<PAGE>
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For Quarter Ended: June 30, 1998
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 Identification Number)
Incorporation or organization)
The Republic Building; Olympia, WA 98501
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (360) 754-6227
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 requirements for the past 90 days.
Yes: X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Common Stock 2,187,300
Class Number of Shares Issued at January 31, 1999
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Westar Financial Services Incorporated and Subsidiaries
Consolidated Balance Sheet
as of June 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
June 30 March 31
(Unaudited)
--------- --------
<S> <C> <C>
Cash $ 985,535 $ 475,275
Accounts receivable, net of allowance
for credit losses 188,665 147,092
Credit enhancement receivable, net of
allowance for credit losses 823,329 855,848
Net investment in direct finance leases, net of
allowance for credit losses 25,524,157 18,533,096
Deferred tax asset 3,186,426 2,936,206
Less: valuation allowance (3,186,426) (2,936,206)
Other assets 491,427 484,066
---------- -----------
$ 28,013,113 $ 20,495,377
---------- -----------
---------- -----------
Accounts payable $ 349,540 $ 692,126
Notes payable - bank 25,845,351 19,057,701
Notes payable - other 6,524,315 2,756,635
Other liabilities 833,453 722,401
---------- -----------
33,552,659 23,228,863
---------- -----------
Redeemable preferred stock 2,048,000 4,073,000
---------- -----------
Common stock, no par value 3,239,795 3,239,795
Paid in capital - stock warrants 371,495 371,495
Accumulated deficit (11,198,836) (10,417,776)
---------- -----------
(7,587,546) (6,806,486)
---------- -----------
$ 28,013,113 $ 20,495,377
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Westar Financial Services Incorporated and Subsidiaries
Consolidated Statement of Operations
For the three months and year to date June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
1998 1997
<S> <C> <C>
Revenues:
Earned income-direct financing
leases $ 435,279 $ 214,457
Revenues from sales and
securitizations 376,313 133,366
Administrative fee income 117,423 52,938
Service fee income 26,246 23,870
Other income 7,998 5,939
--------- ---------
Gross revenues 963,259 430,570
--------- ---------
Direct Costs:
Interest 452,705 221,743
Costs related to sales and
securitizations 385,368 118,582
Provision for credit losses 41,900 25,315
Other 81,860 39,494
--------- ---------
Total direct costs 961,833 405,134
--------- ---------
Operating revenues 1,426 25,436
General and
administrative expenses 737,367 508,583
--------- ---------
Operating loss before other expense
and income tax benefit (735,941) (483,147)
Non-cash interest expense (154,282)
--------- ---------
Loss before income tax benefit (735,941) (637,429)
Income tax benefit 250,220 216,726
Less: valuation allowance (250,220)
--------- ---------
Net Loss (735,941) (420,703)
Dividends on redeemable
preferred stock (45,119) (98,235)
--------- ---------
Net loss applicable to
common stock $(781,060) $(518,938)
--------- ---------
--------- ---------
Net loss per common share $(.35) $(.30)
----- -----
----- -----
Weighted average number
of shares 2,187,300 1,736,633
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Westar Financial Services Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
For the three months and year to date ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net cash used in operating activities $(7,832,033) $(4,529,749)
---------- ----------
Cash flows from investing activities:
Other (39,413) 16,613
---------- ----------
Net cash provided by (used in)
investing activities (39,413) 16,613
---------- ----------
Cash flows from financing activities:
Proceeds from(redemption of) redeemable
preferred stock (2,025,000)
Proceeds from issuance of common stock 106,000
Additions to notes payable to banks 7,848,946 4,624,733
Payments on notes payable to banks (1,061,297) (1,080,157)
Additions to notes payable - other 4,408,886 1,515,690
Payments on notes payable - other (641,205) (463,889)
Dividends paid on preferred stock (115,793) (98,235)
Origination costs (32,831)
---------- ----------
Net cash provided by financing activities 8,381,706 4,604,142
---------- ----------
Net increase in cash 510,260 91,006
Cash:
Beginning of period 475,275 191,380
---------- ----------
End of period $ 985,535 $ 282,386
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The Company's consolidated annual financial statements presented in the 1998
Annual Report on Form 10-K of the Company includes a summary of significant
accounting policies and should be read in conjunction with this Form 10-Q.
The consolidated financial statements include the accounts of Westar
AutoHolding Co., Inc. ("WestAH"), a 100%-owned subsidiary of the Company,
WestarAuto Finance L.L.C. ("WestAF"), a limited liability company owned 99%
by the Company and 1% by WestAH, and Westar Lease Origination Trust, a
Washington Massachusetts business trust beneficially owned by WestAF. The
statements for the three months ended June 30, 1998 and 1997, are unaudited,
condensed and do not contain all information required by generally accepted
accounting principles to be included in a full set of annual financial
statements. In the opinion of Management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the results of
operations for such periods are included. All significant inter-company
balances and transactions have been eliminated. The results of operations for
the three months ended June 30, 1998, are not necessarily indicative of the
results of operations for the entire year. This information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis and financial statements and notes thereto included in Westar
Financial Services Incorporated's 1998 Annual Report on Form 10-K.
INTEREST PAID
The Company paid cash for interest of $389,648 and $122,101 for the three
months ended June 30, 1998 and 1997, respectively. The change is due to
increased warehouse financing costs, which is a result of increased lease
origination volume.
EARNINGS PER SHARE
Earnings (loss) per share is computed using the weighted-average number of
common shares outstanding for the three months ended June 30, 1998 and 1997,
respectively. Net loss used in the computation of earnings per share has been
increased to include the redeemable preferred stock dividends. The
outstanding shares used in the earnings per share calculation have been
adjusted for the 2-for-1 stock split paid in June 1996. Earnings per share
does not include common stock warrants or common stock options as the effect
is anti-dilutive.
FEDERAL INCOME TAX
The Company recorded a 100% valuation allowance against its deferred tax
asset in the 4th quarter of Fiscal 1998. Recording the valuation allowance
resulted in (non-cash) net income tax expense in that year as compared to tax
benefits recorded in prior years. The deferred tax asset is available for an
average of 12 years to offset future reported tax liabilities.
PREFERRED STOCK REDEMPTION
In May 1998, the Company announced that preferred shareholders accepted the
Company's offer to redeem or exchange their shares of Series 1, Series 2 and
Series 3 Preferred at face value. Originally, the 2,823 shares of Series 1, 2
and 3 Preferred Stock were to be redeemed by December 31, 2000. The Company
redeemed 1,088, 231 and 631 shares for Series 1, 2 and 3, respectively at par
value in the amount of $1,950,000 using the proceeds from the issuance of
subordinated convertible debt in May 1998. As part of the redemption, the
preferred shareholders exercised their warrants to purchase Westar's common
stock.
<PAGE>
In May 1998, the Company entered into an agreement with an officer to redeem
his Series 3 Preferred Stock with a par value of $500,000 for a note payable
in the amount of $500,000. The note bears interest at the rate of 9.25% which
is paid quarterly. The note matures on April 1, 1999. As part of the
redemption, the preferred shareholder exercised its warrants to purchase
Westar's common stock
SUBORDINATED DEBT ISSUANCE
In April 1998, the Company entered into an agreement with PLMC, LLC, which is
owned by two directors and other unrelated parties, to borrow $400,000 in the
form of subordinated debt. The note was to be repaid no later than June 30,
1998 with interest at the rate of 9%. This note was repaid in full on May 13,
1998.
In May 1998, the Company issued $4,000,000 in subordinated convertible notes
to PLMC, LLC, which is owned by two directors and other unrelated parties.
The note is due May 2003 and bears interest at the rate of 10.5% per annum.
The note is convertible into 20% of the Company's common stock.
WAREHOUSE FACILITY
In June 1998, Bank One amended the revolving warehouse credit facility to
increase the $25 million line to $26 million. The facility was paid in full
in August 1998.
SUBSEQUENT EVENTS
In July 1998, agreements were reached with Bank One which set the warehouse
line at $15,000,000 and for Bank One to purchase $25 million of Westar's
leases in a securitized transaction.
In July 1998, the Company agreed with T&W Financial Corporation, a related
entity, to establish a $2 million non-recourse lease repurchase credit
facility. In July, the company sold $1.6 million of leases into the facility
at an average interest rate of 9.5% per year. The Company repurchased the
$1.6 million of leases in August 1998.
In August 1998, the Company's origination/issuer/titling securitization
structure, Westar Lease Origination Trust, completed its third securitization
of $27.5 million of automobile lease-backed securities in a private-placement
offering. The Company's cash proceeds from the securitization were reduced by
a reserve in the amount of $273,000, which is anticipated to be received out
of future cash flows from the pool of contracts sold. The Company continues
to service the leases securitized. Because the leases sold in the August
transaction were finance leases rather than operating leases, they are
accounted for in accordance with SFAS 125.
In November 1998, the Company's origination/issuer/titling securitization
structure, Westar Lease Origination Trust, completed its fourth
securitization of $14.4 million of automobile lease-backed securities in a
private-placement offering. The Company's proceeds from the securitization
were reduced by a reserve in the amount of $94,000, which is to be received
in 60 monthly payments in the amount of $1,572. The Company continues to
service the leases securitized. Because the leases sold in the November
transaction were operating leases rather than finance leases, they are
accounted for in accordance with SFAS 13.
In December 1998, the Company's origination/issuer/titling securitization
structure, Westar Lease Origination Trust, completed its fifth and sixth
securitization of $5.2 and $5.9 million, respectively of automobile
lease-backed securities in private-placement offerings. The Company's
proceeds from the securitization were reduced by a reserve in the amount of
$34,000 and $39,400, respectively, which will be received
<PAGE>
in 60 monthly payments in the amount of $563 and $656, respectively. The
Company continues to service the leases securitized. Because the leases sold
in the December transaction were operating leases rather than finance leases,
they are accounted for in accordance with SFAS 13.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL POSITION
Three months ended June 30, 1998 compared to three months ended
June 30, 1997
- -----------------------------------------------------------------------------
Westar Financial Services Inc. and Subsidiaries provides prime credit quality
consumer automobile lease financing through franchised automobile dealers in
the Northwest Region of the United States. Westar has designed and developed
a number of financing, lease servicing and risk management innovations. The
Company has invested significant personnel, time and resources towards its
Dealer Direct Retail Leasing ("DDRL") program. While the Company's statement
of operations reports a net loss of approximately $736,000 and $421,000 for
the three months ended June 30, 1998 and 1997, respectively, it is
management's opinion that DDRL is one of the most sophisticated and
marketable retail leasing programs currently available and a valuable
investment in the Company's future.
Volumes of lease originations increased for the 3rd consecutive quarter, from
164 leases costing $4.8 million in the prior year to 286 leases costing $8.0
million in the current period. The face value of leases serviced increased
from $32 million to $44 million. The credit quality of originated leases
improved, with average FICO scores of 680 in the prior period compared to 695
in the current period.
Total revenues for the quarter increased by approximately $532,700, from
$430,600 to $963,300. The increase is primarily caused by an increase in
sales of vehicles at lease termination of $242,900, an increase in earned
income from direct financing leases held of $220,800, and an increase of
other income of $69,000. The Company did not complete any securitizations or
sales of leases during the period. The increase in direct financing lease
income is due to an increase in the volume of leases warehoused prior to
sale. Other revenues increased primarily due to increased administrative and
service fee income, a result of the increased volumes of lease originations.
Direct costs increased by $556,700, from $405,100 to $961,800. The increase
was caused by an increase in costs related to sales of vehicles of
approximately $266,800, an increase in interest expense of $231,000, and an
increase in other expenses of $58,900. The increase in costs related to sales
is due primarily to an increase in the number of vehicles sold. Interest
costs increased due to the increased volume of leases originated and
warehoused prior to sale or securitization.
General and administrative expenses increased by approximately $229,000, from
$509,000 to $738,000. Interest expense increased by $76,000, salaries and
wages increased by $57,100 due to additional personnel, primarily in Risk
Management. Accounting expense increased by $43,700 due to the timing of 1998
audit billings. Consulting expense increased $38,500 due to improvements and
innovations in LASIR, the Company's proprietary risk and accounting system.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE>
The Company requires substantial cash to implement its business strategy.
Cash is used to: (i) acquire leases and the underlying vehicles; (ii) pay
operating expenses; (iii) satisfy working capital requirements; (iv) pay debt
service; (v) pay sales and securitization costs, including amounts required
for credit enhancement, if any; and (vi) pay preferred stock dividends. Many
of these cash requirements increase as the Company's volumes of lease
origination increase. A substantial portion of the Company's revenues in any
period might represent revenues from sales or securitizations of leases, if
any, but a portion of the cash underlying such revenues is generally received
over the life of the leases. The Company retains the servicing of securitized
leases and receives the related servicing income for the securitized pools.
The Company has historically been successful in meeting its liquidity needs,
principally through borrowings from financial institutions under its
warehouse line, securitizations and whole lease sales, portfolio sales and
sales of equity and debt securities.
Westar was the third company in the nation to structure a free standing lease
securitization, an accomplishment of a limited number of companies. The
Company was the first to originate multiple securitizations from within a
single special purpose entity and to originate a tax benefit transfer from
within a securitization. The Company believes that its unique bankruptcy
remote structure, its "Carlson Trust," is more efficient and cost effective
than alternative structures in use by others.
The Company plans to continue to sell leases as they are produced, through
securitizations in the institutional capital markets, private placements on a
"whole lease" basis with commercial banks or other sophisticated investors,
or on a flow basis with commercial banks.
The revolving credit facility provided by Bank One is the primary source of
cash to finance the acquisition of vehicle leases until they are sold. Westar
and Bank One have agreed to a warehouse facility of $15 million on a
non-recourse basis as well as a "whole lease" purchase facility of $25
million (in November, 1998), both in addition to the $28 million
securitization completed in August. After repayment of borrowings from Bank
One under the warehouse line, the net proceeds from sales or securitizations
provide a source of cash for future acquisition of vehicle leases and general
and administrative expenses. Each of Westar's sales and securitizations in
fiscal 1999 produced positive cash flow.
Though there can be no assurance of their success, the Company is currently
in negotiations to obtain additional financings to provide for planned growth
over the next several years.
It is the opinion of management that, as of June 30, 1998, the liquidity
sources discussed above are sufficient to meet the Company's immediate cash
flow needs in the normal course of business.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
<PAGE>
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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
incorporated by reference to the Exhibit to Form 10-K
dated June 11, 1996.
3. Articles of Incorporation and Bylaws
3.1 The Articles of Incorporation of Westar Financial
Services Incorporated filed on February 13, 1996
incorporated by reference to the Exhibit to Form 10-K
dated June 11, 1996.
3.2 The Bylaws of Westar Financial Services Incorporated
adopted on February 21, 1996 incorporated by reference to
the Exhibit to Form 10-K dated June 11, 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 incorporated by
reference to the Exhibit to Form 10-K dated June 11,
1996.
4.2 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 2 Preferred Stock incorporated by
reference to the Exhibit to Form 10-K dated June 11,
1996.
4.3 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 3 Preferred Stock incorporated by
reference to the Exhibit to Form 10-K dated June 11,
1996.
4.4 Designation of Rights and Preferences of Republic Leasing
Incorporated Series 4 Preferred Stock incorporated by
reference to the Exhibit to Form 10-K dated June 11,
1996.
10. Material Contracts.
<PAGE>
10.1 Republic Leasing Incorporated 1994 Stock Option Plan
incorporated by reference to the Exhibit to Form 10-K
dated June 11, 1996.
10.2 The Letter Agreement between Republic Leasing
Incorporated and The Industrial Bank of Japan, Limited
dated March 3, 1995 incorporated by reference to the
Exhibit to Form 10-K dated June 11, 1996.
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 the lender
dated July 12, 1995 incorporated by reference to the
Exhibit to Form 10-K dated June 11, 1996.
10.4 Amendment, dated February 15, 1996, to the Revolving
Credit Agreement with Bank One, Columbus, N.A., dated
July 12, 1995 incorporated by reference to the Exhibit
to Form 10-K dated June 11, 1996.
10.5 The Promissory Note between Westar Financial Services
Incorporated and Mud Bay Holdings Ltd., as the lender
dated January 15, 1997 incorporated by reference to the
Exhibit to Form 10-K dated September 9, 1997.
10.6 The Promissory Note between Westar Financial Services
Incorporated and & Capital Inc., as the lender dated
April 15, 1997 incorporated by reference to the Exhibit
to Form 10-Q dated September 22, 1997.
10.7 The Amended and Restated Revolving Credit Loan agreement
between Westar Financial Services Incorporated and Bank
One, as the lender dated July 22, 1997 incorporated by
reference to the Exhibit to Form 10-Q dated November 13,
1997.
10.8 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Partners, L.P., as the
lender dated October 20, 1997 incorporated by reference
to the Exhibit to Form 10-Q dated November 13, 1997.
10.9 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Partners, L.P., as the
lender dated February 9, 1998 incorporated by reference
to the Exhibit to Form 10-Q dated February 17, 1998.
10.10 The Amended agreement between Westar Financial Services
Incorporated and Bank One as the lender dated October
27, 1997 incorporated by reference to the Exhibit to
Form 10-Q dated February 17, 1998.
10.11 The Amended agreement between Westar Financial Services
Incorporated and Bank One, as the lender dated March 31,
1998 incorporated by reference to the Exhibit to Form
10-K dated February 17, 1999.
10.12 The Amended agreement between Westar Financial Services
<PAGE>
Incorporated and Mud Bay, as the lender dated August
31, 1998 incorporated by reference to the Exhibit to
Form 10-K dated February 17, 1999.
10.13 The Amended agreement between Westar Financial Services
Incorporated and Cathy Carlson, as the lender dated
April 30, 1998 incorporated by reference to the
Exhibit to Form 10-K dated February 17, 1999.
10.14 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Inc., as the lender dated
August 31, 1998 incorporated by reference to the
Exhibit to Form 10-K dated February 17, 1999.
10.15 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Inc., as the lender dated
August 31, 1998 incorporated by reference to the
Exhibit to Form 10-K dated February 17, 1999.
10.16 The promissory note between Westar Financial Services
Incorporated and Summit Capital as the lender dated
May 1, 1998 incorporated by reference to the Exhibit
to Form 10-K dated February 17, 1999.
10.17 The promissory note between Westar Financial Services
Incorporated and PLMC, LLC, as the lender dated
April 30, 1998.
10.18 The promissory note between Westar Financial Services
Incorporated and PLMC, LLC as the lender dated
May 11, 1998.
10.19 The Amended agreement between Westar Financial Services
Incorporated and Bank One, as the lender dated
June 25, 1998.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirement 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
March 1, 1999 R. W. Christensen, Jr., President
(Date) (Signature)
March 1, 1999 Warren Kornfeld, Senior Vice President, Finance
(Date) (Signature)
<PAGE>
Exhibits
Exhibit 10.17
PROMISSORY NOTE
$400,000 Olympia, Washington
April 30, 1998
FOR VALUE RECEIVED, the undersigned, WESTAR FINANCIAL SERVICES
INCORPORATED, a Washington corporation (the "Company"), promises to pay to
the order of PLMC, LLC (the "Lender"), at its principal place of business at
6416 Pacific Highway East, Tacoma, WA 98424, or to the holder hereof at such
address as the holder may designate by written notice, the principal sum of
$400,000 together with interest on the unpaid principal balance hereof from
the date of disbursement by the Lender at the rate and in the manner
hereinafter set forth.
1. PAYMENTS OF PRINCIPAL AND INTEREST. The total principal sum and
interest hereunder shall be due and payable and shall be paid by the Company
to the Lender in one lump sum payment, which payment is due sixty (60) days
from the date hereof. This Note shall bear interest on the unpaid principal
balance at a rate per annum equal to nine and one-half percent (9.5%). All
interest payable in accordance with this Note shall be calculated on the
basis of a 365 day year for the actual number of days principal is
outstanding.
2. PRE-PAYMENTS. The indebtedness evidenced or created by this Note
may at any time prior to maturity be prepaid in full or in part without any
premium or penalty.
3. REMEDIES.
(a) The failure of the Lender to exercise any option upon any
default shall not constitute a waiver of the right to exercise such option in
the event of any continuing or subsequent default. The Company hereby agrees
that the maturity of all or any part of the loan may be postponed or extended
and that any covenants
<PAGE>
and conditions contained in this Note may be waived or modified without
prejudice to the liability of the Company on this Note.
(b) Presentment for payment, notice or dishonor, protest,
notice of protest and diligence in bringing suit against the Company or any
guarantor of the Company's obligations are hereby severally waived by the
Company.
4. MAXIMUM INTEREST. Nothing herein contained, nor in any instrument
or transaction relating hereto, shall be construed as to require the Company,
or any person liable for the payment of the loan made pursuant to this Note,
to pay interest in an amount or at a rate greater than the highest rate
permissible under applicable law. Should any interest or other charges paid
by the Company or any parties liable for the payment of the loan made
pursuant to this Note, result in the computation of earning or interest in
excess of the highest rate permissible under applicable law, then any and all
such excess shall be and the same is hereby waived by Lender, and all such
excess shall be automatically credited against and in reduction of the
principal balance, and any portion of said excess which exceeds the principal
balance shall be paid by the Lender to the Company or any parties liable for
the payment of the loan made pursuant to this Note as their respective
interests appear, it being the intent of the parties hereto that under no
circumstances shall the Company or any parties liable for the payment of the
loan hereunder be required to pay interest in excess of the highest rate
permissible under applicable law.
5. NOTICES. Except for any notice required under applicable law to
be given in another manner, (a) any notice to the Company provided for
hereunder shall be delivered by mailing such notice by certified mail or
registered mail, return receipt requested, or overnight courier addressed to
the Company at its address as shown on Lender's records or at such address as
the Company may designate by notice to the Lender as provided herein, and (b)
any notice to the Lender shall be delivered by certified or registered mail,
return receipt requested, or by overnight courier to the Lender's address set
forth above, or to such other address as the Lender may designate by notice
to the Company as provided herein. any notice provided for hereunder shall be
deemed to have been delivered to the Company or the Lender three days after
the same has been deposited with the United States Postal Service or
overnight courier in the above manner. Actual notice and receipt of any
written notice shall constitute notice in all events. Payment, however, shall
be deemed received only upon actual receipt.
6. GOVERNING LAW. This Note shall be governed and construed in
accordance with the laws of the State of Washington.
WESTAR FINANCIAL SERVICE INCORPORATED
By:
------------------------------------
Thomas M. Foley
Vice President Finance & CFO
<PAGE>
Exhibit 10.18
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
CONVERTIBLE SUBORDINATED NOTE
Olympia, Washington
$4,000,000 May 11, 1998
FOR VALUE RECEIVED, Westar Financial Services Incorporated, A
Washington corporation (the "Company") hereby promises to pay on May 11, 2003 to
PLMC, LLC or its assigns permitted hereunder ("Payee"), or to its order, at such
address as Payee may designate in writing, (i) the principal sum of four million
dollars ($4,000,000), or if less, the aggregate unpaid and outstanding principal
amount of this Note, plus (ii) any accrued unpaid interest in coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts. Interest shall accrue on the
unpaid principal amount from the date hereof at a rate equal to 10.5% per annum.
Interest will be computed on the basis of a three hundred sixty five (365) day
year and the actual number of days elapsed. Interest shall be due and payable
quarterly on the first day of January, April, July and October each year,
commencing July 1, 1998 and any unpaid interest shall accrue and be added to the
principal amount (and shall, to the extent permitted by law, thereupon bear
interest at the same rate specified herein) until payment.
Notwithstanding the foregoing or any other provision contained
elsewhere in this Note, the Company shall not make any payment of principal or
interest hereunder if such payment would constitute a violation of any provision
of or results in, or with the lapse of time or giving of notice or both would
result in, an Event of Default under any Senior Indebtedness (as defined below)
and any such failure to pay shall not constitute a Default or Event of Default
hereunder. Interest (including post-petition interest on and after the date of
filing of any petition in any bankruptcy proceeding) will be paid upon overdue
principal and accrued interest compounded annually from the due date at the rate
set forth above, to the extent such payment is lawful. Such interest will be
computed and paid on the same basis as set forth above.
This Note is one of a series of Convertible Subordinated Notes
containing substantially identical terms and conditions issued pursuant to the
Note Purchase Agreement dated as of May 11, 1998 among certain investors and the
Company (the "Purchase Agreement") and is subject to the terms of the Purchase
Agreement. Such notes are referred to herein as the "Notes" and the holders
thereof are referred to herein as the "Holders." This Note is subject to the
following terms and conditions:
1. DEFINITIONS.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP,
<PAGE>
and the amount of Indebtedness represented by such obligations shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Common Stock" shall mean the no par value Common Stock of the
Company.
"Common Stock Equivalents" shall mean Convertible Securities and
rights entitling the holder thereof to receive directly, or indirectly,
additional shares of Common Stock without the payment of any consideration by
such holder for such additional shares of Common Stock or Common Stock
Equivalents.
"Convertible Securities" shall mean any indebtedness or shares of
stock convertible into or exchangeable for Common Stock, including this Note.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Event of Default" has the meaning set forth in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the Securities and Exchange
Commission thereunder or any successor thereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date hereof.
"Indebtedness" with respect to any person means (i) any liability,
contingent or otherwise, of such person (A) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof), (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation), or (C) for the payment of money
relating to a Capitalized Lease Obligation; (ii) any liability of others of the
kind described in the preceding clause (i), which such person has guaranteed or
which is otherwise its legal liability; (iii) any obligation secured by a Lien
to which the property or assets of such person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such person's legal liability; (iv) all reimbursement obligations and other
liabilities of such person with respect to letters of credit issued for such
person's account; and (v) any and all deferrals, renewals, extensions and
refundings of, or amendments , modifications or supplements to, any liability of
the kind described in any of the preceding clauses (i), (ii), (iii) or (iv).
(a) "Issuance Date" shall mean the date of this Note.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
adverse claim affecting title or resulting in an encumbrance against real or
personal property, or a security interest of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, any
option or other agreement to sell and any filing of any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
<PAGE>
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Prepayment Price" means a price equal to the principal amount of this
Note plus all accrued interest to date of payment.
"Principal" of a debt security means the principal of the security,
plus, where appropriate, the premium, if any, thereon.
"Representative" means any trustee, agent or representative of the
holders of Senior Indebtedness.
"Senior Indebtedness" means all the principal or premium, if any, and
interest on any Indebtedness of the Company, whether outstanding on the date
hereof or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to, Indebtedness of
the kind described in this clause). Notwithstanding anything to the contrary in
the foregoing, however, Senior Indebtedness shall not include (a) Indebtedness
or amounts owed for goods or materials purchased in the ordinary course of
business, for compensation to employees, or for services, or (b) Indebtedness
to, or guaranteed on behalf of, any officer, director or shareholder of the
Company or of any Subsidiary of the Company. To the extent any payment of
Senior Indebtedness (whether by or on behalf of the Company, as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver other similar party in any bankruptcy, insolvency or receivership
proceedings, then if such payment is recovered by or paid over to, such trustee,
receiver or other similar party, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment has not occurred.
"Subsidiary" of any person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such person, by one
or more Subsidiaries of such persons or (ii) any other person (other than a
corporation) in which such person, a Subsidiary of such person or such person
and a Subsidiary of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest. Unless the
context otherwise requires, the term "Subsidiary" as used herein means a
Subsidiary of the Company.
2. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law, which would prohibit or
forgive the Company from paying all or any portion of the principal of, or
interest on, this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Note; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law as though no such law
had been enacted.
3. PREPAYMENT. This Note may be prepaid in whole or in part at any time
prior to maturity without premium or penalty at the Prepayment Price. If full
payment of all unpaid principal of and accrued interest on this Note is made,
this
<PAGE>
Note shall be canceled. Notwithstanding the foregoing or any other provision
contained elsewhere in this Note, the Company may not prepay this Note prior to
maturity if such prepayment would constitute a violation of any provision of any
Senior Indebtedness.
4. CONVERSION. The principal together with all accrued and unpaid
interest on the Note shall be convertible, at the option of the Payee thereof,
into a number of fully paid and nonassessable shares of Common Stock of the
Company equal to 20% 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 number of shares into which this Note is
convertible shall be fixed upon the occurrence of the earliest of: (i) such
date, after the date hereof, as the Company shall have raised an additional $8
Million of financing through the issuance of common Stock Equivalents and
related securities; (ii) 6 months from the date hereof; and (iii) the date on
which the Payee elects to convert the Note into Common Stock, provided that
Payee's election to convert is prior to the occurrence of subsections (i) and
(ii) hereof. Payee shall not exercise any conversion if such conversion would
cause a "Change of Control" under Section 382 of the Internal Revenue Code of
1986.
5. DEFAULTS AND REMEDIES.
5.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in the payment of principal on this
Note when the same becomes due and payable at maturity;
(2) the Company defaults in the payment of accrued interest
on this Note and the default continues for a period of five business days after
notice of such default is given to the Company by the Payee;
(3) the Company breaches any other provision of this Note;
(4) there shall be a default under any bond, debenture, note
or other evidence of indebtedness for borrowed money or under any mortgage,
indenture or other instrument under which there may be issued or by which there
may be secured or evidenced any indebtedness for borrowed money of the Company
or any Subsidiary or any guarantee of payment by the Company or any Subsidiary
of indebtedness for borrowed money, whether such indebtedness or guarantee now
exists or shall hereafter be created, if such default consists of the failure to
pay any such indebtedness at its stated maturity or the effect of such default
is to cause such indebtedness to become due prior to its stated maturity,
provided in each case that such indebtedness any at one time aggregates in
excess of $2,000,000 in principal amount;
(5) the Company, pursuant to or within the meaning of any
Bankruptcy Law (A) becomes insolvent, (B) fails generally to pay its debts as
they become due, (C) admits in writing its inability to pay its debts generally
as they become due, (D) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (E) consents to the entry of a judgment,
decree or order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (F) consents to the appointment of a Custodian of it or for
any part of its property, (G) consents to or acquiesces in the institution of
bankruptcy or insolvency proceedings against it, (H) applies for, consents to or
acquiesces in the appointment of or taking possession by a Custodian of the
Company or for any part of
<PAGE>
its properties, (I) makes a general assignment for the benefit of its creditors,
or (J) takes any corporate act to authorize any of the foregoing; or
(6) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any Bankruptcy Law which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or composition in
respect of the Company, (B) appoint a Custodian of the Company or for any part
of its properties or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or any bankruptcy or insolvency petition or application
is filed, or any bankruptcy or insolvency proceeding is commenced against the
Company and such petition, application or proceeding is not dismissed within 30
days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A Default under clause (3) is not an Event of Default until Payee
notifies the Company of the Default and the Company (i) does not cure the
Default within five business days after receipt of the notice and (ii) is not
proceeding in good faith to cure such Default. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default." When a Default is cured, it ceases.
5.2 ACCELERATION. If an Event of Default (other than an Event of
Default specified in Section 5.1(5) or (6)) occurs and is continuing, the
Holders of 50% in aggregate principal amount of the then outstanding Notes may,
by written notice to the Company (an "Acceleration Notice"), declare to be
immediately due and payable all principal of an accrued interest on the Notes.
Such amount shall become immediately due and payable without presentment,
demand, protest and notice of any kind or of dishonor, all of which are hereby
expressly waived. If an Event of Default specified in Section 5.1(5) or (6)
occurs, such amount shall IPSO FACTO become and be immediately due and payable
without any declaration or other act on the part of Payee. Upon payment of such
principal amount and interest, all of the Company's obligations under this Note
shall terminate. At any time after an Acceleration Notice has been delivered,
but before a judgment or decree for payment of money has been obtained, the
Holders of 50% in aggregate principal amount of the then outstanding Notes may
cancel and rescind the acceleration request and its consequences.
5.3 OTHER REMEDIES. Except as set forth in Section 5.2 and if an
Event of Default occurs and is continuing, Payee may pursue any available remedy
by proceeding at law or in equity to collect the payment of amounts due on this
Note or to enforce the performance of any provision of this Note. A delay or
omission by Payee in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. A waiver on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any future
occasion. No remedy is exclusive of any other remedy. All available remedies
are cumulative to the extent permitted by law.
5.4 WAIVER OF PAST DEFAULTS. Payee may waive an existing Default
or Event of Default and its consequences. When a Default or Event of Default is
<PAGE>
waived, it is cured and ceases. If Payee has not declared the unpaid principal
of and accrued interest on this Note due and payable pursuant to Section 5.2,
Payee shall waive any existing Event of Default under Section 5.1(4) and its
consequences if such Event of Default under Section 5.1(4) is cured, waived or
suspended.
None of the provisions hereof and none of Payee's rights or remedies
on account of any past or future defaults shall be deemed to have been waived by
Payee's acceptance of any past due payment or by an indulgence granted by Payee
to the Company. It is agreed that time is of the essence of this Note.
6. SUBORDINATION.
6.1 NOTE SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company, for itself and its successor, and Payee agree that the
payment of the principal of and all interest on this Note is subordinated in
right of payment, to the extent and in the manner provided in this Section 6, to
the prior payment in full in cash of all Senior Indebtedness, including interest
accruing after the filing of a petition initiating any proceeding pursuant to
any Bankruptcy Law, whether or not such interest is an allowed claim.
This Section 6 shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are made obligees hereunder and they
and/or each of them may enforce such provisions directly against the holder of
this Note.
6.2 NO PAYMENT ON NOTE IN CERTAIN CIRCUMSTANCES.
(a) Upon any default in the payment of any Senior Indebtedness when
due and payable, whether at maturity, by declaration or otherwise, all Senior
Indebtedness shall first be paid in full in cash before any payment is made on
account of principal of and accrued interest on this Note.
(b) In furtherance of the provisions of Section 6.1 and in the
event that, notwith- standing the foregoing provisions of Section 6.2(a), any
payment on account of this Note shall be made by or on behalf of the Company,
and received by Payee, at a time when such payment was prohibited by the
provisions of this Section 6.2, then, unless and until such payment is no longer
prohibited by this Section 6.2, such payment shall be held in trust for the
benefit of and shall be immediately paid over to, the holders of Senior
Indebtedness or their respective Representatives, ratably according to the
aggregate amount of Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution or
provision therefor to or for the holders of Senior Indebtedness.
6.3 NOTE SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR INDEBTEDNESS
ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE COMPANY.
Upon any acceleration of the maturity of this Note, or any
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution, winding up,
liquidation, reorganization or other similar proceedings of the Company (whether
in voluntary or
<PAGE>
involuntary bankruptcy, insolvency or receivership proceedings or upon any
assignment for the benefit of creditors, any other marshaling of assets or
otherwise):
(a) the holders of all Senior Indebtedness shall first receive
payment in full in cash of the principal and interest and other amounts due
thereon (or have such payments duly provided for in cash) before Payee is
entitled to receive any payment on account of the principal of and interest on
this Note;
(b) any payment or distribution of assets of the company of any
kind or character, whether in cash, property or securities to which Payee would
be entitled except for the provisions of this Section 6 shall be paid by the
Company, the liquidating trustee or agent or other person making such a payment
or distribution, directly to the holders of Senior Indebtedness (PRO RATA to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders) or the Representative, to the extent necessary to make payment
in full in cash of all Senior Indebtedness remaining unpaid; after giving effect
to any concurrent payment of distribution or provision therefor to the holders
of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by Payee on account of principal
of and interest on this Note before all Senior Indebtedness is paid in full in
cash, then such payment or distribution shall be received and held in trust for
the benefit for and shall be immediately paid over to the holders of the Senior
Indebtedness remaining unpaid or unprovided for (PRO RATA as to each of such
holders on the basis of the respective amounts of Senior Indebtedness held by
them) or their respective Representatives, for application to the payment of all
Senior Indebtedness until such Senior Indebtedness shall have been paid in full
in cash, after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Indebtedness.
6.4 PAYEE TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full in cash of all Senior Indebtedness,
Payee shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness until all amounts owing on this Note shall be paid in full,
and for the purpose of such subrogation no such payments or distributions to the
holders of Senior Indebtedness by or on behalf of the Company or by or on behalf
of Payee by virtue of this Section 6, which otherwise would have been made to
Payee, shall, as between the Company and Payee, be deemed to be payment by the
Company to or on account of the Senior Indebtedness, it being understood that
the provisions of this Section 6 are and are intended solely for the purpose of
defining the relative rights of Payee, on the one hand, and the holders of
Senior Indebtedness, on the other hand.
6.5 OBLIGATION OF THE COMPANY TO PAY PRINCIPAL AND INTEREST.
Nothing contained in this Section 6 or elsewhere in this Note is
intended to or shall impair, as between the Company and Payee, the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
interest
<PAGE>
on this Note as and when the same shall become due and payable in accordance
with its terms, or is intended to or shall affect the relative rights of Payee
and creditors of the Company other than the holders of the Senior Indebtedness,
nor shall anything herein or therein prevent Payee from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights, if any, under this Section 6 of the holders of Senior Indebtedness
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy. Upon any event requiring subordination in this
Section 6, Payee shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings or pending, or a certificate of the
liquidating trustee or agent or other person making any distribution to Payee
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amounts thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section 6.
6.6 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
COMPANY, OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Note,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify, waive or amend the terms of Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the Company or
Payee or the rights of such Senior Indebtedness hereunder.
6.7 ACTION TO EFFECTUATE SUBORDINATION.
Payee and the Company each will, at the Company's expense and at any
time from time to time, promptly execute and deliver all further instruments and
documents, and take all further action that my be necessary or that the holders
of the Senior Indebtedness or their respective Representatives may reasonably
request, in order to protect any right or interest granted hereby. Payee hereby
appoints the holders of the Senior Indebtedness and their respective
Representatives, and each of them, as Payee's attorney-in-fact to take any
action that Payee fails to take as required by the first sentence of this
paragraph, including in any bankruptcy, insolvency or receivership proceedings,
the timely filing of a claim for the unpaid balance of this Debenture in the
form required in said proceedings and causing said claim to be approved. So
long as any Senior Indebtedness is outstanding, and if it has been determined in
any bankruptcy, insolvency or receivership proceeding that the Senior
Indebtedness is not fully secured, upon notice to Payee from the holders of the
Senior Indebtedness, the holders of the Senior Indebtedness shall have the right
(without any duty) to exercise all voting rights with respect to any claim filed
by or on behalf of Payee by the holders of the Senior Indebtedness or any other
person in any bankruptcy, insolvency or receivership proceeding.
6.8 SECTION 6 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of and accrued
interest on this Note by reason of any provision of this Section 6 shall not be
<PAGE>
construed as preventing the occurrence of an Event of Default under Sections 5.1
or 5.2.
7. MISCELLANEOUS.
7.1. NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to Payee, addressed to:
PLMC. LLC
P O Box 6104
Federal Way, WA 98063
Attention: Mike Price
Facsimile: 253-926-0739
---------------------------------------
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--------------------------
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If to the Company, addressed to:
Westar Financial Services Incorporated
PO Box 919
Olympia, WA 98507
Attention: Thomas M. Foley
Facsimile: (360) 754-7028
With a copy to:
Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
Attention: Christopher L. Kaufman
Facsimile: (650) 463-2600
The Company or Payee by written notice to the others may designate
additional or different addresses. Any notice or communication to the Company
or Payee shall be deemed to have been given or made as of the date so delivered
if personally delivered; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and five calendar days after mailing if sent by
registered or certified mail (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
7.2 LEGAL HOLIDAYS. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
<PAGE>
7.3 GOVERNING LAW. THIS DEBENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF WASHINGTON, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
7.4 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Note may
not be used to interpret another indenture, loan or debt agreement of the
Company or any of its Subsidiaries. Any such indenture, loan or debt agreement
may not be used to interpret this Note.
7.5 NO RECOURSE AGAINST OTHERS. A director, officer, employee,
stockholder or incorporator, as such, of the Company shall not have any
liability for any obligations of the Company under this Note or for any claim
based on, in respect of or by reason of such obligations or their creation.
Payee by accepting this Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of this Note.
7.6 SUCCESSORS. All agreements of the Company in this Note shall
bind its successor.
7.7 SEVERABILITY. In case any provision in this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.8 AMENDMENTS AND WAIVERS. The Notes may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
the Holders of at least 51% in aggregate principal amount of the then
outstanding Notes (exclusive of any Notes held by the Company and its
Subsidiaries) to such amendment, modification, supplement, wavier or consent.
This Note may not be amended, modified or supplemented without the prior written
consent of the then-current holders of Senior Indebtedness. This provision 7.8
may not be amended, modified or supplemented unless the Company has obtained
written consent of the Holders of 100% in aggregate principal amount of the then
outstanding Notes.
IN WITNESS WHEREOF, the Company has caused this Convertible
Subordinated Note to be duly executed the day and year first above written.
WESTAR FINANCIAL SERVICES INCORPORATED,
a Washington corporation
By:
---------
Its:
---------
<PAGE>
Exhibit 10.19
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT ("Amendment") is made and entered into effective as of June 25,
1998 in Columbus, Ohio, by and among WESTAR AUTO FINANCE, L.L.C., a
Washington limited liability company, as borrower (the "Company"), BANK ONE,
NA, a national banking association, as lender (the "Lender"), and ROBERT W.
CHRISTENSEN, JR., an individual, as indemnitor (the "Indemnitor").
RECITALS
THE FOLLOWING RECITALS ARE REPRESENTATIONS WITH RESPECT TO CERTAIN
FACTUAL MATTERS THAT FORM THE BASIS OF THIS AMENDMENT AND ARE AN INTEGRAL
PART OF THIS AMENDMENT.
A. The Lender agreed to loan to the Company the maximum sum of
$25,000,000.00 (the "Revolving Credit Commitment") pursuant to the terms and
conditions of a certain Amended and Restated Revolving Credit Agreement dated
as of July 22, 1997 by and between the Company and the Lender (the "Restated
Revolving Credit Agreement"). Certain capitalized terms which are not
otherwise defined herein shall have the meanings ascribed to them in the
Restated Revolving Credit Agreement;
B. To evidence the Company's borrowings from time to time under the
Revolving Credit Commitment (collectively, the "Revolving Credit Loans"), the
Company executed a certain Amended and Restated Revolving Credit Note dated
July 22, 1997 (the "Restated Note"), whereby the Company promised to pay to
the order of the Lender, on or before July 12, 1998, the Revolving Credit
Loans, together with interest as set forth in the Restated Revolving Credit
Agreement;
C. To secure the Restated Revolving Credit Agreement and the
Restated Note, the Lender and the Company entered into a certain Amended and
Restated Company Security Agreement dated as of July 22, 1997 (the "Restated
Security Agreement");
D. In further consideration of the Lender entering into the
Restated Revolving Credit Agreement, the Indemnitor agreed, by a certain
Amended and Restated Validity Agreement dated as of July 22, 1997, to
indemnify the Lender as set forth therein (the "Restated Validity Agreement");
E. In further consideration of the Lender entering into the
Restated Revolving Credit Agreement, the Lender and the Company entered into
a certain Amended and Restated Agreement with Respect to Prevention and
Resolution of Disputes dated as of July 22, 1997 (the "Restated Dispute
Resolution Agreement");
F. The Lender is still the holder and beneficiary of the Restated
Revolving Credit Agreement, Restated Note, Restated Security Agreement,
Restated Validity Agreement and Restated Dispute Resolution Agreement (such
documents, together with all other documents related thereto, are hereinafter
collectively referred to as the "Loan Documents"); and
G. The Company, the Lender and the Indemnitor desire to amend the
Restated Revolving Credit Agreement, the Restated Note and the other Loan
Documents to increase the maximum amount of the Revolving Credit Commitment
from $25,000,000 to $26,000,000.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings
of Borrowers and Lender to amend the Loan Documents, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. All terms and conditions of the Restated Revolving Credit
Agreement shall remain in full force and effect without change except as
follows:
(a) Paragraph L of the Recitals on page 3 of the Restated
Revolving Credit Agreement is hereby amended by replacing"$25,000,000"
with "$26,000,000"; and
(b) Section 2.1 of the Restated Revolving Credit Agreement is
hereby amended by replacing "Twenty-Five Million Dollars ($25,000,000)"
with ""Twenty-Six Million Dollars ($26,000,000)".
2. All terms and conditions of the Restated Note shall remain in
full force and effect without change except as follows:
(a) The heading of the Restated Note is hereby amended by
replacing"$25,000,000" with "$26,000,000"; and
(b) The first paragraph of the Restated Note is hereby amended
by replacing "Twenty-Five Million Dollars ($25,000,000)" with
""Twenty-Six Million Dollars ($26,000,000)".
3. All terms and conditions of the Restated Security Agreement and
the Restated Validity Agreement shall remain in full force and effect without
change except that paragraph A of the recitals to each such agreement is
hereby amended by replacing"$25,000,000" with "$26,000,000".
4. The Company hereby represents and warrants that it is in full
compliance with all terms, conditions, covenants, agreements, stipulations,
representations and warranties under the Loan Documents and the Company
hereby reaffirms the same as of the date hereof.
5. The Company and the Indemnitor each covenant to perform and
observe all covenants, agreements, stipulations and conditions on it or his
respective part to be performed under the Loan Documents.
6. Except as specifically modified herein, the Loan Documents shall
remain in full force and effect in all respects according to their original
terms, covenants and conditions as security for the unpaid balance of the
indebtedness and interest thereon evidenced by the Restated Revolving Credit
Agreement and the Restated Note, and nothing in this Amendment shall affect
or impair any rights and powers which Lender may have thereunder.
7. The Company shall pay or cause to be paid and save Lender
harmless against liability for the payment of all reasonable out-of-pocket
expenses, including counsel fees and disbursements, incurred or paid by
Lender in connection with the negotiation, development, preparation,
execution and performance of this Amendment.
<PAGE>
8. This Amendment 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.
9. This Amendment is binding upon, and shall inure to the benefit
of, the parties hereto and their respective heirs, successors and assigns;
provided, however, that neither the Company nor the Indemnitor may assign or
transfer their respective rights or duties under this Amendment or the Loan
Documents without the prior written consent of Lender.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
LENDER: INDEMNITOR:
BANK ONE, N.A.
By:
-------------------------- ---------------------------
Robert N. Kent, Jr. ROBERT W. CHRISTENSEN, JR.,
individually
COMPANY:
WESTAR AUTO FINANCE, L.L.C.,
a Washington limited liability company
By WESTAR AUTO HOLDING CO.,
a Washington Corporation, Manager
By:
-----------------------------
Robert W. Christensen, Jr.
President
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<PAGE>
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<PERIOD-END> JUN-30-1998
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2,048,000
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