Secured Obligations, as follows:
(a) TITLE AND LIENS. It has and will have good and marketable
title to the Collateral from time to time owned or acquired by it, free and
clear of all liens, encumbrances, pledges and security interests, except
such as have been granted to the Lender and such as have not been
prohibited pursuant to Section 6.2 of the Revolving Credit Agreement; and
the security interests of the Lender in the Collateral are perfected lien
security interests, prior to the rights of any other secured party or lien
creditor. The Guarantor shall defend its title to the Collateral against
the claims and demands of all persons whomsoever.
(b) NEGATIVE PLEDGE. It shall not, without the prior written
consent of the Lender, (i) sell, assign or transfer any Accounts, (ii)
grant or create or permit to exist any lien, encumbrance, pledge or
security interest on, or in any of the Collateral or any other personal
property, real property or fixtures of the Guarantor except such as have
not been prohibited pursuant to Section 6.2 of the Revolving Agreement,
(iii) permit any levy or attachment to be made against any of the
Collateral, or (iv) file any financing statement with respect to any of the
Collateral, except financing statements in favor of the Lender and except
such as have not been prohibited pursuant to Section 6.2 of the Revolving
Credit Agreement.
c) RISK OF LOSS; INSURANCE. Risk of loss of, damage to, or
destruction of, the Collateral is on the Guarantor to the extent that the
Guarantor now or hereafter owns or acquires such Collateral. If the
Guarantor fails to effect and keep in full force and effect insurance
covering the Collateral, or fails to pay the premiums thereon when due, the
Lender may do so for the account of the Guarantor and add the cost thereof
to the Secured Obligations. The Guarantor hereby assigns and sets over
unto the Lender all moneys which may become payable on account of such
insurance, including without limitation any return or unearned premiums
which may be due upon cancellation of any such insurance, and directs the
insurers to pay the Lender any amount so due. The Lender, its officers,
employees and authorized agents are hereby irrevocably appointed the
attorneys-in-fact of the Guarantor to endorse any draft or check which may
be payable to the Guarantor in order to collect the proceeds of such
insurance or any return or unearned premiums. Any balance of insurance
proceeds remaining in the possession of the Lender after payment in full of
the Secured Obligations shall be paid to the Guarantor, or its order.
Section 7. EVENTS OF DEFAULT. If any Event of Default (as that term is
defined in the Revolving Credit Agreement) shall occur and be continuing or
shall exist, then in any such event, the Lender shall have such rights and
remedies in respect of the Collateral or any part thereof as are provided by the
Uniform Commercial Code and such other rights and remedies in respect thereof
which it may have at law or in equity or under this Security Agreement,
including without limitation the right to enter any premises where any
Collateral is located and take possession of the same without demand or notice
and without prior judicial hearing or legal proceedings, which the Guarantor
hereby expressly waives, and to sell all or any portion of the Collateral at
public or private sale without prior notice to the Guarantor except as otherwise
required by law (and if notice is required by law, after ten days' prior written
notice) at such place or places and at such time or times and in such manner and
upon such terms, whether for cash or on credit, as the Lender in its sole
discretion may determine. Upon any such sale of any of the Collateral, the
Lender may purchase all or any of the Collateral being sold, free from any
equity or right of redemption. The Lender shall apply the proceeds of any such
sale and any proceeds received by the Lender from the collection of Accounts and
Proceeds to the obligations of the Guarantor as provided in Section 5 hereof.
If such proceeds are insufficient to pay the amounts required by law, the
Guarantor shall be liable for any deficiency in the amount so realized from the
Collateral.
In addition, in any such event, the Guarantor shall promptly upon demand by
the Lender assemble the Collateral and make it available to the Lender at a
place to be designated by the Lender which shall be reasonably convenient to the
Lender. The right of the Lender under this Section to have the Collateral
assembled and made available to it is of the essence of this Security Agreement
and the Lender may, at its election, enforce such right by a bill in equity for
specific performance.
The Guarantor, to the extent that it has any right, title or interest in
any of the Collateral, waives and releases any right to require the Lender to
collect any of the Secured Obligations from any other of the Collateral under
any theory of marshalling of assets, or otherwise, and specifically authorizes
the Lender to apply any of the Collateral against any of the Secured Obligations
in any manner that the Lender may determine.
Section 8. AMENDMENTS, WAIVERS. The provisions of this Security Agreement
may from time to time be waived, modified or amended only by a writing signed by
each of the parties hereto.
Section 9. DEFEASANCE. Upon payment in full of the Secured Obligations,
this Security Agreement shall terminate and be of no further force and effect;
and in such event, the Lender shall, at the expense of the Guarantor, redeliver
and reassign the Collateral to the Guarantor and take all action necessary to
terminate the security interests of the Lender in the Collateral. Until such
time, however, this Security Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 10. MISCELLANEOUS.
10.1 NOTICES. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or three business days after deposit in the U.S. mail, postage prepaid,
addressed as follows, or to such address as may be hereafter notified by the
parties hereto:
The Guarantor: Republic Leasing Incorporated
The Republic Building
505 East Union Avenue, Suite 300
P.O. Box 919
Olympia, Washington 98507
Attention: Robert W. Christensen, Jr., President
The Lender: Bank One, Columbus, N.A.
100 East Broad Street
Columbus, Ohio 43271-1012
Attention: Robert N. Kent, Jr., Vice President
10.2 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on the
Guarantor in any case shall entitle the Guarantor to any other or further notice
or demand in the same, similar and other circumstances. Neither any failure nor
any delay on the part of the Lender in exercising any right, power or privilege
hereunder or under the Revolving Credit Agreement or the Revolving Credit Note
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of the same or the exercise of
any other right, power or privilege.
10.3 APPLICABLE LAW. This Security Agreement, the Revolving Credit
Agreement, the Guaranty and the Revolving Credit Note shall be deemed to be
contracts made under and shall be construed in accordance with and governed by
the laws of the State of Ohio.
10.4 COUNTERPARTS. This Security Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
10.5 HEADINGS. The headings of this Security Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
10.6 SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or effecting the validity or
enforceability of such provisions in any other jurisdiction.
10.7 ENTIRE AGREEMENT. This Security Agreement hereto reflects the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements or understandings with respect thereto in their
entirety.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Security Agreement the day and year
first above written.
BANK ONE, COLUMBUS, N.A. REPUBLIC LEASING INCORPORATED
By_____________________________ By___________________________
Robert N. Kent, Jr., Robert W. Christensen, Jr.,
Vice President President
EXHIBIT D TO THE REVOLVING CREDIT AGREEMENT
COMPANY SECURITY AGREEMENT
July 12, 1995
THIS COMPANY SECURITY AGREEMENT ("Security Agreement") is entered into as
of the date set forth above by and between WESTAR AUTO FINANCE, L.L.C. (the
Borrower") and BANK ONE, COLUMBUS, N.A. (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters which form the basis of this Agreement.
A. LOANS. The Borrower, Republic Leasing Incorporated ( the "Guarantor")
and the Lender have entered into an Revolving Credit Agreement of even date
herewith (the "Revolving Credit Agreement") pursuant to which the Lender has
agreed to lend to the Borrower the maximum sum of $12,000,000 (the "Revolving
Credit Commitment"). The Revolving Credit Commitment is evidenced by a master
promissory note (the "Revolving Credit Note") of the Borrower. The borrowings
under the Revolving Credit Commitment are sometimes hereinafter referred to as
the Revolving Credit Loans. Pursuant to the terms of the Revolving Credit
Agreement, the Guarantor has entered into a Guaranty of even date herewith (the
"Guaranty") agreeing to pay Lender all of the obligations of the Borrower under
the Revolving Credit Agreement and the Revolving Credit Note.
B. SECURITY INTEREST. The Lender is willing to make the Revolving Credit
Loans to the Borrower upon the condition that the Borrower grant to and create
in favor of the Lender security interests in certain property of the Borrower as
security for (i) the payment of the Revolving Credit Note, (ii) the payment of
all amounts owing pursuant to this Security Agreement and the Revolving Credit
Agreement, and (iii) the performance by the Borrower of, and compliance with,
all of the terms, covenants, conditions, stipulations and agreements contained
in this Security Agreement, the Revolving Credit Agreement and the Revolving
Credit Note (collectively, the "Secured Obligations").
Statement of Agreement
For and in consideration of the Revolving Credit Loans made by the Lender
to the Borrower, and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
Section 1. CREATION OF SECURITY INTERESTS. As security for the Secured
Obligations, the Borrower agrees that there now are or shall be duly executed
and filed or recorded in all appropriate state and local offices all documents
necessary to grant and create in favor of the Lender a perfected security
interest under the Uniform Commercial Code in and to the following, whether now
owned or hereafter acquired by the Borrower and the Borrower hereby assigns,
conveys, transfers, delivers and sets over unto the Lender:
(i) all right, title and interest of the Borrower in, to and under
the Trust Agreement and all rights, remedies, powers, privileges and claims
of the Borrower under or with respect to the Trust Agreement;
(ii) the Asset Specific Trust Interest Certificates issued to the
Borrower from time to time pursuant to the terms of the Trust Agreement and
the Asset-Specific Trust Interest in all Trust Assets represented by the
Asset Specific Trust Interest Certificates;
(iii) the proceeds from the sale of any Pooled Interest Certificates
issued to the Borrower from time to time pursuant to the terms of the Trust
Agreement and sold to investors;
(iv) distributions with respect to the Asset Specific Trust Interest
Certificates pursuant to the terms of the Trust Agreement; and
(v) all cash and non-cash Proceeds of the foregoing.
As used in this Security Agreement and unless the context requires a
different meaning, capitalized terms used herein and not otherwise defined
shall have the meanings assigned to such terms in the Revolving Credit
Agreement. The property described in this Section 1 is hereinafter
collectively referred to as the "Collateral."
Section 2. LENDER HAS RIGHTS AND REMEDIES OF A SECURED PARTY. In addition
to all rights and remedies given to the Lender by this Security Agreement, the
Lender shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
Section 3. PROVISIONS APPLICABLE TO THE COLLATERAL. The parties agree
that the following provisions shall be applicable to the Collateral during the
term of this Security Agreement:
(a) CHIEF EXECUTIVE OFFICES; BOOKS AND RECORDS.
(i) The Borrower shall keep accurate and complete books and
records concerning the Collateral.
(ii) The Borrower represents and warrants that its chief
executive office is located at the address set forth in Section 10.1
hereof. The Borrower shall not move its chief executive office except
to such new location as it may establish in accordance with paragraph
(iv) below.
(iii) The only original books of account and records of the
Borrower relating to all Collateral of the Borrower are, and shall
continue to be, kept at its chief executive office. The location
where such books of account and records are kept shall not be changed
except in accordance with paragraph (iv) below.
(iv) The Borrower shall not establish any new location for its
chief executive office or for the place where such books of account
and records are kept until (A) it shall have given to the Lender
written notice of its intention so to do, clearly describing each such
new location and providing such other information in connection
therewith as the Lender may reasonably request and (B), with respect
to each such new location, it shall have taken such action,
satisfactory to the Lender (including without limitation all action
required by Section 4 hereof) as may be necessary to maintain the
security interest of the Lender in the Collateral granted hereunder at
all times fully perfected and in full force and effect.
(b) INSPECTION. The Lender shall have the right to review the books
and records of the Borrower concerning the Collateral and to copy the same
and make excerpts therefrom, and to inspect the Collateral, at all times
during regular business hours; so long as such inspections do not
unreasonably interfere with or impede the operations of the Borrower.
(c) DISTRIBUTIONS WITH RESPECT TO ASSET-SPECIFIC TRUST INTERESTS. As
further security for the Secured Obligations and pursuant to the terms of
the Trust Agreement, prior to the occurrence of an Event of Default (as
such term is defined in the Revolving Credit Agreement), the Lender shall
be entitled to directly receive from the Trustee that portion of
distributions with respect to Asset-Specific Trust Interests as is
specified in the Trust Agreement. Upon the occurrence and during the
continuation of an Event of Default (as such term is defined in the
Revolving Credit Agreement), the Lender shall be entitled to receive from
the Trustee 100% of the distributions with respect to all Asset-Specific
Trust Interests.
Section 4. PRESERVATION AND PROTECTION OF SECURITY INTERESTS. The
Borrower shall faithfully preserve and protect the Lender's security interest in
its Collateral and shall, at its own cost and expense, cause such security
interest to be perfected and continued perfected so long as the Secured
Obligations or any portion thereof is outstanding and unpaid, and for such
purpose the Borrower shall from time to time at the request of the Lender file
or record, or cause to be filed or recorded, such instruments, documents and
notices, including without limitation, financing statements and continuation
statements, as the Lender may deem necessary or advisable from time to time in
order to perfect and continue perfected said security interests. The Borrower
shall do all such other acts and things and shall execute and deliver all such
other instruments and documents, including without limitation further security
agreements, pledges, endorsements, assignments and notices, as the Lender may
deem necessary or advisable from time to time in order to perfect and preserve
the priority of said security interest as a perfected first lien security
interest in the Collateral prior to the rights of any other secured party or
lien creditor except as otherwise permitted herein. The Lender, and its
officers, employees and authorized agents, or any of them, are hereby
irrevocably appointed the attorneys-in-fact of the Borrower to do all acts and
things which the Lender may deem necessary or advisable to preserve, perfect and
continue perfected the Lender's security interest in the Collateral upon the
occurrence of an Event of Default or upon Borrower's refusal to do any such act
or thing, including without limitation the signing of financing, continuation or
other similar statements and notices on behalf of the Borrower and to exercise
of any of the rights, remedies, powers, privileges and claims of the Borrower
under the Assigned Contracts.
Section 5. APPLICATION OF MONEYS. Except as otherwise provided herein, if
any Event of Default (as that term is defined in the Revolving Credit Agreement)
shall occur or be continuing or exist, all moneys in the Cash Collateral Account
and all moneys which the Lender shall receive upon realization of the security
or otherwise may be applied by or at the direction of the Lender in the
following manner:
(a) First, to the payment or reimbursement of all reasonable
advances, expenses and disbursements of the Lender (including, without
limitation, the reasonable fees and disbursements of its counsel and
agents) incurred in connection with the administration and enforcement of,
or the preservation of any rights under, this Security Agreement or the
Revolving Credit Agreement or in the collection of the obligations of the
Borrower under the Revolving Credit Note; and
(b) Second, to be applied in any manner desired by the Lender to the
satisfaction of the Secured Obligations.
Section 6. CERTAIN REPRESENTATIONS AND COVENANTS. The Borrower agrees
from and after the date of this Security Agreement and until payment in full of
the Secured Obligations, as follows:
(a) TITLE AND LIENS. It has and will have good and marketable title
to the Collateral from time to time owned or acquired by it, free and clear
of all liens, encumbrances, pledges and security interests, except such as
have been granted to the Lender and such as have not been prohibited
pursuant to Section 6.2 of the Revolving Credit Agreement; and the security
interests of the Lender in the Collateral are perfected lien security
interests, prior to the rights of any other secured party or lien creditor.
The Borrower shall defend its title to the Collateral against the claims
and demands of all persons whomsoever.
(b) NEGATIVE PLEDGE. It shall not, without the prior written consent
of the Lender, (i) sell, assign or transfer any Collateral, or, except
pursuant to the terms of the Assigned Contracts, any Leases or Leased
Vehicles (ii) grant or create or permit to exist any lien, encumbrance,
pledge or security interest on, or in any of the Collateral or any other
personal property, real property or fixtures of the Borrower except such as
have not been prohibited pursuant to Section 6.2 of the Revolving
Agreement, (iii) permit any levy or attachment to be made against any of
the Collateral, or (iv) file any financing statement with respect to any of
the Collateral, except financing statements in favor of the Lender and
except such as have not been prohibited pursuant to Section 6.2 of the
Revolving Credit Agreement.
(c) RISK OF LOSS; INSURANCE. Risk of loss of, damage to, or
destruction of, the Collateral is on the Borrower to the extent that the
Borrower now or hereafter owns or acquires such Collateral. If the
Borrower fails to effect and keep in full force and effect insurance
covering the Collateral, or fails to pay the premiums thereon when due, the
Lender may do so for the account of the Borrower and add the cost thereof
to the Secured Obligations. The Borrower hereby assigns and sets over unto
the Lender all moneys which may become payable on account of such
insurance, including without limitation any return or unearned premiums
which may be due upon cancellation of any such insurance, and directs the
insurers to pay the Lender any amount so due. The Lender, its officers,
employees and authorized agents are hereby irrevocably appointed the
attorneys-in-fact of the Borrower to endorse any draft or check which may
be payable to the Borrower in order to collect the proceeds of such
insurance or any return or unearned premiums. Any balance of insurance
proceeds remaining in the possession of the Lender after payment in full of
the Secured Obligations shall be paid to the Borrower, or its order.
Section 7. EVENTS OF DEFAULT. If any Event of Default (as that term is
defined in the Revolving Credit Agreement) shall occur and be continuing or
shall exist, then in any such event, the Lender shall have the irrevocable right
under the Trust Agreement to order the Trustee to distribute any Trust Assets
associated with any Asset-Specific Trust Interest which is then part of the
Collateral to the Lender and such rights and remedies in respect of the
Collateral or any part thereof as are provided by the Uniform Commercial Code
and such other rights and remedies in respect thereof which it may have at law
or in equity or under this Security Agreement, including without limitation the
right to enter any premises where any Collateral is located and take possession
of the same without demand or notice and without prior judicial hearing or legal
proceedings, which the Borrower hereby expressly waives, and to sell all or any
portion of the Collateral at public or private sale without prior notice to the
Borrower except as otherwise required by law (and if notice is required by law,
after ten days' prior written notice) at such place or places and at such time
or times and in such manner and upon such terms, whether for cash or on credit,
as the Lender in its sole discretion may determine. Upon any such sale of any of
the Collateral, the Lender may purchase all or any of the Collateral being sold,
free from any equity or right of redemption. The Lender shall apply the
proceeds of any such sale to the obligations of the Borrower as provided in
Section 5 hereof. If such proceeds are insufficient to pay the amounts required
by law, the Borrower shall be liable for any deficiency in the amount so
realized from the Collateral.
In addition, in any such event, the Borrower shall promptly upon demand by
the Lender assemble the Collateral and make it available to the Lender at a
place to be designated by the Lender which shall be reasonably convenient to the
Lender. The right of the Lender under this Section to have the Collateral
assembled and made available to it is of the essence of this Security Agreement
and the Lender may, at its election, enforce such right by a bill in equity for
specific performance.
The Borrower, to the extent that it has any right, title or interest in any
of the Collateral, waives and releases any right to require the Lender to
collect any of the Secured Obligations from any other of the Collateral under
any theory of marshalling of assets, or otherwise, and specifically authorizes
the Lender to apply any of the Collateral against any of the Secured Obligations
in any manner that the Lender may determine.
Section 8. AMENDMENTS, WAIVERS. The provisions of this Security Agreement
may from time to time be waived, modified or amended only by a writing signed by
each of the parties hereto.
Section 9. DEFEASANCE; PARTIAL RELEASES OF COLLATERAL. Upon payment in
full of the Secured Obligations, this Security Agreement shall terminate and be
of no further force and effect; and in such event, the Lender shall, at the
expense of the Borrower, redeliver and reassign the Collateral to the Borrower
and take all action necessary to terminate the security interests of the Lender
in the Collateral. Until such time, however, this Security Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Upon mandatory repayment of outstanding Revolving
Credit Loans pursuant to Section 1.2(c)(ii) of the Revolving Credit Agreement,
the Lender shall, at the expense of the Borrower, redeliver and reassign each
related Asset-Specific Trust Interest Certificate to the Borrower representing
Trust Assets the origination of which was funded with the proceeds of the
Revolving Credit Loans being repaid and take all action necessary to terminate
the security interest of the Lender in, and only in, such Asset-Specific Trust
Interest Certificates and the Asset-Specific Trust Interests evidenced thereby.
Section 10. MISCELLANEOUS.
10.1 NOTICES. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or three business days after deposit in the U.S. mail, postage prepaid,
addressed as follows, or to such address as may be hereafter notified by the
parties hereto:
The Borrower: Republic Leasing Incorporated
The Republic Building
505 East Union Avenue, Suite 300
P.O. Box 919
Olympia, Washington 98507
Attention: Robert W. Christensen, Jr., President
The Lender: Bank One, Columbus, N.A.
100 East Broad Street
Columbus, Ohio 43271-1012
Attention: Robert N. Kent, Jr., Vice President
10.2 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in the same, similar and other circumstances. Neither any failure nor any delay
on the part of the Lender in exercising any right, power or privilege hereunder
or under the Revolving Credit Agreement or the Revolving Credit Note shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of the same or the exercise of any other
right, power or privilege.
10.3 APPLICABLE LAW. This Security Agreement, the Revolving Credit
Agreement and the Revolving Credit Note shall be deemed to be contracts made
under and shall be construed in accordance with and governed by the laws of the
State of Ohio.
10.4 COUNTERPARTS. This Security Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
10.5 HEADINGS. The headings of this Security Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
10.6 SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or effecting the validity or
enforceability of such provisions in any other jurisdiction.
10.7 ENTIRE AGREEMENT. This Security Agreement reflects the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements or understandings with respect thereto in their
entirety.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Security Agreement the day and year
first above written.
BANK ONE, COLUMBUS, N.A. REPUBLIC LEASING INCORPORATED
By_________________________ By_________________________
Robert N. Kent, Jr., Robert W. Christensen, Jr.,
Vice President President
EXHIBIT E TO THE REVOLVING CREDIT AGREEMENT
PLEDGE OF STOCK
This Pledge of Stock ("Agreement") is made as of July 12, 1995 by and
between REPUBLIC LEASING INCORPORATED (the "Pledgor"), and BANK ONE, COLUMBUS,
N.A., as pledgee (the "Lender").
BACKGROUND
A. LOAN AGREEMENT. The Lender, Westar Auto Finance, L.L.C., a Washington
limited liability company (the "Borrower") and the Pledgor have entered into a
Revolving Credit Agreement concurrently with the execution of this Agreement
(the "Loan Agreement"), pursuant to which the Lender has agreed to lend the
maximum principal sum of $12,000,000 to the Borrower (the "Revolving Credit
Commitment"). The Revolving Credit Commitment is evidenced by a master
promissory note (the "Revolving Credit Note") of the Borrower. The borrowings
under the Revolving Credit Commitment are sometimes hereinafter referred to as
the Revolving Credit Loans. Terms used herein which are defined in the Loan
Agreement shall have the meanings set forth in the Loan Agreement, unless
otherwise defined herein or the context hereof otherwise clearly requires.
B. PLEDGE. The Lender is willing to make the Revolving Credit Loans to
the Borrower upon the condition that (i) the Pledgor, which is the holder of 99%
of the membership interests of the Borrower and the owner of 100% of the
outstanding shares of the stock (the "WestAH Shares") of Westar Auto Holding
Co., a Washington corporation (the "Company"), and the Company which is the
holder of all of the remaining membership interests of the Borrower and the
manager of the Borrower, guarantee the obligations of the Borrower relating to
the Revolving Credit Loans in accordance with the terms of a certain Guaranty
Agreement dated the date hereof (the "Guaranty"), (ii) the obligation of the
Pledgor under the Guaranty be secured by a Pledge and Assignment of Membership
Interests in favor of the Lender dated the date hereof (the "Assignment"), (iii)
the obligations of the Pledgor under the Guaranty be further secured by
interests in all of the WestAH Shares in the Company and all of the outstanding
shares of stock of Westar Lease Services, Inc., a Washington corporation and a
wholly owned subsidiary of the Pledgor (the "WesTRUST Shares," and, together
with the WestAH Shares, the "Shares") now owned or which may be owned in the
future by the Pledgor, and (iv) the Pledgor pledges, assigns and delivers all of
the stock certificates evidencing the Shares (the "Certificates") owned by them
to the Lender.
AGREEMENT
In consideration of the Revolving Credit Loans made by the Lender to the
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
Section 1. PLEDGE. As security for its obligations under the Guaranty,
the Pledgor hereby grants to the Lender a security interest in the Shares which
are now owned or which may in the future be owned by the Pledgor, together with
any additions thereto and proceeds therefrom, and hereby pledges and assigns the
Certificates representing the Shares to the Lender. The Pledgor has delivered
stock powers with respect to the Certificate(s) endorsed in blank (the "Stock
Powers") to the Lender and hereby authorizes the Lender, upon the occurrence and
continuation of an Event of Default (as defined in Section 6 below), to transfer
the Certificates to the Lender. The Lender hereby acknowledges receipt of the
Certificate(s) as security for the obligations of the Pledgor under the
Guaranty. The Lender agrees not to transfer, sell, encumber or otherwise
dispose of the Shares except in accordance with the provisions of this
Agreement.
Section 2. DIVIDENDS AND VOTING RIGHTS. The Pledgor, as record owner of
the Shares, is entitled, prior to the occurrence of any Event of Default (as
defined in Section 6 below) and the exercise of the Lender's rights hereunder to
(i) retain all cash dividends paid on account of the Shares, (ii) exercise all
voting rights of the Shares, and (iii) exercise all other shareholders' rights
and privileges attributable to the Shares other than the right of sale, except
and unless as otherwise provided herein.
Section 3. ADJUSTMENTS. As additional security for the obligations of the
Pledgor under the Guaranty, the Pledgor hereby grants to the Lender a security
interest in all securities, money, funds or other property received by the
Pledgor on account of or in exchange for the Shares whether as a result of any
share dividend, share split, reclassification, merger or consolidation,
reorganization or otherwise, and agrees to promptly pledge and deliver such
securities, together with appropriate certificates and stock powers endorsed in
blank to the Lender.
Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The
Pledgor represents, warrants and covenants to the Lender, which representations,
warranties and covenants will survive the execution and delivery of this
Agreement, as follows:
(a) The execution, delivery and performance of this Agreement will
not conflict with any order, writ, injunction or decree of any court or
arbitrator presently in effect having applicability to the Pledgor, or with
any agreement to which the Pledgor is a party, which in any way prohibits
or would be violated by the execution and carrying out of this Agreement.
(b) The Pledgor owns the Shares free and clear of all liens and
encumbrances (other than those granted to Lender) and there are no other
restrictions on the transfer or sale of any of the Shares, except as
disclosed on the Certificates. The Pledgor shall not sell, assign,
transfer, pledge or encumber in any manner the Shares without the prior
written approval of the Lender.
(c) The Shares constitute all of the shares of the capital stock of
the Company.
Section 5. RELEASE OF SECURITY INTEREST. Upon payment in full of the
Revolving Credit Loans and all other amounts payable to the Lender by the
Borrower thereunder, the Lender agrees to (a) immediately cancel all Stock
Powers with respect to the Certificates, (b) release its security interest in
the Shares and (c) deliver all of the Certificates to the Pledgor. In the event
that the Lender shall consent to the transfer by the Pledgor of the WesTRUST
Shares to a Person which is not an Affiliate of the Pledgor, which consent shall
not be unreasonably withheld, the Lender agrees to (a) immediately cancel all
Stock Powers with respect to the Certificates evidencing ownership of the
WesTRUST Shares, (b) release its security interest in the WesTRUST Shares and
(c) deliver all of the Certificates evidencing ownership of the WesTRUST Shares
to the Pledgor.
Section 6. DEFAULT. The failure of the Pledgor to comply with or the
breach of any provision contained in the Guaranty or the Loan Agreement shall
constitute an event of default ("Event of Default") hereunder. Upon the
occurrence and continuation of such an Event of Default, the Lender shall have
all rights and remedies provided by law, including those under the Uniform
Commercial Code as adopted in Ohio ("UCC"), and may sell the Shares in any
manner which is not inconsistent with the provisions of the UCC. The proceeds
of any sale of the Shares shall first be applied to the repayment of all amounts
owing to the Lender under the Loan Agreement. These rights shall be in addition
to other remedies now or hereafter existing at law or in equity. Any failure or
delay by the Lender to exercise any right hereunder shall not be construed as a
waiver of the right to exercise the same or any other right at any time.
Section 7. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Agreement will bind and inure to the benefit of the respective successors and
assigns of the parties.
Section 8. CONTROLLING LAW; SEVERABILITY. The various provisions of this
Agreement will be construed under, and the respective rights and obligations of
the parties will be determined with reference to, the laws of the State of Ohio.
If and to the extent that any court of competent jurisdiction holds any
provision (or any part thereof) of this Agreement to be invalid, such holding
will in no way affect the validity of the remainder of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
LENDER: PLEDGOR:
BANK ONE, COLUMBUS, N.A. REPUBLIC LEASING INCORPORATED
By_____________________________ By___________________________
Robert N. Kent, Jr. Robert W. Christensen, Jr.
Vice President President
EXHIBIT F TO THE REVOLVING CREDIT AGREEMENT
PLEDGE OF AND ASSIGNMENT OF MEMBERSHIP INTERESTS
This Pledge and Assignment of Membership Interests (the "Assignment") is
made as of July 12, 1995 by REPUBLIC LEASING INCORPORATED (the "Assignor") to
BANK ONE, COLUMBUS, N.A. (the "Assignee").
BACKGROUND
A. LOAN AGREEMENT. The Assignee, Westar Auto Finance, L.L.C., a
Washington limited liability company (the "Borrower") and the Assignor have
entered into a Revolving Credit Agreement concurrently with the execution of
this Assignment (the "Loan Agreement"), pursuant to which the Lender has agreed
to lend the maximum principal sum of $12,000,000 to the Borrower (the "Revolving
Credit Commitment"). The Revolving Credit Commitment is evidenced by a master
promissory note (the "Revolving Credit Note") of the Borrower. The borrowings
under the Revolving Credit Commitment are sometimes hereinafter referred to as
the Revolving Credit Loans. Terms used herein which are defined in the Loan
Agreement shall have the meanings set forth in the Loan Agreement, unless
otherwise defined herein or the context hereof otherwise clearly requires.
B. ASSIGNMENT. The Lender is willing to make the Revolving Credit Loans
to the Borrower upon the condition that (i) the Assignor, which is the holder of
99% of the membership interests of the Borrower (the "Membership Interests"), a
Washington limited liability company formed pursuant to the provisions of a
Limited Liability Company Agreement dated as of July 12, 1995 between the
Assignor and Westar Auto Holding Co. (the "Limited Liability Company
Agreement"), guarantee the obligations of the Borrower relating to the Revolving
Credit Loans in accordance with the terms of a certain Guaranty Agreement dated
the date hereof (the "Guaranty") and (ii) the obligations of the Assignor under
the Guaranty be secured by the Assignment.
AGREEMENT
In consideration of the Revolving Credit Loans made by the Assignee to the
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
Section 1. ASSIGNMENT. As security for their obligations under the
Guaranty, the Assignor hereby assigns, transfers and sets over unto the Assignee
all of its right, title and interest in and to the Membership Interests and all
proceeds therefrom, including without limitation the Assignor's rights to
distributions of cash or other property from the Borrower ("Distributions" and,
together with the Membership Interests, the "Collateral").
Section 2. CREATION OF SECURITY INTEREST. The Assignor agrees that there
shall be duly executed and filed or recorded in all appropriate state and local
offices all documents necessary to grant and create in favor of the Assignee a
perfected security interest in the Collateral under the Uniform Commercial Code.
Section 3. ASSIGNEE HAS RIGHTS AND REMEDIES OF A SECURED PARTY. In
addition to all rights and remedies given to the Assignee by this Assignment,
the Assignee shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
Section 4. PRESERVATION AND PROTECTION OF SECURITY INTEREST. The Assignor
shall faithfully preserve and protect the Assignee's security interest in the
Collateral and shall, at its own cost and expense, cause such security interest
to be perfected and continued perfected until the Assignor has been released
pursuant to the provisions of the Guaranty, and for such purpose the Assignor
shall from time to time at the request of the Assignee file or record, or cause
to be filed or recorded, such instruments, documents and notices, including
without limitation, financing statements and continuation statements, as the
Assignee may deem necessary or advisable from time to time in order to perfect
and continue perfected said security interest. The Assignor shall do all such
other acts and things and shall execute and deliver all such other instruments
and documents, including without limitation further security agreements,
pledges, endorsements, assignments and notices, as the Assignee may deem
necessary or advisable from time to time in order to perfect and preserve the
priority of said security interest as a perfected first lien security interest
in the Collateral prior to the rights of any other secured party or lien
creditor except as otherwise permitted herein. The Assignee, and its officers,
employees and authorized agents, or any of them, are hereby irrevocably
appointed the attorneys-in-fact of the Assignor to do all acts and things which
the Assignee may deem necessary or advisable to preserve, perfect and continue
perfected the Assignee's security interest in the Collateral upon the occurrence
of an Event of Default or upon Assignor's refusal to do any such act or thing,
including without limitation the signing of financing, continuation or other
similar statements and notices on behalf of the Assignor.
Section 5. RIGHTS TO COLLATERAL PRIOR TO AND AFTER OCCURRENCE OF EVENT OF
DEFAULT. Until the occurrence of an Event of Default (as defined in Section 9
below) and the exercise of the Assignee's rights hereunder, the Assignor may
retain, use and enjoy the benefits of its Collateral. After the occurrence of
an Event of Default, Assignee may enforce this Assignment by notifying the
Assignor by registered or certified mail or by personal delivery sent or
delivered to the address hereinafter prescribed for sending notices. Upon the
occurrence of any Event of Default, Assignee shall have the right, but not the
obligation, exercisable upon written notice to the Assignor and the Borrower, to
exercise all of the Assignee's rights and remedies hereunder, and this
Assignment, together with such notice to the Borrower, shall constitute a
direction to and full authority to the Borrower to treat and regard Assignee as
the transferee of the Membership Interests entitled in the place and stead of
the Assignor to receive all Distributions with respect thereto. The Assignor
hereby irrevocably authorizes the Borrower to rely upon and comply with any
written notice or demand by Assignee for the collection of any Distributions
under the Limited Liability Company Agreement. The Assignee shall not be
required to prove or otherwise establish for the benefit of the Borrower the
existence of an Event of Default, and the Borrower is hereby authorized to rely
upon the written statement of Assignee with respect to the existence of an Event
of Default. The Borrower shall have no liability to the Assignor for the
Borrower's reliance upon Assignee's written notice of the existence of an Event
of Default. Without in any way limiting the effectiveness of the aforesaid
authorization, if the Assignor shall receive all or any portion of any
Distribution which under this Assignment is receivable by the Assignee, the
Assignor will hold the same in trust and will remit the same immediately to the
Assignee. Upon the exercise by the Assignee of its rights and remedies
hereunder (i.e. upon written notice from Assignee to the Assignor and the
Borrower), the Assignee shall enjoy all of the rights and privileges of the
Assignor to operate, manage and control the Borrower, all as if Assignee were a
party to the Limited Liability Company Agreement in lieu of the Assignor.
Section 6. OBLIGATIONS OF THE ASSIGNEE. The Assignee shall have no
responsibility to enforce collection of any Distribution hereby assigned and
shall have no other responsibility in connection therewith, except the
responsibility to account for funds actually received. Neither this Assignment
nor any action or inaction on the part of Assignee prior to the exercise of
Assignee's rights hereunder shall constitute an assumption on the part of
Assignee of any duty or obligation with respect to the Membership Interests or
the Limited Liability Company Agreement, nor shall Assignee have any duty or
obligation to make any payment to be made by the Assignor under the Limited
Liability Agreement, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts or the performance of
any obligations which have been assigned to the Assignee or to which it may be
entitled hereunder at any time or times. No action or inaction on the part of
the Assignee shall adversely affect or limit in any way the rights of the
Assignee hereunder.
Section 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ASSIGNOR. The
Assignor represents, warrants and covenants that the following are true as of
this date and will continue to be true until the Assignor has been released
pursuant to the provisions of the Guaranty:
(a) The Borrower is duly organized and is a validly existing limited
liability company under the laws of the State of Washington;
(b) The Assignor will not create nor permit to exist any lien on the
Collateral;
(c) The Assignor has full power and authority to execute this
Assignment, to perform its obligations hereunder and to subject the
Collateral to the security interest granted hereunder;
(d) The execution of this Assignment will not cause a default by the
Assignor under any agreements to which it is a party;
(e) The Assignor is the sole owner of the Collateral;
(f) No certificate evidencing the Collateral has been issued and if
such certificate is subsequently issued, it will be deposited with the
Assignee to continue the perfection of its security interest;
(g) If the Assignee becomes the owner of the Collateral upon the
exercise of its remedies under this Assignment, the Assignee shall not be
required to pay any capital contributions or other assessments to the
Borrower with respect to such Collateral;
(h) The Collateral constitutes all economic and beneficial interests
in the Borrower;
(i) The Assignor has not made any prior assignment of the Collateral;
(j) The Collateral is not subject to any defenses, set-offs or
counterclaims of any nature whatsoever;
(k) There exists no event, condition or occurrence that constitutes,
or which with notice and/or the passage of time would constitute, a breach
of or a default under any term or condition of any of the Collateral; and
(l) The Assignor will not take any action that would destroy or
impair the security to the Assignee of this Assignment.
Section 8. RELEASE OF SECURITY INTEREST. Upon payment in full of the
Revolving Credit Loans and all other amounts payable to the Assignee by the
Borrower thereunder, the Assignee agrees to release its security interest in the
Collateral.
Section 9. DEFAULT. The failure of the Assignor to comply with or the
breach of any provision contained in the Guaranty or in the Loan Agreement shall
constitute an event of default ("Event of Default") hereunder. Upon the
occurrence and continuation of such an Event of Default, the Assignee shall have
all rights and remedies provided by law, including those under the Uniform
Commercial Code as adopted in Ohio ("UCC"). The proceeds of any sale of the
Collateral shall first be applied to the repayment of all amounts owing to the
Lender under the Loan Agreement. These rights shall be in addition to other
remedies now or hereafter existing at law or in equity. Any failure or delay by
the Assignee to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time.
Section 10. CONTROLLING LAW; SEVERABILITY. The various provisions of this
Assignment will be construed under, and the respective rights and obligations of
the parties will be determined with reference to, the laws of the State of Ohio.
If and to the extent that any court of competent jurisdiction holds any
provision (or any part thereof) of this Assignment to be invalid, such holding
will in no way affect the validity of the remainder of this Assignment.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed
on the date first above written.
REPUBLIC LEASING INCORPORATED
a Delaware corporation
By__________________________
Robert W. Christensen, Jr.
President
EXHIBIT G TO THE REVOLVING CREDIT AGREEMENT
DISPUTE RESOLUTION AGREEMENT
BANK ONE AGREEMENT WITH RESPECT TO PREVENTION
AND RESOLUTION OF DISPUTES
This Agreement with Respect to Prevention and Resolution of Disputes
(hereafter referred to as "Agreement") dated as of this 12th day of July, 1995,
by and between Bank One, Columbus, N.A., (hereafter referred to as "Bank One"),
and Westar Auto Finance, L.L.C., Republic Leasing Incorporated, and ___________,
(hereafter referred to as "Obligors").
WITNESSETH:
WHEREAS, Bank One is entering into or has entered into a financing
transaction (hereafter referred to as "Financing Transaction") evidenced by the
following instruments, including any amendments, extensions or renewals thereof
which instruments may be secured with collateral security documents and/or
guaranty agreements (hereafter collectively referred to as "Loan Documents"):
(i) Revolving Credit Agreement $ 12,000,000
----------------------------- ----------------- -------------------
Instrument Amount Date
(ii)_____________________________ _________________ ___________________
Instrument Amount Date
(iii)_____________________________ _________________ ___________________
Instrument Amount Date
WHEREAS, Bank One and Obligors seek to minimize potential costs caused by
undue delays and expenses arising from the resolution of a dispute under the
Financing Transaction by (i) giving certainty as to where the dispute will be
heard and which laws will be applicable to its resolution, (ii) limiting the
understanding between the parties to written agreements, and (iii) waiving the
right to have a jury trial so that the dispute can be resolved quickly and
efficiently;
WHEREAS, to prevent disputes, to expedite the resolution of any dispute
between Bank One and any of the Obligors and to induce Bank One to enter into or
continue the Financing Transaction, Obligors are executing and delivering this
Agreement; and
WHEREAS, Bank One has requested this Agreement as a condition of Bank One
entering into or continuing the Financing Transaction;
NOW THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Obligors agree as follows:
1. SUBMISSION TO JURISDICTION, VENUE, AND LAW. With respect to any claim
arising out of the Financing Transaction, the Obligors irrevocably submit, for
themselves and their property, to the nonexclusive jurisdiction and to the
laying of venue of the courts of competent jurisdiction in _____________________
County_________________. The Loan Documents and this Agreement shall in all
respects be construed in accordance with and governed by the laws of the state
of Ohio.
2. PREVENTION OF DISPUTES. The Loan Documents together with this
Agreement constitute the ONLY agreement and understanding among Bank One and the
Obligors and supersede any and all prior agreements and understandings, oral or
written, relating to the Financing Transaction. Obligors acknowledge that they
have not relied on any oral promises or representations by Bank One other than
those set forth in the Loan Documents together with this Agreement. No change
in the terms, amendment, modification or waiver of any provision of the Loan
Documents or this Agreement shall be effective unless the same shall be in
writing and signed by the Obligors and Bank One.
3. WAIVER OF JURY TRIAL. BANK ONE AND OBLIGORS HEREBY VOLUNTARILY,
IRREVOCABLE AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN
BANK ONE AND ANY OF THE OBLIGORS ARISING OUT OF, IN CONNECTION WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN ANY OF THE OBLIGORS AND
BANK ONE IN CONNECTION WITH THE LOAN DOCUMENTS, THIS AGREEMENT, OR ANY OTHER
AGREEMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK
ONE TO ENTER INTO THE FINANCING TRANSACTION. IT SHALL NOT IN ANY WAY AFFECT,
WAIVE, LIMIT, AMEND OR MODIFY BANK ONE'S ABILITY TO PURSUE ITS REMEDIES
INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATED HERETO.
In the event of a conflict between the provisions of this Agreement and the
provisions of any of the Loan Documents, the provisions of this Agreement shall
supersede and prevail over those provisions of the Loan Documents which appear
to conflict. In the event that any one or more of the provisions contained in
this Agreement or in the Loan Documents shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or the
Loan Documents. This Agreement shall be binding upon and inure to the benefit
of Obligors and Bank One and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed on the day and year first above written.
WESTAR AUTO FINANCE, L.L.C.
Bank One, Columbus, N.A. By: WESTAR AUTO HOLDING CO., Manager
By:______________________________ By:_________________________________
Robert N. Kent, Jr. Robert W. Christensen, Jr.
Its: Vice President President
REPUBLIC LEASING INCORPORATED
By:_________________________________
Robert W. Christensen, Jr.
President
EXHIBIT H TO THE REVOLVING CREDIT AGREEMENT
COMPANY/GUARANTOR'S COUNSEL'S OPINION
Frank J. Owens OWENS DAVIES MACKIE
Arthur L. Davies -------------------------
John V. Lyman A Professional Services Corporation
Alexander W. Mackie Attorneys at Law
Richard G. Phillips, Jr.
Brial L. Budsberg Street Address
Michael W. Mayberry 926 - 24th Way S.W.
Kirk M. Veis Olympia, Washington 98502
Robert F. Hauth
--------- Mailing Address
Burton R. Johnson (1970) P.O. Box 187
--------- Olympia, Washington 98507-0187
Cynthia D. Turner
Matthew B. Edwards
James H. Blundell, Jr.
*ALSO ADMITTED IN WASHINGTON, D.C.
July 12, 1995
Bank One, Columbus, N.A.
100 East Broad Street
Columbus, Ohio 43271-1012
Ladies and Gentlemen:
We have acted as special counsel to Republic Leasing Incorporated (the
"Guarantor"), Westar Auto Holding Co. ("WestAH") and Westar Auto Finance, L.L.C.
(the "Company") in connection with the execution and delivery of that certain
Revolving Credit Agreement dated the date hereof (the "Revolving Credit
Agreement") among the Guarantor, the Company and Bank One, Columbus, N.A. ("Bank
One"), that certain Revolving Credit Note of the Company dated the date hereof
in the amount of $12,000,000 (the "Revolving Credit Note"), that certain
Guaranty Agreement of the Guarantor and WestAH dated the date hereof (the
"Guaranty"), that certain Guarantor Security Agreement dated the date hereof
between the Guarantor and Bank One (the "Guarantor Security Agreement"), that
certain Company Security Agreement dated the date hereof between the Company and
Bank One (the "Company Security Agreement"), that certain Pledge of Stock dated
the date hereof between the Guarantor and Bank One (the "Stock Pledge"), that
certain Pledge and Assignment of Membership Interests dated the date hereof
between the Guarantor and Bank One (the "Assignment") and all documents and
instruments contemplated by, or executed in connection with, the Revolving
Credit Agreement (hereinafter collectively referred to as the "Loan Documents").
In connection with this opinion, we have reviewed the Loan Documents. We have
investigated such questions of law, and have examined and relied upon originals,
or copies certified or otherwise identified to our satisfaction, of such
corporate documents and records of the Guarantor, WestAH and the Company and
such public records as in our judgment are necessary or appropriate to enable us
to render the opinions expressed below. As to matters of fact (except facts
constituting legal conclusions), we have relied on certificates and other
statements of public officials and corporate officers or representatives of the
Guarantor, WestAH and the Company, none of which has been independently verified
by us, but none of which do we have reason to believe is inaccurate, or with
respect to which our reliance would be unreasonable.
In rendering this opinion, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, the legal capacity
and authority of all persons signing such documents other than those signing on
behalf of the Guarantor, WestAH and the Company, the genuineness of the
signatures of persons signing all documents examined by us other than those
signed on behalf of the Guarantor, WestAH and the Company, that all parties to
the Loan Documents, other than the Guarantor, WestAH and the Company, are in
compliance with all of their obligations and undertakings arising under the Loan
Documents.
Where we render an opinion "to the best of our knowledge" or otherwise refer to
our knowledge, our opinion is based solely upon (i) an inquiry of attorneys
within this firm who perform legal services for the Guarantor, WestAH, and the
Company, and/or (ii) such certification of officers or representatives of the
Guarantor, WestAH and the Company as we have deemed appropriate.
The opinions hereinafter expressed are subject to the following qualifications:
A. The fact that a court might not enforce certain covenants of the Loan
Documents or allow acceleration of amounts due if it concludes that such
enforcement or acceleration is not undertaken in good faith under the then
existing circumstances, and the fact that each of the Loan Documents is subject
to any requirement under applicable law generally imposing an obligation of good
faith or reasonableness in the performance and enforcement of contracts.
B. Provisions in the Loan Documents specifying that the terms and conditions
of the Loan Documents may be waived only in writing may not be enforced under
Washington law to the extent that an oral agreement has been performed modifying
provisions of the Loan Documents.
C. The effect of Washington law which provides that, where a contract permits
one party to the contract to recover attorneys' fees, the prevailing party in
any action to enforce any provision of the contract shall be entitled to recover
its reasonable attorneys' fees notwithstanding the absence of a written
agreement to such effect.
D. Statutes and case law reflecting existing public policy may render
unenforceable waivers or releases of the benefits of statutory, common law, or
broadly or vaguely stated rights or unknown future rights.
E. We express no opinion as to the enforceability of provisions in the Loan
Documents to the effect that failure to exercise, or delay in exercising, rights
or remedies will not operate as a waiver of any such rights or remedies.
F. We express no opinion as to: (i) the enforceability of any provision
relating to cumulation of remedies; (ii) the availability of remedies in the
event of a non-material default; and (iii) the enforceability of powers of
attorney to the extent that they purport to grant rights and powers that may not
be granted or waived under applicable laws.
Based on and subject to the foregoing, we are of the opinion that:
(i) The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and holds a valid
certificate of authority to transact business in the State of Washington.
WestAH is a corporation and the Company is a limited liability company, duly
organized, validly existing and in good standing under the laws of the State of
Washington. The Guarantor, WestAH and the Company have all requisite power and
authority to own and operate their properties and to carry on their businesses
as now conducted, and have all requisite power and authority to execute and
deliver and to perform all of their obligations under the Loan Documents.
(ii) The Guarantor, WestAH and the Company are each duly qualified or
licensed to do business and in good standing as a foreign corporation or limited
liability company in each jurisdiction in which the character of the properties
owned or leased or the nature of the activities conducted makes such
qualification or licensing necessary and in which the failure to be so qualified
or licensed would have a materially adverse effect on the conduct of the
businesses of the Guarantor, WestAH or the Company, taken as a whole.
(iii) The execution, delivery and performance by the Guarantor, WestAH and
the Company of the Loan Documents to which they are a party, respectively, have
been duly authorized by all necessary corporate or limited liability company
actions, as the case may be.
(iv) The execution, delivery and performance by the Guarantor, WestAH and the
Company of the Loan Documents to which they are a party, respectively, do not
and will not result in any violation of or be in conflict with or constitute a
default under, the articles of incorporation or bylaws of the Guarantor or
WestAH, or the certificate of formation or operating agreement of the Company,
or, to the best of our knowledge, of any agreement or instrument to which any of
them is a party or by which any of them is bound, or any order, writ,
injunction, judgment, decree, statute, or governmental rule or regulation
applicable to any of them or by which any of them is bound.
(v) Except as referred to in paragraph (viii) below, no authorization,
consent, approval, license or exemption by, or filing or registration with, any
domestic court or governmental department, commission, board, bureau, agency or
instrumentality, is or will be necessary to the valid execution, delivery or
performance by the Guarantor, WestAH and the Company of the Loan Documents to
which they are a party, respectively.
(vi) The Loan Documents to which the Guarantor, WestAH or the Company is a
party have been duly executed and delivered by each of them, as applicable, and
are the valid and binding obligations of each of them, respectively, enforceable
against each of them, respectively, in accordance with their respective terms
and applicable law, except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, rehabilitation, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceedings therefor may be brought.
(vii) To the best of our knowledge, there is no court action, or other
governmental proceedings or investigations pending or threatened, involving the
Guarantor, WestAH, or the Company which question the validity of the Loan
Documents or any action taken or to be taken pursuant thereto, which would have
a materially adverse effect on the businesses or operations of the Guarantor,
WestAH or the Company taken as a whole.
(viii) The Security Agreements are in appropriate form to create the liens
they purport to create in the personal property described therein. Filing or
recording financing statements with the Washington State Department of Licensing
is the only filing or recording necessary to perfect, for purposes of the
Uniform Commercial Code as adopted in the State of Washington (the "UCC"), the
security interests created by the Security Agreements in that part of the
personal property in which a security interest may be perfected by filing. We
advise you that action other than filing of a financing statement is necessary
to perfect a security interest in certain personal property. In that regard,
possession by the secured party is sufficient to perfect the security interest
in any certificated securities in which a security interest is granted. We also
advise that such filing will become ineffective after the lapse of five years,
and that additional filings may be required if any debtor changes its name,
identity or corporate structure; moves collateral to another jurisdiction; or
changes its location to another jurisdiction.
(ix) The Trust Agreement (as defined in the Revolving Credit Agreement) has
been duly executed and delivered by the Company and Westar Lease Services, Inc.,
as trustee, and is the valid and binding obligation of each of them enforceable
against each of them, respectively, in accordance with its terms and applicable
law, except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, rehabilitation, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceedings therefor may be brought.
We express no opinion as to the laws of any jurisdiction other than the State of
Washington, the General Corporation Law of the State of Delaware and the laws of
the United States of America. This opinion is furnished as of the date hereof
and we undertake no obligation to advise you of any event occurring after the
date hereof which would change any of the opinions set forth herein. This
opinion is furnished by us solely for your benefit and no other person may rely
upon the opinions herein expressed. Except with our prior written consent, this
opinion is not to be used, circulated, quoted or otherwise referred to in
connection with any transaction other than those contemplated by the Loan
Documents or by or to any person.
Respectfully submitted,
OWENS DAVIES MACKIE
Richard G. Phillips, Jr.
(Signature)
EXHIBIT I TO THE REVOLVING CREDIT AGREEMENT
VALIDITY AGREEMENT
This Validity Agreement ("Agreement") is made as of July 12, 1995 by Robert
W. Christensen, Jr. and Cathy L. Carlson (individually an "Indemnitor" and,
collectively, the "Indemnitors") to BANK ONE, COLUMBUS, N.A. (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters which form the basis of this Agreement.
A. LOAN AGREEMENT. The Lender, Westar Auto Finance, L.L.C., a Washington
limited liability company (the "Company") and Republic Leasing Incorporated, a
Delaware corporation ("Republic") have entered into a Revolving Credit Agreement
concurrently with the execution of this Agreement (the "Loan Agreement"),
pursuant to which the Lender has agreed to lend the maximum principal sum of
$12,000,000 to the Company (the "Revolving Credit Commitment"). The Revolving
Credit Commitment is evidenced by a master promissory note (the "Revolving
Credit Note") of the Company. The borrowings under the Revolving Credit
Commitment are sometimes hereinafter referred to as the Revolving Credit Loans.
Republic is the holder of 99% of the membership interests of the Borrower and
pursuant to the terms of the Loan Agreement has concurrently with the execution
of this Agreement executed the Guarantor Security Agreement and the Pledge
Agreements. Robert W. Christensen, Jr. is a shareholder and both of the
Indemnitors are officers of Republic.
B. INDEMNIFICATION AGREEMENT. The Lender is willing to enter into the
Loan Agreement upon the condition that the Indemnitors execute and deliver this
Agreement to indemnify the Lender against the breach of certain representations
made by the Borrower in the Loan Agreement and against the breach of the
representations, warranties and covenants made by the Indemnitors in this
Agreement. Terms used herein which are defined in the Loan Agreement shall have
the meanings set forth in the Loan Agreement, unless otherwise defined herein or
the context hereof otherwise clearly requires.
STATEMENT OF AGREEMENT
The Indemnitors, in consideration of the premises and for the purpose of
inducing the Lender to enter into the Loan Agreement, do hereby, jointly and
severally, covenant and agree to and for the benefit of the Lender as follows:
Section 1. CERTAIN REPRESENTATION, WARRANTIES AND COVENANTS. The
Indemnitors, jointly and severally, represent, warrant and covenant to the
Lender, which representations and warranties shall survive the execution and
delivery of this Agreement, the Loan Agreement and the Security Agreements, as
follows.
(a) Each Indemnitor is a duly elected, qualified and acting officer
of Republic and will not, without the prior written consent of Lender, take
any action to resign from his office or to sell, transfer or otherwise
dispose of any shares of the stock of Republic currently owned by him.
(b) Each Indemnitor is fully familiar with all of Republic's and the
Borrower's business and financial affairs, has examined the
representations, warranties, covenants and agreements contained in the Loan
Agreement and the Security Agreements and certifies that to the best of his
or her knowledge and belief upon diligent inquiry, as of the date hereof,
all of the representations, warranties and covenants of Republic and the
Borrower contained in the Loan Agreement and the Security Agreements
(including, without limitation, all financial statements and financial
information supplied to the Lender by the Borrower and Republic) are true
and correct in all material respects and that as of the date of this
Agreement there exists no Default or Event of Default.
(c) Each indemnitor shall use all reasonable efforts to cause to be
instituted and implemented controls and procedures, and will regularly
review the actions of the employees of Republic and the Borrower
responsible for seeing that such procedures and controls are properly
followed, with the objective that (i) all reports with respect to the
Collateral and all other financial and other reports of every nature
whatsoever submitted by Republic or the Borrower to the Lender (including,
without limitation, the Borrowing Base certificate and the financial
statements, cash flow statements, and such other statements as required
under the Loan Agreement) shall be true, complete and correct in all
material respects, as of the date delivered to the Lender, consistent with
generally accepted accounting practices, and will not contain any
misstatement of any material fact, (ii) the Borrower shall fully and timely
comply with all of the covenants of the Loan Agreement and the Security
Agreements which require disclosure to the Lender, including without
limitation disclosure with respect to (A) the existence of liens or
security interests in the Collateral, (B) the quality of the Collateral and
(C) Republic's or the Borrower's ownership or assignment of the Collateral,
and (iii) Republic and the Borrower adhere to the underwriting criteria for
Eligible Leases set forth in the Loan Agreement.
(d) Unless the Borrower is judicially contesting the existence of an
Event of Default, in the event the Lender comes into possession of any or
all of the Collateral and/or its collecting any portion of the Collateral
by reason of the occurrence of an Event of Default, each Indemnitor hereby
covenants that he will, at the Lender's option and upon Lender's written
request, and for so long as any Revolving Credit Loans shall remain
outstanding, assist Lender in disposing of such Collateral and/or
collecting or otherwise realizing upon such Collateral. During such
period, when asked by Lender to render such assistance, each Indemnitor
shall exert all reasonable efforts to obtain sales of such Collateral at
the best obtainable prices and terms and/or to collect or otherwise realize
upon such Collateral at its full face value.
Section 2. INDEMNIFICATION. The Indemnitors, jointly and severally, shall
indemnify and hold the Lender harmless from and against any and all claims,
liabilities, losses, damages, costs and expenses (including, without limitation,
attorneys' fees, judgments, fines, and amounts paid in settlement) which Lender
may incur by reason of or arising out of (i) the breach by Republic or the
Borrower of any of the representations and warranties contained in the Loan
Agreement or (ii) the breach by any of the Indemnitors of any of the
representations, warranties or covenants contained in this Agreement.
Section 3. COSTS AND EXPENSES. Each Indemnitor agrees, jointly and
severally, to pay all the reasonable costs, expenses and fees, including all
reasonable attorneys' fees, which may be incurred by the Lender in enforcing or
attempting to enforce this Agreement, whether the same shall be enforced by suit
or otherwise.
Section 4. ENFORCEMENT. The obligations of the Indemnitors hereunder are
independent of the obligations of Republic or the Borrower, and a separate
action or actions may be brought and prosecuted against the Indemnitors
regardless of whether any action is brought against Republic or the Borrower or
whether Republic or the Borrower be joined in any such action(s). Indemnitors
hereby acknowledge and agree that it shall not be a condition precedent to the
enforcement of this Agreement by the Lender against the Indemnitors that the
Lender first seek recourse against Republic or the Borrower under the Loan
Agreement or any of the Security Agreements.
Section 5. TERM. This Agreement shall continue in full force and effect
until all obligations of Republic and the Borrower under the Loan Agreement and
the Security Agreements (the "Obligations") are fully paid, performed and
discharged and Lender has given the Indemnitors written notice thereof. This
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time payment of any of the Obligations is rescinded or must otherwise
be returned by the Lender upon the insolvency, bankruptcy or reorganization of
any Indemnitor or Borrower or otherwise, all as though such payment had not been
made. This Agreement shall be binding upon the Indemnitors and inure to the
benefit of the Indemnitors and the Lender and their respective heirs,
administrators, executors, personal representatives, successors and assigns.
Section 6. DEFAULT UNDER LOAN AGREEMENT. Each Indemnitor acknowledges and
agrees that a breach of the terms of this Agreement shall be an Event of Default
under the Loan Agreement.
Section 7. SPECIFIC PERFORMANCE. The Indemnitors, jointly and severally,
agree and acknowledge that a breach any Indemnitor of any of the terms of this
Agreement may not be adequately measured or compensated in money damages, and
that any breach or threatened breach of any such terms could do irreparable
injury to the Lender. It is therefore agreed that in the event of any breach or
threatened breach by any Indemnitor of any of the terms of this Agreement, to
the extent available under applicable law, the Lender shall be entitled, in
addition to any and all other rights and remedies which it may have at law or in
equity, to apply for and obtain specific performance by such Indemnitor of such
terms of this Agreement.
Section 8. AMENDMENTS, MODIFICATIONS, ETC. No amendment, modification,
termination, or waiver of any provision of this Agreement nor consent to any
departure by the Indemnitors therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice or demand on the Indemnitors in any case
shall entitle the Indemnitors to any other or further notice or demand in
similar or other circumstances.
Section 9. APPLICABLE LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of Ohio and for all purposes shall be
governed by and construed in accordance with the laws of the State of Ohio.
Section 10. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
Section 11. MULTIPLE COUNTERPARTS. This Agreement may be signed in
multiple counterparts with the same effect as if the signatures thereto were
upon the same instrument.
This Agreement has been executed by the Indemnitors on the date first
written above.
Indemnitors:
--------------------------
Robert W. Christensen, Jr.
--------------------------
Cathy L. Carlson
AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS AMENDMENT TO REVOLVING CREDIT AGREEMENT (the "Agreement") is made and
entered into as of February 15, 1996 by and among WESTAR AUTO FINANCE, L.L.C.
(the "Company"), REPUBLIC LEASING INCORPORATED ("Republic") and BANK ONE,
COLUMBUS, N.A., a national banking association (the "Lender").
RECITALS
The following recitals are representations with respect to certain factual
matters that form the basis of this Agreement and are an integral part of this
Agreement.
A. The parties to this Agreement are parties to the Revolving Credit
Agreement dated as of July 12, 1995 (the "Revolving Credit Agreement").
B. Section 4.18 of the Revolving Credit Agreement provides that each Lease
and, to the extent applicable, each Leased Vehicle will be originated by a
dealer located in the states of Idaho, Oregon or Washington (or such other
states as shall be mutually agreed to by the parties) in the ordinary course of
business and in compliance with the Guarantor's normal lease contract
underwriting policies and practices.
C. The parties to this Agreement desire to amend the Revolving Credit
Agreement to add states in which such dealers may be located.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings of the
parties to amend the Revolving Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Terms used herein which are defined in the Revolving Credit Agreement
shall have the meanings set forth in the Revolving Credit Agreement unless the
context hereof otherwise clearly requires.
2. Pursuant to Section 4.18 of the Revolving Credit Agreement, the parties
mutually agree that a Lease, and, to the extent applicable, a Leased Vehicle,
may be originated by a dealer located in the States of Montana and Utah in
addition to the States of Idaho, Oregon or Washington.
3. This agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
IN WITNESS THEREOF, the parties hereto have executed this Agreement as of
the date first written.
BANK ONE COLUMBUS, N.A. WESTAR AUTO FINANCE, L.L.C.
a Washington limited liability company
By: Robert N. Kent
--------------------------
(Signature)
Robert N. Kent, Jr., By: WESTAR AUTO HOLDING CO.,
Vice President a Washington corporation, Manager
REPUBLIC LEASING INCORPORATED, By: R W. Christensen
a Delaware corporation -------------------------------
(Signature)
Robert W. Christensen, Jr.
President
By: R W. Christensen
---------------------------
(Signature)
Robert W. Christensen, Jr.
President
WESTAR FINANCIAL SERVICES INCORPORATED
SUBSIDIARIES OF THE REGISTRANT
The following table indicates the name, jurisdiction of incorporation and basis
of ownership of each of Westar Financial Services Incorporated's ("WFSI")
subsidiaries:
Percentage
of Voting
State of Securities
Name of Subsidiary Organization Owned
- -------------------------------------------- ------------ ------------------
Westar Auto Holding Company, Inc. ("WestAH") Washington 100%
Westar Auto Finance, L.L.C. ("WestAF") Washington 99% by WFSI
1% by WestAH
Westar Lease Origination Trust Washington Beneficially owned
100% by WestAF
