<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___TO___
COMMISSION FILE NUMBER 0-20774
ACE CASH EXPRESS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2142963
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1231 GREENWAY DRIVE, SUITE 800
IRVING, TEXAS 75038
(Address of principal executive offices)
(972) 550-5000
(Registrants telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
Class Outstanding as of February 11, 1997
----- ------------------------------------
Common Stock 6,385,803 shares
<PAGE>
ACE CASH EXPRESS, INC.
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 1996, and June 30, 1996 3
Interim Unaudited Consolidated Statements of Earnings for the
Three and Six Months Ended December 31, 1996 and 1995 4
Interim Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended December 31, 1996 and 1995 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996
----------------------- -----------------------
(UNAUDITED)
(in thousands, except share and per share data)
<S> <C> <C>
Cash and cash equivalents $ 48,311 $ 56,603
Accounts and notes receivable, net 5,040 4,891
Prepaid expenses 490 328
Inventories 1,344 2,084
Property and equipment, net 21,460 19,469
Covenants not to compete, net 2,877 2,372
Excess of purchase price over fair value of assets acquired, net 26,182 23,124
Other assets 3,409 2,616
Net assets held for sale 3,813 3,197
------------------- -------------------
$ 112,926 $ 114,684
------------------- -------------------
</TABLE>
LIABILITIES AND SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Money order principal payable $ 41,028 $ 35,488
Revolving advances from money order supplier 5,839 21,157
Senior secured notes payable 20,135 --
Accounts payable and accrued liabilities 8,167 10,411
Notes payable 1,381 2,320
Term advances from money order supplier 5,857 16,969
Other liabilities 4,070 3,103
Commitments and contingencies
Shareholders equity:
Preferred stock, $1 par value, 1,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $.01 par value, 10,000,000 shares
authorized, 6,383,428 and 6,324,306 shares issued 64 63
and outstanding, respectively
Additional paid-in capital 18,459 18,109
Retained earnings 7,926 7,064
------------------- -------------------
Total shareholders equity 26,449 25,236
------------------- -------------------
$ 112,926 $ 114,684
------------------- -------------------
</TABLE>
See notes to the interim consolidated financial statements.
3
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------------------- ---------------------------------------
(in thousands, except per share data)
1996 1995 1996 1995
--------------- --------------- ---------------- ---------------
<S> <C> <C> | <C> <C>
Revenues $ 20,097 $ 14,591 | $ 39,118 $ 28,658
|
Store expenses: |
Salaries and benefits 6,054 4,630 | 11,809 9,237
Occupancy 3,407 2,598 | 6,695 5,214
Depreciation 811 650 | 1,583 1,270
Other 4,159 3,097 | 8,351 6,108
------------ ------------- | -------------- -------------
Total store expenses 14,431 10,975 | 28,438 21,829
Region expenses 1,795 1,310 | 3,559 2,515
Headquarters expenses 1,408 1,088 | 2,635 2,053
Franchise expenses 288 -- | 526 --
Other depreciation and amortization 730 485 | 1,386 970
Interest expense 564 388 | 1,113 674
Other expenses 27 16 | 42 18
------------ ------------- | -------------- -------------
|
Income before income taxes 854 329 | 1,419 599
Income taxes 335 125 | 556 227
------------ ------------- | -------------- -------------
Net income $ 519 $ 204 | $ 863 $ 372
------------ ------------- | -------------- -------------
|
Earnings per share $ .08 $ .03 | $ .13 $ .06
------------ ------------- | -------------- -------------
|
Weighted average number of |
common and common equivalent |
shares outstanding 6,500 6,281 | 6,472 6,290
------------ ------------- | -------------- -------------
|
</TABLE>
See notes to the interim consolidated financial statements.
4
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------------------------
1996 1995
---------------- ----------------
(in thousands
<S> <C> <C>
Cash flows from operating activities:
Net income $ 863 $ 372
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,255 2,240
Loss on disposal of property and equipment -- 18
Recognition of deferred revenue (702) (139)
Changes in assets and liabilities:
Accounts and notes receivable, net (764) (891)
Prepaid expenses (162) 1
Inventories 740 1,038
Other assets (793) (846)
Accounts payable and other liabilities (576) 117
------------ ------------
Net cash provided by operating activities 861 1,910
Cash flows from investing activities:
Purchases of property and equipment, net (2,186) (1,857)
Cost of net assets acquired (5,624) (320)
------------ ------------
Net cash used by investing activities (7,810) (2,177)
Cash flows from financing activities:
Net borrowings from (payments to) money order supplier (9,777) 3,126
Net borrowings of senior secured notes payable 20,135 --
Term advances from money order supplier 8,335 1,050
Payments of term advances from money order supplier (19,447) (324)
Net increase (decrease) in notes payable (939) (545)
Proceeds from stock options exercised 350 4
------------ ------------
Net cash provided (used) by financing activities (1 ,343) 3,311
------------ ------------
Net increase (decrease) in cash and cash equivalents (8,292) 3,044
Cash and cash equivalents, beginning of period 56,603 49,249
------------ ------------
Cash and cash equivalents, end of period $ 48,311 $ 52,293
------------ ------------
Supplemental disclosures of cash flows information:
Cash paid for:
Interest $ 1,004 $ 582
Income taxes 1,811 471
</TABLE>
See notes to the interim consolidated financial statements.
5
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed unaudited interim consolidated financial
statements of Ace Cash Express, Inc. (the Company or ACE) and its subsidiaries
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the rules and regulations of the
Securities and Exchange Commission. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. Although management believes that the disclosure is
adequate to prevent the information from being misleading, the interim
consolidated financial statements should be read in conjunction with the
Companys audited financial statements in its Annual Report on Form 10-K filed
with the Securities and Exchange Commission. In the opinion of Company
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.
Certain prior period accounts have been reclassified to conform to the
current years presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
OPERATIONS
Ace Cash Express, Inc. was incorporated under the laws of the State of
Texas in March 1982. The Company operates in one business segment and provides
check cashing, money order, wire transfer, loans and other transactional
services to customers for a fee. As of December 31, 1996, the Company owned
and operated 592 stores in 19 states and the District of Columbia and had 96
additional franchised stores in 18 states.
SENIOR SECURED NOTES PAYABLE
On December 4, 1996, the Company completed a private placement for $20
million of 9.03% Senior Secured Notes to support its acquisition program. These
notes are due November 15, 2003, with annual principal payments of $4 million
beginning November 15, 1999. Proceeds from the private placement were used to
pay down the Companys outstanding term advances.
COMMON STOCK
On October 29, 1996, the Board of Directors of the Company authorized a
stock dividend in the form of a three-for-two stock split. The split was
effected by distributing one additional share of common stock of the Company for
every two shares of common stock outstanding. The record date for determining
holders entitled to receive the stock dividend was November 15, 1996, with a
delivery date on or about November 30, 1996. Cash was paid in lieu of
fractional shares. All share and per share amounts have been restated as if the
split were effective as of July 1, 1995.
6
<PAGE>
SUPPLEMENTAL STATISTICAL DATA - COMPANY OWNED STORES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED JUNE 30,
-------------------- -------------------- ------------------------------
1996 1995 1996 1995 1996 1995 1994
--------- --------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STORE OPERATING DATA:
Beginning of period 576 456 544 452 452 343 276
Acquired 11 4 34 4 69 77 32
Opened 14 8 25 14 33 40 47
Closed (9) (2) (11) (4) (10) (8) (12)
------ ------ ------ ------ ------- ------- ------
End of Period 592 466 592 466 544 452 343
====== ====== ====== ====== ======= ======= ======
Percentage increase in
comparable store revenues from
prior period (1) 7.7% 3.6% 6.8% 3.3% 4.7% 1.6% 1.0%
Capital expenditures
(in thousands) $1,152 $ 980 $2,179 $1,740 $ 3,435 $ 4,187 $4,367
Cost of net assets acquired $1,869 $ 407 $5,624 $ 492 $14,432 $14,000 $4,846
- -----------------------------------------------------------------------------------------------------------------
OPERATING DATA:
Face amount of checks cashed
(in millions) $ 611 $ 477 $1,185 $ 949 $ 2,144 $ 1,567 $1,309
Face amount of money orders sold
(in millions) $ 447 $ 351 $ 882 $ 703 $ 1,531 $ 1,213 $1,042
Face amount of money orders
sold as a percentage of the face
amount of checks cashed 73.2% 73.6% 74.4% 74.1% 71.4% 77.4% 79.6%
Face amount of average check $ 270 $ 267 $ 270 $ 272 $ 285 $ 284 $ 286
Average fee per check $ 6.27 $ 6.11 $ 6.30 $ 6.16 $ 6.81 $ 6.79 $ 6.94
Number of checks cashed
(in thousands) 2,256 1,787 4,370 3,491 7,535 5,516 4,585
Number of money orders sold
(in thousands) 3,369 2,767 6,622 5,540 11,835 9,334 8,266
- -----------------------------------------------------------------------------------------------------------------
COLLECTIONS DATA:
Face amount of returned checks
(in thousands) $2,342 $2,178 $5,047 $4,126 $ 8,661 $ 6,206 $5,196
Collections (in thousands) 1,556 1,255 3,098 2,464 5,004 3,786 3,304
------ ------ ------ ------ ------- ------- ------
Net write offs (in thousands) $ 786 $ 923 $1,949 $1,662 $ 3,657 $ 2,420 $1,892
------ ------ ------ ------ ------- ------- ------
Collections as a percentage of
returned checks 66.4% 57.6% 61.4% 59.7% 57.8% 61.0% 63.6%
Net write-offs as a percentage of
revenues 3.9% 6.3% 5.0% 5.8% 5.3% 5.1% 4.7%
Net write-offs as a percentage of the
face amount of checks cashed .13% .19% .16% .18% .17% .15% .14%
</TABLE>
(1) Calculated based on the change in revenues of all stores open for both of
the full year and the six-month periods compared.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
REVENUE ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
-------------------------------------------------- ---------------------------------------------
(in thousands) (Percentage of Revenue) (in thousands) (Percentage of Revenue)
1996 1995 1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check fees $ 14,062 $ 10,856 70.0% 74.4% $ 27,197 $ 21,251 69.5% 74.2%
Tax check fees 87 73 0.4 0.5 314 277 0.8 1.0
Money transfer services 1,470 1,043 7.3 7.1 2,891 1,983 7.4 6.9
Loan fees and interest 1,382 501 6.9 3.4 2,570 901 6.6 3.1
Money order sales 675 573 3.4 3.9 1,334 1,117 3.4 3.9
New customer fees 494 293 2.4 2.0 929 565 2.4 2.0
Bill payment services 469 286 2.3 2.0 934 563 2.4 2.0
Food stamp distribution 200 189 1.0 1.3 402 477 1.0 1.7
Franchise revenues 254 -- 1.3 0.0 616 -- 1.6 0.0
Electronic tax filings 1 5 0.0 0.0 9 12 0.0 0.0
Other fees 1,003 772 5.0 5.4 1,922 1,512 4.9 5.2
--------- --------- ----- ----- --------- --------- ----- -----
Total revenue $ 20,097 $ 14,591 100.0% 100.0% $ 39,118 $ 28,658 100.0% 100.0%
--------- --------- ----- ----- --------- --------- ----- -----
Average revenue per store
$34.4 $31.7 $68.9 $62.4
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Revenues increased $5.5 million, or 38%, to $20.1 million in the second quarter
of fiscal 1997 from the $14.6 million in the second quarter of the last fiscal
year. This revenue growth resulted, in part, from a $1.1 million, or 7.7%,
increase in comparable store revenues (429 stores). The balance of the increase
came from stores which were opened or acquired after June 30, 1995, and were
therefore not open for both of the full periods compared. The number of
Company-owned stores increased by 126, or 27%, from 466 stores opened at
December 31, 1995, to 592 stores opened at December 31, 1996. The increase in
total check cashing fees accounted for 58% of the total revenue increase. Check
cashing fees increased $3.2 million, or 29%, from the $10.9 million in the
second quarter of the last fiscal year to $14.1 million in the second quarter of
fiscal 1997. This increase resulted from a 26% increase in the total number of
checks cashed, plus a 2.6% increase in the average fee per check realized by the
Company.
Money transfer services increased $0.4 million, or 41%, principally as a result
of acquired stores and the related revenue guarantees and continued promotion
activities by the money transfer services supplier. Franchise fees in the
second quarter of fiscal 1997 are primarily franchise royalties from the Check
Express and Check-X-Change franchisees which commenced with the Check Express,
Inc. acquisition on February 1, 1996. Loan fees and interest increased $0.9
million, or 176%, as a result of increased volume of the Companys small consumer
loan program, currently offered in 164 Company-owned stores in 13 states.
SIX-MONTH COMPARISON
Revenues increased $10.5 million, or 36%, from the $28.7 million in the first
six months of the last fiscal year to $39.1 million in the first six months of
fiscal 1997. This revenue growth resulted, in part, from a $1.9 million, or
6.8%, increase in comparable store revenues (429 stores). The balance of the
increase came from stores which were opened or acquired after June 30, 1995, and
were therefore not open for both of the full periods compared. The increase in
total check cashing fees accounted for 57% of the total revenue increase. Check
cashing fees increased $6.0 million, or 28%, from the $21.5 million in the first
six months of the last fiscal year to $27.5 million in the first six months of
the fiscal 1997. This increase resulted from a 25% increase in the total number
of checks cashed, plus a 2.3% increase in the average fee per check realized by
the Company.
8
<PAGE>
Money transfer services increased $0.9 million, or 46%, principally as a result
of acquired stores and the related revenue guarantees and continued promotion
activities by the money transfer services supplier. Loan fees and interest
increased $1.7 million, or 185%, as a result of increased volume of the
Companys small consumer loan program, currently offered in 164 Company-owned
stores in 13 states.
<TABLE>
<CAPTION>
STORE EXPENSE ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
-------------------------------------------------- ---------------------------------------------
(in thousands) (Percentage of Revenue) (in thousands) (Percentage of Revenue)
1996 1995 1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 6,054 $ 4,630 30.1% 31.7% $ 11,809 $ 9,237 30.2% 32.2%
Occupancy 3,407 2,598 17.0 17.8 6,695 5,214 17.1 18.2
Armored and security 844 675 4.2 4.6 1,618 1,394 4.1 4.9
Returns and cash shorts 1,325 1,301 6.6 8.9 2,966 2,407 7.6 8.4
Loan losses 353 97 1.8 0.7 651 179 1.7 0.6
Depreciation 811 650 4.0 4.5 1,583 1,270 4.0 4.4
Other 1,637 1,024 8.1 7.0 3,116 2,128 8.0 7.5
--------- --------- ---- ---- -------- -------- ---- ----
Total store expenses $ 14,431 $ 10,975 71.8% 75.2% $ 28,438 $ 21,829 72.7% 76.2%
--------- --------- ---- ---- -------- -------- ---- ----
Average per store expense
$24.7 $22.5 $50.1 $47.6
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Store expenses increased $3.4 million, or 31%, to $14.4 million in the second
quarter of fiscal 1997 from $11.0 million in the second quarter of the last
fiscal year. Store expenses decreased as a percentage of revenues, decreasing to
71.8% in the second quarter of fiscal 1997 from 75.2% in the second quarter of
the last fiscal year. Salaries and benefits expenses and occupancy costs
increased primarily as a result of the increased number of stores in operation.
Loan losses increased $0.3 million in the second quarter of fiscal 1997, as
compared to the second quarter of fiscal 1996, as a result of the increased
volume of loans made. Other store expenses increased $0.6 million, or 60%,
primarily as a result of the increased number of stores in operation.
SIX-MONTH COMPARISON
Store expenses increased $6.6 million, or 30%, from the $21.8 million in the
first six months of the last fiscal year to $28.4 million in the first six
months of fiscal 1997. Store expenses decreased as a percentage of revenues,
decreasing from 76.2% in the first six months of the last fiscal year to 72.7%
in the first six months of fiscal 1997. Salaries and benefits expenses and
occupancy costs increased primarily as a result of the increased number of
stores in operation. Returned checks, net of collections, and cash shortages
increased $0.6 million, or 23%, in the first six months of fiscal 1997 as a
result of the increased number of stores and increased theft losses. Returned
checks, net of collections, and cash shortages decreased as a percentage of
revenues to 7.6% in the first six months of fiscal 1997 from 8.4% in the first
six months of fiscal 1996. Loan losses increased $0.5 million in the first six
months of fiscal 1997, as compared to the first six months of fiscal 1996, as a
result of the increased volume of loans made. Other store expenses increased
$1.0 million, or 46%, primarily as a result of the increased number of stores in
operation.
9
<PAGE>
<TABLE>
<CAPTION>
OTHER EXPENSE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
-------------------------------------------------- ----------------------------------------------
(in thousands) (Percentage of Revenue) (in thousands) (Percentage of Revenue)
1996 1995 1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Region expenses $ 1,795 $ 1,310 8.9% 9.0% $ 3,559 $ 2,515 9.1% 8.8%
Headquarters expenses 1,408 1,088 7.0 7.5 2,635 2,053 6.7 7.2
Franchise expense 288 -- 1.4 -- 526 -- 1.3 --
Other depreciation and
amortization 730 485 3.6 3.3 1,386 970 3.5 3.4
Interest expense 564 388 2.8 2.7 1,113 674 2.8 2.4
Other expense 27 16 0.1 0.1 42 18 0.1 0.1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Region Expenses
Region expenses increased $0.5 million, or 37%, in the second quarter of fiscal
1997 over the second quarter of the last fiscal year, primarily due to the
addition of region personnel serving the expanded Southwest region and the new
Florida region, including additional operations support personnel. In addition,
district supervisors now serve as full-time region management, with their
salaries allocated only to region expenses, where previously a portion of their
salaries was allocated to their store expense.
Headquarters Expenses
Headquarters expenses increased $0.3 million, or 29%, in the second quarter of
fiscal 1997 over the second quarter of the last fiscal year, principally as a
result of increased salaries and benefits and lease expense for additional space
at the Companys corporate headquarters. Headquarters expenses decreased as a
percentage of revenues from 7.5% in the second quarter of the last fiscal year
to 7.0% in the second quarter of fiscal 1997.
Franchise Expenses
Franchise expenses consist primarily of salaries of the franchise support and
sales personnel and allocated occupancy costs since the acquisition of Check
Express, Inc. on February 1, 1996.
Other Depreciation and Amortization
Other depreciation and amortization increased $0.2 million, or 51%, in the
second quarter of fiscal 1997 from the second quarter of the last fiscal year,
principally due to increased amortization of intangibles related to acquired
stores.
Interest Expense
Interest expense, net of interest income, increased $0.2 million, or 45%, in the
second quarter of fiscal 1997 as compared to the second quarter of the last
fiscal year. This increase was principally the result of increased borrowings of
term advances to finance store acquisitions, including the acquisition of Check
Express, Inc. Those borrowings consisted of Term Advances from the Money Order
Supplier, which bear interest at the prime rate plus 1%, currently totaling
9.25%, and the $20 million borrowed from Principal Mutual Life Insurance Company
under a Note Purchase Agreement, which bears interest at 9.03%. See --
Liquidity and Capital Resources below.
Other Expense
Other expense was $27,000 in the second quarter of fiscal 1997 as compared to
$16,000 in the second quarter of the last fiscal year. These expenses consist
of store closing costs.
10
<PAGE>
Income Taxes
A total of $0.3 million was provided for income taxes in the second quarter of
fiscal 1997, up from $0.1 million in the second quarter of the last fiscal year.
The provision for income taxes was calculated based on a statutory federal
income tax rate of 34%, plus a provision for state income taxes and non-
deductible goodwill resulting from the acquisition of Check Express, Inc.
SIX-MONTH COMPARISON
Region Expenses
Region expenses increased $1.0 million, or 42%, in the first six months of
fiscal 1997 over the first six months of the last fiscal year, primarily due to
the addition of region personnel serving the expanded Southwest region and the
new Florida region, including additional operations support personnel. In
addition, district supervisors now serve as full-time region management, with
their salaries allocated only to region expenses, where previously a portion of
their salaries was allocated to their store expense. Region expenses increased
as a percentage of revenues, from 8.8% in the first six months of the last
fiscal year to 9.1% in the first six months of fiscal 1997.
Headquarters Expenses
Headquarters expenses increased $0.6 million, or 28%, in the first six months of
fiscal 1997 over the first six months of the last fiscal year, principally as a
result of increased salaries and benefits and lease expense for additional space
at the Companys corporate headquarters. Headquarters expenses decreased as a
percentage of revenues from 7.2% in the first six months of the last fiscal year
to 6.7% in the first six months of fiscal 1997.
Franchise Expenses
Franchise expenses consist primarily of salaries of the franchise support and
sales personnel and allocated occupancy costs since the acquisition of Check
Express, Inc. on February 1, 1996.
Other Depreciation and Amortization
Other depreciation and amortization increased $0.4 million, or 43%, in the
first six months of fiscal 1997 from the first six months of the last fiscal
year, principally due to increased amortization of intangibles related to
acquired stores.
Interest Expense
Interest expense, net of interest income, increased $0.4 million, or 65%, in the
first six months of fiscal 1997 as compared to the first six months of the last
fiscal year. This increase was principally the result of increased borrowings of
term advances to finance store acquisitions, including the acquisition of Check
Express, Inc. Those borrowings consisted of Term Advances from the Money Order
Supplier, which bear interest at the prime rate plus 1%, currently totaling
9.25%, and the $20 million borrowed from Principal Mutual Life Insurance Company
under a Note Purchase Agreement, which bears interest at 9.03%. See --
Liquidity and Capital Resources below.
Other Expense
Other expense was $42,000 in the first six months of fiscal 1997 as compared to
$18,000 in the first six months of the last fiscal year. These expenses consist
of store closing costs.
Income Taxes
A total of $0.6 million was provided for income taxes in the first six months of
fiscal 1997, up from $0.2 million in the first six months of the last fiscal
year. The provision for income taxes was calculated based on a statutory
federal income tax rate of 34%, plus a provision for state income taxes and non-
deductible goodwill resulting from the acquisition of Check Express, Inc.
11
<PAGE>
BALANCE SHEET VARIATIONS
Certain balance sheet accounts of the Company vary as a result of seasonal and
day-to-day requirements resulting from maintaining cash for the cashing of
checks, receipts of cash from the sale of money orders, and remittances on money
orders sold. For the six months ended December 31, 1996, cash and cash
equivalents and money order principal payable increased principally as a result
of the increase in the number of stores operated, from 544 at June 30, 1996, to
592 at December 31, 1996, and the timing of scheduled remittances of money order
proceeds.
Property and equipment and the excess purchase price over the fair value of net
assets acquired increased $2.0 million and $3.1 million, respectively, as a
result of the 34 stores acquired and the 25 stores opened during the six months
ended December 31, 1996, offset by related depreciation and amortization.
On October 29, 1996, the Board of Directors of the Company authorized a stock
dividend in the form of a three-for-two stock split. The split was effected by
distributing one additional share of common stock of the Company for every two
shares of common stock outstanding. The record date for determining holders
entitled to receive the stock dividend was November 15, 1996, with a delivery
date on or about November 30, 1996. Cash was paid in lieu of fractional shares.
All share and per share amounts have been restated as if the split were
effective as of July 1, 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended December 31, 1996 and 1995, the Company had net cash
provided by operating activities of $0.8 million and $1.9 million, respectively.
During the six months ended December 31, 1996 and 1995, the Company used $7.8
million and $2.2 million, respectively, for purchases of property and equipment
related to new stores and other capital expenditures.
Net cash used by financing activities for the six months ended December 31, 1996
was $1.3 million. Net cash provided by financing activities for the six months
ended December 31, 1995, was $3.3 million. On December 4, 1996, the Company
completed a private placement for $20 million of 9.03% Senior Secured Notes to
support its acquisition program. These notes are due November 15, 2003, with
annual principal payments of $4 million beginning November 15, 1999. Proceeds
from the private placement were used to pay down the Companys outstanding term
advances. Term advances from the Money Order Supplier decreased by $11.1
million for the six months ended December 31, 1996. This change is comprised of
advances of $8.3 million to fund new and acquired stores, less payments of $19.4
million. In addition payments to the Money Order Supplier totaled $9.8 million
for the six months ended December 31, 1996.
For the six months ended December 31, 1996, the Company obtained a total of $8.3
million in advances under the Revolving Advance Commitment provisions of the
Companys agreement with the Money Order Supplier (Term Advances). The repayment
terms of each Term Advance call for the principal amount to be paid in equal
monthly installments on a 60-month amortization through December 1998, when the
remaining principal is due. As of December 31, 1996, $5.9 million was
outstanding under this borrowing facility. Borrowed amounts bear interest at
the prime rate plus one percent, which currently totals 9.25%.
DESCRIPTION OF NOTE PURCHASE AGREEMENT AND THIRD AMENDMENT
On December 4, 1996, the Company completed a private placement for $20 million
of 9.03% Senior Secured Notes issued to Principal Mutual Life Insurance Company
under the terms of a Note Purchase Agreement dated November 15, 1996. The
principal amount of these notes is due in five equal annual installments of $4
million each, beginning November 15, 1999. Interest payments are due
semiannually, beginning May 15, 1997. Net proceeds from the issuance of these
notes were used to pay the outstanding $18.5 million principal plus accrued
interest on the Term Advances from the Money Order Supplier.
These notes are secured by a security interest in substantially all the assets
of the Company. The Company also entered into a Collateral Trust Agreement with
Wilmington Trust Company, as trustee, and the Companys two secured lenders,
Principal Mutual Life Insurance Company and the Money Order Supplier. Under the
terms of the Collateral Trust Agreement, the Money Order Supplier has priority
with respect to deferred money order remittances, and all secured lenders
otherwise share in the collateral on a pro rata basis, in the event of
foreclosure or liquidation of the collateral. The Company also executed an
Assignment of Deposit Accounts and Security Agreement with Wilmington Trust
Company, to
12
<PAGE>
grant the trustee a security interest in the same collateral that
had previously secured the Companys obligations solely to the Money Order
Supplier.
In addition, the Company and the Money Order Supplier entered into the Third
Amendment to the Money Order Agreement, under which the Money Order Supplier
agreed to continue to make the Term Advance facility available to the Company on
substantially the same terms existing prior to the issuance of these notes.
After repayment of the $18.5 million outstanding Term Advances, the Company
obtained Term Advances from the Money Order Supplier of approximately $5.9
million as of December 31, 1996.
OPERATING TRENDS
Seasonality
The Companys business is seasonal because of the impact of cashing tax refund
checks and two other tax-related services--electronic tax filing and processing
applications for refund anticipation loans. In addition, results of operations
depend significantly upon the timing and amount of revenues and expenses
associated with the acquisition and addition of new stores.
IMPACT OF INFLATION
The Company believes that the results of its operations are not dependent upon
the levels of inflation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on November 15, 1996.
At the Annual Meeting the Companys shareholders elected six individuals to serve
as directors of the Company until the next annual meeting or until their
successors are elected and qualified. The table below shows the votes cast in
favor of the election of the six persons as directors and the votes withheld
against their election. There were no abstentions or broker non-votes.
<TABLE>
<CAPTION>
DIRECTOR VOTES FOR VOTES WITHHELD
<S> <C> <C>
Raymond C. Hemmig 3,781,167 60,051
Donald H. Neustadt 3,783,167 58,051
Howard W. Davis 3,781,167 60,051
Marshall B. Payne 3,781,167 60,051
Edward W. Rose III 3,780,467 60,751
C. Daniel Yost 3,783,167 58,051
</TABLE>
At the Annual Meeting, the Companys shareholders also voted to approve a
proposal (previously approved by the Companys Board of Directors) to increase
the number of shares of Common Stock authorized for issuance under the Companys
1987 Stock Option Plan, as amended, from 520,000 shares to 720,000 shares. An
aggregate 3,726,549 shares were voted for the proposal, 86,312 shares were
voted against the proposal, and 12,200 shares abstained.
13
<PAGE>
All of the numbers of shares stated in the two preceding paragraphs do not
reflect the three-for-two stock split as of the close of business on November
15, 1996 (after the Annual Meeting). See Managements Discussion and Analysis of
Financial Condition and Results of Operations -- Balance Sheet Variations.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Exhibits
-------------- --------
10.28 Note Purchase Agreement dated November 15,
1996, between the Company and Principal Mutual
Life Insurance Company.
10.29 Form of 9.03% Senior Secured Notes due November
15, 2003.
10.30 Collateral Trust Agreement dated November 15,
1996, among the Company and the Money Order
Supplier, Principal Mutual Life Insurance
Company, and Wilmington Trust Company.
10.31 Assignment of Deposit Accounts and Security
Agreement dated November 15, 1996, between the
Company and Wilmington Trust Company.
10.32 Third Amendment to the Money Order Agreement
dated November 15, 1996, between the Company
and the Money Order Supplier.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACE CASH EXPRESS, INC.
----------------------
February 11, 1997 By: /s/ SUSAN S. PRESSLER
---------------------------
Vice President and Controller
(Duly authorized officer and
chief accounting officer)
14
<PAGE>
Exhibit 10.28
================================================================================
- --------------------------------------------------------------------------------
ACE CASH EXPRESS, INC.
-------------------
NOTE PURCHASE AGREEMENT
---------------------
Dated as of November 15, 1996
$20,000,000
9.03% Senior Secured Notes due November 15, 2003
THIS AGREEMENT AND THE NOTES ISSUED HEREUNDER MAY BE SUBJECT TO THE TERMS OF A
COLLATERAL TRUST AGREEMENT, DATED AS OF NOVEMBER 15, 1996, AS SUCH COLLATERAL
TRUST AGREEMENT MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO
TIME, AMONG THE COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.,
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AND WILMINGTON TRUST COMPANY. BY
ACCEPTANCE OF A NOTE, THE HOLDER THEREOF MAY BECOME BOUND BY THE PROVISIONS OF
SUCH COLLATERAL TRUST AGREEMENT, WHETHER OR NOT SUCH HOLDER BECOMES A PARTY TO
SUCH COLLATERAL TRUST AGREEMENT.
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
(Not a Part of the Agreement)
PAGE
1. SALE AND PURCHASE OF NOTES............................................ 1
1.1 Issuance of Notes............................................... 1
1.2 The Closing..................................................... 1
2. COMPANY WARRANTIES AND REPRESENTATIONS................................ 2
3. CLOSING CONDITIONS.................................................... 2
4. PAYMENTS.............................................................. 2
4.1 Interest........................................................ 2
4.2 Scheduled Principal Payments.................................... 2
4.3 Optional Prepayments............................................ 3
4.4 Offer to Prepay upon Change in Control, etc..................... 4
4.5 Partial Prepayment Pro Rata..................................... 5
4.6 Notation of Notes on Prepayment................................. 6
4.7 No Other Prepayments; Acquisition of Notes...................... 6
4.8 Payments Generally.............................................. 6
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......................... 7
5.1 Registration of Notes........................................... 7
5.2 Exchange of Notes............................................... 7
5.3 Replacement of Notes............................................ 8
5.4 Issuance Taxes.................................................. 8
6. FINANCIAL AND GENERAL COVENANTS....................................... 8
6.1 Operating Cash Flow............................................. 8
6.2 Cash Coverage Ratio............................................. 9
6.3 Fixed Charges Coverage Ratio.................................... 9
6.4 Consolidated Adjusted Debt...................................... 9
6.5 Coverage of Scheduled Debt Payments............................. 9
6.6 Subsidiary Debt................................................. 10
6.7 Restricted Payments............................................. 10
6.8 Restrictions Affecting Subsidiaries............................. 11
6.9 Asset Dispositions.............................................. 11
6.10 Disposal of Ownership of a Subsidiary........................... 12
6.11 Consolidation or Merger......................................... 12
6.12 Liens........................................................... 13
6.13 Transactions with Affiliates and Franchisees.................... 15
6.14 Payment of Taxes and Claims..................................... 16
6.15 Maintenance of Properties; Corporate Existence; etc............. 16
6.16 Payment of Notes and Maintenance of Office...................... 17
6.17 Plans........................................................... 17
6.18 Lines of Business............................................... 18
6.19 Private Offering................................................ 18
6.20 Limitation on AMEX Term Advances, etc........................... 19
i
<PAGE>
6.21 Permitted Subsidiaries.......................................... 19
7. INFORMATION COVENANTS................................................. 19
7.1 Financial and Business Information.............................. 19
7.2 Reports to NAIC................................................. 22
7.3 Officer's Certificates.......................................... 23
7.4 Accountants' Certificates....................................... 23
7.5 Inspection...................................................... 23
8. EVENTS OF DEFAULT..................................................... 24
8.1 Nature of Events................................................ 24
8.2 Default Remedies................................................ 26
8.3 Annulment of Acceleration of Notes.............................. 28
9. INTERPRETATION OF AGREEMENT........................................... 28
9.1 Terms Defined................................................... 28
9.2 Accounting Principles........................................... 45
9.3 Directly or Indirectly.......................................... 45
9.4 Section Headings, Table of Contents and Construction............ 45
9.5 Governing Law................................................... 46
10. PURCHASER REPRESENTATIONS............................................. 46
10.1 Purchase for Investment......................................... 46
10.2 Source of Funds................................................. 46
11. MISCELLANEOUS......................................................... 47
11.1 Communications.................................................. 47
11.2 Reproduction of Documents....................................... 48
11.3 Survival........................................................ 48
11.4 Successors and Assigns.......................................... 48
11.5 Amendment and Waiver............................................ 49
11.6 Expenses........................................................ 50
11.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc.............. 51
11.8 Entire Agreement................................................ 52
11.9 Severability.................................................... 52
11.10 Construction.................................................... 52
11.11 Execution in Counterpart........................................ 52
11.12 General Interest Provisions..................................... 53
Annex 1 -- Information as to Purchaser
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company
Attachment A -- Company Warranties and Representations
Attachment B -- Closing Conditions
Exhibit A -- Form of 9.03% Senior Secured Note due November 15, 2003
ii
<PAGE>
Exhibit B1 -- Form of Closing Opinion of Special Counsel for the Company
Exhibit B2 -- Form of Closing Opinion of Special Counsel for the Trustee
Exhibit B3 -- Form of Closing Opinion of Special Counsel for the Purchaser
Exhibit C -- Form of Collateral Trust Agreement
Exhibit D -- Form of Security Agreement
iii
<PAGE>
ACE CASH EXPRESS, INC.
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
$20,000,000
9.03% Senior Secured Notes due November 15, 2003
Dated as of November 15, 1996
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Ladies and Gentlemen:
ACE CASH EXPRESS, INC., a Texas corporation (together with its successors
and assigns, the "Company"), hereby agrees with you as follows:
1. SALE AND PURCHASE OF NOTES
1.1 Issuance of Notes.
The Company will authorize the issuance of $20,000,000 in aggregate
principal amount of its 9.03% Senior Secured Notes due November 15, 2003 (all
such notes, whether initially issued, or issued in exchange or substitution for,
any such note, in each case in accordance with this Agreement, and as amended,
restated or otherwise modified from time to time, the "Notes"). The Notes shall
be in the form of Exhibit A, and shall have the terms as herein and therein
provided.
1.2 The Closing.
(a) Purchase and Sale of Notes. The Company hereby agrees to sell to
you and you hereby agree to purchase from the Company, in accordance with
the provisions hereof, the aggregate principal amount of Notes set forth
below your name in Annex 1 at 99.367725% of the principal amount thereof.
(b) The Closing. The closing (the "Closing") of the Company's sale of
Notes will be held on December 4, 1996 (the "Closing Date") at 9:00 a.m.,
local time, at the office of Gardere & Wynne, L.L.P., 1601 Elm Street,
Suite 3000, Dallas, TX 75201. At the Closing, the Company will deliver to
you one or more Notes (as set forth below your name in Annex 1), in the
denominations indicated in Annex 1, in the aggregate principal amount of
your purchase, dated the Closing Date and payable as indicated in Annex 1,
against payment by federal funds wire transfer in immediately available
funds of the purchase price thereof, as directed by the Company in Annex 2.
1
<PAGE>
2. COMPANY WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase and pay for the
Notes to be delivered to you at the Closing, the Company makes the warranties
and representations set forth in Attachment A, effective as of the date of the
Company's execution of this Agreement and as of the Closing Date, which are
incorporated herein by reference with the same force and effect as though set
forth herein in full.
3. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation, the
obligation to purchase and pay for the Notes to be delivered to you at the
Closing, are subject to the conditions precedent set forth in Attachment B,
which are incorporated herein by reference with the same force and effect as
though set forth herein in full, and the failure by the Company to satisfy all
such conditions shall, at your election, relieve you of all such obligations.
The failure of the Company to satisfy such conditions shall not operate to
relieve the Company of its obligations hereunder or to waive any of your rights
against the Company.
4. PAYMENTS
4.1 Interest.
Interest shall accrue on the unpaid principal balance of the Notes on the
basis of a 360-day year of twelve 30-day months at the rate of 9.03% per annum
and shall be payable, in arrears, semi-annually on May 15 and November 15 in
each year, commencing on May 15, 1997, until the principal amount of the Notes
in respect of which such interest shall have accrued shall become due and
payable, and interest shall accrue on any overdue principal (including any
overdue prepayment of principal) and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) on any overdue installment of interest, at a
rate equal to the lesser of (a) the highest rate allowed by applicable law or
(b) the greater of (i) 11.03% per annum or (ii) 2% over the rate of interest
publicly announced by Citibank, N.A. or its successor in New York City as its
"base" or "prime" rate.
4.2 Scheduled Principal Payments.
The Company shall pay, and there shall become due and payable, $4,000,000
in principal amount of the Notes on November 15 in each year beginning on
November 15, 1999 and ending on November 15, 2003, inclusive (each, a "Scheduled
Principal Payment"). Each Scheduled Principal Payment shall be at 100% of the
principal amount payable, together with interest accrued thereon to the date of
payment. Without limitation of the foregoing, all of the principal of the Notes
remaining outstanding, if any, on the maturity date of the Notes, November 15,
2003, together with interest accrued thereon, shall become due and payable on
such date.
4.3 Optional Prepayments.
(a) Optional Prepayments. The Company may at any time after March 1,
1997 prepay the principal amount of the Notes in part, in a principal
amount of not less than $1,000,000 for any such prepayment, or in whole, in
each case together with:
2
<PAGE>
(i) an amount equal to the Make-Whole Amount, if any, as of the
prepayment date in respect of the principal amount of the Notes being so
prepaid; and
(ii) interest on such principal amount then being prepaid accrued to
the prepayment date.
(b) Notice of Optional Prepayment. The Company will give notice of any
optional prepayment of the Notes pursuant to this Section 4.3 to each holder of
Notes not less than 30 days or more than 60 days before the date fixed for
prepayment, specifying:
(i) such date;
(ii) that such payment is to be made under Section 4.3 of this
Agreement;
(iii) the principal amount of each Note to be prepaid on such date;
(iv) the interest to be paid on each such Note, accrued to the date
fixed for prepayment; and
(v) a reasonably detailed calculation of an estimated Make-Whole
Amount, if any (calculated as if the date of such notice were the date of
prepayment), due in connection with such prepayment.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes to be prepaid specified in such notice, together with the Make-Whole
Amount, if any, as of the specified prepayment date with respect thereto and
accrued interest thereon shall become due and payable on the specified
prepayment date. Two Business Days prior to the making of such prepayment, the
Company shall deliver to each holder of Notes by facsimile transmission a
certificate of a Senior Financial Officer of the Company specifying the details
of the calculation of such Make-Whole Amount as of the specified prepayment
date.
(c) Effect of Prepayment. Each prepayment of the Notes pursuant to this
Section 4.3 shall be applied to reduce each of the Scheduled Principal Payments
remaining after the date of such prepayment ratably.
4.4 Offer to Prepay upon Change in Control, etc.
(a) Notice and Offer. In the event of either
(i) a Change in Control, or
(ii) the obtaining of knowledge of a Control Notice Event by any
Senior Officer of the Company (including, without limitation, via the
receipt of notice of a Control Notice Event from any holder of Notes),
3
<PAGE>
the Company will, within two Business Days of the occurrence of either of such
events (or, in the case of any Change in Control the consummation or
finalization of which would involve any action of the Company, at least 30 days
prior to such Change in Control), give written notice of such Change in Control
or Control Notice Event to each holder of Notes by facsimile transmission and,
simultaneously with the sending of such telecopied notice, send a copy of such
notice to each such holder via an overnight courier of national reputation. In
the event of a Change in Control, such written notice shall contain, and such
written notice shall constitute, an irrevocable offer to prepay all, but not
less than all, the Notes held by such holder on a date specified in such notice
(the "Control Prepayment Date") that is not less than 30 days and not more than
60 days after the date of such notice. If the Control Prepayment Date shall not
be specified in such notice, the Control Prepayment Date shall be the 30th day
after the date of such holder's receipt of such notice. If the Company shall
not have received a written response to such notice from each holder of Notes
within ten days after the delivery of such telecopied notice to such holder of
Notes, then the Company will immediately send a second written notice via an
overnight courier of national reputation to each such holder of Notes who shall
have not previously responded to the Company. If the Company shall not have
received a written response to any such second written notice from a holder of
Notes within 15 days after the delivery of such second written notice to such
holder, such holder shall be deemed to have accepted such offer to prepay the
Notes held by such holder. In no event will the Company take any action to
consummate or finalize a Change in Control unless contemporaneously with such
action the Company prepays all Notes required to be prepaid in accordance with
Section 4.4(b).
(b) Acceptance and Payment. To accept such offered prepayment, a holder of
Notes shall cause a notice of such acceptance to be delivered to the Company not
later than 15 days after the date of receipt by such holder of the latest
written offer of such prepayment (provided that such offer may also be deemed to
be accepted under the circumstances specified in Section 4.4(a)). If so
accepted (or so deemed accepted), such offered prepayment shall be due and
payable on the Control Prepayment Date. Such offered prepayment shall be made at
100% of the principal amount of such Notes, together with:
(i) an amount equal to the Make-Whole Amount, if any, as of the
Control Prepayment Date in respect of the principal amount of the Notes
being so prepaid; and
(ii) interest on such principal amount then being prepaid accrued to
the Control Prepayment Date.
Two Business Days prior to the making of any such prepayment, the Company shall
deliver to each accepting holder (including, without limitation, each deemed
accepting holder) of Notes by facsimile transmission a certificate of a Senior
Financial Officer of the Company specifying the details of the calculation of
such Make-Whole Amount as of the Control Prepayment Date.
4
<PAGE>
(c) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 4.4 shall be accompanied by a certificate, executed by a Senior
Officer of the Company and dated the date of such offer, specifying:
(i) the Control Prepayment Date;
(ii) that such offer is being made under Section 4.4 of this
Agreement;
(iii) the principal amount of each Note offered to be prepaid;
(iv) the interest that would be due on each such Note offered to
be prepaid, accrued to the date fixed for payment;
(v) that the conditions of this Section 4.4 have been fulfilled;
(vi) in reasonable detail, the nature and date or proposed date of
the Change in Control; and
(vii) a reasonably detailed calculation of an estimated Make-Whole
Amount, if any (calculated as if the date of such notice was the date of
prepayment), that would be due in connection with such offered prepayment.
(d) Effect of Prepayment. Each prepayment of the Notes pursuant to this
Section 4.4 shall be applied to reduce each of the Scheduled Principal Payments
remaining after the date of such prepayment ratably.
(e) Notice Concerning Status of Holders of Notes. Promptly after each
Control Prepayment Date and the making of all prepayments contemplated on such
Control Prepayment Date under this Section 4.4 (and, in any event, within ten
days thereafter), the Company shall deliver to each holder of Notes a
certificate signed by a Senior Financial Officer of the Company containing a
list of the then current holders of Notes (together with their addresses) and
setting forth as to each such holder the outstanding principal amount of Notes
held by such holder at such time.
4.5 Partial Prepayment Pro Rata.
If at the time any required prepayment or optional prepayment under Section
4.2 or Section 4.3 is due there is more than one Note outstanding, the aggregate
principal amount of each required or optional partial prepayment of the Notes
shall be allocated among the holders of the Notes at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of the Notes then outstanding, with adjustments, to the extent practicable, to
equalize for any prior prepayments not in such proportion.
4.6 Notation of Notes on Prepayment.
Upon any partial prepayment of a Note, such Note may, at the option of the
holder thereof, be:
5
<PAGE>
(a) surrendered to the Company pursuant to Section 5.2 in exchange
for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) made available to the Company for notation thereon of the
portion of the principal so prepaid; or
(c) marked by such holder with a notation thereon of the portion of
the principal so prepaid.
In case the entire principal amount of any Note is paid, such Note shall, if
requested in writing by the Company following such payment, be surrendered to
the Company for cancellation and shall not be reissued, and no Note shall be
issued in lieu of the paid principal amount of any Note.
4.7 No Other Prepayments; Acquisition of Notes.
Except for prepayments made in accordance with this Section 4, the Company
may not make any prepayment of principal in respect of the Notes. The Company
will not, and will not permit any Subsidiary or any Affiliate to, directly or
indirectly, acquire or make any offer to acquire any Notes. In case the Company
does acquire any Notes, such Notes will simultaneously with such acquisition be
cancelled, no Notes will be issued in substitution therefor and the aggregate
principal amount of the Notes so cancelled will be applied to reduce each of the
Scheduled Principal Payments remaining after the date of such acquisition
ratably.
4.8 Payments Generally.
(a) Manner of Payment. The Company will pay all amounts payable
with respect to each Note (without any presentment of such Note and without
any notation of such payment being made thereon) by crediting, by United
States of America federal funds bank wire transfer, the account of the
holder thereof in any bank in the United States of America as may be
designated in writing by such holder, or in such other manner as may be
reasonably directed or to such other address in the United States of
America as may be reasonably designated in writing by such holder. Annex 1
shall be deemed to constitute notice, direction or designation (as
appropriate) to the Company with respect to such payments. In the absence
of such written direction, all amounts payable with respect to each Note
shall be paid by check mailed and addressed to the registered holder of
such Note at the address shown in the register maintained by the Company
pursuant to Section 5.1.
(b) Payments Due on Non-Business Days. If any payment due on, or
with respect to, any Note shall fall due on a day other than a Business
Day, then such payment shall be made on the first Business Day following
the day on which such payment shall have so fallen due, provided that if
all or any portion of such payment shall consist of a payment of interest,
for purposes of calculating such interest, such payment shall be deemed to
have been originally due on such first following Business Day, such
interest shall accrue and be payable to (but not including) the actual date
of
6
<PAGE>
payment, and the amount of the next succeeding interest payment shall be
adjusted accordingly.
(c) Payments, When Received. Any payment to be made to the holders of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available to such holder at such
holder's bank prior to 12:00 noon (local time of such bank).
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 Registration of Notes
The Company will keep at its office, maintained pursuant to Section 6.16, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 5.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall
be registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 5.2.
5.2 Exchange of Notes
(a) Exchange of Notes. Upon surrender of any Note at the office of
the Company maintained pursuant to Section 6.16, duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly authorized in
writing, the Company will execute and, within five Business Days after such
surrender, deliver, at the Company's expense (except as provided in Section
5.2(b)), a new Note or Notes in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered
Note. Each such new Note shall be payable to such Person as such holder may
request and shall be substantially in the form of Exhibit A. Each such new
Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered
Note if no interest shall have been paid thereon. Each such new Note shall
carry the same rights to unpaid interest and interest to accrue that were
carried by the Note so exchanged or transferred. Notes shall not be
transferred in denominations of less than $500,000, provided that a holder
of Notes may transfer its entire holding of Notes regardless of the
principal amount of such holder's Notes. The Notes have not been registered
under the Securities Act and may be resold or otherwise transferred only if
registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and the
Company is not required to register the Notes.
(b) Costs. The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company, insured
to the reasonable satisfaction of such holder, the surrendered Note and any
Note issued in substitution or replacement for the surrendered Note. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes.
7
<PAGE>
5.3 Replacement of Notes
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
Institutional Investor, notice from such Institutional Investor of such loss,
theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company (provided that if the holder of such
Note is an Institutional Investor or a nominee of an Institutional
Investor, such holder's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense will execute and, within five Business Days after
such surrender, deliver, in lieu thereof, a replacement Note, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.
5.4 Issuance Taxes
The Company will pay all taxes (if any) due in connection with and as the
result of the initial issuance and sale of the Notes and in connection with any
modification, waiver or amendment of this Agreement or the Notes and shall save
each holder of Notes harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
6. FINANCIAL AND GENERAL COVENANTS
The Company covenants and agrees that on and after the Closing Date and
thereafter for so long as any of its obligations under this Agreement and the
Notes shall be outstanding:
6.1 Operating Cash Flow.
The Company will not at any time permit the ratio of
(a) Consolidated Operating Cash Flow for the period of four
consecutive fiscal quarters of the Company most recently ended at such time
to
(b) Consolidated Operating Cash Flow for,
(i) if the period referred to in clause (a) above ended at
the end of a fiscal year of the Company, the fiscal year of the Company
immediately preceding such fiscal year, or
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(ii) otherwise, the fiscal year of the Company most recently
ended at such time,
to be less than 0.85 to 1.0.
6.2 Cash Coverage Ratio.
The Company will not at any time permit the ratio of
(a) the Liquid Security Amount at such time
to
(b) Aggregate Working Capital Indebtedness at such time,
to be less than 1.0 to 1.0.
6.3 Fixed Charges Coverage Ratio.
The Company will not at any time permit the Fixed Charges Coverage Ratio
for the period of four consecutive fiscal quarters of the Company most recently
ended at such time to be less than 1.25 to 1.0.
6.4 Consolidated Adjusted Debt.
The Company will not at any time permit the ratio of
(a) Consolidated Adjusted Debt at such time
to
(b) Pro Forma Consolidated Operating Cash Flow for the period of
four consecutive fiscal quarters of the Company most recently ended at such
time
to be greater than 3.0 to 1.0, provided that compliance or non-compliance with
this Section 6.4 shall be determined only as of the end of the Company's
business on each day on which the Company conducts business.
6.5 Coverage of Scheduled Debt Payments.
The Company will not at any time permit the sum of
(a) the excess of the Liquid Security Amount over Aggregate Working
Capital Indebtedness at such time, plus
(b) the Aggregate Available Term Advance Amount at such time,
to be less than the aggregate principal amount of Consolidated Adjusted Debt
scheduled to become due during the period of six months immediately next
following such time.
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6.6 Subsidiary Debt.
The Company will not at any time permit any Subsidiary to, directly or
indirectly, create, incur, assume, guaranty, have outstanding or otherwise be or
become directly or indirectly liable for, any Debt other than:
(a) Debt of a Subsidiary under its Subsidiary Guaranty Agreement;
(b) Debt of a Subsidiary outstanding on the Closing Date that is
described in Part 6.6(a) of Annex 3, provided that such Debt may not be
extended, renewed, refunded or increased in principal amount after the
Closing Date;
(c) Debt of a Subsidiary owed solely to the Company or a Wholly-Owned
Subsidiary; and
(d) Debt of a Subsidiary outstanding at the time such Subsidiary
becomes a Subsidiary, provided that
(i) such Debt shall not have been incurred in contemplation of
such Subsidiary becoming a Subsidiary,
(ii) immediately after such Subsidiary becomes a Subsidiary no
Default or Event of Default shall exist, and
(iii) such Debt may not be extended, renewed, refunded or
increased in principal amount after the time such Subsidiary becomes a
Subsidiary.
6.7 Restricted Payments.
The Company will not, and will not permit any Subsidiary to, at any time
declare or make, or incur any liability to declare or make, any Restricted
Payment unless immediately after giving effect to such action:
(a) the Fixed Charges Coverage Ratio for the most recently ended
period of four consecutive fiscal quarters of the Company is equal to or
greater than 1.75 to 1.0;
(b) the sum of all Restricted Payments declared or made or obligated
to be made during the then-current fiscal quarter of the Company would not
exceed 5% of Consolidated Net Income for the most recently ended period of
four consecutive fiscal quarters of the Company; and
(c) no Default or Event of Default exists or would exist.
6.8 Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary to, enter into any
agreement that would restrict, or create or otherwise cause or permit to exist
or become effective any consensual restriction or encumbrance on, the ability or
right of any Subsidiary to:
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(a) pay dividends or make any other Distributions on any Subsidiary's
Capital Stock, to the Company or, if such Subsidiary is not directly owned
by the Company, the parent Subsidiary of such Subsidiary;
(b) pay any Debt owed to the Company or any other Subsidiary;
(c) make any loans, advances or capital contributions to the Company
or any other Subsidiary; or
(d) Transfer any of its Property to the Company or any other
Subsidiary;
provided that the restrictions described in Part 6.8 of Annex 3 existing on the
Closing Date may remain in effect after the Closing Date so long as such
restrictions are not amended or otherwise modified in any manner that causes
them to be more restrictive in respect of any of the foregoing matters than as
an effect on the Closing Date.
6.9 Asset Dispositions.
Except as permitted under Section 6.11 the Company will not, and will not
permit any Subsidiary to, make any Asset Disposition unless:
(a) in the good faith opinion of the Company, such Asset Disposition
is in exchange for consideration having a Fair Market Value at least equal
to that of the Property exchanged and is in the best interest of the
Company or such Subsidiary;
(b) immediately after giving effect to the Asset Disposition, no
Default or Event of Default exists or would exist; and
(c) immediately after giving effect to such Asset Disposition, the
Disposition Value of all Property that was the subject of any Asset
Disposition occurring in the period of four fiscal quarters of the Company
then next ending would not exceed $2,000,000 (provided that, in the case of
an Asset Disposition of all of the Subsidiary Stock issued by, or all or
substantially all of the Property of, Check Express Finance, Inc., a
Florida corporation, the Disposition Value of such Subsidiary Stock or such
Property shall be excluded for purposes of determining compliance with this
clause (c)).
If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application or a Property Reinvestment Application within 180 days after such
Transfer, then such Transfer, only for the purpose of determining compliance
with clause (c) of this Section 6.9 as of a date on or after the Net Proceeds
Amount is so applied, shall be deemed not to be an Asset Disposition. You agree,
and each other holder of Notes by its acceptance of any Note shall be deemed to
have agreed, that upon demonstration (including, without limitation, by delivery
to each holder of Notes of reasonably detailed calculations) by the Company to
your or such other holder's satisfaction that any Asset Disposition in respect
of specified items or portions of Property constituting Collateral is in
compliance with the requirements of this Section 6.9 (and, if applicable,
Section 6.10) you or such other holder will, if requested by the Company in
writing to do so, promptly instruct the Trustee that you have, or such holder
has, approved
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the release of the Trustee's security interest in such specified items or
portions of the Collateral, in accordance with Section 7.1(b) of the Collateral
Trust Agreement.
6.10 Disposal of Ownership of a Subsidiary.
The Company will not, and will not permit any Subsidiary to, Transfer any
shares of Subsidiary Stock, nor will the Company permit any Subsidiary to issue,
sell or otherwise dispose of any shares of its own Subsidiary Stock, provided
that the foregoing restrictions do not apply to:
(a) the issuance of directors' qualifying shares by any Subsidiary;
(b) any such Transfer of Subsidiary Stock constituting a Transfer
described in clause (a) of the definition of "Asset Disposition"; and
(c) the Transfer of all of the Subsidiary Stock of a Subsidiary
owned by the Company and the other Subsidiaries if:
(i) such Transfer satisfies the requirements of Section 6.9,
(ii) in connection with such Transfer the entire Investment
(whether represented by stock, Debt, claims or otherwise) of the
Company and the other Subsidiaries in such Subsidiary is sold,
transferred or otherwise disposed of to a Person other than (A) the
Company, (B) another Subsidiary not being simultaneously disposed
of, or (C) an Affiliate, and
(iii) the Subsidiary being disposed of has no continuing
Investment in any other Subsidiary not being simultaneously disposed
of or in the Company.
6.11 Consolidation or Merger.
The Company will not consolidate or merge with or into any other Person or
convey, transfer or lease all or substantially all of its Property in a single
transaction or series of transactions to any Person, provided that the foregoing
restriction does not apply to the consolidation or merger of the Company with or
into, or the conveyance, transfer or lease of all or substantially all of the
Property of the Company in a single transaction or series of transactions to,
any Person so long as:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
all or substantially all of the assets of the Company as an entirety, as
the case may be (the "Successor Corporation"), shall be a solvent
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes its
assumption of the due and punctual performance and observance of each
covenant and condition of the Financing
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Documents, and the Company shall have caused to be delivered to each holder
of Notes an opinion of independent counsel of recognized national standing
or of Gardere & Wynne, L.L.P. or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms of the Financing Documents and to the
effect that after giving effect to such transaction the Liens of the
Trustee under the Security Documents remain valid, enforceable and
perfected in accordance with the requirements of the Security Documents;
and
(c) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of all or substantially all of the assets
of the Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 6.11 from its liability under the Financing Documents.
6.12 Liens.
(a) Negative Pledge. The Company will not, and will not permit any
of the Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien
on or with respect to any Property of the Company or any such Subsidiary,
whether now owned or held or hereafter acquired, or any income or profits
therefrom, or assign or otherwise convey any right to receive income or
profits, except:
(i) Taxes, etc. -- Liens for property taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen and mechanics made or incurred in the ordinary course of
business of the Company or such Subsidiary, provided that the payment
thereof is not at the time required by Section 6.14;
(ii) Judicial Liens -- any attachment or judgment Lien,
provided that
(A) the execution or other enforcement of such Lien is
effectively stayed, and
(B) the claims secured thereby are being actively and
diligently contested in good faith (within the applicable time
for initial contest, appeal or petition for rehearing) and by
appropriate proceedings and appropriate book reserves shall
have been established and maintained and shall exist with
respect thereto;
(iii) Ordinary Course Business Liens -- Liens incurred or
deposits made incidental to the conduct of business or the ownership
of Property by the Company or such Subsidiary
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(A) in connection with workers' compensation,
unemployment insurance and other types of social security and
retirement benefits and similar benefits,
(B) to secure claims or demands of warehousemen,
attorneys and landlords, and
(C) to secure the performance of letters of credit,
bids, tenders, sales contracts, leases, statutory obligations,
surety bonds, indemnity bonds and performance bonds (of a type
other than set forth in Section 6.12(a)(ii)) and other similar
obligations not incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the deferred
purchase price of Property;
(iv) Certain Encumbrances -- Liens in the nature of
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar title
exceptions or encumbrances affecting real Property, provided that such
exceptions and encumbrances are incidental to the conduct of business or
the ownership of Property by the Company and such Subsidiary and do not
in the aggregate detract from the value of such Properties or interfere
with the use of such Property in the ordinary conduct of the business of
the Company and the Subsidiaries in a manner that has or could reasonably
be expected to have a Material Adverse Effect;
(v) Intragroup Liens -- Liens on Property of a Subsidiary,
provided that such Liens secure only obligations owing to the Company or
to a Wholly-Owned Subsidiary;
(vi) Purchase Money Liens -- Liens on Property of the Company
created to secure all or any part of the purchase price, or to secure
Debt incurred or assumed to pay all or any part of the purchase price, of
Property acquired by the Company after the Closing Date (including Liens
existing on such Property at the time of the Company's acquisition
thereof), provided that
(A) any such Lien shall attach solely to the item or
items of such Property so acquired,
(B) the principal amount of the Debt secured by any such
Lien shall at no time exceed an amount equal to 80% of the
lesser of (1) the cost to the Company of the Property so
acquired and (2) the Fair Market Value (as determined in good
faith by the board of directors of the Company) of such
Property at the time of such acquisition, and
(C) any such Lien shall be created contemporaneously
with, or within 90 days after, the acquisition of such
Property;
(vii) Closing Date Liens -- Liens in existence on the Closing
Date, provided that such Liens are described in Part 6.12(a)(vii) of
Annex 3; and
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(viii) Other Liens -- Liens of the Trustee under the Security
Documents securing the Notes and the other Secured Debt.
Nothing in this Section 6.12(a) shall be construed to permit the incurrence
or existence of any Debt or any other obligation not otherwise permitted by
this Agreement. Nothing in this Agreement that permits the incurrence or
existence of any Debt or other obligation shall be construed to permit the
incurrence or existence of a Lien securing such Debt unless such Lien is
permitted by this Section 6.12(a).
(b) Equal and Ratable Lien; Equitable Lien. In case any Property
shall be subjected to a Lien in violation of this Section 6.12, the Company
will immediately make or cause to be made, to the fullest extent permitted
by applicable law, provision whereby the Notes will be secured equally and
ratably with all other obligations secured thereby pursuant to such
agreements and instruments as shall be approved by the Required Holders,
and the Company will cause to be delivered to each holder of a Note an
opinion, satisfactory in form and substance to the Required Holders, of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms, and in any such case the Notes
shall have the benefit, to the fullest extent that, and with such priority
as, the holders of Notes may be entitled thereto under applicable law, of
an equitable Lien on such Property securing the Notes. A violation of this
Section 6.12 will constitute an Event of Default, whether or not any such
provision is made pursuant to this Section 6.12(b).
6.13 Transactions with Affiliates and Franchisees.
(a) Affiliates. The Company will not, and will not permit any of the
Subsidiaries to, directly or indirectly, enter into or be a party to any
Material transaction or arrangement or Material group of related
transactions or arrangements (including, without limitation, the purchase
from, sale to or exchange of Property with or the rendering of any service
by or for) with any Affiliate, except:
(i) in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's existing or
proposed business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate;
and
(ii) employment agreements entered into and obligations incurred
in connection with such employment agreements, in each case, in the
ordinary course of business of the Company or such Subsidiary.
For purposes of this Section 6.13(a), any transaction or arrangement or
group of related transactions or arrangements shall be deemed to be
"Material" if the aggregate of the Affiliate Transaction Amounts in respect
of all such transactions and arrangements collectively during the period
commencing with the Closing Date and ending with the most recent such
transaction or arrangement exceeds $1,000,000.
(b) Franchisees. Without limitation of Section 6.13(a), the Company
will not, and will not permit any of the Subsidiaries to, directly or
indirectly, enter into or be a
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party to any transaction or arrangement or group of related transactions or
arrangements (including, without limitation, the purchase from, sale to or
exchange of Property with or the rendering of any service by or for) with
any Franchisee, except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's existing or
proposed business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not a Franchisee, provided that the
Company and the Subsidiaries need not make any profit on any such
transaction or arrangement with any Franchisee so long as the consideration
received by the Company and the Subsidiaries in any such transaction or
arrangement is at least sufficient to cover the expenses and costs incurred
by the Company and the Subsidiaries in connection with such transaction or
arrangement.
6.14 Payment of Taxes and Claims.
The Company will, and will cause each of the Subsidiaries to, pay before
they become delinquent,
(a) all taxes, assessments and governmental charges or levies imposed
upon it or its Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, attorneys, landlords and other like Persons that, if
unpaid, might result in the creation of a statutory, regulatory or common
law Lien upon its Property,
provided, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings, appropriate book reserves have been established and maintained with
respect thereto, and such items, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
6.15 Maintenance of Properties; Corporate Existence; etc.
The Company will, and will cause each of the Subsidiaries to:
(a) Property -- maintain its Property in good condition, ordinary
wear and tear and obsolescence excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto, provided
that this Section 6.15 shall not prevent the Company or any such Subsidiary
from discontinuing the operation and the maintenance of any of its
Properties if such discontinuance is desirable in the conduct of its
business and such discontinuance could not reasonably be expected to have a
Material Adverse Effect;
(b) Insurance -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types and in such amounts as is
customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated;
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(c) Financial Records -- keep proper books of record and account, in
which full and correct entries shall be made of all dealings and
transactions of or in relation to the Properties and business thereof, and
which will permit the production of financial statements in accordance with
GAAP;
(d) Corporate Existence and Rights -- do or cause to be done all
things necessary to preserve and keep in full force and effect its
corporate existence, corporate rights (charter and statutory) and corporate
franchises except as permitted by Section 6.11; and
(e) Compliance with Law -- comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, Environmental Laws, the Occupational Safety and Health
Act of 1970, as amended, and all related rules and regulations) and obtain
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties and the conduct
of its business except for such violations and failures to obtain that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
6.16 Payment of Notes and Maintenance of Office.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Make-Whole Amount, if any) on, the Notes, as and when the same
shall become due according to the terms hereof and of the Notes, and will
maintain an office at the address of the Company as provided in Section 11.1
where notices, presentations and demands in respect of the Financing Documents
may be made upon it. Such office will be maintained at such address until such
time as the Company notifies the holders of the Notes of any change of location
of such office, which will in any event be located within the United States of
America.
6.17 Plans.
(a) Compliance. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Plan, comply with all
applicable provisions of ERISA and the IRC, except for such failures to
comply that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) Prohibited Actions. The Company will not, and will not permit
any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the IRC) or
"reportable event" (as such term is defined in section 4043 of ERISA)
that could result in the imposition of a tax or penalty;
(ii) incur with respect to any Plan any "accumulated funding
deficiency" (as such term is defined in section 302 of ERISA), whether
or not waived;
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(iii) terminate any Plan in a manner that could result in the
imposition of a Lien on the Property of the Company or any of the
Subsidiaries pursuant to section 4068 of ERISA or the creation of any
liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515 of ERISA;
(v) incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan or any liability as a result of the
termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of any Lien on
the Property of the Company or any ERISA Affiliate, in either case
pursuant to Title I or Title IV of ERISA or pursuant to the penalty or
excise tax or security provisions of the IRC,
if the aggregate amount of the taxes, penalties, funding deficiencies,
interest, amounts secured by Liens, and other liabilities in respect of any
of the foregoing at any time could reasonably be expected to have a
Material Adverse Effect.
6.18 Lines of Business.
The Company will not, and will not permit any Subsidiary to, engage to any
substantial extent in any business other than the businesses in which the
Company and the Subsidiaries are engaged on the Closing Date as described in the
Placement Memorandum and businesses reasonably related thereto or in furtherance
thereof (including, without limitation, the business of issuing money orders).
All or substantially all of the business of the Company and the Subsidiaries
will at all times be conducted in, and all or substantially all of the
Properties of the Company and the Subsidiaries will at all times be located in,
the United States of America and Canada.
6.19 Private Offering.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issuance
or sale to, or solicit any offer to acquire any of the same from, any Person so
as to bring the issuance and sale of the Notes within the provisions of section
5 of the Securities Act.
6.20 Limitation on AMEX Term Advances, etc.
The Company will not at any time permit
(a) the aggregate principal amount of the Revolving Commitment
Advances (as such term is defined in the Collateral Trust Agreement) to
exceed $18,500,000, or
(b) the aggregate principal amount of advances or loans by any
Beneficiary (as such term is defined in the Collateral Trust Agreement) to
the Company to exceed the limitation agreed to by such Beneficiary pursuant
to Section 8.9(c)(Z) of the Collateral Trust Agreement.
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6.21 Permitted Subsidiaries.
Notwithstanding anything else in this Agreement to the contrary, the
Company will not at any time have any Subsidiary that is not a Permitted
Subsidiary.
7. INFORMATION COVENANTS
7.1 Financial and Business Information.
The Company will deliver to each holder of Notes:
(a) Quarterly Financial Statements -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year), and
in any event within 45 days thereafter,
(i) a consolidated balance sheet as at the end of such quarter,
and
(ii) consolidated statements of earnings, shareholders' equity
and cash flows for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
for the Company and the Subsidiaries, setting forth in each case, in
comparative form, the financial statements for the corresponding periods in
the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and
certified as complete and correct by a Senior Financial Officer, and
accompanied by the certificate required by Section 7.3, provided, that
delivery of copies of the Company's Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission within the time period
specified above shall be deemed to satisfy the requirements of this Section
7.1(a) so long as such Quarterly Report contains or is accompanied by the
information specified in this Section 7.1(a);
(b) Annual Financial Statements -- as soon as practicable after the
end of each fiscal year of the Company, and in any event within 90 days
thereafter,
(i) a consolidated balance sheet as at the end of such year,
and
(ii) consolidated statements of earnings, shareholders' equity
and cash flows for such year,
for the Company and the Subsidiaries, setting forth, in comparative form,
the financial statement for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied by
(A) an audit report thereon of independent certified public
accountants of recognized national standing, which report shall state
without qualification, that such financial statements have been
prepared and are in conformity with GAAP,
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(B) a certification by a Senior Financial Officer that such
consolidated statements are complete and correct, and
(C) the certificates required by Section 7.3 and Section 7.4,
provided that the delivery of the Company's Annual Report on Form 10-K for
such fiscal year filed with the Securities and Exchange Commission within
the time period specified above shall be deemed to satisfy the requirements
of this Section 7.1(b) so long as such Annual Report contains or is
accompanied by the reports and other information otherwise specified in
this Section 7.1(b);
(c) SEC and Other Reports promptly upon their becoming available,
(i) each financial statement, report, notice or proxy statement
sent by the Company or any of the Subsidiaries to stockholders
generally,
(ii) each regular or periodic report (including, without
limitation, each Form 10-K, Form 10-Q and Form 8-K), any registration
statement which shall have become effective, and each final prospectus
and all amendments thereto filed by the Company or any of the
Subsidiaries with the Securities and Exchange Commission (and any
successor agency), and
(iii) all press releases and other statements made available by
the Company or any Subsidiary to the public concerning material
developments in the business of the Company or the Subsidiaries;
(d) Notice of Default or Event of Default within five Business Days
of becoming aware
(i) of the existence of any condition or event that constitutes
a Default or an Event of Default, or
(ii) that the holder of any Note, or of any Debt of the Company
or any of the Subsidiaries, shall have given notice or taken any other
action with respect to a claimed Default, Event of Default or default
or event of default,
a notice specifying the nature of the claimed Default, Event of Default or
default or event of default and the notice given or action taken (if any)
by such holder and what action the Company is taking or proposes to take
with respect thereto;
(e) Term Advances within five Business Days of the Company becoming
liable with respect to any Revolving Commitment Advance (as such term is
defined in the Collateral Trust Agreement) under the AMEX Documents, or
with respect to any other Term Advance, a certificate of a Senior Financial
Officer, setting forth the financial information (including reasonably
detailed calculations) required in order to establish whether the Company
was in compliance with the requirements of Sections 6.4, 6.5 and 6.20 (in
each case where such Section imposes numerical financial requirements)
immediately after giving effect to such Revolving Commitment Advance or
other Term Advance;
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(f) ERISA
(i) within five Business Days of becoming aware of the
occurrence of any "reportable event" (as such term is defined in
section 4043 of ERISA) for which notice thereof has not been waived
pursuant to regulations of the Department of Labor, or "prohibited
transaction" (as such term is defined in section 406 of ERISA or
section 4975 of the IRC) in connection with any Plan or any trust
created thereunder, a notice specifying the nature thereof, what
action the Company is taking or proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and
(ii) prompt notice of and, where applicable, a description of
(A) any notice from the PBGC in respect of the commencement
of any proceedings pursuant to section 4042 of ERISA to terminate
any Plan or for the appointment of a trustee to administer any
Plan, and any distress termination notice delivered to the PBGC
under section 4041 of ERISA in respect of any Plan, and any
determination of the PBGC in respect thereof,
(B) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA, any Multiemployer
Plan becoming "insolvent" (as such term is defined in section
4245 of ERISA) under Title IV of ERISA, or the whole or partial
withdrawal of the Company or any ERISA Affiliate from any
Multiemployer Plan and the withdrawal liability incurred in
connection therewith, or
(C) the occurrence of any event, transaction or condition
that could result in the incurrence of any liability of the
Company or any ERISA Affiliate or the imposition of a Lien on the
Property of the Company or any ERISA Affiliate, in either case
pursuant to Title I or Title IV of ERISA or pursuant to the
penalty or excise tax or security provisions of the IRC,
provided that the Company shall not be required to deliver any such notice
at any time when the aggregate amount of the actual or potential liability
of the Company and the Subsidiaries in respect of all such events at such
time could not reasonably be expected to have a Material Adverse Effect;
(g) Auditor's Reports each report submitted to the Company or any of
the Subsidiaries by independent accountants (including, without limitation,
each management letter) in connection with any annual, interim or special
audit made of the books of the Company or any of the Subsidiaries;
(h) Actions, Proceedings promptly after the commencement of any
action or proceeding relating to the Company or any of the Subsidiaries in
any court or before any Governmental Authority or arbitration board or
tribunal as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined,
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could reasonably be expected to have a Material Adverse Effect, a notice
specifying the nature and period of existence thereof and what action the
Company is taking or proposes to take with respect thereto;
(i) Notices from Governmental Authority promptly, and in any event
within five Business Days of receipt thereof, copies of any notice to the
Company or any of the Subsidiaries from any federal or state Governmental
Authority relating to any order, ruling, statute or other law or regulation
that could reasonably be expected to have a Material Adverse Effect;
(j) Other Creditors promptly upon the request of any holder of Notes,
copies of any statement, report, certificate, notice or other item
furnished to any holder of Debt of the Company or any of the Subsidiaries
(including, without limitation, monthly financial statements and any other
items furnished to AMEX pursuant to the AMEX Documents) to the extent that
the information contained in such statement, report, certificate, notice or
other item has not already been delivered to each holder of Notes;
(k) Rule 144A promptly upon the request of any holder of Notes,
information required to comply with 17 CFR (S)230.144A, as amended from
time to time; and
(l) Requested Information with reasonable promptness, such other data
and information relating to the business, operations, affairs, financial
condition, Properties or prospects of the Company or any of the
Subsidiaries or relating to the ability of the Company to perform its
obligations under the Financing Documents as from time to time may be
reasonably requested by any such holder of Notes.
7.2 Reports to NAIC
Concurrently with the delivery to each holder of Notes of each of the
Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q
pursuant to Section 7.1(c), the Company will deliver (or, in consultation with
the holder of Notes holding the greatest aggregate principal amount of Notes,
cause to be delivered) a copy thereof to: Securities Valuation Office, National
Association of Insurance Commissioners, 7 World Trade Center, 19th Floor, New
York, New York 10048.
7.3 Officer's Certificates
Each set of financial statements delivered to each holder of Notes pursuant
to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a
Senior Financial Officer, setting forth:
(a) Covenant Compliance the financial information (including
reasonably detailed calculations) required in order to establish whether
the Company was in compliance with the requirements of Section 6 (in each
case where such Section imposes numerical financial requirements) as of the
end of the period covered by the financial statements then being furnished
(including with respect to such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Section, and the calculation of the
amount, ratio or percentage then in existence); and
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(b) Event of Default a statement that the signer has reviewed the
relevant terms of the Financing Documents and has made, or caused to be
made, under his or her supervision or authority, a review of the
transactions and conditions of the Company and the Subsidiaries from the
beginning of the accounting period covered by the income statements being
delivered therewith to the date of the certificate and that such review
shall not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Company shall have taken or proposes
to take with respect thereto.
7.4 Accountants' Certificates
Each set of annual financial statements delivered pursuant to Section
7.1(b) shall be accompanied by a certificate of the accountants who were engaged
to audit such financial statements, stating that they have reviewed this
Agreement and stating further, whether, in making their audit, such accountants
have become aware of any condition or event that then constitutes a Default or
an Event of Default, and, if such accountants are aware that any such condition
or event then exists, specifying the nature and period of existence thereof.
7.5 Inspection
The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss the finances and affairs of the Company
and the Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. Expenses incurred by the holders of the Notes in
connection with this Section 7.5 shall be paid in accordance with Section 11.6.
8. EVENTS OF DEFAULT
8.1 Nature of Events.
An "Event of Default" shall exist if any one or more of the following
occurs and is continuing at any time:
(a) Principal or Make-Whole Amount Payments -- the Company shall fail
to make any payment of principal or Make-Whole Amount on any Note on or
before the date such payment is due;
(b) Interest Payments -- the Company shall fail to make any payment
of interest on any Note on or before five days after the date such payment
is due;
(c) Particular Covenant Defaults -- the Company shall fail to comply
with any covenant contained in Section 6.1 through Section 6.7, inclusive,
Section 6.9 through Section 6.12, inclusive, Section 6.20, or Section
7.1(d);
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(d) Other Defaults -- the Company or any Subsidiary shall fail to
comply with any other provision of any Financing Document, and such failure
shall continue for more than 30 days after the earlier of (i) the date on
which such failure shall first become known to any officer of the Company
and (ii) the date on which the Company shall have received written notice
of such failure from any holder of Notes or any representative thereof;
(e) Warranties or Representations -- any warranty, representation or
other statement by or on behalf of the Company or any Subsidiary contained
in any Financing Document, or in any certificate, instrument or written
statement furnished in compliance with or in reference to any Financing
Document, shall have been false or misleading in any material respect when
made or deemed made;
(f) Security Document Defaults -- an "Event of Default" as such term
is defined under any Security Document shall have occurred and be
continuing;
(g) Default on Debt --
(i) the Company or any Subsidiary shall fail to make any
payment on any Debt (including, without limitation, any Working
Capital Indebtedness) when due, whether such Debt is due by its
scheduled terms, by demand, by acceleration, as a result of a
termination or otherwise; or
(ii) any event shall occur or any condition shall exist in
respect of any Working Capital Indebtedness of the Company or any
Subsidiary, or under any agreement securing or relating to any such
Working Capital Indebtedness, that immediately or with any one or more
of the passage of time, the giving of notice or the expiration of
waivers or modifications granted in respect of such event or
condition:
(A) causes such Working Capital Indebtedness, or a portion
thereof, to become due before its stated maturity or before its
regularly scheduled date or dates of payment; or
(B) permits any one or more of the holders thereof or a
trustee therefor to require the Company or any Subsidiary to
repurchase such Debt from such holder and such one or more holder
or trustee makes a demand to, or otherwise requires, the Company
or any Subsidiary to so repurchase such Working Capital
Indebtedness; or
(iii) any event shall occur or any condition shall exist in
respect of any Debt (other than Working Capital Indebtedness) of the
Company or any Subsidiary, or under any agreement securing or relating
to any such Debt, that immediately or with any one or more of the
passage of time, the giving of notice or the expiration of waivers or
modifications granted in respect of such event or condition:
(A) causes (or permits any one or more of the holders
thereof or a trustee therefor to cause) such Debt, or a portion
thereof, to become
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due before its stated maturity or before its regularly scheduled
date or dates of payment; or
(B) permits any one or more of the holders thereof or a
trustee therefor to require the Company or any Subsidiary to
repurchase such Debt from such holder;
provided that the aggregate amount of all obligations in respect of all
such Debt referred to in this clause (g) exceeds at such time $1,000,000;
(h) Involuntary Bankruptcy Proceedings --
(i) a receiver, administrator, examiner, liquidator, custodian,
trustee or similar official in respect of the Company or any
Subsidiary or in respect of all or any part of the Property of the
Company or any Subsidiary shall be appointed by order of a court or
other Governmental Authority and such order shall remain in effect for
more than 60 days, or an order for relief shall be entered with
respect to the Company or any Subsidiary, or the Company or any
Subsidiary shall be adjudicated a bankrupt or insolvent;
(ii) any of the Property of the Company or any Subsidiary shall
be attached or sequestered by court order and such order shall remain
in effect for more than 60 days from the date of its entry and shall
not have been discharged in full or stayed; or
(iii) a petition shall be filed against the Company or any
Subsidiary under any bankruptcy, administration, examinership,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or similar law of any jurisdiction, whether
now or hereafter in effect, and shall not be dismissed within 60 days
after such filing;
(i) Voluntary Petitions -- the Company or any Subsidiary shall file a
petition in voluntary bankruptcy or seeking relief under any provision of
any bankruptcy, administration, examinership, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or similar law
of any jurisdiction, whether now or hereafter in effect, or shall consent
to the filing of any petition against it under any such law;
(j) Assignments for Benefit of Creditors, etc. -- the Company or any
Subsidiary shall make an assignment for the benefit of its creditors, or
shall admit in writing its inability, or shall fail, to pay its debts
generally as they become due, or shall consent to the appointment of a
receiver, administrator, examiner, liquidator, custodian, trustee or
similar official in respect of the Company or any Subsidiary or in respect
of all or any part of the Property of the Company or any Subsidiary; or
(k) Undischarged Final Judgments -- a final judgment, decree or other
order or final judgments, decrees or other orders for the payment of money
aggregating in excess of $1,000,000 shall be outstanding against any one or
more of the Company or the Subsidiaries and any one of such judgments shall
have been outstanding for more
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than 30 days from the date of its entry and shall not have been discharged
or vacated in full or stayed.
8.2 Default Remedies.
(a) Acceleration on Event of Default.
(i) If an Event of Default specified in clause (h), clause (i)
or clause (j) of Section 8.1 shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and payable,
together with interest accrued thereon and the Make-Whole Amount (as
of the date such Notes first become due and payable), if any, with
respect to such principal amount of such Notes, and all other amounts
owing by the Company under the Notes and this Agreement, in each case
without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived.
(ii) If an Event of Default other than those specified in clause
(h), clause (i) and clause (j) of Section 8.1 shall exist, the holders
of at least 25% in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by any one or more of the
Company, any Subsidiary or any Affiliate) may exercise any right,
power or remedy permitted to such holder or holders by law and shall
have, in particular, without limiting the generality of the foregoing,
the right to declare the entire principal of, and all interest accrued
on, all the Notes then outstanding to be, and such Notes shall
thereupon become, immediately due and payable, without any
presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Company shall immediately pay to
the holder or holders of all the Notes then outstanding the entire
principal of, and interest accrued on, the Notes and, to the extent
permitted by applicable law, the Make-Whole Amount on the date of such
declaration with respect to such principal amount of such Notes, and
all other amounts owing by the Company under the Notes and this
Agreement.
(b) Acceleration on Payment Default. During the existence of an Event
of Default described in Section 8.1(a) or Section 8.1(b), and irrespective
of whether the Notes then outstanding shall have been declared to be due
and payable pursuant to Section 8.2(a)(ii), any holder of Notes that shall
have not consented to any waiver with respect to such Event of Default may,
at such holder's option, by notice in writing to the Company, declare the
Notes then held by such holder to be, and such Notes shall thereupon
become, immediately due and payable together with all interest accrued
thereon, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, and the Company shall
immediately pay to such holder the entire principal of and interest accrued
on such Notes and, to the extent permitted by applicable law, the Make-
Whole Amount (as of the date of such declaration), if any, with respect to
such principal amount of such Notes, and all other amounts owing by the
Company under the Notes and this Agreement.
(c) Valuable Rights. The Company acknowledges, and the parties
hereto agree, that the right of each holder to maintain its investment in
the Notes free from repayment (except as herein specifically provided for)
is a valuable right and that the
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provision for payment of a Make-Whole Amount, if any, by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event
of Default, is intended to provide compensation for the deprivation of such
right under such circumstances.
(d) Other Remedies. During the existence of an Event of Default and
irrespective of whether the Notes then outstanding shall have been declared
to be due and payable pursuant to Section 8.2(a)(ii) and irrespective of
whether any holder of Notes then outstanding shall otherwise have pursued
or be pursuing any other rights or remedies, any holder of Notes may
proceed to protect and enforce its rights under the Financing Documents by
exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or
both, whether for specific performance of any agreement contained herein or
in aid of the exercise of any power granted under any Financing Document,
provided that the maturity of such holder's Notes may be accelerated only
in accordance with Section 8.2(a) and Section 8.2(b).
(e) Security Documents. The holders of Notes shall be entitled to
all of the rights, benefits and remedies provided in the Security
Documents.
(f) Nonwaiver; Cumulative Rights, etc. No course of dealing on the
part of any holder of Notes or the Trustee nor any delay or failure on the
part of any holder of Notes or the Trustee to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies. All rights and remedies of each holder of
Notes and the Trustee under the Financing Documents and under applicable
law are cumulative to, and not exclusive of, any other rights or remedies
any such holder of Notes or the Trustee would otherwise have.
8.3 Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 8.2(a)(ii), then and in every
such case, the holders of at least 76% in principal amount of the Notes at the
time outstanding (exclusive of Notes then owned by any one or more of the
Company, any Subsidiary or any Affiliate) may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or to the Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable hereunder and under the Notes (except any principal of, or interest
or Make-Whole Amount on, the Notes that shall have become due and payable
by reason of such declaration under Section 8.2(a)(ii)) shall have been
duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 11.5 or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
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9. INTERPRETATION OF AGREEMENT
9.1 Terms Defined.
As used herein, the following terms have the respective meanings set forth
below or as otherwise specified below:
Affiliate -- means a Person (other than a Wholly-Owned Subsidiary)
(a) that directly or indirectly Controls, or is Controlled by, or
is under common Control with, the Company,
(b) that beneficially owns 10% or more of the Voting Stock of the
Company, or
(c) 10% or more of the Voting Stock (or in the case of a Person
that is not a corporate entity, 10% or more of the equity interest) of
which is owned by one or more of the Company and the Subsidiaries.
As used in this definition,
Control -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Affiliate Transaction Amount -- means, for any period, with respect to
any transaction or arrangement by the Company or any Subsidiary with any
Affiliate, an amount equal to the greater of
(a) $0, and
(b) the remainder of
(i) the aggregate value that would have been obtained by
the Company or such Subsidiary during such period in such
transaction or arrangement assuming such transaction or
arrangement had been entered into upon fair and reasonable terms
with a Person other than an Affiliate, minus
(ii) the aggregate actual value obtained by the Company or
such Subsidiary in connection with such transaction or
arrangement during such period,
all as determined in accordance with sound financial practices.
Aggregate Available Term Advance Amount -- means, at any time, and
with respect to any period of six months immediately next following such
time, the aggregate principal amount (without duplication) of unused credit
available to be
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drawn upon by the Company at such time under one or more agreements
providing for Term Advances to the Company, each satisfying the following
conditions:
(a) such Term Advances are to be made by AMEX or any bank, trust
company, savings and loan association or other financial institution,
any pension plan, any investment company, any venture capital company,
any insurance company or any other similar financial institution or
entity, regardless of legal form, but in each case other than any
Subsidiary or Affiliate of the Company;
(b) the maturity date or dates of each required principal payment
of the Debt in respect of the portion of each such Term Advance that
shall constitute a portion of the Aggregate Available Term Advance
Amount shall be after the end of such period of six months;
(c) the agreement or agreements providing for such Term Advances
do not contain any provision or provisions permitting the provider or
providers of such Term Advances to refuse to make such Term Advances
solely at the discretion of such provider or providers or upon the
occurrence or existence of one or more adverse or materially adverse
events or circumstances with respect to the Company or its
Subsidiaries; and
(d) at such time no default or event of default or similar
condition exists under the terms of the agreement or agreements
providing for such Term Advances and the terms of such agreement or
agreements at such time permit the Company to draw upon such Term
Advances.
Aggregate Working Capital Indebtedness -- means, at any time, the sum
(without duplication) of all Working Capital Indebtedness of the Company
and the Subsidiaries outstanding at such time.
Agreement, this -- means this agreement, as it may be amended,
restated or otherwise modified from time to time.
AMEX -- means, collectively, American Express Travel Related Services
Company, Inc. and First Data Corporation and their respective successors
and assigns.
AMEX Documents -- means, collectively, the Master Agreement (as such
term is defined in the first recital paragraph of the Security Agreement),
the AMEX Security Agreement (as such term is defined in the third recital
paragraph of the Security Agreement) and any other agreements or
instruments executed by the Company or by AMEX in connection therewith, in
each case as may be amended, restated or otherwise modified from time to
time.
Asset Disposition -- means any Transfer except:
(a) any
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(i) Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary (including, without limitation, any dissolution of a
Subsidiary, Transfer of Subsidiary Stock issued by a Subsidiary or
other transaction in which the Property of a Subsidiary or the
Subsidiary Stock issued by a Subsidiary is Transferred to the Company
or a Wholly-Owned Subsidiary); and
(ii) Transfer from the Company to a Wholly-Owned Subsidiary;
so long as immediately before and immediately after the consummation of any
such Transfer and after giving effect thereto, no Default or Event of
Default exists; and
(b) any Transfer made in the ordinary course of business and involving
only Property that is either (i) inventory held for sale or (ii) equipment,
fixtures, supplies or materials no longer required in the operation of the
business of the Company or any of the Subsidiaries or that is obsolete.
Business Day -- means any day other than a Saturday, a Sunday or a day on
which commercial banks in Des Moines, Iowa or New York, New York are required or
authorized to be closed.
Capital Lease -- means a lease with respect to which the lessee is required
to recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
Capital Stock -- means any class of capital stock, share capital or similar
equity interest of a Person.
Change in Control -- means, at any time, the acquisition by any Person or
group of Persons, directly or indirectly, of
(a) the beneficial ownership of more than 50% of the total voting
power of the then outstanding Voting Stock of the Company (as adjusted by
stock splits, stock dividends or similar events), or
(b) all or substantially all of the Properties and assets of the
Company,
in each case through merger, consolidation, Transfer of Property or otherwise.
For purposes of this definition, "group of Persons" shall mean two or more
Persons that are acting together or in concert as a partnership, limited
partnership, syndicate or other group for the common purpose of directly or
indirectly acquiring, holding or disposing of Securities of an issuer or
Property of any Person.
Closing -- is defined in Section 1.2(b).
Closing Date -- is defined in Section 1.2(b).
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Collateral -- is defined in Section 1.5 of the Security Agreement.
Collateral Trust Agreement -- means the Collateral Trust Agreement, dated
as of November 15, 1996, among the Company, AMEX, you and the Trustee, as such
agreement may be amended, restated or otherwise modified from time to time.
Company -- is defined in the introductory paragraph.
Consolidated Adjusted Debt -- means, at any time, the total of all Debt of
the Company and the Subsidiaries outstanding at such time (excluding, however,
Aggregate Working Capital Indebtedness), after eliminating all offsetting debits
and credits between the Company and the Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and the Subsidiaries in accordance with
GAAP.
Consolidated Earnings Available for Fixed Charges -- means, for any period,
the sum of
(a) Consolidated Net Income for such period, plus
(b) the amount of all Consolidated Interest Charges, income taxes,
depreciation, amortization and Consolidated Lease Rentals, but only to the
extent deducted in the determination of Consolidated Net Income for such
period.
Consolidated Fixed Charges -- means, for any period, the sum of
(a) Consolidated Interest Charges for such period, plus
(b) Consolidated Lease Rentals for such period.
Consolidated Interest Charges -- means, for any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and the Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and the Subsidiaries in accordance with
GAAP):
(a) all interest in respect of Debt of the Company and the
Subsidiaries (including, without limitation, Aggregate Working Capital
Indebtedness and imputed interest on Capital Leases) deducted in
determining Consolidated Net Income for such period, together with all
interest capitalized or deferred during such period and not deducted in
determining Consolidated Net Income for such period, but excluding any
dividends in respect of Mandatorily Redeemable Preferred Stock, plus
(b) all debt discount and expense amortized or required to be
amortized in the determination of Consolidated Net Income for such period.
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Consolidated Lease Rentals -- means, for any period, the sum of the rental
and other obligations required to be paid during such period by the Company or
any Subsidiary as lessee under all leases of real or personal Property (other
than Capital Leases), excluding any amount required to be paid by the lessee
(whether or not therein designated as rental or additional rental) on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges, provided that if, at the date of determination, any such rental or
other obligations are contingent or not otherwise definitely determinable by the
terms of the related lease, the amount of such obligations (a) shall be assumed
to be equal to the amount of such obligations for the period of 12 consecutive
calendar months immediately preceding the date of determination or (b) if the
related lease was not in effect during such preceding 12-month period, shall be
the amount estimated by a Senior Financial Officer on a reasonable basis and in
good faith.
Consolidated Net Income -- means, for any period, the net income (or net
loss) (before extraordinary gains but after extraordinary losses) of the Company
and the Subsidiaries for such period after deducting, without duplication, all
operating expenses, provisions for all taxes and reserves (including reserves
for deferred income taxes), and all other proper deductions, all in accordance
with GAAP on a consolidated basis, provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is consolidated or merged with or into the Company
or a Subsidiary, and the income (or loss) of any Person, all or
substantially all of the assets of which have been acquired in any manner,
realized by such other Person prior to the date of acquisition; and
(b) any net income or gain (but not any net loss) during such period
from (i) any change in accounting principles in accordance with GAAP, (ii)
any prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, or (iii) any discontinued operations or
the disposition thereof.
Consolidated Operating Cash Flow -- means, for any period, the sum of
(a) Consolidated Net Income for such period, plus
(b) the amount of all interest expenses, depreciation, amortization,
income taxes, deferred items and other non-cash expenses of the Company and
the Subsidiaries, but only to the extent deducted in the determination of
Consolidated Net Income for such period.
Control Notice Event -- means:
(a) the execution by the Company or any Subsidiary or Affiliate of any
letter of intent or similar agreement with respect to any proposed
transaction or event or series of transactions or events that, individually
or in the aggregate, could reasonably be expected to result in a Change in
Control;
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(b) the execution of any written agreement that, when fully performed
by the parties thereto, would result in a Change in Control; or
(c) the making of any written offer by any Person or group of Persons
to the holders of the Voting Stock of the Company which offer, if accepted
by the requisite number of such holders, would result in a Change in
Control.
For purposes of this definition, "group of Persons" shall mean two or more
Persons that are acting together or in concert as a partnership, limited
partnership, syndicate or other group for the common purpose of directly or
indirectly acquiring, holding or disposing of Securities of an issuer or
Property of any Person.
Control Prepayment Date -- is defined in Section 4.4(a).
Debt -- means, at any time, with respect to any Person (without
duplication):
(a) its liabilities for borrowed money and its redemption obligations
in respect of Mandatorily Redeemable Preferred Stock;
(b) its Working Capital Indebtedness;
(c) its liabilities for the deferred purchase price of Property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such Property);
(d) all liabilities in respect of Capital Leases of such Person;
(e) all liabilities secured by any Lien with respect to any Property
owned by such Person (whether or not it has assumed or otherwise become
liable for such liabilities);
(f) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and
other financial institutions (whether or not representing obligations for
borrowed money, but excluding any such liabilities in respect of letters of
credit issued solely for purposes of supporting payment of current accounts
payable arising in the ordinary course of such Person's business);
(g) its liabilities under so-called "take-or-pay" contracts and other
similar agreements; and
(h) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (g) of this definition.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (h) above to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
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Debt Prepayment Application -- means, with respect to any Transfer of
Property, the application by the Company or the Subsidiaries of cash in an
amount equal to the Net Proceeds Amount with respect to such Transfer to pay
Debt constituting a portion of Consolidated Adjusted Debt (other than any such
Debt owing to the Company, any of the Subsidiaries or any Affiliate and other
than any such Debt in respect of any revolving credit or similar credit facility
providing the Company or any of the Subsidiaries with the right to obtain loans
or other extensions of credit from time to time, except to the extent that in
connection with such payment of such Debt the availability of credit under such
credit facility is permanently reduced by an amount not less than the amount of
such proceeds applied to the payment of such Debt).
Default -- means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
Disposition Value -- means, at any time, with respect to any Property
(a) in the case of Property that does not constitute Subsidiary Stock,
the greater of (i) the book value thereof or (ii) the Fair Market Value
thereof (such greater amount, for purposes of this definition, with respect
to any Property, the "Relevant Value"), in either case valued at the time
of such disposition in good faith by the Company, and
(b) in the case of Property that constitutes Subsidiary Stock, an
amount equal to that percentage of the Relevant Value of the assets of the
Subsidiary that issued such stock as is equal to the percentage that the
Relevant Value of such Subsidiary Stock represents of the Relevant Value of
all of the outstanding capital stock of such Subsidiary (assuming, in
making such calculations, that all Securities convertible into such capital
stock are so converted and giving full effect to all transactions that
would occur or be required in connection with such conversion) determined
at the time of the disposition thereof, in good faith by the Company.
Distribution -- means, in respect of any corporation, association or other
business entity:
(a) dividends or other distributions or payments on Capital Stock or
other equity interest of such corporation, association or other business
entity (except distributions in such stock or other equity interest); and
(b) the redemption or acquisition of such stock or other equity
interests or of warrants, rights or other options to purchase such stock or
other equity interests (except when solely in exchange for such stock or
other equity interests).
Environmental Laws -- means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any
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materials into the environment, including, but not limited to, those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA Affiliate -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the IRC.
Event of Default -- is defined in Section 8.1.
Exchange Act -- means the Securities Exchange Act of 1934, as amended.
Fair Market Value -- means, at any time and with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).
Financing Documents -- means this Agreement, the Notes and the Security
Documents.
Fixed Charges Coverage Ratio -- means, for any period, the ratio of
(a) Consolidated Earnings Available for Fixed Charges for such period
to
(b) Consolidated Fixed Charges for such period.
Franchisee -- means any Person who or that is a franchisee of the Company
or of any Subsidiary.
GAAP -- means generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authority -- means
(a) the government of
(i) the United States of America or any state or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or that asserts jurisdiction
over any properties of the Company or any Subsidiary, or
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(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
Guaranty -- means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
Institutional Investor -- means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any venture capital company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.
Investment -- means any investment, made in cash or by delivery of
Property, by the Company or any Subsidiary
(a) in any Person, whether by acquisition of stock, Debt or other
obligation or Security, or by loan, Guaranty, advance, capital contribution
or otherwise, or
(b) in any Property.
IRC -- means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
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Lien -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any Property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
Liquid Security Amount -- means, at any time, the sum at such time of
(a) the amount of the Company's collected balances and uncollected
balances (represented by provisional credits) in all bank accounts,
deposits in transit (representing no more than one day's volume of checks
cashed during weekday operations and no more than three days' volume of
checks cashed during weekend and holiday operations), other cash
equivalents, negotiable instruments (other than consumer loans) and other
liquid assets (at their Fair Market Value if less than their face value,
and otherwise at their face value), plus
(b) the amount of currency on hand at the Company's check-cashing
locations,
but in any event excluding the aggregate sum of any cash that the Company is
prevented by agreement from pledging to any Person.
Make-Whole Amount -- means with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining Scheduled Payments with
respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:
Called Principal -- means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 4.3 or Section 4.4 or
has become or is declared to be immediately due and payable pursuant to
Section 8.2, as the context requires.
Discounted Value -- means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
Reinvestment Yield -- means, with respect to the Called Principal of
any Note, 0.5% over the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 500" on the Telerate Access Service (or such
other display as may
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replace Page 500 on Telerate Access Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such yields
are not reported as of such time or the yields reported as of such time are
not ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of the
second Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
U.S. Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the maturity closest to and less than the Remaining Average Life.
Remaining Average Life -- means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
Remaining Scheduled Payments -- means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 4.3,
Section 4.4 or Section 8.2.
Settlement Date -- means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 4.3 or Section 4.4 or has become or is declared to be immediately
due and payable pursuant to Section 8.2, as the context requires.
Mandatorily Redeemable -- means, with respect to the Capital Stock of any
Person, each share of such Person's Capital Stock that is:
(a) redeemable, payable or required to be purchased or otherwise
retired or extinguished, or convertible into Debt of such Person (i) at a
fixed or determinable date, whether by operation of sinking fund or
otherwise, (ii) at the
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option of any Person other than such Person, or (iii) upon the occurrence
of a condition not solely within the control of such Person; or
(b) convertible into other Mandatorily Redeemable Capital Stock.
Material -- means material in relation to the business, operations,
affairs, financial condition or Properties of the Company and the Subsidiaries
taken as a whole.
Material Adverse Effect -- means a material adverse effect on
(a) the business, operations, affairs, financial condition or
Properties of the Company and the Subsidiaries taken as a whole,
(b) the ability of the Company to perform its obligations under any of
the Financing Documents,
(c) the validity or priority of any Lien in favor of the Trustee for
the benefit of the holders of the Notes and the holders of the other
Secured Debt, or the relative priority of any claim or right to any
distribution of the holders of the Notes, under any of the Financing
Documents, or
(d) the validity or enforceability of any of the Financing Documents.
Multiemployer Plan -- means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
Net Proceeds Amount -- means, with respect to any Transfer of any Property
by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time of the consummation of such
Transfer) received by such Person in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and expenses
actually incurred by such Person in connection with such Transfer.
Notes -- is defined in Section 1.1.
PBGC -- means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
Permitted Subsidiary -- means each Subsidiary in existence on the Closing
Date (as set forth in Part A.3(a) of Annex 3), or a single Subsidiary created or
acquired after the Closing for the purpose of engaging in the business of
issuing money orders, provided that:
(a) each such Subsidiary shall at all times be a guarantor under a
Subsidiary Guaranty Agreement;
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(b) with respect to each such Subsidiary, at any time,
(i) the portion of Consolidated Operating Cash Flow, determined
for the then most recently ended period of four consecutive fiscal
quarters of the Company, attributable to such Subsidiary pursuant to
GAAP is not greater than 1% (or 3.5% in the case of Check Express
Finance, Inc., a Florida corporation), and
(ii) the portion of the consolidated total assets of the Company
and the Subsidiaries, determined as of the end of the then most
recently ended fiscal quarter of the Company, attributable to such
Subsidiary pursuant to GAAP is not greater than 1% (or 3.5% in the
case of Check Express Finance, Inc., a Florida corporation); and
(c) with respect to all such Subsidiaries, at any time,
(i) the portion of Consolidated Operating Cash Flow, determined
for the then most recently ended period of four consecutive fiscal
quarters of the Company, attributable to all such Subsidiaries
pursuant to GAAP is not greater than 5%, and
(ii) the portion of the consolidated total assets of the Company
and the Subsidiaries, determined as of the end of the then most
recently ended fiscal quarter of the Company, attributable to all such
Subsidiaries pursuant to GAAP is not greater than 5%.
Notwithstanding the foregoing, if the Property (or such portion of the Property
as shall be agreed to by the Required Holders) of a single Subsidiary created or
acquired after the Closing for the purpose of engaging in the business of
issuing money orders shall have been made, and shall remain, subject to a first
priority Lien in favor of the Trustee for the benefit of the holders of Notes
and other Beneficiaries (as such term is defined under the Collateral Trust
Agreement) on such terms and conditions, and pursuant to such agreements and
instruments, as shall have been approved by the Required Holders, and the
Company shall have caused to be delivered to each holder of a Note an opinion,
satisfactory in form and substance to the Required Holders, of independent
counsel to the effect that such agreements and instruments are enforceable in
accordance with their terms, then such single Subsidiary shall be deemed to be a
Permitted Subsidiary and the portions of Consolidated Operating Cash Flow
contributed by such single Subsidiary, and the portions of consolidated total
assets attributable to such Subsidiary, shall be excluded for purposes of
determining compliance with the foregoing clause (c) of this definition.
Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Placement Agent -- means Montgomery Securities.
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Placement Memorandum -- means the Confidential Private Placement
Memorandum, dated June 1996, furnished in connection with the placement of the
Notes, including, without limitation, all exhibits, schedules, appendices and
other attachments thereto.
Plan -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
Preferred Stock -- means any class of Capital Stock of a Person that is
preferred over any other class of Capital Stock of such Person as to the payment
of dividends or other equity distributions or the payment of any amount upon
liquidation or dissolution of such Person.
Pro Forma Consolidated Operating Cash Flow -- means, for any period of four
consecutive fiscal quarters of the Company, and in connection with any
determination under Section 6.4, Consolidated Operating Cash Flow for such
period, calculated giving effect to pro forma adjustments in accordance with 17
CFR 210.11-01 and 17 CFR 210.11-02 (as in effect on the Closing Date) (for
purposes of this definition, the "Applicable Regulations") with respect to any
acquisitions or divestitures of Property (but not any other transactions) of the
Company and the Subsidiaries that occurred during such period of four
consecutive fiscal quarters of the Company or after the end of such period but
at or before the time as of which Consolidated Adjusted Debt is being determined
for purposes of Section 6.4, provided that if no such acquisitions or
divestitures occurred during the relevant periods referred to above, or if the
Applicable Regulations would otherwise not require any such pro forma
adjustments, Pro Forma Consolidated Operating Cash Flow for such period of four
consecutive fiscal quarters of the Company shall mean Consolidated Operating
Cash Flow, without adjustment, for such period.
Property -- means, unless otherwise specifically limited, any kind of
property or asset, whether real, personal or mixed, tangible or intangible,
choate or inchoate.
Property Reinvestment Application -- means, with respect to any Transfer of
Property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to the acquisition by the Company or any Subsidiary of
tangible operating assets of the Company or any Subsidiary to be used in the
principal business of such Person.
PTCE 95-60 -- is defined in Section 10.2(a).
Required Holders -- means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any Subsidiary or Affiliate).
Restricted Payment -- means any Distribution in respect of the Company or
any Subsidiary (other than on account of Capital Stock or other equity interests
of a
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Subsidiary owned legally and beneficially by the Company or a Wholly-Owned
Subsidiary), including, without limitation, any Distribution resulting in the
acquisition by the Company of Securities that would constitute treasury stock.
For purposes of this Agreement, the amount of any Restricted Payment made in
Property shall be the greater of (x) the Fair Market Value of such Property (as
determined in good faith by the board of directors (or equivalent governing
body) of the Person making such Restricted Payment) and (y) the net book value
thereof on the books of such Person, in each case determined as of the date on
which such Restricted Payment is made.
Revolving Advances -- means, without duplication,
(a) all Advances (as such term is defined in the Collateral Trust
Agreement), and
(b) all other advances or loans, or other financial accommodations, to
the Company or any Subsidiary (whether or not they extend or replace all or
a portion of the Advances referred to in clause (a) above, and whether or
not they are used for working capital purposes), in respect of which the
liabilities of the Company or such Subsidiary constitute all or a portion
of AMEX Priority Obligations (as such term is defined in the Collateral
Trust Agreement), or in respect of which the liabilities of the Company or
such Subsidiary are directly or indirectly secured, or otherwise are
entitled to benefits (under the Security Documents or otherwise), in such a
manner as to give the holder or holders of the Debt constituted thereby the
benefits of any Lien priority, priority in right to receive proceeds or
other priority in right of payment, but excluding, in any event,
liabilities constituting Working Capital Indebtedness under clauses (a) or
(b) of the definition of Working Capital Indebtedness.
Scheduled Principal Payment -- is defined in Section 4.2.
Secured Debt -- is defined in the Collateral Trust Agreement.
Securities Act -- means the Securities Act of 1933, as amended from time to
time.
Security -- has the meaning set forth in section 2(1) of the Securities
Act.
Security Agreement -- means the Assignment of Deposit Accounts and Security
Agreement, dated as of November 15, 1996, between the Company and the Trustee,
as such agreement may be amended, restated or otherwise modified from time to
time.
Security Documents -- means the Collateral Trust Agreement, the Security
Agreement, the Subsidiary Guaranty Agreements and the other Security Documents
(as such term is defined in the Collateral Trust Agreement).
Senior Financial Officer -- means any one of the president, the chief
financial officer and the principal accounting officer of the Company.
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Senior Officer -- means any one of the chairman of the board of directors,
the chief executive officer, the chief operating officer and the president of
the Company.
Source -- is defined in Section 10.2.
Subsidiary -- means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
Subsidiary Guaranty Agreement -- has the meaning assigned to the term
"Guaranty" in the Collateral Trust Agreement.
Subsidiary Stock -- means the Capital Stock (or any options or warrants to
purchase stock or other Securities exchangeable for or convertible into any
Capital Stock) of any Subsidiary.
Successor Corporation -- is defined in Section 6.11.
Term Advances -- means, without duplication,
(a) all Revolving Commitment Advances (as such term is defined in the
Collateral Trust Agreement), and
(b) any other advances or loans, or other financial accommodations, to
the Company or any Subsidiary constituting a portion of Debt of the Company
and the Subsidiaries, but excluding any such advances, loans or other
financial accommodations constituting Working Capital Indebtedness.
Transfer -- means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers, leases (as lessor) or otherwise disposes
of any of its Property, including, without limitation, Subsidiary Stock, and
including, without limitation, any consolidation, merger or other transaction
the direct or indirect result of which is a disposition of all or a portion of
any equity or other interest in any Person. For purposes of determining the
application of the Net Proceeds Amount in respect of any Transfer, the Company
may designate any Transfer as one or more separate Transfers each yielding a
separate Net Proceeds Amount. In any such case, the Disposition Value of any
Property subject to each such separate Transfer attributable to any Property
subject to each such separate Transfer shall be determined by ratably allocating
the aggregate Disposition Value of all Property subject to all such separate
Transfers to each such separate Transfer on a proportionate basis.
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Trustee -- means Wilmington Trust Company, as trustee under the Collateral
Trust Agreement, and any successor trustee in such capacity.
Voting Stock -- means, with respect to any Person, any Capital Stock of
such Person whose holders are entitled under ordinary circumstances to vote for
the election of directors (or Persons performing similar functions) of such
Person (irrespective of whether at the time Capital Stock of any other class or
classes shall have or might have voting powers by reason of the happening of any
contingency).
Wholly-Owned Subsidiary -- means, at any time, any Subsidiary 100% of all
of the equity interests (except directors' qualifying shares) and voting
interests of which are owned by, and all of the outstanding Debt of which is
held by, any one or more of the Company and the Company's other Wholly-Owned
Subsidiaries at such time.
Working Capital Indebtedness -- means, at any time, with respect to any
Person (without duplication), its liabilities in respect of:
(a) the principal amount of all money orders issued by such Person, or
sold by such Person as agent or otherwise on behalf of any issuer thereof,
or in respect of which such Person is otherwise directly or indirectly
liable;
(b) electronic money transfer services performed by such Person as
principal, agent or otherwise, or in respect of which such Person is
otherwise directly or indirectly liable; and
(c) outstanding Revolving Advances.
Without limitation of the foregoing, clauses (a) and (b) of this definition
shall include (without duplication) all liabilities in respect of "Trust
Funds" as such term is used in the AMEX Documents and the "Trust Amount" as
such term is defined in the Collateral Trust Agreement.
9.2 Accounting Principles.
Where the character or amount of any asset or liability or item of income
or expense, or any consolidation or other accounting computation is required to
be made for any purpose hereunder, it shall be done in accordance with GAAP as
in effect on the date of, or at the end of the period covered by, the financial
statements from which such asset, liability, item of income, or item of expense,
is derived, or, in the case of any such computation, as in effect on the date as
of which such computation is required to be determined, provided, that if any
term defined herein or other provision herein includes or excludes amounts,
items or concepts that would not be included in or excluded from such term or
other provision if such term or provision was defined or otherwise written with
reference solely to GAAP, such term or other provision will be deemed to include
or exclude such amounts, items or concepts as set forth herein.
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9.3 Directly or Indirectly.
Where any provision herein refers to action to be taken by any Person, or
that such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including,
without limitation, actions taken by or on behalf of any partnership in which
such Person is a general partner.
9.4 Section Headings, Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. Unless otherwise specified,
references to Sections are to Sections of this Agreement, references to
Annexes are to Annexes to this Agreement, references to Attachments are to
Attachments to this Agreement and references to Exhibits are to Exhibits to
this Agreement.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
9.5 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-
OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF
THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
10. PURCHASER REPRESENTATIONS
10.1 Purchase for Investment.
You represent that you are an "insurance company" (as such term is defined
in section 2(13) of the Securities Act) and that you are purchasing the Notes
for your own account or for one or more separate accounts maintained by you or
for the account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their Property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold or
otherwise transferred only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
10.2 Source of Funds.
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You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) General Account -- you are an insurance company and the Source
is an "insurance company general account," as such term is defined in
Department of Labor Prohibited Transaction Class Exemption 95-60
("PTCE 95-60") (issued July 12, 1995), and there is no employee benefit
plan, treating as a single plan all plans maintained by the same employer
(and affiliates thereof as defined in section V(a)(1) of PTCE 95-60) or
by the same employee organization with respect to which the amount of the
general account reserves and liabilities for all contracts held by or on
behalf of such plan, exceed 10% of the total reserves and liabilities of
such general account as determined under PTCE 95-60 (exclusive of separate
account liabilities) plus surplus, as set forth in the National
Association of Insurance Commissioners Annual Statement filed with your
state of domicile; or
(b) Separate Account -- the Source is a "separate account" (as define
section 3 of ERISA):
(i) 10% Pooled Separate Account -- that is an insurance company
pooled separate account, within the meaning of Department of Labor
Prohibited Transaction Class Exemption 90-1 (issued January 29,
1990) and to the extent that there are any plans whose assets in
such separate account exceed 10% of the assets of such separate
account, you have disclosed the names of such plans to the Company
in writing; or
(ii) Identified Plan Assets -- that is comprised of employee
benefit plans identified by you in writing and with respect to which
the Company hereby warrants and represents that, as of the date of
the Closing, neither the Company nor any ERISA Affiliate is a
"party in interest" (as defined in section 3 of ERISA) or a
"disqualified person" (as defined in section 4975 of the IRC) with
respect to any plan so identified; or
(iii) Guaranteed Separate Account -- that is maintained solely
in connection with fixed contractual obligations of an insurance
company, under which any amounts payable, or credited, to any
employee benefit plan having an interest in such account and to any
participant or beneficiary of such plan (including an annuitant) are
not affected in any manner by the investment performance of the
separate account (as provided by 29 CFR (S)2510.3-101(h)(1)(iii)); or
(c) Qualified Professional Asset Manager -- the Source is an
"investment fund" managed by a "qualified professional asset manager"
(as such terms are defined in Part V of Department of Labor Prohibited
Transaction Class Exemption 84-14) and all the requirements for an
exemption under such Exemption are met with respect to the use of funds
to purchase the Notes; or
(d) Excluded Plan -- the Source is an employee benefit plan that is
excluded from the provisions of section 406 of ERISA by virtue of section
4(b) of ERISA; or
46
<PAGE>
(e) Exempt Funds -- the Source is a separate investment account that
is not subject to ERISA and no funds of which come from assets of an
"employee benefit plan" or a "plan" or any other entity that is deemed
to hold assets of an "employee benefit plan" or a "plan" ("employee
benefit plan" is defined in section 3 of ERISA, and "plan" is defined in
section 4975(e)(1) of the IRC).
11. MISCELLANEOUS
11.1 Communications.
All notices and other communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), (b) by registered or certified mail with return receipt
requested (postage prepaid) or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Annex 1, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at 1231 Greenway Drive,
Suite 800,Irving, Texas 75038, Attention: President, Telephone no.
(214) 550-5000, Telecopy no. (214) 550-5150, or at such other address
as the Company shall have specified to the holder of each Note in writing.
Notices under this Section 11.1 will be deemed given only when actually
received.
11.2 Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be
executed, documents received by you at the closing of the issuance of
the Notes (except the Notes themselves), and financial statements,
certificates and other information previously or hereafter furnished to
any holder of Notes, may be reproduced by any holder of Notes or the
Company by any photographic, photostatic, microfilm, micro-card,
miniature photographic, digital or other similar process and each holder
of Notes may destroy any original document so reproduced. Any such
reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by such
holder of Notes or the Company in the regular course of business) and
that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. Nothing in this
Section 11.2 shall prohibit the Company or any holder of Notes from
contesting the accuracy or validity of any such reproduction.
47
<PAGE>
11.3 Survival.
All warranties, representations, certifications and covenants made by the
Company in the Financing Documents or in any certificate or other instrument
delivered by it or on its behalf under the Financing Documents at or prior to
the Closing shall be considered to have been relied upon by you and shall
survive the delivery to you of the Notes regardless of any investigation made by
you or on your behalf. All statements in any certificate or other instrument
delivered by or on behalf of the Company pursuant to the terms of the Financing
Documents shall constitute warranties and representations by the Company
hereunder. All payment obligations of the Company hereunder (including, without
limitation, reimbursement obligations in respect of costs, expenses and fees of
or incurred by the holders of the Notes) shall survive the payment of the Notes
and the termination hereof.
11.4 Successors and Assigns.
This Agreement and the Notes shall inure to the benefit of and be binding
upon and enforceable by the Company and the holders, from time to time, of the
Notes, provided that the identity of the holders of the Notes shall be
determined solely by reference to the register for the registration and transfer
of Notes maintained pursuant to Section 5.1.
11.5 Amendment and Waiver.
(a) Requirements. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders, provided that
no such amendment or waiver shall, without the written consent of the
holders of all Notes (exclusive of Notes held by the Company, any
Subsidiary or any Affiliate) at the time outstanding:
(i) change the amount or time of any prepayment or payment of
principal or Make-Whole Amount or the rate or time of any payment of
interest;
(ii) amend or waive the provisions of Section 8.1(a), Section
8.2 or Section 8.3 or amend or waive any defined term as used
therein,
(iii) amend or waive the provisions of Section 4.4 or amend or
waive any defined term as used therein,
(iv) amend or waive the definition of "Required Holders" or
change the proportion of the principal amount of the Notes required
with respect to any approval or consent required under this
Agreement, or
(v) amend or waive this Section 11.5 or amend or waive any
defined term as used herein.
(b) Solicitation of Noteholders.
(i) Solicitation. Each holder of the Notes (irrespective of
the amount of Notes then owned by it) shall be provided by the
Company with sufficient information to enable such holder to make an
informed decision with respect
48
<PAGE>
to any proposed waiver or amendment of any of the provisions of the
Financing Documents. Executed or true and correct copies of any
amendment or waiver effected pursuant to the provisions of this
Section 11.5 shall be delivered by the Company to each holder of
outstanding Notes forthwith following the date on which such
amendment or waiver becomes effective.
(ii) Payment. The Company shall not, directly or indirectly,
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any
waiver or amendment of any of the provisions hereof or of the Notes
unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to the holders of
all Notes then outstanding.
(iii) Scope of Consent. Any amendment or waiver made pursuant
to this Section 11.5 by a holder of Notes that has transferred or
has agreed to transfer its Notes to the Company, any Subsidiary or
any Affiliate and has provided or has agreed to provide such
amendment or waiver as a condition to such transfer shall be void
and of no force and effect except solely as to such holder, and
any amendments effected or waivers granted that would not have been
or would not be so effected or granted but for such amendment or
waiver (and the amendments or waivers of all other holders of Notes
that were acquired under the same or similar conditions) shall be
void and of no force and effect, retroactive to the date such
amendment or waiver initially took or takes effect, except solely as
to such holder.
(c) Binding Effect. Except as provided in Section 11.5(b)(iii), any
amendment or waiver consented to as provided in this Section 11.5 shall apply
equally to all holders of Notes and shall be binding upon them and upon each
future holder of any Note and upon the Company whether or not such Note shall
have been marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon.
11.6 Expenses.
(a) Closing Expenses. Whether or not the Notes are sold, the
Company shall pay, at the Closing (if the Notes are sold, and otherwise upon
receipt of any statement or invoice therefor), all reasonable fees, expenses
and costs relating thereto, including, without limitation, the statement
presented at the Closing by your special counsel for fees and disbursements
incurred in connection herewith, each additional statement for fees and
disbursements (promptly upon receipt thereof) of your special counsel rendered
after the Closing in connection with the issuance of the Notes, and all expenses
incurred by you on your behalf or the Company's behalf in complying with each
of the conditions to closing referred to in Section 3 and Attachment B.
(b) Amendments and Waivers. The Company shall pay when billed the
reasonable costs and expenses (including, without limitation, reasonable
attorneys'
49
<PAGE>
fees) incurred by the holders of the Notes in connection with the
consideration, negotiation, preparation or execution of any amendments, waivers,
consents, standstill agreements and other similar agreements with respect hereto
(whether or not any such amendments, waivers, consents, standstill agreements or
other similar agreements are executed).
(c) Restructuring and Workout, Inspections. At any time when the
Company and the holders of Notes are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default exists, the
Company shall pay when billed the costs and expenses (including attorneys' fees
and the fees of professional advisors) incurred by the holders of the Notes in
connection with the assessment, analysis or enforcement of any rights or
remedies that are or may be available to the holders of Notes and in connection
with inspections made pursuant to Section 7.5.
(d) Collection. If the Company shall fail to pay when due any
principal of, or Make-Whole Amount or interest on, any Note, the Company shall
pay to each holder of Notes, to the extent permitted by law, such amounts as
shall be sufficient to cover the costs and expenses, including but not limited
to reasonable attorneys' fees, incurred by such holder in collecting any sums
due on such Notes.
11.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT
IN RESPECT OF ANY BREACH UNDER ANY FINANCING DOCUMENT MAY BE BROUGHT BY SUCH
PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY
NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS
SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN
PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVE AND AGREE NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO
THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT OR TRANSACTION
CONTEMPLATED THEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
50
<PAGE>
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED, SERVED BY U.S. REGISTERED MAIL OR SERVED IN
THE MANNER PROVIDED FOR COMMUNICATIONS IN THIS AGREEMENT, AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES, OR, IN THE CASE OF THE COMPANY,
TO ITS AGENT FOR SERVICE OF PROCESS LISTED IN PART 11.7(c) OF ANNEX 3
(WHICH PERSON THE COMPANY HEREBY IRREVOCABLY APPOINTS AS ITS AGENT FOR
SUCH PURPOSE), SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW,
ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY FINANCING DOCUMENT OR TRANSACTION CONTEMPLATED
THEREBY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY
JUDGMENT IN RESPECT OF ANY BREACH UNDER ANY FINANCING DOCUMENT. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER ANY OTHER PARTY HERETO IN SUCH OTHER JURISDICTION, AND
IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
11.8 Entire Agreement.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
11.9 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
11.10 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
11.11 Execution in Counterpart.
51
<PAGE>
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
11.12 General Interest Provisions
Nothing contained in this Agreement or in any of the Financing Documents
shall be construed to obligate the Company, under any circumstances whatsoever,
to pay interest in excess of the maximum non-usurious interest rate applicable
to the Company under applicable law. If any sums received from the Company are
at any time under applicable law deemed to be in excess of the maximum non-
usurious amount any holder of the Notes could collect under applicable usury
law, the effective rate of interest on the Notes shall be reduced to and be the
maximum non-usurious interest rate permitted under applicable law and the
Company shall accept as its sole remedy under such circumstances either return
of any sums of interest that may have been collected and that produced a rate of
interest in excess of the applicable maximum non-usurious interest rate or the
application of those sums as a credit against the unpaid principal amount of the
Notes, whichever remedy may be elected by any holder of the Notes.
[Remainder of page intentionally blank; next page is signature
page.]
52
<PAGE>
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.
Very truly yours,
ACE CASH EXPRESS, INC.
By
--------------------------------
Name:
Title:
Accepted:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By
--------------------------------
Name:
Title:
By
--------------------------------
Name:
Title:
[Signature page for Note Purchase Agreement of ACE CASH EXPRESS, INC. in
connection with the issuance of its 9.03% Senior Secured Notes due 2003]
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER
<TABLE>
<CAPTION>
================================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<S> <C>
Name in which to register Principal Mutual Life Insurance Company
Note(s)
- --------------------------------------------------------------------------------
Note registration R-1; $16,000,000
number(s); Principal
amount(s)
- --------------------------------------------------------------------------------
Payment on account of
Note(s)
Method Federal Funds Wire Transfer
Account information Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA# 073000228
For credit to Principal Mutual Life Insurance
Company, Account No. 014752, Reference:
OBI:PFGSE(S) B 1-B-60815 ( )Principal
$_____________ Interest $___________.
- --------------------------------------------------------------------------------
Accompanying information Name of Company: Ace Cash Express, Inc.
Description of
Security: 9.03% Senior Secured Notes
due November 15, 2003
PPN: 004403 A* 2
Due date and application (as among principal,
Make-Whole Amount and interest) of the
payment being made:
- --------------------------------------------------------------------------------
Address for notices Principal Mutual Life Insurance Company
related to payments 711 High Street
Des Moines, IA 50392-0960
Attn: Investment - Accounting & Treasury -
Securities
- --------------------------------------------------------------------------------
Address for all other Principal Mutual Life Insurance Company
notices 711 High Street
Des Moines, IA 50392-0800
Attn: Investment Department - Securities
- --------------------------------------------------------------------------------
</TABLE>
Annex 1-1
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (Cont.)
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Tax identification number 42-0127290
================================================================================
</TABLE>
Annex 1-2
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (Cont.)
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Name in which to register Principal Mutual Life Insurance Company
Note(s)
- --------------------------------------------------------------------------------
Note registration R-2; $2,000,000
number(s); Principal
amount(s)
- --------------------------------------------------------------------------------
Payment on account of
Note(s)
Method Federal Funds Wire Transfer
Account information Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA# 073000228
For credit to Principal Mutual Life Insurance
Company, Separate Account No. 032395,
Reference: OBI:PFGSE(S) B 16-B-60815 ( )
Principal $__________ Interest $__________.
- --------------------------------------------------------------------------------
Accompanying information Name of Company: Ace Cash Express, Inc.
Description of
Security: 9.03% Senior Secured Notes due
November 15, 2003
PPN: 004403 A* 2
Due date and application (as among principal,
Make-Whole Amount and interest) of the
payment being made:
- --------------------------------------------------------------------------------
Address for notices related Principal Mutual Life Insurance Company
to payments 711 High Street
Des Moines, IA 50392-0960
Attn: Investment - Accounting & Treasury -
Securities
- --------------------------------------------------------------------------------
</TABLE>
Annex 1-3
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (Cont.)
<TABLE>
<CAPTION>
================================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<S> <C>
Address for all other Principal Mutual Life Insurance Company
notices 711 High Street
Des Moines, IA 50392-0800
Attn: Investment Department - Securities
- --------------------------------------------------------------------------------
Tax identification number 42-0127290
================================================================================
</TABLE>
Annex 1-4
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (cont.)
<TABLE>
<CAPTION>
===============================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
<S> <C>
Name in which to register Principal Mutual Life Insurance Company
Note(s)
- --------------------------------------------------------------------------------
Note registration R-3; $2,000,000
number(s); Principal
amount(s)
- --------------------------------------------------------------------------------
Payment on account of
Note(s)
Method Federal Funds Wire Transfer
Account information Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA# 073000228
For credit to Principal Mutual Life Insurance
Company, Account No. 7051484, Reference:
OBI:PFGSE(S) B 916-B-60815 ( )Principal
$_____________ Interest $___________.
- --------------------------------------------------------------------------------
Accompanying information Name of Company: Ace Cash Express, Inc.
Description of
Security: 9.03% Senior Secured Notes due
November 15, 2003
PPN: 004403 A* 2
Due date and application (as among principal,
Make-Whole Amount and interest) of the
payment being made:
- --------------------------------------------------------------------------------
Address for notices Principal Mutual Life Insurance Company
related to payments 711 High Street
Des Moines, IA 50392-0960
Attn: Investment - Accounting & Treasury -
Securities
- --------------------------------------------------------------------------------
</TABLE>
Annex 1-5
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (Cont.)
<TABLE>
<CAPTION>
================================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<S> <C>
Address for all other Principal Mutual Life Insurance Company
notices 711 High Street
Des Moines, IA 50392-0800
Attn: Investment Department - Securities
- --------------------------------------------------------------------------------
Tax identification number 42-0127290
================================================================================
</TABLE>
Annex 1-6
<PAGE>
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
Re: Ace Cash Express, Inc. --
$20,000,000 9.03% Senior Secured Notes due 2003
-----------------------------------------------
In accordance with Section 1.2(b) of the Note Purchase Agreement, the
Company directs you to make payment for the Note or Notes being purchased by you
by payment by federal funds wire transfer in immediately available funds of the
purchase price thereof to:
Wells Fargo Bank
1445 Ross Avenue
Dallas, Texas 75202
ABA no.: 121000248
Account no.: 415-969-8539
Account name: Ace Cash Express Inc. - Concentration Account
Contact person at bank:
Name: Jeffery Cook
Phone no.: (214) 740-1539
Annex 2-1
<PAGE>
ANNEX 3
INFORMATION AS TO COMPANY
Part A.2(a) -- Financial Statements.
[To be provided by the Company]
********
Part A.2(b) -- Debt as of the Closing Date.
[To be provided by the Company]
********
Part A.2(c) -- Material Adverse Change.
[To be provided by the Company]
********
Part A.3(a) -- Ownership of Subsidiaries.
[To be provided by the Company]
********
Part A.9 -- Restrictions on Company and Subsidiaries.
[To be provided by the Company]
********
Part A.11(e) -- ERISA Matters.
[To be provided by the Company]
********
Part A.17(a) -- Use of Proceeds.
[To be provided by the Company]
********
Annex 3-1
<PAGE>
Part 6.6(a) -- Subsidiary Debt.
[To be provided by the Company]
********
Part 6.8 -- Restrictions Affecting Subsidiaries.
[To be provided by the Company]
********
Part 6.12(a)(vii) -- Closing Date Liens.
[To be provided by the Company]
********
Part 11.7(c) -- Agent for Service of Process.
[To be provided by the Company]
Annex 3-2
<PAGE>
ATTACHMENT A
A. COMPANY WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase and pay for the
Notes to be delivered to you at the Closing, the Company makes the following
warranties and representations, effective as of the date of the Company's
execution of this Agreement and as of the Closing Date:
A.1 Full Disclosure.
The Placement Memorandum (a copy of which previously has been delivered to
you) correctly describes the general nature of the business and principal
Properties of the Company and the Subsidiaries as of the Closing Date. Neither
the statements made by the Company in the Financing Documents, the Placement
Memorandum, the financial statements referred to in Section A.2(a), nor any
other written statement furnished by or on behalf of the Company to you in
connection with the negotiation or the closing of the sale of the Notes, taken
as a whole, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein and herein not
misleading under the circumstances under which they were made. There is no fact
that the Company has not disclosed to you in writing that has had or, so far as
the Company can now reasonably foresee, could reasonably be expected to have, a
Material Adverse Effect (provided that the Company makes no warranty or
representation in this sentence as to general, economic, market and industry
conditions that are generally applicable to the Company and the Subsidiaries and
all other Persons that are in the same or similar businesses as the Company and
the Subsidiaries and are similarly situated).
A.2 Financial Statements; Debt; Material Adverse Change.
(a) Financial Statements. The Company has provided you with the
financial statements described in Part A.2(a) of Annex 3. All of such
financial statements have been prepared in accordance with GAAP consistently
applied (except as otherwise noted therein) and present fairly, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates, and the results of their operations
and cash flows for the periods, specified therein.
(b) Debt. Part A.2(b) of Annex 3 lists all Debt of the Company
and the Subsidiaries as of the Closing Date, and provides the following
information with respect to each item of such Debt: the obligor, each
guarantor thereof and each other Person similarly liable in respect thereof,
the holder thereof, the outstanding amount, the current portion of the
outstanding amount, the final maturity, required sinking fund payments and a
description of the collateral securing such Debt.
(c) Material Adverse Change. Except as disclosed in Part A.2
(c) of Annex 3, since June 30, 1996, there has been no change in the business,
operations, affairs, financial condition or Properties of the Company or the
Subsidiaries, except changes that, in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
Attachment A-1
<PAGE>
(d) Summary and Pro Forma Financial Information. All statements or
summaries of historical financial condition and performance of the Company and
the Subsidiaries included in the Placement Memorandum have been derived from
financial statements and information prepared on a basis of accounting
consistent with GAAP and with the accounting principles currently used by the
Company, to the extent applicable, except as noted therein. All pro forma
information with respect to the Company and the Subsidiaries included in the
Placement Memorandum has been derived from financial statements and information
prepared on a basis of accounting consistent with GAAP and with accounting
principles currently used by the Company, except as noted there in, and all
material assumptions on which such pro forma information was based are disclosed
therein.
A.3 Subsidiaries and Affiliates.
(a) Ownership of Subsidiaries. Part A.3(a) of Annex 3 states
(i) the name of each Subsidiary, its jurisdiction of organization,
form of organization and the percentage of its Voting Stock owned by the
Company and each other Subsidiary, and
(ii) the name of each Affiliate and the nature of the affiliation of
such Affiliate.
Each of the Company and the Subsidiaries has record title to all of the shares
it purports to own of the stock of each Subsidiary, free and clear in each case
of any Lien. All such shares have been duly issued and are fully paid and
nonassessable.
(b) Dividend Restrictions, etc. No Subsidiary is a party to, or
otherwise subject to, any legal restriction or any agreement (other than this
Agreement, the agreements listed in Part 6.8 of Annex 3 and statutory,
regulatory or common law restrictions) restricting the ability of such
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of the Subsidiaries that own
Voting Stock of such Subsidiary.
A.4 Title to Properties.
(a) General. Each of the Company and the Subsidiaries has indefeasible
title to all of the Property reflected in the most recent balance sheet referred
to in Part A.2(a) of Annex 3 and to all of the Property purported to have been
acquired by the Company or any Subsidiary after such date (except as sold or
otherwise disposed of in the ordinary course of business), except for such
failures to have indefeasible title as are immaterial to such balance sheet and
that, in the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect. All Property of the Company and the
Subsidiaries is free from Liens not permitted by Section 6.12.
(b) Leases. All leases necessary for the conduct of the respective
businesses of the Company and the Subsidiaries are valid and subsisting and are
in full force and effect, except for such failures to be valid and subsisting
that, in the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect.
Attachment A-2
<PAGE>
aggregate for all such failures, could not reasonably be expected to have a
Material Adverse Effect.
(c) Intellectual Property. Each of the Company and the Subsidiaries
owns, possesses or has the right to use all of the licenses, permits,
franchises, patents, copyrights, trademarks, service marks and trade names
necessary for the present and currently planned future conduct of its
business, without any known conflict with the rights of others, except for
such failures to own, possess, or have the right to use, that, in the
aggregate for all such failures, could not reasonably be expected to have a
Material Adverse Effect.
A.5 Returns Filed, Taxes Paid.
All tax returns required to be filed by or on behalf of each of the
Company and the Subsidiaries and any other Person with which the Company or
any Subsidiary files or has filed a consolidated return in any jurisdiction
have been filed on a timely basis, and all taxes, assessments, fees and
other governmental charges upon each of the Company and such Subsidiaries
and upon any of their respective Properties, income or franchises, that are
due and payable have been paid, except for such tax returns and such tax
payments that individually or in the aggregate for all such tax returns and
payments, could not reasonably be expected to have a Material Adverse
Effect, or the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect
to which the Company or a Subsidiary, as the case may be, has established
appropriate reserves.
A.6 Pending Litigation, etc.
There are no proceedings, actions or investigations pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
the Subsidiaries in any court or before any Governmental Authority or
arbitration board or tribunal that, in the aggregate for all such proceedings,
actions and investigations, could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries is in violation
of any judgment, order, writ, injunction or decree of any court, Governmental
Authority, arbitration board or tribunal that, in the aggregate for all such
violations, could reasonably be expected to have a Material Adverse Effect.
A.7 Corporate Organization and Authority.
Each of the Company and the Subsidiaries:
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of organization;
(b) has all corporate power and authority necessary to own and
operate its Properties and to carry on its business as now conducted and as
presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and other
governmental authorizations necessary to own and operate its Properties and
to
Attachment A-3
<PAGE>
carry on its business as now conducted and as presently proposed to be
conducted, except where the failure to have such licenses, certificates,
permits, franchises and other governmental authorizations, in the aggregate
for all such failures, could not reasonably be expected to have a Material
Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is authorized
to do business and is in good standing, as a foreign corporation, in each
state in the United States of America and in each other jurisdiction where
the failure to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could reasonably be
expected to have a Material Adverse Effect (Exhibit A to the opinion of
Gardere & Wynne, L.L.P. delivered to you on the Closing Date pursuant to
Section B.1(a) of Attachment B includes, but is not necessarily limited to,
disclosure of all states where such qualification, licensing or
authorization is required in order for the warranty and representation in
this clause (d) to be true).
A.8 Charter Instruments, Other Agreements.
Neither the Company nor any of the Subsidiaries is in violation in any
respect of any term of any charter instrument or bylaw. Neither the Company nor
any of the Subsidiaries is in violation in any respect of any term in any
agreement or other instrument to which it is a party or by which it or any of
its Property may be bound except for such violations that, in the aggregate for
all such violations, could not reasonably be expected to have a Material Adverse
Effect.
A.9 Restrictions on Company and Subsidiaries.
Neither the Company nor any of the Subsidiaries:
(a) is a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all such
contracts, agreements, and charter and corporate restrictions, is
reasonably likely to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the right
or ability of such corporation to incur Debt, other than this Agreement and
the agreements listed in Part A.9 of Annex 3 (true, correct and complete
copies of each of the agreements listed in such Part have been provided to
you), none of which restricts the issuance and sale of the Notes or the
performance of the Company under the Financing Documents; or
(c) has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 6.12.
A.10 Compliance with Law.
Attachment A-4
<PAGE>
Neither the Company nor any of the Subsidiaries is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
A.11 Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the IRC
relating to employee benefit plans (as defined in section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights or Properties of the Company or any ERISA Affiliate, in
either case pursuant to Title I or IV of ERISA or to such penalty or excise
tax provisions or to section 401(a)(29) or 412 of the IRC, other than such
liabilities or Liens that individually or in the aggregate are not
Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning
specified in section 3 of ERISA.
(c) The Company and the ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by section
4980B of the IRC) of the Company and the Subsidiaries is not Material.
(e) Part A.11(e) of Annex 3 sets forth all ERISA Affiliates and all
"employee benefit plans" maintained by the Company (or any "affiliate"
thereof) or in respect of which the Notes could constitute an "employer
security" ("employee benefit plan" has the meaning specified in section 3
of ERISA, "affiliate" has the meaning specified in section 407(d) of ERISA
and section V of PTCE 95-60 and "employer security" has the meaning
specified in section 407(d) of ERISA).
Attachment A-5
<PAGE>
(f) The execution and delivery of the Financing Documents and the
issuance and sale of the Notes hereunder will not involve any transaction
that would subject the Company, any ERISA Affiliate or any Plan to the
prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the IRC. The
representation by the Company in the first sentence of this Section A.11(f)
is made in reliance upon and subject to the accuracy of your representation
in Section 10.2 as to the sources of the funds used to pay the purchase
price of the Notes to be purchased by you.
A.12 Environmental Compliance.
Neither the Company nor any of the Subsidiaries has:
(a) knowledge or any notice of any claim, or the existence of any
proceeding raising any claim, or any facts that would give rise to any
claim, public or private, against the Company or any of the Subsidiaries or
any Property currently or previously owned, leased or operated by any of
them alleging any damage to the environment or violation of any
Environmental Laws, except, for such claims or facts that, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect;
(b) stored or disposed of any hazardous or toxic substances, wastes
or pollutants in a manner contrary to any Environmental Laws, except for
such violations that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect; or
(c) maintained, operated or permitted to exist conditions in
buildings and improvements on any Properties currently or previously owned,
leased or operated by any of them in a manner in violation of any
Environmental Laws, except, for such violations that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
A.13 Sale of Notes is Legal and Authorized; Obligations are Enforceable.
(a) Sale of Notes is Legal and Authorized. Each of the issuance, sale
and delivery of the Notes by the Company, the execution and delivery of the
Financing Documents by the Company and compliance by the Company with all
of the provisions of the Financing Documents:
(i) is within the corporate powers of the Company; and
(ii) is legal and does not conflict with, result in any breach
of any of the provisions of, constitute a default under, or result in
the creation of any Lien (other than a Liens granted to the Trustee
pursuant to the Security Documents) upon any Property of the Company
or any of the Subsidiaries under the provisions of,
Attachment A-6
<PAGE>
(A) any agreement, charter instrument, bylaw or other
instrument to which it is a party or by which it or any of its
Property may be bound, or
(B) any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or
any of the Subsidiaries.
(b) Obligations are Enforceable. The execution and delivery of each
Financing Document has been duly authorized by all necessary action on the
part of the Company, each Financing Document has been executed and
delivered by one or more duly authorized officers of the Company, and each
Financing Document constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except that the enforceability of each such Financing Document may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws affecting
the enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
A.14 Governmental Consent to Sale of Notes.
(a) Generally. Neither the nature of the Company or any of the
Subsidiaries, or of any of their respective businesses or Properties, nor
any relationship between the Company or any of the Subsidiaries and any
other Person, nor any circumstance in connection with the offer, issuance,
sale or delivery of the Notes and the execution and delivery of any of the
Financing Documents, or the performance of the obligations under such
Financing Documents, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of the Company or any Subsidiary as a
condition to the execution and delivery of any of the Financing Documents,
the offer, issuance, sale or delivery of the Notes, or the performance of
the obligations under any of the Financing Documents.
(b) Particular Laws. The issuance and sale of the Notes, the
incurrence of the Debt represented thereby, and the performance under the
Financing Documents, by the Company,
(i) is not subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of
1935, as amended, the Transportation Acts of the United States of
America (49 U.S.C.), as amended, or the Federal Power Act, as amended,
and
(ii) does not violate any provision of any statute or other rule
or regulation of any Governmental Authority applicable to the Company
or any of the Subsidiaries.
Attachment A-7
<PAGE>
A.15 No Defaults Under Financing Documents.
No event has occurred and no condition exists that, upon the execution and
delivery of the Financing Documents and the issuance and sale of the Notes,
would constitute a Default or an Event of Default.
A.16 Private Offering of Notes.
(a) Offering. Neither the Company nor the Placement Agent (the only
Person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Notes or any
similar Security of the Company, other than employees of the Company) has
offered any of the Notes or any similar Security of the Company for sale
to, or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser, other than
not more than 40 Institutional Investors (including you), each of whom was
offered all or a portion of the Notes at private sale for investment.
(b) Securities Act. Neither the Company nor any of the Subsidiaries,
nor any agent acting on behalf of any of them, has taken any action that
would subject the issuance or sale of the Notes to the registration
provisions of section 5 of the Securities Act or to the registration,
qualification or other similar provisions of any securities or "blue sky"
law of any applicable jurisdiction.
A.17 Use of Proceeds of Notes.
(a) Use of Proceeds. The Company shall use the proceeds of the sale
of the Notes as set forth in Part A.17(a) of Annex 3.
(b) Margin Securities. No part of the proceeds from the sale of the
Notes under this Agreement will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12
CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a
violation of Regulation X of such Board (12 CFR 224) or to involve any
broker or dealer in a violation of Regulation T of such Board (12 CFR 220).
Margin stock does not constitute more than 1% of the value of the
consolidated assets of the Company and the Subsidiaries and the Company
does not have any present intention that margin stock will constitute more
than 1% of the value of such assets. As used in this Section, the terms
"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation G.
(c) Absence of Foreign or Enemy Status. Neither the sale of the Notes
nor the use of proceeds from the sale thereof will result in a violation of
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended), or any ruling
issued thereunder or any enabling legislation or Presidential Executive
Order in connection therewith.
Attachment A-8
<PAGE>
A.18 Warranties and Representations in Other Financing Documents True.
Each of the warranties and representations of the Company contained in the
other Financing Documents is true.
Attachment A-9
<PAGE>
ATTACHMENT B
B. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation, the
obligation to purchase and pay for the Notes to be delivered to you at the
Closing, are subject to the following conditions precedent:
B.1 Opinions of Counsel.
You shall have received from
(a) Gardere & Wynne, L.L.P., special counsel for the Company,
(b) Richards, Layton & Finger, P.A., special counsel for the Trustee,
and
(c) Hebb & Gitlin, your special counsel,
closing opinions, each dated as of the Closing Date, substantially in the
respective forms set forth in Exhibit B1, Exhibit B2 and Exhibit B3 and as to
such other matters as you may reasonably request. This Section B.1 shall
constitute direction by the Company to such counsel named in the immediately
preceding clause (a) to deliver such closing opinion to you.
B.2 Warranties and Representations True; Compliance with Agreement.
(a) Warranties and Representations True. The warranties and
representations of the Company in Attachment A and elsewhere in the
Financing Documents shall be true on the Closing Date with the same effect
as though made on and as of that date.
(b) Compliance with Financing Documents. The Company shall have
performed and complied with all agreements and conditions contained in the
Financing Documents that are required to be performed or complied with by
the Company on or prior to the Closing Date, and such performance and
compliance shall remain in effect on the Closing Date.
B.3 Company Certificates.
(a) Officer's Certificate. The Company shall have delivered to you a
certificate signed by two Senior Officers of the Company, dated the Closing
Date, certifying that the conditions specified in Section B.2 have been
fulfilled and as to such other matters as you may reasonably request.
(b) Secretary's Certificate. The Company shall have delivered to you
a certificate signed by the Secretary or an Assistant Secretary of the
Company certifying as to true and correct copies attached thereto of the
charter documents and bylaws of the Company and the resolutions attached
thereto and other corporate
Attachment B-1
<PAGE>
proceedings relating to the authorization, execution and delivery of the
Financing Documents.
B.4 Trustee's Certificate.
The Trustee shall have delivered to you a certificate certifying as to the
resolutions attached thereto and other proceedings relating to the
authorization, execution and delivery of the Security Documents.
B.5 Legality.
The Notes shall on the Closing Date qualify as a legal investment for you
under applicable insurance law (without regard to any "basket" or "leeway"
provisions), and the acquisition thereof shall not subject you to any penalty or
other onerous condition pursuant to any such law or regulation, and you shall
have received such evidence as you may reasonably request to establish
compliance with this condition.
B.6 Security Documents, etc.
The Company and each of the other intended partes thereto shall have
executed and delivered each of the Collateral Trust Agreement, the Security
Agreement and the other Security Documents required by the terms of the
Collateral Trust Agreement, the Security Agreement and this Agreement to be in
effect on the Closing Date, and you shall have received original counterparts or
certified copies (as you may reasonably request) of each of the foregoing. The
Company shall have taken, or caused to be taken, all actions necessary to
perfect the Liens of the Trustee contemplated by the Security Documents to the
extent such perfection is required by the terms of the Security Documents.
B.7 Private Placement Number.
There shall have been obtained a private placement number for the Notes
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners), and you shall have been informed in writing of such private
placement number.
B.8 Expenses.
All fees and disbursements required to be paid pursuant to Section 11.6
shall have been paid in full.
B.9 Proceedings Satisfactory.
All proceedings taken in connection with the issuance and sale of the Notes
and all documents and papers relating thereto shall be satisfactory to you and
your special counsel. You and your special counsel shall have received copies of
such documents and papers as you or they may reasonably request in connection
therewith or in connection with your special counsel's closing opinion, all in
form and substance satisfactory to you and your special counsel.
Attachment B-2
<PAGE>
EXHIBIT A
[FORM OF NOTE]
THIS NOTE AND THE NOTE PURCHASE AGREEMENT REFERRED TO BELOW MAY BE SUBJECT TO
THE TERMS OF A COLLATERAL TRUST AGREEMENT, DATED AS OF NOVEMBER 15, 1996, AS
SUCH COLLATERAL TRUST AGREEMENT MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED
FROM TIME TO TIME, AMONG THE COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC., PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AND WILMINGTON TRUST
COMPANY. BY ACCEPTANCE OF THIS NOTE, THE HOLDER HEREOF MAY BECOME BOUND BY THE
PROVISIONS OF SUCH COLLATERAL TRUST AGREEMENT, WHETHER OR NOT SUCH HOLDER
BECOMES A PARTY TO SUCH COLLATERAL TRUST AGREEMENT.
ACE CASH EXPRESS, INC.
9.03% Senior Secured Notes due November 15, 2003
No. R-___
$ [Date]
-------------
PPN: 004403 A* 2
ACE CASH EXPRESS, INC., a Texas corporation, (the "Company"), for value
received, hereby promises to pay to ________________________ or registered
assigns the principal sum of ________________________ DOLLARS ($____________) on
November 15, 2003 and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid principal balance hereof from the date of
this Note at the rate of at the rate of 9.03% per annum, semi-annually on May 15
and November 15 in each year, commencing on May 15, 1997 or the payment date
next succeeding the date hereof, until the principal amount hereof in respect of
which such interest shall have accrued shall become due and payable; and to pay
on demand interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law or (b) the greater of
(i) 11.03% per annum or (ii) 2% over the rate of interest publicly announced by
Citibank, N.A. or its successor in New York City as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
referred to below.
This Note is one of the issue of the 9.03% Senior Secured Notes due
November 15, 2003 of the Company issued in an aggregate principal amount limited
to $20,000,000
EXHIBIT A-1
<PAGE>
pursuant to the Company's Note Purchase Agreement (as may be amended, restated
or otherwise modified from time to time, the "Note Purchase Agreement"), dated
as of November 15, 1996, with the purchaser listed on Annex 1 thereto, and is
entitled to the benefits thereof. Capitalized terms used herein and not
otherwise defined herein have the meanings specified in the Note Purchase
Agreement. This Note is secured pursuant to the terms of the Security Documents
and is entitled to the benefits thereof.
The Company agrees to make required payments on the Notes as provided in
the Note Purchase Agreement. In addition, as provided in the Note Purchase
Agreement, this Note is subject to prepayment, in whole or in part, in certain
cases without a Make-Whole Amount and in other cases with a Make-Whole Amount.
This Note is a registered Note and is transferable only by surrender hereof
at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or its attorney duly authorized
in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
ACE CASH EXPRESS, INC.
By
--------------------------------
Name:
Title:
EXHIBIT A-2
<PAGE>
EXHIBIT B1
[FORM OF CLOSING OPINION OF SPECIAL COUNSEL FOR THE COMPANY]
EXHIBIT B1-1
<PAGE>
EXHIBIT B2
[FORM OF CLOSING OPINION OF SPECIAL COUNSEL FOR THE TRUSTEE]
EXHIBIT B2-1
<PAGE>
EXHIBIT B3
[FORM OF CLOSING OPINION OF SPECIAL COUNSEL FOR THE PURCHASER]
EXHIBIT B3-1
<PAGE>
EXHIBIT C
[FORM OF COLLATERAL TRUST AGREEMENT]
<PAGE>
EXHIBIT D
[FORM OF SECURITY AGREEMENT]
<PAGE>
EXHIBIT 10.29
THIS NOTE AND THE NOTE PURCHASE AGREEMENT REFERRED TO BELOW MAY BE SUBJECT TO
THE TERMS OF A COLLATERAL TRUST AGREEMENT, DATED AS OF NOVEMBER 15, 1996, AS
SUCH COLLATERAL TRUST AGREEMENT MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED
FROM TIME TO TIME, AMONG THE COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC., PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AND WILMINGTON TRUST
COMPANY. BY ACCEPTANCE OF THIS NOTE, THE HOLDER HEREOF MAY BECOME BOUND BY THE
PROVISIONS OF SUCH COLLATERAL TRUST AGREEMENT, WHETHER OR NOT SUCH HOLDER
BECOMES A PARTY TO SUCH COLLATERAL TRUST AGREEMENT.
ACE CASH EXPRESS, INC.
9.03% Senior Secured Notes due November 15, 2003
No. R-1
$16,000,000 , 1996
PPN: 004403 A* 2
ACE CASH EXPRESS, INC., a Texas corporation, (the "Company"), for value
received, hereby promises to pay to PRINCIPAL MUTUAL LIFE INSURANCE COMPANY or
registered assigns the principal sum of SIXTEEN MILLION DOLLARS ($16,000,000) on
November 15, 2003 and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid principal balance hereof from the date of
this Note at the rate of at the rate of 9.03% per annum, semi-annually on May 15
and November 15 in each year, commencing on May 15, 1997 or the payment date
next succeeding the date hereof, until the principal amount hereof in respect of
which such interest shall have accrued shall become due and payable; and to pay
on demand interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law or (b) the greater of
(i) 11.03% per annum or (ii) 2% over the rate of interest publicly announced by
Citibank, N.A. or its successor in New York City as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
referred to below.
This Note is one of the issue of the 9.03% Senior Secured Notes due
November 15, 2003 of the Company issued in an aggregate principal amount limited
to $20,000,000 pursuant to the
<PAGE>
Company's Note Purchase Agreement (as may be amended, restated or otherwise
modified from time to time, the "Note Purchase Agreement"), dated as of November
15, 1996, with the purchaser listed on Annex 1 thereto, and is entitled to the
benefits thereof. Capitalized terms used herein and not otherwise defined
herein have the meanings specified in the Note Purchase Agreement. This Note is
secured pursuant to the terms of the Security Documents and is entitled to the
benefits thereof.
The Company agrees to make required payments on the Notes as provided in
the Note Purchase Agreement. In addition, as provided in the Note Purchase
Agreement, this Note is subject to prepayment, in whole or in part, in certain
cases without a Make-Whole Amount and in other cases with a Make-Whole Amount.
This Note is a registered Note and is transferable only by surrender hereof
at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or its attorney duly authorized
in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
ACE CASH EXPRESS, INC.
By
------------------------------
Name:
Title:
2
<PAGE>
THIS NOTE AND THE NOTE PURCHASE AGREEMENT REFERRED TO BELOW MAY BE SUBJECT TO
THE TERMS OF A COLLATERAL TRUST AGREEMENT, DATED AS OF NOVEMBER 15, 1996, AS
SUCH COLLATERAL TRUST AGREEMENT MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED
FROM TIME TO TIME, AMONG THE COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC., PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AND WILMINGTON TRUST
COMPANY. BY ACCEPTANCE OF THIS NOTE, THE HOLDER HEREOF MAY BECOME BOUND BY THE
PROVISIONS OF SUCH COLLATERAL TRUST AGREEMENT, WHETHER OR NOT SUCH HOLDER
BECOMES A PARTY TO SUCH COLLATERAL TRUST AGREEMENT.
ACE CASH EXPRESS, INC.
9.03% Senior Secured Notes due November 15, 2003
No. R-2
$2,000,000 , 1996
PPN: 004403 A* 2
ACE CASH EXPRESS, INC., a Texas corporation, (the "Company"), for value
received, hereby promises to pay to PRINCIPAL MUTUAL LIFE INSURANCE COMPANY or
registered assigns the principal sum of TWO MILLION DOLLARS ($2,000,000) on
November 15, 2003 and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid principal balance hereof from the date of
this Note at the rate of at the rate of 9.03% per annum, semi-annually on May 15
and November 15 in each year, commencing on May 15, 1997 or the payment date
next succeeding the date hereof, until the principal amount hereof in respect of
which such interest shall have accrued shall become due and payable; and to pay
on demand interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law or (b) the greater of
(i) 11.03% per annum or (ii) 2% over the rate of interest publicly announced by
Citibank, N.A. or its successor in New York City as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
referred to below.
This Note is one of the issue of the 9.03% Senior Secured Notes due
November 15, 2003 of the Company issued in an aggregate principal amount limited
to $20,000,000 pursuant to the
<PAGE>
Company's Note Purchase Agreement (as may be amended, restated or otherwise
modified from time to time, the "Note Purchase Agreement"), dated as of November
15, 1996, with the purchaser listed on Annex 1 thereto, and is entitled to the
benefits thereof. Capitalized terms used herein and not otherwise defined herein
have the meanings specified in the Note Purchase Agreement. This Note is secured
pursuant to the terms of the Security Documents and is entitled to the benefits
thereof.
The Company agrees to make required payments on the Notes as provided in
the Note Purchase Agreement. In addition, as provided in the Note Purchase
Agreement, this Note is subject to prepayment, in whole or in part, in certain
cases without a Make-Whole Amount and in other cases with a Make-Whole Amount.
This Note is a registered Note and is transferable only by surrender hereof
at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or its attorney duly authorized
in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
ACE CASH EXPRESS, INC.
By________________________________
Name:
Title:
2
<PAGE>
THIS NOTE AND THE NOTE PURCHASE AGREEMENT REFERRED TO BELOW MAY BE SUBJECT TO
THE TERMS OF A COLLATERAL TRUST AGREEMENT, DATED AS OF NOVEMBER 15, 1996, AS
SUCH COLLATERAL TRUST AGREEMENT MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED
FROM TIME TO TIME, AMONG THE COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC., PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AND WILMINGTON TRUST
COMPANY. BY ACCEPTANCE OF THIS NOTE, THE HOLDER HEREOF MAY BECOME BOUND BY THE
PROVISIONS OF SUCH COLLATERAL TRUST AGREEMENT, WHETHER OR NOT SUCH HOLDER
BECOMES A PARTY TO SUCH COLLATERAL TRUST AGREEMENT.
ACE CASH EXPRESS, INC.
9.03% Senior Secured Notes due November 15, 2003
No. R-3
$2,000,000 , 1996
PPN: 004403 A* 2
ACE CASH EXPRESS, INC., a Texas corporation, (the "Company"), for value
received, hereby promises to pay to PRINCIPAL MUTUAL LIFE INSURANCE COMPANY or
registered assigns the principal sum of TWO MILLION DOLLARS ($2,000,000) on
November 15, 2003 and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid principal balance hereof from the date of
this Note at the rate of at the rate of 9.03% per annum, semi-annually on May 15
and November 15 in each year, commencing on May 15, 1997 or the payment date
next succeeding the date hereof, until the principal amount hereof in respect of
which such interest shall have accrued shall become due and payable; and to pay
on demand interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law or (b) the greater of
(i) 11.03% per annum or (ii) 2% over the rate of interest publicly announced by
Citibank, N.A. or its successor in New York City as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
referred to below.
This Note is one of the issue of the 9.03% Senior Secured Notes due
November 15, 2003 of the Company issued in an aggregate principal amount limited
to $20,000,000 pursuant to the
<PAGE>
Company's Note Purchase Agreement (as may be amended, restated or otherwise
modified from time to time, the "Note Purchase Agreement"), dated as of November
15, 1996, with the purchaser listed on Annex 1 thereto, and is entitled to the
benefits thereof. Capitalized terms used herein and not otherwise defined herein
have the meanings specified in the Note Purchase Agreement. This Note is secured
pursuant to the terms of the Security Documents and is entitled to the benefits
thereof.
The Company agrees to make required payments on the Notes as provided in
the Note Purchase Agreement. In addition, as provided in the Note Purchase
Agreement, this Note is subject to prepayment, in whole or in part, in certain
cases without a Make-Whole Amount and in other cases with a Make-Whole Amount.
This Note is a registered Note and is transferable only by surrender hereof
at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or its attorney duly authorized
in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
ACE CASH EXPRESS, INC.
By________________________________
Name:
Title:
2
<PAGE>
EXHIBIT 10.30
COLLATERAL
TRUST AGREEMENT
by and among
ACE CASH EXPRESS, INC.,
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
and
WILMINGTON TRUST COMPANY
--------------------------
Dated as of November 15, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
PARTIES .................................................................... 1
RECITALS ................................................................... 1
DECLARATION OF TRUST ....................................................... 1
SECTION 1 DEFINITIONS AND OTHER MATTERS ............................... 3
SECTION 2 CERTAIN OBLIGATIONS AND DUTIES OF THE TRUSTEE
AND THE DEBTOR; POWERS OF ATTORNEY ......................... 13
Section 2.1. Authorization to Execute Security Documents .................. 13
Section 2.2. Certain Representations and Warranties ....................... 13
Section 2.3. Actions: Control of the Trustee .............................. 14
Section 2.4. Additional Security Documents ................................ 16
Section 2.5. Powers of Attorney ........................................... 16
Section 2.6. Copies of Letters and Documents .............................. 16
SECTION 3 ACTIONABLE DEFAULTS; REMEDIES ............................... 17
Section 3.1. Actionable Default ........................................... 17
Section 3.2. Remedies ..................................................... 17
Section 3.3. Right to Initiate Judicial Proceedings, etc .................. 18
Section 3.4. Appointment of a Receiver .................................... 19
Section 3.5. Exercise of Powers ........................................... 19
Section 3.6. Remedies Not Exclusive ....................................... 19
Section 3.7. Waiver of Certain Rights ..................................... 20
Section 3.8. Limitation on Trustee's Duties in Respect
of Collateral .............................................. 20
Section 3.9. Limitation by Law ............................................ 20
Section 3.10. Absolute Rights of the Beneficiaries ........................ 21
SECTION 4 COLLATERAL ACCOUNT; APPLICATION OF MONEYS ................... 21
Section 4.1. The Collateral Account ....................................... 21
Section 4.2. Grant of Security Interest; Control of
Collateral Account ......................................... 22
Section 4.3. Investment of Funds Deposited in Collateral
Account .................................................... 22
Section 4.4. Application of Moneys ........................................ 24
SECTION 5 AGREEMENTS WITH THE TRUSTEE ................................. 26
Section 5.1. Delivery of Debt Instruments ................................. 26
Section 5.2. Information as to Beneficiaries .............................. 26
Section 5.3. Compensation and Expenses .................................... 27
Section 5.4. Stamp and Other Similar Taxes ................................ 27
Section 5.5. Filing Fees, Excise Taxes, etc ............................... 28
Section 5.6. Indemnification .............................................. 28
Section 5.7. Further Assurances ........................................... 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6 THE TRUSTEE ................................................. 29
Section 6.1. Acceptance of Trust .......................................... 29
Section 6.2. Exculpatory Provisions ....................................... 29
Section 6.3. Delegation of Duties ......................................... 30
Section 6.4. Reliance by Trustee .......................................... 30
Section 6.5. Limitations on Duties of the Trustee ......................... 31
Section 6.6. Moneys to Be Held in Trust ................................... 32
Section 6.7. Resignation and Removal of the Trustee ....................... 32
Section 6.8. Status of Successors to the Trustee .......................... 34
Section 6.9. Merger of the Trustee ........................................ 34
Section 6.10. Additional Co-Trustees; Separate Trustees ................... 34
SECTION 7 RELEASE OF COLLATERAL ....................................... 36
Section 7.1. Conditions to Release of Collateral .......................... 36
Section 7.2. Actions Following Release of the Collateral .................. 36
SECTION 8 AGREEMENTS AMONG BENEFICIARIES .............................. 37
Section 8.1. Limited Subordination of Liens ............................... 37
Section 8.2. Bankruptcy Issues ............................................ 37
Section 8.3. Miscellaneous Agreements Among Beneficiaries ................. 38
Section 8.4. Cap on Principal Mutual Obligations .......................... 39
Section 8.5. Cap on Revolving Commitment Advances ......................... 39
Section 8.6. Payment of Trustee's Fees .................................... 40
Section 8.7. Assignment ................................................... 40
Section 8.8. Invalidation of Payments ..................................... 40
Section 8.9. Restrictions on the Admission of Other
Beneficiaries .............................................. 40
SECTION 9 MISCELLANEOUS ............................................... 42
Section 9.1. Amendments, Supplements and Waivers .......................... 42
Section 9.2. Notices ...................................................... 42
Section 9.3. Guaranties ................................................... 43
Section 9.4. Trust Funds Remittance Statutes .............................. 44
Section 9.5. Restricted Actions ........................................... 44
Section 9.6. Headings ..................................................... 44
Section 9.7. Severability ................................................. 44
Section 9.8. Dealings with the Debtor ..................................... 44
Section 9.9. Claims Against the Trustee ................................... 44
Section 9.10. Binding Effect .............................................. 45
Section 9.11. Conflict with Other Agreements .............................. 45
Section 9.12. Governing Law ............................................... 45
Section 9.13. Counterparts ................................................ 45
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1: Centers
Schedule 2: Custodial Agents and Agreements
Schedule 3: Trade Names
Schedule 4: Deposit Accounts
Schedule 5: Locations of Collateral
Schedule 6: Financing Statements
Schedule 7-A: Form of Guaranty
Schedule 7-B: Form of Guaranty
EXHIBITS
Exhibit A: Form of Long Letter to Depositories
Exhibit B: Form of Short Letter to Depositories
Exhibit C: Form of Letter to Custodial Agents
Exhibit D: Form of Advance Request
</TABLE>
iii
<PAGE>
COLLATERAL TRUST AGREEMENT
This COLLATERAL TRUST AGREEMENT (this "Agreement") dated as of
---------
November 15, 1996 is by and among ACE CASH EXPRESS, INC. (doing business
sometimes under the name of Ace America's Cash Express), a Texas corporation
(the "Debtor"), AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a New
------
York corporation ("AMEX"), PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa
----
corporation ("Principal Mutual"), and WILMINGTON TRUST COMPANY, a Delaware
----------------
banking corporation (the "Trustee"), and such other beneficiaries who may
-------
become a party to this Agreement from time to time.
W I T N E S S E T H:
WHEREAS, the Debtor and AMEX have entered into the Master Agreement (as
hereinafter defined) and the AMEX Security Agreement (as hereinafter defined);
WHEREAS, the Debtor and Principal Mutual have entered into the
Principal Mutual Note Agreement (as hereinafter defined);
WHEREAS, the senior secured notes issued pursuant to the Principal
Mutual Note Agreement in the initial aggregate principal amount of $20,000,000
(as such notes may be amended, restated, modified, replaced or extended from
time to time, the "Notes") will, from time to time, be held by Principal Mutual
-----
and/or other Persons (collectively, the "Noteholders");
-----------
WHEREAS, in consideration of AMEX entering into the Third Master
Agreement Amendment (as hereinafter defined) and Principal Mutual entering into
the Principal Mutual Note Agreement, the Debtor has agreed to enter into the
Security Agreement (as hereinafter defined) with the Trustee to secure, subject
to the terms and conditions of this Agreement and the Security Documents (as
hereinafter defined), the payment of the Secured Debt (as hereinafter defined);
and
WHEREAS, the closing of each of the Third Master Agreement Amendment
and the Principal Mutual Note Agreement is conditioned upon this Agreement and
the related Security Documents having been duly executed and delivered.
DECLARATION OF TRUST:
NOW, THEREFORE, to secure the payment, observance and performance of
the Secured Debt and in consideration of the premises and the mutual agreements
set forth herein, the Trustee does hereby declare that it holds as trustee in
trust under this
<PAGE>
Agreement all of its right, title and interest in, to and under all the
following (and the Debtor does hereby consent thereto):
(A) the Assignment of Deposit Accounts and Security Agreement dated as
of the date hereof and the security interests granted to the Trustee
thereunder;
(B) the Uniform Commercial Code financing statements listed on
Schedule 6 hereto;
----------
(C) each agreement entered into and delivered, from time to time,
pursuant to Sections 2.4, 5.7 or 9.1(b) of this Agreement and the
------------ --- ------
collateral granted to the Trustee thereunder;
(D) the Guaranties;
(E) the Trust Agreement Collateral (as hereinafter defined); and
(F) the Proceeds (as hereinafter defined) of each of the foregoing.
TO HAVE AND TO HOLD the foregoing Security Documents and the Collateral
(as hereinafter defined) and the Proceeds of any and all thereof (the right,
title and interest of the Trustee in the Security Documents and the Collateral
and such Proceeds being hereinafter referred to as the "Trust Estate") unto the
------------
Trustee and its successors in trust under this Agreement and its assigns and the
assigns of its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
set forth herein and in the Security Documents, and for the benefit of the
Beneficiaries (as hereinafter defined) and for the enforcement of the payment of
all Secured Debt, and for the performance of and compliance with the covenants
and conditions of this Agreement, the Master Agreement, the Principal Mutual
Note Agreement, each other Beneficiary Agreement (as hereinafter defined) and
each of the Security Documents.
PROVIDED, HOWEVER, that these presents are upon the condition that if
the Debtor, or its successors or assigns, shall satisfy all of the conditions
set forth in Section 7 of this Agreement with respect to all or any part of the
---------
Collateral, as the case may be, then (if with respect to all of the Collateral)
this Agreement, and the estates and rights assigned in the Security Documents,
shall cease, determine and be void or (if with respect to part of the
Collateral) this Agreement, and the estates and rights assigned in the Security
Documents, shall cease, determine and be void with respect to such part of the
Collateral; otherwise they shall remain and be in full force and effect.
2
<PAGE>
IT IS HEREBY FURTHER COVENANTED AND DECLARED that the Trust Estate is
to be held and applied by the Trustee, subject to the further covenants,
conditions and trust hereinafter set forth.
SECTION 1
DEFINITIONS AND OTHER MATTERS
(a) 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):
"Actionable Default" shall mean (i) with respect to AMEX, an AMEX Event
------------------
of Default exists or has occurred and, as a result thereof, there has been
an acceleration of the AMEX Obligations; (ii) with respect to the
Noteholders, a Principal Mutual Event of Default exists or has occurred and,
as a result thereof, there has been an acceleration of the Principal Mutual
Obligations; or (iii) with respect to any other Beneficiary, an Event of
Default (as defined in such other Beneficiary's Beneficiary Agreement)
exists or has occurred and, as a result thereof, there has been an
acceleration of such Beneficiary's Beneficiary Obligations.
"Advance Request" shall mean a written request substantially in the
---------------
form of Exhibit D hereto delivered by the Debtor to AMEX in accordance with
---------
the Master Agreement (with a copy delivered to the Trustee, and copies of
which shall be sent by the Trustee to each Beneficiary upon such
Beneficiary's request), pursuant to which the Debtor requests Advances,
provides current information concerning the Liquid Security Amount,
certifies that following such Advance the Coverage Ratio will not be less
than 1 to 1 and further certifies to the best of its knowledge the accuracy
of such information.
"Advances" shall mean, in addition to the Advances (as defined in the
--------
Master Agreement) outstanding as of the date hereof, the loans from time to
time advanced to the Debtor pursuant to Advance Requests delivered by the
Debtor to AMEX in accordance with the Master Agreement, which Advances shall
be for the purposes permitted by Section 3.4 of the Master Agreement as in
effect on the date hereof. Any loan or advance made to the Debtor pursuant
to an Advance Request shall be an Advance and AMEX shall have no obligation
or duty to any Person to verify or review the accuracy of the information
contained in such Advance Request.
3
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person
---------
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"Agreement" shall mean this Collateral Trust Agreement, as it may be
---------
amended, restated or otherwise modified from time to time.
"AMEX" shall mean American Express Travel Related Services Company,
----
Inc., a New York corporation.
"AMEX Event of Default" shall have the meaning attributed to the term
---------------------
"Event of Default" set forth in Section 9 of the First Master Agreement
Amendment.
"AMEX Obligations" shall mean all existing and future obligations and
----------------
liabilities of the Debtor to AMEX and/or its assignee under the Master
Agreement, the AMEX Security Agreement and any and all other agreements,
documents and instruments heretofore, now or hereafter executed in
connection therewith or which relate thereto other than the principal amount
of Revolving Commitment Advances made in excess of $18.5 million (plus
interest, fees and expenses thereon) without the consent required pursuant
to Section 8.5 of this Agreement.
-----------
"AMEX Priority Fees and Expenses" shall mean such portion of the total
-------------------------------
fees and expenses incurred by AMEX in connection with the collection or
enforcement of the AMEX Obligations which on the date of distribution,
pursuant to Section 4.4 of this Agreement, shall equal the amount obtained
-----------
by multiplying the total of such fees and expenses by a fraction of which
the numerator is equal to the AMEX Priority Obligations (less all fees and
expenses incurred by AMEX) and the denominator is equal to the AMEX
Obligations (less all fees and expenses incurred by AMEX). For purposes of
this definition, fees and expenses incurred by AMEX shall not include any
penalties, premiums, commitment fees, breakage fees or similar types of
fees, if any, charged by AMEX.
"AMEX Priority Obligations" shall mean that portion of the AMEX
-------------------------
Obligations equal to the sum, without duplication, of (i) Trust Amount, plus
----
(ii) the outstanding unpaid balance of all Advances (provided that Advances,
--------
for the purpose of determining AMEX Priority Obligations, shall not exceed
the Maximum Advances), plus (iii) all accrued and unpaid interest (including
----
default interest) on the amounts in subsections (i) and (ii) of this
paragraph, plus (iv) the AMEX Priority Fees and Expenses.
----
4
<PAGE>
"AMEX Security Agreement" shall have the meaning set forth in the
-----------------------
recitals to the Security Agreement.
"Approved Account" shall mean, with respect to any Depository, any of
----------------
the Deposit Accounts identified in, or listed on an exhibit to, an effective
letter agreement (substantially in the form of Exhibit A or B to this
--------- -
Agreement) executed by such Depository.
"Bankruptcy Code" shall mean the federal Bankruptcy Code, as amended
---------------
from time to time.
"Beneficiary" shall mean AMEX, each Noteholder, the Trustee and any
-----------
other Person for whose benefit there is now or hereafter granted a security
interest in the Collateral pursuant to the Security Agreement. For purposes
of determining the actions taken by a Beneficiary which is a Class of
Beneficiaries (other than the Noteholders), all of the Beneficiaries making
up such Class shall be deemed to have taken or be bound by any action
approved by the Required Beneficiaries of such Class.
"Beneficiary Agreement" shall mean the Master Agreement, the Principal
---------------------
Mutual Note Agreement and, with respect to any other Beneficiary, the
agreement between the Debtor and such Beneficiary under which such
Beneficiary agrees to loan money to the Debtor and, in return, such
Beneficiary agrees in writing to be bound by the provisions of this
Agreement and the Security Agreement.
"Beneficiary Obligations" shall mean the AMEX Obligations, the
-----------------------
Principal Mutual Obligations and all existing and future obligations and
liabilities of the Debtor to any and all Beneficiaries under all Beneficiary
Agreements and any and all agreements, documents and instruments executed in
connection therewith or which relate thereto other than (i) with respect to
AMEX, the principal amount of Revolving Commitment Advances made in excess
of $18.5 million (plus interest, fees and expenses thereon) without the
consent required pursuant to Section 8.5 of this Agreement, (ii) with
-----------
respect to Principal Mutual and the other Noteholders, the principal amount
advanced or loaned by Principal Mutual or any other Noteholder made in
excess of $20 million (plus interest, fees and expenses thereon) without the
consent required pursuant to Section 8.4 of this Agreement and (iii) with
-----------
respect to any other Beneficiary, the principal amount advanced or loaned by
such Beneficiary made in excess of the limitation agreed to by such
Beneficiary pursuant to Section 8.9(c)(Z) of this Agreement (plus interest,
-----------------
fees and expenses thereon) without the consent required by Section 8.9(d) of
--------------
this Agreement.
5
<PAGE>
"Business Day" shall mean (i) any day excluding Saturday, Sunday and
------------
any day which is a legal holiday under the law of the State of New York or
Delaware or is a day on which banking institutions located in either such
State are required or authorized by law or other governmental action to
close, and (ii) a day of the year on which the Trustee is not required or
authorized to close.
"Centers" shall have the meaning set forth in Section 1.3 of the
-------
Security Agreement. All of the Debtor's Centers (which includes all
locations where the Debtor transacts business) are identified on Schedule 1
----------
hereto.
"Class" shall mean two or more Beneficiaries which hold Beneficiary
-----
Obligations arising out of the same Beneficiary Agreement.
"Collateral" shall have the meaning set forth in Section 1.5 of the
----------
Security Agreement.
"Collateral Account" shall have the meaning set forth in Section 4.1 of
------------------
this Agreement.
"Concentration Account" shall have the meaning set forth in Section 4.1
--------------------- -----------
of this Agreement.
"Coverage Ratio" shall mean the ratio of (a) the Liquid Security Amount
--------------
to (b) the sum of (i) the Trust Amount plus (ii) Advances.
----
"Custodial Agent" shall have the meaning set forth in Section 1.6 of
---------------
the Security Agreement. All of the Debtor's Custodial Agents and all of the
Debtor's agreements with its Custodial Agents are identified on Schedule 2
----------
hereto.
"Debt Instrument" shall mean any promissory note or other instrument,
---------------
document or agreement evidencing any Secured Debt.
"Debtor" shall mean Ace Cash Express Inc., a Texas corporation, and all
------
other trade names under which Ace Cash Express Inc. transacts business as
identified on Schedule 3 hereto.
----------
"Depository" shall mean each financial institution at which a Deposit
----------
Account is maintained.
"Deposit Accounts" shall have the meaning set forth in Section 1.9 of
----------------
the Security Agreement. All of the Debtor's Deposit Accounts are identified
on Schedule 4 hereto.
----------
6
<PAGE>
"Distribution Dates" shall mean the Business Days fixed by the Trustee
------------------
(the first of which shall occur as soon as practicable but in no event more
than ninety (90) days after the giving of a Notice of Actionable Default
which has not theretofore been withdrawn and the balance of which shall, so
long as such Notice of Actionable Default shall not have been withdrawn, be
on the corresponding date (of if not a Business Day, the next Business Day)
in each calendar month thereafter) for the distribution of all moneys held
by the Trustee in the Collateral Account.
"First Data" shall mean First Data Corporation, a Delaware corporation.
----------
"First Master Agreement Amendment" shall have the meaning set forth in
--------------------------------
the recitals to the Security Agreement. "GAAP" shall mean United States
generally accepted accounting principles in effect at the applicable date.
"Governmental Authority" shall mean any nation or government, any state
----------------------
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" shall mean the guaranty executed by each of the Debtor's
Subsidiaries for the benefit of all Beneficiaries, which guaranty shall be
substantially in the form of Schedule 7-A or 7-B to this Agreement.
------------ ---
"Hurdle" shall equal $12,500,000.
------
"IPS" shall mean Integrated Payment Systems Inc., a Delaware
---
corporation.
"Liquid Security Amount" shall mean the sum of (i) the amount of
----------------------
collected balances and uncollected balances (represented by provisional
credits) in all bank accounts, deposits in transit (representing one day's
volume of checks cashed during weekday operations and up to three days'
volume of checks cashed during weekend and holiday operations), other cash
equivalents, negotiable instruments and other instruments and liquid assets
of the Debtor in which the Trustee shall have been granted a security
interest (excluding any such instruments or assets as may be related to
consumer loans), plus (ii) the amount of cash at the end of each day in the
Debtor's locations at which Money Orders are sold, but excluding the
aggregate sum of any cash that the Debtor is prevented by agreement from
pledging to any Person.
7
<PAGE>
"Locations of Collateral" shall include all the properties on which
-----------------------
Equipment or Inventory is located as identified on Schedule 5 hereto.
----------
"Majority Holders" shall mean, as of any date, subject to the following
----------------
sentence, the Beneficiary or Beneficiaries (other than the Trustee) holding
more than 50% of the aggregate unpaid principal amount of the Secured Debt
(other than the Secured Debt owed to the Trustee). For purposes of
determining Majority Holders, all of the Noteholders shall be deemed to have
taken or be bound by any action approved by the Required Noteholders and all
of the Beneficiaries comprising a Class of Beneficiaries shall be deemed to
have taken or be bound by any action approved by the Required Beneficiaries
of such Class.
"Make-Whole Amount" shall have the meaning set forth in Section 9.1 of
-----------------
the Principal Mutual Note Agreement.
"Mandatory Holders" shall mean, as of any date, AMEX, the Noteholders
-----------------
and each other Beneficiary (other than the Trustee). The consent or approval
of the Mandatory Holders requires the consent or approval of AMEX, the
Required Noteholders and the Required Beneficiaries of each Class of
Beneficiaries and each other Beneficiary (other than the Trustee) not
participating in a Class of Beneficiaries.
"Master Agreement" shall have the meaning set forth in the recitals to
----------------
the Security Agreement.
"Material Adverse Effect" shall mean any condition, change, effect or
-----------------------
event (or any development that, insofar as can be reasonably foreseen, would
result in any condition, change, effect or event) that is materially adverse
to (i) the assets, business, financial condition, results of operations,
affairs, properties or prospects of the Debtor and its Subsidiaries taken as
a whole, (ii) the ability of the Debtor to perform its obligations under any
of the Security Documents, (iii) the validity or priority of the lien in
favor of the Trustee or the Trustee's security interest, or (iv) the
validity or enforceability of any Security Documents.
"Maximum Advances" shall mean, as of any date, the greater of (i) the
----------------
Liquid Security Amount less the Trust Amount or (ii) the aggregate
----
outstanding balance of Advances made pursuant to Advance Requests certifying
that after the making of the requested Advance the Coverage Ratio will not
be less than 1 to 1.
"Money Orders" shall mean money orders issued pursuant to the Master
------------
Agreement.
8
<PAGE>
"Noteholders" shall have the meaning set forth in the recitals to this
-----------
Agreement. For purposes of determining the actions taken by the Noteholders,
all of the Noteholders shall be deemed to have taken or be bound by any
action approved by the Required Noteholders.
"Notes" shall have the meaning set forth in the recitals to this
-----
Agreement.
"Notice of Actionable Default" shall mean a written certification to
----------------------------
the Trustee and the Debtor (i) from AMEX, certifying that an Actionable
Default has occurred (with respect to the AMEX Obligations); (ii) from the
Required Noteholders certifying that an Actionable Default has occurred
(with respect to the Principal Mutual Obligations); (iii) from the Required
Beneficiaries of a Class of Beneficiaries certifying that an Actionable
Default has occurred (with respect to such Class of Beneficiaries'
Beneficiary Obligations); or (iv) from any other Beneficiary (other than the
Trustee), which is not participating in a Class of Beneficiaries, certifying
that an Actionable Default has occurred (with respect to such Beneficiary's
Beneficiary Obligations).
"Obligations" shall mean and include, collectively, the AMEX
-----------
Obligations, the Principal Mutual Obligations, the Beneficiary Obligations,
all other obligations secured by the Security Agreement and all obligations
due the Trustee under this Agreement.
"Person" shall mean any individual, corporation, partnership, joint
------
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, Governmental Authority or other entity.
"Principal Mutual" shall mean Principal Mutual Life Insurance Company,
----------------
an Iowa corporation.
"Principal Mutual Event of Default" shall have the meaning attributed
---------------------------------
to the term "Event of Default" set forth in Section 8.1 of the Principal
Mutual Note Agreement.
"Principal Mutual Note Agreement" shall have the meaning set forth in
-------------------------------
the recitals to the Security Agreement.
"Principal Mutual Obligations" shall mean all existing and future
----------------------------
obligations and liabilities of the Debtor to Principal Mutual and the other
Noteholders under the Principal Mutual Note Agreement and any and all other
agreements, documents and instruments executed in connection therewith or
which relate thereto other than the principal
9
<PAGE>
amount advanced or loaned by Principal Mutual or any other Noteholder made
in excess of $20 million (plus interest, fees and expenses thereon) without
the consent required pursuant to Section 8.4 of this Agreement.
-----------
"Proceeds" shall have the meaning ascribed to it in Section 9-306(l) of
--------
the Uniform Commercial Code as in effect in the State of New York and,
whether or not constituting proceeds under such section, shall include, but
shall not be limited to, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Debtor from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to the Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental
Authority, and (iii) any and all other amounts from time to time paid or
payable to the Debtor upon the sale, exchange, collection or other
disposition of any part of the Collateral.
"Required Beneficiaries" shall mean, at any time, with respect to each
----------------------
Class of Beneficiaries (other than the Noteholders), the holders of at least
51% in principal amount of the Obligations owing to such Class of
Beneficiaries.
"Required Noteholders" shall mean, at any time, the holders of at least
--------------------
51% in principal amount of the Notes at the time outstanding (exclusive of
the Notes then owned by the Debtor or any Subsidiary or Affiliate of the
Debtor).
"Responsible Officer" shall mean, with respect to any Person (other
-------------------
than individuals and Governmental Authorities), the chief executive officer,
the chief financial officer or the chief accounting officer of such Person,
and, with respect to AMEX, the chief executive officer, the chief financial
officer or the chief accounting officer of IPS or any executive vice
president of First Data.
"Restricted Actions" shall include (i) the release of Collateral
------------------
pursuant to Section 7.1, (ii) any amendment to the Security Agreement which
-----------
adds as Collateral any real property or any personal property of a type or
category which is not of the same or similar type or category listed in
Section 1.5 of the Security Agreement and (iii) any amendment to this
Agreement except as provided in Section 9.1(b) hereof.
--------------
"Revolving Commitment Advances" shall mean the advances made from time
-----------------------------
to time by AMEX to the Debtor, which advances
10
<PAGE>
shall be for the purposes permitted by Section 5.7 (as said Section 5.7 is
set forth at Section 1.1.L. of the Second Master Agreement Amendment) of the
Master Agreement as in effect on the date hereof.
"Second Master Agreement Amendment" shall have the meaning set forth in
---------------------------------
the recitals to the Security Agreement.
"Secured Debt" shall mean, as of any date, the Obligations then
------------
outstanding. In no event, unless the Mandatory Holders give their prior
written consent, shall Secured Debt include the unadvanced amount of any
commitment (other than the undrawn face amount of letters of credit).
"Security Agreement" shall mean the Assignment of Deposit Accounts and
------------------
Security Agreement by and between the Debtor and the Trustee dated as of the
date hereof, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Security Documents" shall mean the Security Agreement, the Guaranty
------------------
Agreements and the other security agreements, instruments and documents
referred to on Schedules 1, 2, 3, 4, 5, 6 and 7 hereto, any additional
----------- - - - - - -
documents executed to reflect the grant to the Trustee, of a lien upon or
security interest in any Collateral, and any agreement or document referred
to in Sections 2.4, 5.7 or 9.1(b) of this Agreement, as the same may be
------------ --- ------
amended, supplemented or otherwise modified from time to time in accordance
with their respective terms.
"Standstill Period" shall mean the period commencing on the earlier of
-----------------
(i) the day AMEX provides written notice to the Trustee, the Noteholders and
any other Beneficiaries (in a manner set forth in Section 9.2 of this
-----------
Agreement) of the existence or occurrence of an Actionable Default (with
respect to the AMEX Obligations) or (ii) the day AMEX receives written
notice from the Required Noteholders or any other Beneficiary (in a manner
set forth in Section 9.2 of this Agreement, a copy of which notice AMEX
-----------
shall promptly forward to the Trustee) of the existence or occurrence of an
Actionable Default (with respect to the Principal Mutual Obligations or such
Beneficiary's Beneficiary Obligations) and ending on the earlier of (x) the
close of business on the day which is 45 days after the date the Standstill
Period commenced or (y) the day on which the AMEX Priority Obligations are
paid in full, in cash or other consideration acceptable to AMEX in its sole
discretion. The Standstill Period shall be determined in accordance with the
preceding sentence and shall not terminate any earlier notwithstanding that
the amount of outstanding AMEX Priority Obligations may, at any time during
the Standstill Period, be less than
11
<PAGE>
the Hurdle. If a Standstill Period commences and later terminates upon the
expiration of the 45-day period thereof, AMEX shall not be permitted to
invoke another Standstill Period until after 180 days following the
expiration of such Standstill Period. If a Standstill Period commences and
later terminates prior to the expiration of the 45-day period thereof
because a Notice of Actionable Default has been withdrawn, additional
Standstill Period(s) can be invoked in the manner, for the period, and
subject to the limitations set forth in this paragraph if a new Actionable
Default shall occur; provided, if a Standstill Period commences upon the
--------
filing of a Notice of Actionable Default by AMEX, from the day thereof until
180 days thereafter, the total number of days comprising the Standstill
Period(s) during such 180-day period shall be 45 days.
"Subsidiary" shall mean, when used with reference to any Person, any
----------
corporation, association or other business entity in which such Person owns
directly or indirectly a majority of the outstanding voting securities or
owns sufficient equity or voting interests to enable it, in the absence of
contingencies, to elect a majority of the directors of such entity or, if
such entity is a partnership or a joint venture, such Person has more than a
50% interest in the profits or capital thereof. Unless the context otherwise
clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Debtor.
"Third Master Agreement Amendment shall have the meaning set forth in
--------------------------------
the recitals to the Security Agreement.
"Trust Agreement Collateral" shall have the meaning set forth in
--------------------------
Section 4.2(a) of this Agreement.
--------------
"Trust Amount" shall mean, with respect to the following items for
------------
which payment has not been actually received by AMEX or its assignee and for
which the Debtor is liable pursuant to the Master Agreement, the sum of (i)
the face amount of all Money Orders either (x) sold by the Debtor pursuant
to the Master Agreement or (y) lost, stolen or misappropriated by or from
the Debtor, and paid by AMEX or its assignee, plus (ii) the per item fee (as
----
adjusted pursuant to the Master Agreement) for each such Money Order.
"Trust Estate" shall have the meaning set forth in the recitals to this
------------
Agreement.
"Trustee" shall mean Wilmington Trust Company, a Delaware banking
-------
corporation, and its successors in trust as provided herein.
12
<PAGE>
"Trustee's Fees" shall mean all fees, costs and expenses of the Trustee
--------------
of the types described in Sections 5.3, 5.4, 5.5 and 5.6 of this Agreement.
--- --- --- ---
"Trustee's Liens" shall mean all liens and security interests against
---------------
the Trust Estate which result from (i) claims against the Trustee unrelated
to the transactions contemplated by this Agreement and the Security
Documents or (ii) affirmative acts by the Trustee creating a lien or
security interest other than as contemplated by this Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
(d) Terms describing items or types of collateral not otherwise defined
herein which are defined in or used in Article 9 of the Uniform Commercial Code
as in effect in the State of New York shall herein have the respective meanings
given to them in such Article 9.
SECTION 2
CERTAIN OBLIGATIONS AND DUTIES OF THE TRUSTEE AND
THE DEBTOR; POWERS OF ATTORNEY
Section 2.1. Authorization to Execute Security Documents. The Trustee
shall execute and deliver each of the Security Documents requiring execution and
delivery by it and shall accept delivery from the Debtor of those Security
Documents which do not require the Trustee's execution.
Section 2.2. Certain Representations and Warranties. The Trustee, in
its capacity as trustee hereunder, and Wilmington Trust Company, in its
individual capacity, each represent and warrant to the Beneficiaries as follows:
(a) Wilmington Trust Company is a banking corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to enter into and perform its obligations under this Agreement and
the Security Documents to which it is a party.
13
<PAGE>
(b) The execution, delivery and performance by the Trustee of this
Agreement and the Security Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of Wilmington
Trust Company.
(c) There are no Trustee's Liens and Wilmington Trust Company, in its
individual capacity, has no liens or security interests against the Trust
Estate.
(d) There are no actions or proceedings pending or, to the actual
knowledge of any officers of Wilmington Trust Company's Corporate Trust
Administration, threatened against it before any Governmental Authority (i)
which question the validity or enforceability of this Agreement or any
Security Documents to which it is a party; or (ii) which relate to the
banking or trust powers of Wilmington Trust Company and which, if
determined adversely to the position of Wilmington Trust Company, would
materially and adversely affect the ability of Wilmington Trust Company or
the Trustee to perform their respective obligations under this Agreement or
any of the Security Documents to which any one or more of them is a party.
(e) This Agreement and each of the Security Documents to which the
Trustee is a party have been duly executed and delivered by the Trustee
(assuming, with respect to the Security Documents, that this Agreement has
been duly authorized, executed and delivered by the other parties hereto)
and are the legal, valid and binding obligations of the Trustee enforceable
in accordance with their terms, except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(f) No Uniform Commercial Code financing statements or other filings or
recordations executed by or on behalf of Wilmington Trust Company (in its
individual capacity) have been filed by or against it with respect to any
of the Collateral.
Section 2.3. Actions: Control of the Trustee. (a) Subject to Sections
--------
2.3(b) and 2.3(c), at such times during the Standstill Period as the amount of
- ------ ------
outstanding AMEX Priority Obligations is greater than or equal to the Hurdle,
the Trustee shall take such action with respect to the Collateral and the
Security Documents (including, but not limited to, exercising the
14
<PAGE>
rights and remedies provided in Section 3 hereof) as is requested in writing by
---------
AMEX and only by AMEX; if, however, the Standstill Period has expired or if
during the Standstill Period the amount of outstanding AMEX Priority Obligations
is at the time action is requested less than the Hurdle, the Trustee shall take
only such action with respect to the Collateral and the Security Documents
(including, but not limited to, exercising any of the rights and remedies
provided in Section 3 hereof) as is requested in writing by the Majority
---------
Holders. Notwithstanding the foregoing, the Trustee shall at no time take any
Restricted Actions without the consent of the Mandatory Holders; and the Trustee
shall not be obligated to take any action which is in conflict with any
provisions of law or of this Agreement or the Security Documents or with respect
to which the Trustee has not received adequate security or indemnity as provided
in Section 6.4(d). Following the receipt by the Trustee of a Notice of
--------------
Actionable Default, and so long as such Notice of Actionable Default has not
been withdrawn, the Trustee shall not take any action to enforce the security
interest in the Collateral unless the Trustee has received instructions to do so
in the manner provided in this Section 2.3.
-----------
(b) The Trustee shall not be obligated to follow any written directions
received pursuant to Section 2.3(a) of this Agreement to the extent the Trustee
--------------
has received an opinion of Richards, Layton & Finger, P.A. or such other
independent counsel reasonably satisfactory to the Majority Holders to the
effect that such written directions are in conflict with any provisions of law
or this Agreement; provided, however, under no circumstances shall the Trustee
-------- -------
be liable for following the written instructions of AMEX, the Majority Holders
or the Mandatory Holders at such times as such parties have the authority to act
as herein provided.
(c) Nothing in this Section 2.3 shall impair the right of the Trustee
-----------
in its discretion to take or omit to take any action deemed proper by the
Trustee and which action or omission is not inconsistent with any direction of
AMEX, so long as the Standstill Period has not expired and the amount of
outstanding AMEX Priority Obligations is greater than or equal to the Hurdle, or
any direction of the Majority Holders, if the Standstill Period has expired or
if during the Standstill Period at such times that the amount of outstanding
AMEX Priority Obligations is less than the Hurdle; provided, however, the
-------- -------
Trustee shall not be under any obligation, as a result of this Section 2.3, to
-----------
take any action which is discretionary with the Trustee under the provisions
hereof or under any Security Document unless so directed by AMEX, so long as the
Standstill Period has not expired and the amount of outstanding AMEX Priority
Obligations is greater than or equal to the Hurdle, or the Majority Holders, if
the Standstill Period has expired or during the Standstill Period at such times
that the amount of outstanding AMEX Priority
15
<PAGE>
Obligations is less than the Hurdle; provided further that notwithstanding the
-------- -------
foregoing, the Trustee shall at no time take any Restricted Actions without the
consent of the Mandatory Holders.
Section 2.4. Additional Security Documents. In the event that the
Debtor acquires any interest in any Collateral which is not covered by a
Security Document in a manner which will perfect the Trustee's lien upon and
first priority security interest in such Collateral without further act or deed
of the Trustee, at the time such interest in such Collateral is acquired, to the
extent that such security interest may be perfected by the execution and/or
filing of a Security Document, then the Debtor shall immediately prepare,
execute and deliver to the Trustee such Security Documents, in form and
substance similar to the Security Documents heretofore executed and delivered by
the Debtor, as are necessary to perfect the Trustee's lien upon and security
interest in such Collateral. If the signature of the Trustee is required on any
such Security Document, the Debtor shall present such Security Document to AMEX
and the Noteholders for review by AMEX and the Noteholders and, if approved by
AMEX or the Required Noteholders, AMEX or the Required Noteholders (as the case
may be) will forward such Security Document to the Trustee for signature and the
Trustee shall execute such Security Document and return it to AMEX or the
Required Noteholders (as the case may be) who shall file such Security Document
with appropriate public filing and/or recording offices if such filing and/or
recording is required or advisable to perfect or protect the Trustee's lien upon
and security interest in such Collateral.
Section 2.5. Powers of Attorney. The Debtor hereby irrevocably
constitutes and appoints the Trustee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full power
and authority in the name of the Debtor or the name of such attorney-in-fact,
from time to time in the Trustee's discretion, for the purpose of signing
documents and taking other action to perfect, promote and protect the liens and
security interests of the Trustee in the Collateral. This power of attorney is a
power coupled with an interest, shall be irrevocable and shall not first require
the Trustee to have received a Notice of Actionable Default.
Section 2.6. Copies of Letters and Documents. The Trustee shall
promptly provide each Beneficiary copies of any letters or documents it receives
in connection with any Deposit Account or any arrangement with any Custodial
Agent, including, but not limited to, letters and documents related to the
termination or opening of any Deposit Account or the termination of, or the
entering into any new agreements with, any Custodial Agents or Depositories. In
addition, if not already required to do
16
<PAGE>
so, the Trustee shall provide to any Beneficiary, upon such Beneficiary's
request, copies of any letters or documents the Trustee receives from the Debtor
or any other Person in connection with this Agreement, including additional
Security Documents.
SECTION 3
ACTIONABLE DEFAULTS; REMEDIES
Section 3.1. Actionable Default. (a) Upon receipt of a Notice of
Actionable Default, the Trustee shall, within five (5) Business Days thereafter,
send a copy thereof to each Beneficiary and shall notify each Beneficiary, in
the manner provided in Section 9.2 of this Agreement, that an Actionable Default
-----------
exists and that Notice of Actionable Default has been received. Upon receipt of
any written directions pursuant to Section 2.3(a) of this Agreement, the Trustee
--------------
shall, within five (5) Business Days thereafter, send a copy thereof to each
Beneficiary.
(b) The party or parties (or successors in interest thereto) giving a
Notice of Actionable Default shall be entitled to withdraw it by delivering
written notice of withdrawal to the Trustee (i) before the Trustee takes any
action to exercise any remedy with respect to the Collateral or (ii) thereafter,
if the Debtor otherwise indemnifies the Trustee and the Beneficiaries (in a
manner satisfactory to the Trustee and the Beneficiaries in their sole
discretion) with respect to all costs and expenses incurred by the Trustee and
the Beneficiaries in connection with reversing all actions the Trustee has taken
to exercise any remedy or remedies with respect to the Collateral. The Trustee
shall immediately notify the Debtor as to the receipt and contents of any such
notice of withdrawal and shall promptly notify each Beneficiary, in the manner
provided in Section 9.2 of this Agreement, of the withdrawal of any Notice of
-----------
Actionable Default and shall promptly send a copy of any such notice of
withdrawal to each Beneficiary.
Section 3.2. Remedies. (a) Upon receipt of a Notice of Actionable
Default, and irrespective of whether the Trustee has delivered notices to the
Beneficiaries pursuant to Section 3.1(a) of this Agreement, the Trustee shall
--------------
exercise the rights and remedies provided in this Section 3 and the rights and
---------
remedies provided in any of the Security Documents.
(b) The Debtor hereby waives presentment, demand, protest or any notice
(to the extent permitted by applicable law and except as otherwise expressly
provided in this Agreement) of any kind in connection with this Agreement, any
Collateral or any Security Document.
17
<PAGE>
(c) The Debtor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full power and authority in the name of the
Debtor or in its own name, from time to time in the Trustee's discretion, upon
the occurrence and during the continuance of any Actionable Default, for the
purpose of carrying out the terms of this Agreement and any of the Security
Documents, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes hereof and thereof and, without limiting the generality of the
foregoing, hereby gives the Trustee the power and right on behalf of the Debtor,
without assent by the Debtor, to the extent permitted by applicable law, to do
the following:
(i) to ask for, demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due with respect to the Collateral,
(ii) to receive, take, endorse, assign and deliver any and all checks,
notes, drafts, acceptances, documents and other negotiable and
nonnegotiable instruments, documents and chattel paper taken or received by
the Trustee in connection herewith and therewith,
(iii) to commence, file, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to the Collateral,
(iv) to sell, transfer, assign or otherwise deal in or with the
Collateral or any part thereof pursuant to the terms and conditions
hereunder and thereunder, and
(v) to do, at its option and at the expense and for the account of the
Debtor, at any time or from time to time, all acts and things which the
Trustee deems necessary to protect or preserve the Collateral or the Trust
Estate and to realize upon the Collateral;
provided that the Trustee shall provide the Debtor written notice of any actions
- --------
taken by the Trustee pursuant to this subsection(c); provided further, however,
-------- ------- -------
that the Trustee's failure to provide the Debtor with such written notice shall
not affect the validity of the Trustee's actions taken hereunder.
Section 3.3. Right to Initiate Judicial Proceedings, etc. (a) Even if
the Trustee has not received a Notice of Actionable Default, the Trustee shall
nevertheless have the right and power to institute and maintain such suits and
proceedings as it may deem appropriate to protect and enforce the rights vested
in it by this Agreement and each Security Document; provided,
--------
18
<PAGE>
however, that as set forth in Section 2.3(a) of this Agreement, foreclosure of
- ------- --------------
the liens and security interests in the Collateral may not be commenced prior to
the Trustee's receipt of a Notice of Actionable Default.
(b) If and only if the Trustee shall have received a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn in accordance with the provisions of Section
-------
3.1(b) hereof, the Trustee may, either after entry or without entry, proceed by
- ------
suit or suits at law or in equity to foreclose upon the Collateral and to sell
all or, from time to time, any of the Trust Estate under the judgment or decree
of a court of competent jurisdiction.
Section 3.4. Appointment of a Receiver. If a receiver of the Trust
Estate shall be appointed in judicial proceedings, Wilmington Trust Company may
be appointed as such receiver. Notwithstanding the appointment of a receiver,
the Trustee shall be entitled to retain possession and control of all cash held
by or deposited with it or its agents or co-trustees pursuant to any provision
of this Agreement or any Security Document.
Section 3.5. Exercise of Powers. All of the powers, remedies and
rights of the Trustee as set forth in this Agreement may be exercised by the
Trustee in respect of any Security Document as though set forth at length
therein and all the powers, remedies and rights of the Trustee as set forth in
any Security Document may be exercised from time to time as herein and therein
provided.
Section 3.6. Remedies Not Exclusive. (a) No remedy conferred upon or
reserved to the Trustee herein or in the Security Documents is intended to be
exclusive of any other remedy or remedies, but every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or in
any of the Security Documents or now or hereafter existing at law or in equity
or by statute.
(b) No delay or omission of the Trustee to exercise any right, remedy
or power accruing upon any Actionable Default shall impair any such right,
remedy or power or shall be construed to be a waiver of any such Actionable
Default or an acquiescence therein; and every right, power and remedy given by
this Agreement or any Security Document to the Trustee may be exercised from
time to time and as often as may be deemed expedient by the Trustee.
(c) In case the Trustee shall have proceeded to enforce any right,
remedy or power under this Agreement or any Security Document and the proceeding
for the enforcement thereof shall have been discontinued or abandoned for any
reason or shall
19
<PAGE>
have been determined adversely to the Trustee, then and in every such case the
Debtor, the Trustee and the Beneficiaries shall, subject to any effect of or
determination in such proceeding, severally and respectively be restored to
their former positions and rights hereunder and under such Security Document
with respect to the Trust Estate and in all other respects, and thereafter all
rights, remedies and powers of the Trustee shall continue as though no such
proceeding had been taken.
(d) All rights of action and rights to assert claims upon or under this
Agreement and the Security Documents may be enforced by the Trustee without the
possession of any Debt Instrument or the production thereof in any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its name as Trustee and any recovery of judgment
shall be held as part of the Trust Estate.
Section 3.7. Waiver of Certain Rights. The Debtor, to the extent it
may lawfully do so, on behalf of itself and all who may claim through or under
it, including, without limitation, any and all subsequent creditors, vendees,
assignees and lienors, expressly waives and releases any, every and all rights
to demand or to have any marshaling of the Trust Estate upon any sale, whether
made under any power of sale granted under the Security Documents, or pursuant
to judicial proceedings or upon any foreclosure or any enforcement of this
Agreement or the Security Documents and consents and agrees that all the Trust
Estate may at any such sale be offered and sold as an entirety. In no event,
however, does the Debtor waive any obligations of the Trustee under applicable
law to dispose of the Trust Estate in a commercially reasonable manner.
Section 3.8. Limitation on Trustee's Duties in Respect of Collateral.
Beyond its duties set forth in this Agreement as to the custody thereof and the
accounting to the Debtor and the Beneficiaries for moneys received by it
hereunder, the Trustee shall not have any duty to the Debtor or the
Beneficiaries as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of it or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. To the extent, however, that the Trustee or an agent or
nominee of the Trustee maintains possession or control of any of the Collateral
or the Security Documents at any office of the Debtor, the Trustee shall, or
shall instruct such agent or nominee to, grant the Debtor the access to such
Collateral or Security Documents which the Debtor requires for the conduct of
its business, as permitted by the Master Agreement, the Principal Mutual Note
Agreement and each other Beneficiary Agreement, so long as the Trustee shall not
have received a Notice of Actionable Default.
20
<PAGE>
Section 3.9. Limitation by Law. All the provisions of this Section 3
---------
are intended to be subject to all applicable mandatory provisions of law which
may be controlling in the premises and to be limited to the extent necessary so
that they will not render this Agreement invalid or unenforceable in whole or in
part.
Section 3.10. Absolute Rights of the Beneficiaries. Notwithstanding
any other provision of this Agreement or any provision of any Security Document,
but subject in all cases to the rights and obligations of the Beneficiaries
under Sections 2.3 and 8.2 hereof, neither the right of each Beneficiary, which
------------ ---
is absolute and unconditional, to receive payments of the Secured Debt held by
such Beneficiary on or after the due date thereof as therein expressed, to
institute suit for the enforcement of such payment on or after such due date, or
to assert its position and views as a secured or unsecured creditor in, and to
otherwise exercise any right (other than the right to enforce the security
interest in the Collateral, which shall in all circumstances be exercisable only
by the Trustee and only as provided in this Agreement and the Security
Agreement) which such Beneficiary may have in connection with, a case under the
Bankruptcy Code in which the Debtor is a debtor, nor the obligation of the
Debtor, which is also absolute and unconditional, to pay the Secured Debt owing
by the Debtor to each Beneficiary at the time and place expressed therein shall
be impaired or affected without the consent of such Beneficiary.
SECTION 4
COLLATERAL ACCOUNT; APPLICATION OF MONEYS
Section 4.1. The Collateral Account. On the date hereof there shall be
established and, at all times thereafter until the trusts created by this
Agreement shall have terminated, there shall be maintained with the Trustee an
account which shall be entitled the "Collateral Account" (herein called the
"Collateral Account"). The Collateral Account shall be established and
------------------
maintained by the Trustee at Rodney Square North, Wilmington, Delaware 19890.
All moneys which are received by the Trustee with respect to the Collateral
after the Trustee shall have received a Notice of Actionable Default which shall
not have been withdrawn in accordance with the terms of Section 3.1(b) hereof
--------------
shall be deposited in the Collateral Account and thereafter shall be held,
applied and/or disbursed by the Trustee in accordance with the terms of this
Agreement. All moneys received by the Trustee with respect to all or any part
of the Collateral (including, without limitation, any insurance proceeds
received by the Trustee with respect to any policy carried by the Debtor, or any
affiliate thereof, covering the Collateral), either (a) prior to Trustee's
receipt of a Notice of Actionable
21
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Default, or (b) after the withdrawal of a Notice of Actionable Default in
accordance with the terms of Section 3.1(b) hereof, shall be deposited,
--------------
forthwith, into the Debtor's account no. 4159696539 with Wells Fargo Bank
(Texas), N.A. ("Concentration Account"). All moneys received by the Trustee with
---------------------
respect to all or any part of the Collateral between the receipt by the Trustee
of a Notice of Actionable Default and the withdrawal of such Notice of
Actionable Default in accordance with the terms of Section 3.1(b) hereof shall,
--------------
to the extent not distributed pursuant to the terms of Section 4.4 of this
-----------
Agreement, be deposited, forthwith following such withdrawal, into the
Concentration Account.
Section 4.2. Grant of Security Interest; Control of Collateral Account.
(a) To secure the prompt and complete payment, when due, and the observance and
performance of all Secured Debt, the Debtor hereby assigns and pledges to the
Trustee and grants to the Trustee a security interest in all of the right, title
and interest of the Debtor in and to the following, whether presently existing
or hereafter arising or acquired (the "Trust Agreement Collateral"): the
--------------------------
Collateral Account, all cash deposited therein, all certificates and
instruments, if any, from time to time representing the Collateral Account; all
investments from time to time made pursuant to Section 4.3 hereof, all notes,
-----------
certificates of deposit and other instruments from time to time hereafter
delivered to or otherwise possessed by the Trustee in substitution for, or in
addition to, any or all of the then existing Trust Agreement Collateral; all
interest, dividends, cash, instruments, and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the then existing Trust Agreement Collateral; and to the extent
not covered above, all Proceeds of and any collections, earnings and accruals
with respect to any or all of the foregoing (whether the same are acquired
before or after the commencement of a case under the Bankruptcy Code by or
against the Debtor as debtor).
(b) All right, title and interest in and to the Collateral Account
shall vest in the Trustee, and funds on deposit in the Collateral Account and
other Trust Agreement Collateral shall constitute part of the Trust Estate. The
Collateral Account shall be subject to the exclusive dominion and control of the
Trustee.
Section 4.3. Investment of Funds Deposited in Collateral Account. The
Trustee shall invest and reinvest moneys on deposit in the Collateral Account at
any time in:
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(i) marketable obligations of the United States having a maturity not
exceeding the date one year from the date of acquisition;
(ii) marketable obligations directly and fully guaranteed by the United
States having a maturity not exceeding the date one year from the date of
acquisition;
(iii) bankers' acceptances and certificates of deposit and other
interest bearing obligations issued by Wilmington Trust Company or any bank
organized under the laws of the United States or any state thereof
(provided, however, that Wilmington Trust Company or such bank, as the case
-------- -------
may be, has capital, surplus and undivided profits aggregating at least
$ 250,000,000 and a rating from Standard & Poor's Ratings Group or Moody's
Investors Service, Inc. of A or better), in each case having a maturity not
exceeding the date one year from the date of acquisition;
(iv) commercial paper (except for commercial paper issued by the Debtor
or any of its Affiliates) rated A-1 or the equivalent thereof by Standard &
Poor's Ratings Group and P-1 or the equivalent thereof by Moody's Investors
Service, Inc., and having a maturity not exceeding the date two hundred and
seventy (270) days from the date of acquisition; and
(v) repurchase obligations entered into with Wilmington Trust Company
or with any bank (provided, however, that Wilmington Trust Company or such
-------- -------
bank meets the requirements set forth in Section 4.3(iii) above), having a
----------------
maturity not exceeding the earlier of the Distribution Date next following
the date of acquisition or the date thirty (30) days from the date of
acquisition, and collateralized by investments described in subsections
4.3(i) and 4.3(ii) above, provided that the Trustee takes immediate
------ -------
physical possession of such collateral;
provided, however, that in order to provide the Beneficiaries with a perfected
- -------- -------
security interest therein, each such investment shall be either:
(A) evidenced, or deemed under applicable federal regulations to be
evidenced, by negotiable certificates or instruments, or if non-negotiable
then issued in the name of the Trustee, which (together with any
appropriate instruments of transfer) are delivered to, and held by, the
Trustee or an agent thereof (which shall not be the Debtor or any of its
Affiliates) in Delaware or New York; or
(B) in book-entry form and issued in the States of Delaware or New York
by an entity located in the States of
23
<PAGE>
Delaware or New York and in which (in the opinion of independent counsel to
the Trustee) the Trustee shall have a perfected security interest;
and provided, further, that the maximum amount of the funds held in the
-------- -------
Collateral Account which may be invested in obligations of the types described
in clauses (iii), (iv) and (v) above of any one issuer shall not exceed the
lesser of five percent (5.0%) of such funds or $1,000,000. All such investments
and the interest and income received thereon and therefrom and the net proceeds
realized on the sale thereof shall be held in the Collateral Account as part of
the Trust Estate.
Section 4.4. Application of Moneys. Subject to Section 4.1 hereof, all
-----------
moneys held by the Trustee in the Collateral Account shall, to the extent
available for distribution, be distributed by the Trustee on the first and each
succeeding Distribution Date as follows:
FIRST: To the Trustee in an amount equal to the Trustee's Fees which
are unpaid as of such Distribution Date, and to any Beneficiary which has
theretofore advanced or paid any such Trustee's Fees in an amount equal to
the amount thereof so advanced or paid by such Beneficiary prior to such
Distribution Date; provided, however, that nothing herein is intended to
-------- -------
relieve the Debtor of its obligation to pay such costs, fees, expenses and
liabilities from funds outside of the Collateral Account;
SECOND: To AMEX in an amount equal to the AMEX Priority Fees and
Expenses;
THIRD: To AMEX in an amount equal to the AMEX Priority Obligations (but
excluding therefrom any premiums thereon and AMEX Priority Fees and
Expenses), such amount to be determined as of the day before the
Distribution Date;
FOURTH: To the Beneficiaries in an amount equal to the collection
costs, fees and expenses (but excluding therefrom any penalties, premiums,
commitment fees, breakage fees or similar types of fees) due to the
Beneficiaries (including the balance of collection costs, fees and expenses
owed to AMEX) and their representatives which are payable by the Debtor to
the Beneficiaries under the relevant Debt Instrument, and, in case such
moneys shall be insufficient to pay in full such costs, fees and expenses,
then to the payment thereof ratably (without priority of any one over any
other, except in accordance with applicable subordination provisions, if
any, contained in the Debt Instruments) to each Beneficiary in proportion
to the unpaid amounts thereof on the relevant Distribution Date;
24
<PAGE>
FIFTH: To the Beneficiaries in an amount equal to the unpaid interest
(but excluding therefrom any penalties, premiums, commitment fees, breakage
fees or similar types of fees) on loans and extensions of credit comprising
the Secured Debt (other than the AMEX Priority Obligations) and, in case
such moneys shall be insufficient to pay in full such interest, then to the
payment thereof ratably (without priority of any one over any other, except
in accordance with applicable subordination provisions, if any, contained
in the Debt Instruments) to each Beneficiary in proportion to the unpaid
amounts thereof determined on the day before the relevant Distribution
Date;
SIXTH: To the Beneficiaries in an amount equal to the unpaid principal
of (but excluding therefrom any penalties, premiums, commitment fees,
breakage fees or similar types of fees) loans and extensions of credit
comprising the Secured Debt (other than the AMEX Priority Obligations) and,
with respect to any outstanding letters of credit issued by any Beneficiary
to the Debtor, the Trustee shall withhold and retain in the Collateral
Account in trust for such Beneficiary the undrawn face amount of such
letters of credit, and, in case such moneys shall be insufficient to pay in
full such principal or to secure such letters of credit, then to the
payment of each Beneficiary and to secure each such letter of credit
ratably (without priority of any one over any other, except in accordance
with applicable subordination provisions, if any, contained in the Debt
Instruments) in proportion to the unpaid amounts thereof and the undrawn
face amounts of such letters of credit determined on the day before the
relevant Distribution Date (provided if the undrawn letters of credit are
--------
thereafter drawn, the Trustee shall pay the drawee the amount drawn up to
the maximum amount retained by the Trustee for such drawee, and provided
--------
further, if such letters of credit expire, the Trustee shall distribute the
-------
amounts retained to secure such undrawn letters of credit to the
Beneficiaries pursuant to this Section 4.4);
-----------
SEVENTH: To the Beneficiaries in an amount equal to the penalties,
premiums, commitment fees, breakage fees or similar types of fees on all
amounts due to the Beneficiaries and their representatives which are
payable by the Debtor to the Beneficiaries under the relevant Debt
Instrument (including the Make-Whole Amount), and, in case such moneys
shall be insufficient to pay in full such penalties, premiums, commitment
fees, breakage fees or similar types of fees, then to the payment thereof
ratably (without priority of any one over any other, except in accordance
with applicable subordination provisions, if any, contained in the Debt
Instruments) to each Beneficiary in
25
<PAGE>
proportion to the unpaid amounts thereof on the relevant Distribution Date;
EIGHTH: To the Beneficiaries in an amount equal to all other amounts,
if any, then due to the Beneficiaries and their representatives; and
NINTH: Any surplus then remaining shall be paid to the Debtor or its
successors or assigns, or to whomever may be lawfully entitled to receive
the same, or as a court of competent jurisdiction may direct; provided,
--------
however, that if any Beneficiary shall have notified the Trustee in writing
-------
that such Beneficiary has an outstanding claim, or has knowledge of a
threatened potential claim, against the Debtor and such Beneficiary is
entitled to the benefits of an indemnification, reimbursement or similar
provision constituting Secured Debt in connection with such claim or
potential claim, the Trustee shall continue to hold in the Collateral
Account, for a period of not more than two (2) years following the date of
such notice, the amount specified in such notice (which notice shall
contain the Beneficiary's certification that the amount so specified is not
included as part of an allowed claim in a pending bankruptcy proceeding
and, if included in a pending claim, the Beneficiary's covenant to notify
the Trustee to reduce the amount being held by the amount of such
contingent claim that becomes an allowed claim).
SECTION 5
AGREEMENTS WITH THE TRUSTEE
Section 5.1. Delivery of Debt Instruments. On or promptly after the
date hereof, the Debtor will deliver to the Trustee true and complete copies of
the Master Agreement, the Principal Mutual Note Agreement and the Security
Documents; provided, however, that the Debtor's failure to provide the Trustee
-------- -------
with copies of such documents shall not affect the rights of the Beneficiaries
hereunder or the validity of the Trustee's actions taken hereunder. The Debtor
agrees that, promptly upon the execution thereof, the Debtor will deliver to the
Trustee a true and complete copy of any other Beneficiary Agreements and any and
all Debt Instruments and Security Documents entered into by the Debtor
subsequent to the date hereof and a true and complete copy of any and all
amendments, modifications or supplements to any Debt Instrument (including,
without limitation, the Master Agreement, the Principal Mutual Note Agreement
and any other Beneficiary Agreement) and Security Documents entered into by the
Debtor subsequent to the date hereof.
26
<PAGE>
Section 5.2. Information as to Beneficiaries. (a) The Debtor agrees
that it shall deliver to the Trustee by December 1 in each year, commencing
December 1, 1996, and from time to time thereafter upon request of the Trustee,
a list setting forth each Beneficiary and the information required pursuant to
Section 9.2 to send notices to each such Beneficiary.
- -----------
(b) At any time after the Trustee has received a Notice of Actionable
Default, and so long as such Notice of Actionable Default has not been
withdrawn, upon the request of the Trustee, each Beneficiary agrees that it
shall deliver to the Trustee, within five Business Days following the receipt of
such request, a schedule setting forth the aggregate principal amount of Secured
Debt owing to such Beneficiary, the interest rate then in effect with respect to
such Secured Debt and such other information the Trustee may request to make a
distribution pursuant to Section 4.4, and with respect to AMEX, the schedule
-----------
shall also set forth the amount of Secured Debt which constitutes AMEX Priority
Obligations. Upon receipt of the requested information, the Trustee shall
compile such information and prepare a master schedule which the Trustee shall
promptly send to each Beneficiary.
Section 5.3. Compensation and Expenses. The Debtor agrees to pay to
the Trustee as compensation for the Trustee's services hereunder and under the
Security Documents and for administering the Trust Estate, (a) such fees as
shall be agreed to in writing from time to time between the Debtor and the
Trustee (with a copy of each such fee agreement and any amendments thereto to be
sent by the Trustee to each Beneficiary) and (b) from time to time, upon demand,
all of the fees, costs and expenses of the Trustee (including, without
limitation, the reasonable fees and disbursements of its counsel and such
special counsel as the Trustee elects to retain) (x) arising in connection with
the preparation, execution, delivery, modification, restatement, amendment or
termination of this Agreement and each Security Document or the enforcement
(whether in the context of a civil action, adversary proceeding, workout or
otherwise) of any of the provisions hereof or thereof, or (y) incurred or
required to be advanced in connection with the administration of the Trust
Estate (including, but not limited to, reimbursements made by the Trustee to
Depositories), the sale or other disposition of Collateral pursuant to any
Security Document and the preservation, protection or defense of the Trustee's
rights under this Agreement and in and to the Collateral and the Trust Estate.
As security for such payment, the Trustee shall have a lien prior to the Secured
Debt upon all Collateral and other property and funds held or collected by the
Trustee as part of the Trust Estate.
27
<PAGE>
Section 5.4. Stamp and Other Similar Taxes. The Debtor agrees to
indemnify and hold harmless the Trustee and each Beneficiary from, and shall
reimburse the Trustee and each Beneficiary for, any present or future claim for
liability for any stamp or other similar tax and any penalties or interest with
respect thereto, which may be assessed, levied or collected by any jurisdiction
in connection with this Agreement, any Security Document, the Trust Estate, or
the attachment or perfection of the security interest granted to the Trustee in
any Collateral. The obligations of the Debtor under this Section 5.4 shall
-----------
survive the termination of the other provisions of this Agreement.
Section 5.5. Filing Fees, Excise Taxes, etc. The Debtor agrees to
pay or to reimburse the Trustee for any and all amounts in respect of all
search, filing, recording and registration fees, taxes, excise taxes and other
similar imposts which may be payable or determined to be payable in respect of
the execution, delivery, performance and enforcement of this Agreement and each
Security Document and agrees to save the Trustee harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. The obligations of the Debtor under this
Section 5.5 shall survive the termination of the other provisions of this
- -----------
Agreement.
Section 5.6. Indemnification. (a) The Debtor agrees to pay,
indemnify and hold the Trustee and each of its agents harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement and the Security Documents, unless arising from
the gross negligence or willful misconduct of such of the Trustee or such of the
agents as are seeking indemnification. As security for such payment, the Trustee
shall have a lien prior to the Secured Debt upon all Collateral and other
property and funds held or collected by the Trustee as part of the Trust Estate.
(b) In any suit, proceeding or action brought by the Trustee under or
with respect to the Collateral for any sum owing thereunder, or to enforce any
provisions thereof, or of any of the Security Documents or this Agreement, the
Debtor will save, indemnify and keep the Trustee and the Beneficiaries harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of the
obligee thereunder, arising out of a breach by the Debtor of any of its
obligations hereunder or thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such obligee or
its
28
<PAGE>
successors from the Debtor, and all such obligations of the Debtor shall be
and remain enforceable against and only against the Debtor and shall not be
enforceable against the Trustee or any Beneficiary.
(c) The agreements in this Section 5.6 shall survive the termination
-----------
of the other provisions of this Agreement.
Section 5.7. Further Assurances. At any time and from time to time,
upon the written request of the Trustee, and at the expense of the Debtor, the
Debtor will promptly execute and deliver any and all such further instruments
and documents and take such further action as the Trustee reasonably deems
necessary or desirable in obtaining the full benefits of this Agreement and the
Security Documents and of the rights and powers herein and therein granted,
including, without limitation, the filing of any financing or continuation
statements to perfect the liens and security interests granted thereby. The
Debtor shall, in all of its published financial statements customarily prepared
with footnotes or filed with the Securities and Exchange Commission, indicate by
footnote or otherwise that the Secured Debt is secured pursuant to this
Agreement and the Security Documents.
SECTION 6
THE TRUSTEE
Section 6.1. Acceptance of Trust. The Trustee, for itself and its
successors, hereby accepts the trusts created by this Agreement upon the terms
and conditions hereof, including those contained in this Section 6.
---------
Section 6.2. Exculpatory Provisions. (a) The Trustee shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties contained herein or in the Security
Documents, except for those made by the Trustee. The Trustee makes no
representations as to the value or condition of the Trust Estate or any part
thereof, or as to the title of the Debtor thereto or as to the security afforded
by the Security Documents or this Agreement or, except as set forth in
Section 2.2 of this Agreement, as to the validity, execution, enforceability,
- -----------
legality or sufficiency of this Agreement, any Security Document or of the
Secured Debt secured hereby and thereby, and the Trustee shall incur no
liability or responsibility in respect of any such matters. The Trustee shall
not be responsible for insuring the Trust Estate or for the payment of taxes,
charges, assessments or liens upon the Trust Estate or otherwise as to the
maintenance of the Trust Estate, except that (i) in the event the
29
<PAGE>
Trustee enters into possession of a part or all of the Trust Estate, the Trustee
shall preserve the part in its possession, and (ii) the Trustee will promptly,
and at its own expense, take such action as may be necessary duly to remove and
discharge (by bonding or otherwise) any Trustee's Lien on any part of the Trust
Estate or any other lien on any part of the Trust Estate resulting from claims
against it not related to the administration of the Trust Estate or (if so
related) resulting from gross negligence or willful misconduct on its part.
(b) The Trustee shall not be required to ascertain or inquire as to
the performance by the Debtor of any of the covenants or agreements contained
herein, in any Security Document or in any Debt Instrument. Whenever it is
necessary, or in the opinion of the Trustee advisable, for the Trustee to
ascertain the amount of Secured Debt then held by a Beneficiary, the Trustee may
rely on a certificate of such Beneficiary as to such amount.
(c) Wilmington Trust Company shall, in its individual capacity and at
its own cost and expense, promptly take all action as may be necessary to
discharge any Trustee's Liens or any other lien resulting from claims against it
not related to the administration of the Trust Estate or (if so related)
resulting from gross negligence or willful misconduct on its part.
(d) The Trustee shall not be personally liable for any acts,
omissions, errors of judgment or mistakes of fact or law made, taken or omitted
to be made or taken by it in accordance with this Agreement or any Security
Document (including, without limitation, acts, omissions, errors or mistakes
with respect to the Collateral), except for those arising out of or in
connection with the Trustee's gross negligence or willful misconduct.
Notwithstanding anything set forth herein to the contrary, the Trustee shall
have a duty of reasonable care with respect to any Collateral which is delivered
to the Trustee or its designated representatives and is in the Trustee's or its
designated representatives' possession and control.
Section 6.3. Delegation of Duties. The Trustee may execute any of
the trusts or powers hereof and perform any duty hereunder either directly or by
or through agents, nominees or attorneys-in-fact; provided that the Trustee
--------
shall obtain a written acknowledgment from such agents, nominees or
attorneys-in-fact that they shall be liable to the Beneficiaries for losses or
damages incurred by any such Beneficiary as a result of such agent's, nominee's
or attorneys'-in-fact gross negligence or willful misconduct as and to the
extent the Trustee would be liable for such losses or damages if the actions or
omissions of such agents, nominees or attorneys-in-fact constituting such
30
<PAGE>
gross negligence or willful misconduct had been actions or omissions of the
Trustee. The Trustee shall be entitled to advice of counsel concerning all
matters pertaining to such trusts, powers and duties. The Trustee shall not be
responsible for the negligence or misconduct of any agents, designated
representatives, nominees or attorneys-in-fact selected by it without gross
negligence or willful misconduct.
Section 6.4. Reliance by Trustee. (a) Whenever in the
administration of the trusts of this Agreement the Trustee shall deem it
necessary or desirable that a matter be proved or established with respect to
the Debtor in connection with the taking, suffering or omitting of any action
hereunder by the Trustee, such matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be provided or established
by a certificate of a Responsible Officer of the Debtor delivered to the
Trustee, and such certificate, in the absence of the Trustee's gross negligence
or willful misconduct, shall be full warranty to the Trustee for any action
taken, suffered or omitted in reliance thereon, subject, however, to the
provisions of Section 6.5 of this Agreement.
-----------
(b) The Trustee may consult with counsel, accountants and other
experts, and any opinion of Richards, Layton & Finger, P.A. or such other
independent counsel reasonably satisfactory to the Majority Holders, any such
accountant, and any such other expert shall be full and complete authorization
and protection in respect of any action taken or suffered by it hereunder in
accordance therewith. The Trustee shall have the right at any time to seek
instructions concerning the administration of the Trust Estate from any court of
competent jurisdiction.
(c) The Trustee may rely, and shall be fully protected in acting,
upon any resolution, statement, certificate, instrument, opinion, report,
notice, request, consent, order, bond or other paper or document which it has no
reason to believe to be other than genuine and to have been signed or presented
by the proper party or parties or, in the case of cables, telecopies and
telexes, to have been sent by the proper party or parties, including the
information provided by the Debtor to the Trustee pursuant to Section 5.2 of
-----------
this Agreement. In the absence of its gross negligence or willful misconduct,
the Trustee may rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement or any Security
Document.
(d) If the Trustee has been requested to take action pursuant to
Section 2.3 of this Agreement, the Trustee shall not be under any obligation to
- -----------
exercise any of the rights or powers vested in the Trustee by this Agreement or
any Security Document
31
<PAGE>
unless the Trustee shall have been provided adequate security and indemnity
against the costs, expenses and liabilities which may be incurred by it in
complying with such request or direction, including such reasonable advances as
may be requested by the Trustee.
Section 6.5. Limitations on Duties of the Trustee. (a) The Trustee
shall be obliged to perform such duties and only such duties as are specifically
set forth in this Agreement or in any Security Document, and no implied
covenants or obligations shall be read into this Agreement or any Security
Document against the Trustee. The Trustee shall, upon receipt of a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn in accordance with the provisions of Section
-------
3.1(b) hereof, exercise the rights and powers vested in it by this Agreement or
- ------
by any Security Document, and the Trustee shall not be liable with respect to
any action taken or omitted by it in accordance with the direction of AMEX, the
Majority Holders or the Mandatory Holders pursuant to Section 2.3 of this
-----------
Agreement.
(b) Except as herein otherwise expressly provided, including, without
limitation, upon the written request of AMEX, the Majority Holders or the
Mandatory Holders pursuant to Section 2.3 of this Agreement, the Trustee shall
-----------
not be under any obligation to take any action which is discretionary with the
Trustee under the provisions hereof or under any Security Document. The Trustee
shall furnish to each Beneficiary promptly upon receipt thereof, a copy of each
certificate or other paper furnished to the Trustee by the Debtor under or in
respect of this Agreement, any Security Document or any of the Trust Estate.
Section 6.6. Moneys to Be Held in Trust. All moneys received by the
Trustee under or pursuant to any provision of this Agreement or any Security
Document shall be held in trust for the purposes for which they were paid or are
held.
Section 6.7. Resignation and Removal of the Trustee. (a) The
Trustee may at any time, by giving thirty (30) days' prior written notice to the
Debtor, AMEX, each of the Noteholders and each other Beneficiary, resign and be
discharged of the responsibilities hereby created, such resignation to become
effective upon the appointment of a successor trustee or trustees by the
Mandatory Holders, and the acceptance of such appointment by such successor
trustee or trustees. The Trustee may be removed at any time without cause and a
successor trustee appointed by the affirmative vote of the Mandatory Holders;
provided that the Trustee shall be entitled to its fees and expenses to the date
- --------
of removal. If no successor trustee or trustees shall be appointed and approved
within thirty (30) days from the date of the giving of the aforesaid notice of
32
<PAGE>
resignation or within thirty (30) days from the date of such removal, the
Trustee shall, or any Beneficiary may, apply to any court of competent
jurisdiction to appoint a successor trustee or trustees (which may be an
individual or individuals) to act until such time, if any, as a successor
trustee or trustees shall have been appointed as above provided. Any successor
trustee or trustees so appointed by such court shall immediately and without
further act be superseded by any successor trustee or trustees appointed by the
Mandatory Holders.
(b) If at any time the Trustee shall resign, be removed or otherwise
become incapable of acting, or if at any time a vacancy shall occur in the
office of the Trustee for any other cause, a successor trustee or trustees may
be appointed by the Mandatory Holders, and the powers, duties, authority and
title of the predecessor trustee or trustees terminated and canceled without
procuring the resignation of such predecessor trustee or trustees, and without
any other formality (except as may be required by applicable law) than the
appointment and designation of a successor trustee or trustees in writing, duly
acknowledged, delivered to the predecessor trustee or trustees and the Debtor,
and filed for record in each public office, if any, in which this Agreement is
required to be filed.
(c) The appointment and designation referred to in Section 6.7(b) of
--------------
this Agreement shall, after any required filing, be full evidence of the right
and authority to make the same and of all the facts therein recited, and this
Agreement shall vest in such successor trustee or trustees, without any further
act, deed or conveyance, all of the estate and title of its predecessor or their
predecessors, and upon such filing for record the successor trustee or trustees
shall become fully vested with all the estates, properties, rights, powers,
trusts, duties, authority and title of its predecessor or their predecessors;
but such predecessor or predecessors shall, nevertheless, on the written request
of any Beneficiary, the Debtor, or its or their successor trustee or trustees,
execute and deliver an instrument transferring to such successor or successors
all the estates, properties, rights, powers, trusts, duties, authority and title
of such predecessor or predecessors hereunder and shall deliver all securities
and moneys held by it or them to such successor trustee or trustees. Should any
deed, conveyance or other instrument in writing from the Debtor be required by
any successor trustee or trustees for more fully and certainly vesting in such
successor trustee or trustees the estates, properties, rights, powers, trusts,
duties, authority and title vested or intended to be vested in the predecessor
trustee or trustees, any and all such deeds, conveyances and other instruments
in writing shall, on request of such successor trustee or trustees, be so
executed, acknowledged and delivered.
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<PAGE>
(d) Any required filing for record of the instrument appointing a
successor trustee or trustees as hereinabove provided shall be at the expense of
the Debtor. The resignation of any trustee or trustees and the instrument or
instruments removing any trustee or trustees, together with all other
instruments, deeds and conveyances provided for in this Section 6 shall, if
---------
required by law, be forthwith recorded, registered and filed by and at the
expense of the Debtor, wherever this Agreement is recorded, registered and
filed.
(e) Notwithstanding any provision to the contrary in this Section
-------
6.7, unless there is an Actionable Default, the Mandatory Holders shall consult
- ---
with the Debtor when appointing a successor trustee or trustees; provided that
the Debtor may not under any circumstances reject, block or prevent such
appointment.
Section 6.8. Status of Successors to the Trustee. Every successor to
Wilmington Trust Company appointed pursuant to Section 6.7 of this Agreement and
-----------
every corporation resulting from a merger or consolidation pursuant to Section
-------
6.9 of this Agreement shall be a bank or trust company in good standing and
- ---
having power so to act, incorporated under the laws of the United States or any
State thereof or the District of Columbia, and having its principal corporate
trust office within the forty-eight (48) contiguous States, and shall also have
capital, surplus and undivided profits of not less than $250,000,000 and a
rating from Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
of A or better.
Section 6.9. Merger of the Trustee. Any corporation into which the
Trustee shall be merged, or with which it shall be consolidated, or any
corporation resulting from any merger or consolidation to which the Trustee
shall be a party, shall be the Trustee under this Agreement without the
execution or filing of any paper or any further act on the part of the parties
hereto.
Section 6.10. Additional Co-Trustees; Separate Trustees. (a) If at
any time or times it shall be necessary or prudent in order to conform to any
law of any jurisdiction in which any of the Collateral shall be located, or the
Trustee shall be advised by counsel, satisfactory to it, that it is so
necessary, or prudent in the interest of the Beneficiaries, or the Majority
Holders shall in writing so request, or the Trustee shall deem it desirable for
its own protection in the performance of its duties hereunder, the Trustee and
the Debtor shall execute and deliver all instruments and agreements necessary or
proper to constitute another bank or trust company, or one or more persons
approved by the Trustee and the Debtor either to act as co-trustee or co-
trustees of all or any of the Collateral, jointly with the Trustee originally
named herein or any successor or
34
<PAGE>
successors, or to act as separate trustee or trustees of any such property. In
the event the Debtor shall not have joined in the execution of such instruments
and agreements within ten (10) days after the receipt of a written request from
the Trustee so to do, or in case an Actionable Default shall have occurred and
be continuing, the Trustee may act under the foregoing provisions of this
Section 6.10 without the concurrence of the Debtor, and the Debtor hereby
- ------------
irrevocably appoints the Trustee as its agent and attorney to act for it under
the foregoing provisions of this Section 6.10 in either of such contingencies.
------------
(b) Every separate trustee and every co-trustee, other than any
trustee which may be appointed as successor to Wilmington Trust Company shall,
to the extent permitted by law, be appointed and act and be such, subject to the
following provisions and conditions, namely:
(i) all rights, powers, duties and obligations conferred upon the
Trustee in respect of the custody, control and management of moneys, papers
or securities shall be exercised solely by Wilmington Trust Company, or its
successors as Trustee hereunder;
(ii) all rights, powers, duties and obligations conferred or imposed
upon the Trustee hereunder shall be conferred or imposed and exercised or
performed by the Trustee and such separate trustee or separate trustees or
co-trustee or co-trustees, jointly, as shall be provided in the instrument
appointing such separate trustee or separate trustees or co-trustee or co-
trustees, except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations shall be exercised and performed by
such separate trustee or separate trustees or co-trustee or co-trustees;
(iii) no power given hereby to, or which it is provided hereby may be
exercised by, any such co-trustee or co-trustees or separate trustee or
separate trustees, shall be exercised hereunder by such co-trustee or co-
trustees or separate trustee or separate trustees, except jointly with, or
with the consent in writing of, the Trustee, anything herein contained to
the contrary notwithstanding;
(iv) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(v) the Debtor and the Trustee, at any time by an instrument in
writing, executed by them jointly, may accept
35
<PAGE>
the resignation of or remove any such separate trustee or co-trustee with
or without cause, and in that case may be, an instrument in writing
executed by the Debtor and the Trustee jointly, may appoint a successor to
such separate trustee or co-trustee, as the case may be, anything herein
contained to the contrary, notwithstanding. In the event that the Debtor
shall not have joined in the execution of any such instrument within ten
(10) days after the receipt of a written request from the Trustee so to do,
or in case an Actionable Default shall have occurred and be continuing, the
Trustee shall have the power to accept the resignation of or remove any
such separate trustee or co-trustee and to appoint a successor without the
concurrence of the Debtor, the Debtor hereby irrevocably appointing the
Trustee its agent and attorney to act for it in such connection in either
of such contingencies. In the event that the Trustee shall have appointed a
separate trustee or separate trustees or co-trustee or co-trustees as above
provided, it may at any time, by an instrument in writing, accept the
resignation of or remove any such separate trustee or co-trustee, the
successor to any such separate trustee or co-trustee to be appointed by the
Debtor and the Trustee, or by the Trustee alone, as hereinabove provided in
this Section 6.10.
------------
SECTION 7
RELEASE OF COLLATERAL
Section 7.1. Conditions to Release of Collateral. (a) Subject to
this Section 7.1(a) and Section 7.2, the Trustee shall release its security
-------------- -----------
interest in all of the Collateral on the earlier of:
(i) the date on which (A) all the Secured Debt shall have been paid
and the unfunded commitments of all Beneficiaries shall have been
terminated and (B) accrued and unpaid Trustee's Fees shall have been paid
in full; or
(ii) the date which is 3 days after the date on which (A) the Trustee
shall have received written instructions from the Mandatory Holders
instructing the Trustee to release its security interest in all of the
Collateral, and (B) accrued and unpaid Trustee's Fees shall have been paid
in full.
(b) Subject to this Section 7.1(b) and Section 7.2, the Trustee shall
-------------- -----------
release its security interest in specific items or portions of the Collateral on
the date which is 3 days after the date on which (i) the Trustee shall have
received written instructions from the Mandatory Holders instructing the Trustee
36
<PAGE>
to release its security interest in specific items or portions of the
Collateral, and (ii) accrued and unpaid Trustee's Fees shall have been paid in
full.
Section 7.2. Actions Following Release of the Collateral. To the
extent that the Trustee is required to release Collateral in accordance with
Section 7.1 of this Agreement, or the security interest in any Collateral
- -----------
granted pursuant to any of the Security Documents is otherwise terminated or
released in accordance with the terms thereof, all right, title and interest of
the Trustee in, to and under such Collateral and the security interest of the
Trustee therein shall terminate and shall revert to the Debtor or its successors
and assigns, and the estate, right, title and interest of the Trustee therein
shall thereupon cease, determine and become void. Following such request,
instructions or other termination or release, the Trustee shall, upon the
written request of the Debtor or its successors or assigns and at the cost and
expense of the Debtor, or its successors or assigns, execute such instruments
and take such other actions as are necessary or desirable to terminate any such
security interest and otherwise to effectuate the release of the specified
portions of the Collateral from the lien of such security interest. Such
termination and release shall be without prejudice to the rights of the Trustee
or any successor trustee to charge and be reimbursed for any expenditures which
it may thereafter incur in connection therewith.
SECTION 8
AGREEMENTS AMONG BENEFICIARIES
Section 8.1. Limited Subordination of Liens. Notwithstanding the
date, manner or order of perfection or recording of security interests or liens
granted to AMEX and to the Trustee, and notwithstanding any provisions of the
Uniform Commercial Code, of any applicable law or decision, or of the Security
Documents, or whether AMEX or the Trustee holds possession of all or any part of
the Collateral, the Trustee shall have a first and prior security interest and
lien in and upon the Collateral and AMEX shall have only a second and
subordinate security interest and lien therein. Subject to the last sentence of
this Section 8.1, the priorities, subordinations and distribution arrangements
-----------
specified in this Agreement and in the Security Agreement with respect to the
Collateral are expressly conditioned upon the non-avoidability and perfection of
the security interests and liens held by the Trustee in the Collateral, and in
the event the security interests or liens held by the Trustee in any Collateral
is judicially determined to be unperfected or is avoided for any reason, then
the priorities, subordinations and distribution arrangements provided for in
this
37
<PAGE>
section shall not be effective as to such Collateral. AMEX agrees, however, that
it will not challenge the legality, validity, enforceability or priority of the
security interests or liens granted to the Trustee pursuant to this Agreement
and the Security Agreement. The subordination provided for in this Section 8.1
-----------
is solely for the benefit of the Trustee and the Beneficiaries. No other Person
shall have or be entitled to assert any rights or benefits under or as a result
of this Section 8.1. Any recoveries by AMEX with respect to the enforcement of
-----------
any security interests or liens granted to AMEX shall be governed by Section
-------
8.3(e) of this Agreement.
- ------
Section 8.2. Bankruptcy Issues. Prior to the payment in full, in cash
or other consideration acceptable to AMEX in its sole discretion, of the AMEX
Priority Obligations, each Beneficiary (other than AMEX) agrees (so long as the
amount of outstanding AMEX Priority Obligations is greater than or equal to the
Hurdle) that if the Debtor becomes the subject of a case under the Bankruptcy
Code: (a) the Trustee and/or AMEX may consent to the use of cash collateral
(under Section 363 of the Bankruptcy Code, or otherwise) on such terms and
conditions and in such amounts as AMEX, in its sole discretion, may decide,
provided that the use of such cash collateral will not result in a Coverage
Ratio less than the Coverage Ratio as calculated on the date of the filing under
the Bankruptcy Code, and in connection with such cash collateral usage or such
financing, the Debtor (or a trustee appointed for the estate of the Debtor) may
grant to the Trustee security interests and liens upon the assets of the Debtor,
which liens and security interests shall secure payment of all Secured Debt
(whether arising before or after the commencement of the case); and (b) each
Beneficiary (other than AMEX) will not object to or oppose a cash collateral
usage consented to by AMEX as provided in subsection (a), and will not assert
any right it may have to "adequate protection" of its interest in any Collateral
provided the Trustee receives liens and security interests in all Collateral
arising or acquired after the commencement of a case against the Debtor under
the Bankruptcy Code, which Collateral is substituted for the Collateral subject
to such usage under Section 363 and agrees that it will not seek to have the
automatic stay lifted with respect to such security interests without the prior
written consent of AMEX.
Section 8.3. Miscellaneous Agreements Among Beneficiaries. (a) Each
Beneficiary represents that it has made an independent credit decision
concerning the Debtor.
(b) Each Beneficiary acknowledges and agrees that it has not made any
representation or warranty to any other Beneficiary with respect to the
execution, validity, legality, completeness of this Agreement, any Security
Documents or the
38
<PAGE>
Collateral or with respect to the collectibility or enforceability of the
Obligations.
(c) Each Beneficiary hereby assumes responsibility for keeping itself
informed of (i) the financial condition of the Debtor and (ii) all other
circumstances bearing upon the risk of nonpayment of the Secured Debt. Each of
the Beneficiaries hereby agrees that, except as provided in Section 5.2(b) of
--------------
this Agreement, no other Beneficiary shall have a duty to advise any of the
others of information known to it regarding such condition or any such
circumstances. In the event any Beneficiary, in its sole discretion, undertakes
at any time or from time to time to provide any such information to any other
Beneficiary, it shall be under no obligation (x) to provide any such information
to such other Beneficiary on any subsequent occasion, (y) to undertake any
investigation, or (z) to disclose any information which such Beneficiary wishes
to maintain confidential.
(d) Each Beneficiary agrees that should it obtain, receive or take
any Collateral (by means of set-off, recoupment or other enforcement actions),
or recover any amounts under any Security Document, at any time after the
Trustee has received a Notice of Actionable Default, then the received
Collateral or the amount recovered shall be delivered to the Trustee for
distribution in accordance with Section 4.4 of this Agreement; provided that (i)
----------- --------
AMEX shall not have to remit to the Trustee any property of the Debtor it
recovers pursuant to a set-off which is applied in repayment of the AMEX
Priority Obligations, and (ii) AMEX shall not have to remit to the Trustee any
property of the Debtor which, pursuant to applicable laws relating to the
remittance of trust funds, must be remitted to AMEX and which shall be applied
by AMEX in repayment of the AMEX Priority Obligations.
(e) Any recovery by any Beneficiary with respect to the enforcement
of any consensual or non-consensual lien or security interest on any property of
the Debtor shall be remitted to the Trustee for distribution in accordance with
Section 4.4 of this Agreement, and if any judgment obtained by any Beneficiary
- -----------
in connection with any suit or litigation becomes a lien on any of the property
or interests in property of the Debtor, such lien shall be subordinate to the
lien of the Trustee and shall be subject to this Section 8.3(e).
--------------
(f) Each Beneficiary (other than AMEX) represents that in entering
into this Agreement and related documents, it is not relying on any commitment
or agreement made by AMEX to make Revolving Commitment Advances pursuant to the
Third Master Agreement Amendment.
39
<PAGE>
Section 8.4. Cap on Principal Mutual Obligations. Principal Mutual
and each of the other Noteholders agree that the maximum amount of the Principal
Mutual Obligations (excluding interest, Make-Whole Amounts and all other amounts
other than principal) shall not, without the prior written consent of the
Mandatory Holders, which may be exercised in their sole and absolute discretion,
exceed $20 million in aggregate principal amount. Notwithstanding any provision
in this Agreement or in any Security Document to the contrary, unless the
Mandatory Holders provide their prior written consent, any amounts advanced or
loaned by Principal Mutual or any other Noteholder (including interest, fees and
expenses thereon) to the Debtor in excess of the foregoing limitation shall not
be secured by the Security Agreement and shall not be covered by the terms of
this Agreement, and such excess amounts shall be excluded from the definitions
of Obligations, Principal Mutual Obligations and Secured Debt.
Section 8.5. Cap on Revolving Commitment Advances. AMEX agrees that
the maximum amount of Revolving Commitment Advances shall not, without the prior
written consent of the Mandatory Holders, which may be exercised in their sole
and absolute discretion, exceed $18.5 million in aggregate principal amount.
Notwithstanding any provision in this Agreement or in any Security Document to
the contrary, unless the Mandatory Holders provide their prior written consent,
any amounts advanced or loaned by AMEX (including interest, fees and expenses
thereon) to the Debtor in excess of the foregoing limitation shall not be
secured by the Security Agreement and shall not be covered by the terms of this
Agreement, and such excess amounts shall be excluded from the definitions of
AMEX Obligations, Obligations and Secured Debt.
Section 8.6. Payment of Trustee's Fees. In the event the Debtor does
not pay the Trustee's Fees, each Beneficiary (other than the Trustee) agrees to
pay the Trustee's Fees ratably in accordance with the proportion of the Secured
Debt held by such Beneficiary or, if there has been any recovery of the Secured
Debt, in accordance with the proportion of (a) the Secured Debt recovered by
such Beneficiary to (b) the aggregate amount of Secured Debt recovered by all
Beneficiaries.
Section 8.7. Assignment. None of the Beneficiaries shall assign any
interest in the Obligations or the Secured Debt unless such assignment is
subject to all terms and conditions of this Agreement, including, but not
limited to, any assignment pursuant to the next succeeding sentence. AMEX, at
any time, may assign the AMEX Obligations to First Data, or an Affiliate or
Subsidiary of First Data, and all references to AMEX in this Agreement shall be
deemed to include AMEX and such assignee until all obligations of the Debtor to
AMEX under the Master Agreement
40
<PAGE>
have been satisfied, at which time all references to AMEX shall be deemed to be
to such assignee. It is hereby acknowledged and agreed that any assignment by
AMEX pursuant to this Section 8.7 likely will be on a location-by-location basis
-----------
and, therefore, the Debtor, on a system-wide basis, will be offering both
American Express(R) Money Orders as well as those of a permitted assignee until
such conversion is completed.
Section 8.8. Invalidation of Payments. To the extent that any of the
Beneficiaries receive payments on the Secured Debt or receive Proceeds of
Collateral which are subsequently invalidated, declared to be fraudulent or
preferential, or are required to be repaid to a trustee, receiver or any other
Person under the Bankruptcy Code or under state, federal or common law, then, to
the extent the payments or Proceeds are so repaid, the Secured Debt or part
thereof which was intended to be satisfied shall be revived and will continue to
be in full force and effect as if those payments or Proceeds had never been
received by the Beneficiary.
Section 8.9. Restrictions on the Admission of Other Beneficiaries.
(a) Subject to the restrictions set forth in this Section 8.9, the Debtor has
-----------
the right to bring in other Beneficiaries under this Agreement. Other
Beneficiaries may not be included hereunder so long as:
(i) a Notice of Actionable Default has been given and not withdrawn,
unless the proceeds received by the Debtor in connection with the loan from
such proposed Beneficiary shall be used to pay, in full, the Obligations
then owed to all Beneficiaries existing at such time; or
(ii) the incurring of the proposed additional indebtedness by the
Debtor will cause the Debtor to be in violation of the terms of any
Beneficiary Agreement existing at such time.
(b) At least 15 Business Days prior to the closing of a transaction
with a proposed Beneficiary, the Debtor shall provide a written notice to each
Beneficiary of the designation of such proposed Beneficiary and shall certify
(which certification shall include reasonably detailed supporting calculations)
in such notice that the incurring of the proposed additional indebtedness by the
Debtor will not cause the Debtor to be in violation of the terms of any
Beneficiary Agreement existing at such time.
(c) In no event may a proposed Beneficiary be included under this
Agreement unless the requirements of Section 8.9(a) have been satisfied and (X)
--------------
the commitment made by such proposed Beneficiary pursuant to such proposed
Beneficiary's Beneficiary
41
<PAGE>
Agreement is greater than or equal to $10.0 million, (Y) such proposed
Beneficiary agrees in writing to be bound in all respects by the terms of the
Security Agreement, this Agreement and all related documents and (Z) such
proposed Beneficiary agrees in writing to a maximum amount which it will advance
or loan to the Debtor and which will constitute Secured Debt hereunder.
(d) Notwithstanding any provision in this Agreement or in any
Security Document to the contrary, unless the Mandatory Holders provide their
prior written consent, any amounts advanced or loaned by such additional
Beneficiary (including interest, fees and expenses thereon) to the Debtor in
excess of the limitation agreed to by such Beneficiary, pursuant to Section
-------
8.9(c)(Z) of this Agreement, shall not be secured by the Security Agreement and
- ---------
shall not be covered by the terms of this Agreement, and such excess amounts
shall be excluded from the definitions of Beneficiary Obligations, Obligations
and Secured Debt.
SECTION 9
MISCELLANEOUS
Section 9.1. Amendments, Supplements and Waivers. (a) Except as set
forth in Section 9.1(b), this Agreement may not be amended, revised, restated or
--------------
supplemented without the prior written consent of the Mandatory Holders, the
Debtor and the Trustee.
(b) The Debtor and the Trustee, at any time and from time to time,
may enter into additional Security Documents or one or more agreements
supplemental hereto or to any Security Document, in form satisfactory to the
Trustee,
(i) to mortgage, pledge or grant a security interest in personal
property of a type or category which is set forth in Section 1.5 of the
Security Agreement in favor of the Trustee as additional security for the
Secured Debt pursuant to any Security Document, or
(ii) to cure any ambiguity, to correct or supplement any provision
herein or in any Security Document which may be defective or inconsistent
with any other provision herein or therein; provided, however, that any
-------- -------
such action contemplated in this clause (ii) shall not adversely affect the
interests of the Beneficiaries in any manner whatsoever.
Section 9.2. Notices. All notices, requests, demands and other
communications provided for or permitted hereunder
42
<PAGE>
shall be in writing (including telex and telecopy communications), shall be sent
by mail, telex, telecopier or hand delivery and, except as otherwise provided in
this Agreement, the cost thereof shall be for the sole account of the Debtor and
shall be added to the Obligations:
(a) If to the Debtor, to Ace Cash Express, Inc., 1231 Greenway Drive,
Suite 800, Irving, Texas 75038, Attention: Chief Financial Officer, or at such
other address as shall be designated by it in a written notice to the Trustee (a
copy of which the Trustee shall send to all other Beneficiaries), with a copy
thereof to Gardere Wynne Sewell & Riggs, L.L.P., 333 Clay Avenue, Suite 800,
Houston, Texas 77002 Attention: Robert W. Bramlette; provided, however, that the
-------- -------
failure to provide a copy of such communications to Gardere Wynne Sewell &
Riggs, L.L.P. shall not affect the validity or effectiveness of such
communications.
(b) If to the Trustee, to the Trustee at: Wilmington Trust Company,
Rodney Square North, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration, or at such other address as shall be designated by it in a
written notice to the Debtor and the Beneficiaries, with a copy thereof to
Richards, Layton & Finger, 920 King Street, Wilmington, Delaware, 19801
Attention: William J. Wade; provided, however, that the failure to provide a
-------- -------
copy of such communications to Richards, Layton & Finger shall not affect the
validity or effectiveness of such communications.
(c) If to AMEX, to American Express Travel Related Services Company,
Inc., c/o Integrated Payment Systems Inc., 6200 South Quebec, Englewood,
Colorado 80111, Attention: President, or at such other address as shall be
designated by it in a written notice to the Trustee (a copy of which the Trustee
shall send to all other Beneficiaries), with a copy thereof to Sidley & Austin,
One First National Plaza, Chicago, Illinois 60603, Attention: H. Bruce
Bernstein; provided, however, that the failure to provide a copy of such
-------- -------
communications to Sidley & Austin shall not affect the validity or effectiveness
of such communications.
(d) If to Principal Mutual, to Principal Mutual Life Insurance
Company, 711 High Street, Des Moines, Iowa 50392-0800, Attention: Investment
Department--Securities Division, or at such other address as shall be designated
by it in a written notice to the Trustee (a copy of which the Trustee shall send
to the other Beneficiaries).
(e) If to any other Beneficiary, to such address and Persons as
designated by such Beneficiary in a written notice to the Debtor, the Trustee
and the other Beneficiaries.
43
<PAGE>
All such notices, requests, demands and communications shall, to be
effective hereunder, be in writing or by a telecommunications device capable of
creating a written record, and shall be deemed to have been given or made when
delivered by hand or five (5) days after its deposit in the mail, first class or
air postage prepaid, or in the case of notice by such a telecommunications
device, when properly transmitted if on the same day the sender sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid); provided, however, that any notice, request, demand or other
-------- -------
communication to the Trustee shall not be effective until received.
Section 9.3. Guaranties. As of the date hereof, each of the Debtor's
Subsidiaries has executed a Guaranty, and the Debtor shall cause any other
corporation or entity which becomes a Subsidiary of the Debtor to execute and
become a party to a Guaranty within five Business Days following the date such
corporation becomes a Subsidiary of the Debtor. The Debtor shall promptly
forward to each Beneficiary an original executed copy of all Guaranties executed
after the date hereof.
Section 9.4. Trust Funds Remittance Statutes. NOTHING IN THIS
AGREEMENT OR IN ANY SECURITY DOCUMENT SHALL BE CONSTRUED AS, AND AMEX HAS NOT
INTENDED THERE TO BE, A WAIVER OF ANY RIGHTS AMEX MAY HAVE UNDER APPLICABLE
STATE OR FEDERAL LAWS (INCLUDING FEDERAL BANKRUPTCY LAWS) RELATING TO THE
OBLIGATIONS OF ACE TO REMIT TRUST FUNDS TO AMEX. HOWEVER, IF AT ANY TIME AFTER
THE TRUSTEE HAS RECEIVED A NOTICE OF ACTIONABLE DEFAULT, THE APPLICATION OF SUCH
LAWS WOULD RESULT IN ANY RECOVERIES BY AMEX, AMEX SHALL REMIT SUCH RECOVERIES TO
THE TRUSTEE FOR DISTRIBUTION IN ACCORDANCE WITH SECTION 4.4 OF THIS AGREEMENT.
-----------
Section 9.5. Restricted Actions. Notwithstanding any provision to the
contrary in this Agreement, the Security Agreement or any related documents, no
Restricted Actions shall be taken without the consent of the Mandatory Holders.
Section 9.6. Headings. Section, subsection and other headings used in
this Agreement are for convenience only and shall not affect the construction of
this Agreement.
Section 9.7. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction; provided that this Agreement shall be construed so as to
--------
give effect to the intention expressed in Section 3.10 hereof.
------------
44
<PAGE>
Section 9.8. Dealings with the Debtor. (a) Upon any application or
demand by the Debtor to the Trustee to take or permit any action under any of
the provisions of this Agreement or any Security Document, the Debtor shall
furnish to the Trustee, with copies to AMEX, the Noteholders and each other
Beneficiary, a certificate signed by a Responsible Officer of the Debtor stating
that all conditions precedent, if any, provided for in this Agreement or any
Security Document relating to the proposed action have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Agreement or any Security Document, relating to such particular application or
demand, no additional certificate or opinion need be furnished.
(b) Any opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate of Responsible Officers of the Debtor
delivered to the Trustee.
Section 9.9. Claims Against the Trustee. Any claims or causes of
action which AMEX, the Noteholders, any other Beneficiary or the Debtor shall
have against the Trustee shall survive the termination of this Agreement and the
release of the Collateral hereunder.
Section 9.10. Binding Effect. (a) This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and shall inure to
the benefit of the Beneficiaries and their respective successors and assigns,
and nothing herein or in any Security Document is intended or shall be construed
to give any other Person any right, remedy or claim under, to or in respect of
this Agreement, any Security Document, the Collateral or the Trust Estate.
(b) The Debtor has agreed in Sections 5.3, 5.4, 5.5 and 5.6 of this
------------ --- --- ---
Agreement to pay on demand the Trustee's Fees. In the event the Debtor fails to
pay the Trustee's Fees, each Beneficiary (other than the Trustee) has agreed in
Section 8.6 of this Agreement to pay the Trustee's Fees, ratably in accordance
- -----------
with the proportion of the Secured Debt held by such Beneficiary or, if there
has been any recovery of the Secured Debt, in accordance with the proportion of
(i) the Secured Debt recovered by such Beneficiary to (ii) the aggregate amount
of Secured Debt recovered by all Beneficiaries, all as set forth in this
Agreement.
Section 9.11. Conflict with Other Agreements. The parties agree that
in the event of any conflict between the provisions of this Agreement and the
provisions of any of the Security Documents, the provisions of this Agreement
shall control.
45
<PAGE>
Section 9.12. Governing Law. The provisions of this Agreement
creating a trust for the benefit of the Beneficiaries and setting forth the
rights, duties, obligations and responsibilities of the Trustee hereunder shall
be governed by and construed in accordance with the internal laws (as opposed to
conflicts of law provisions) and decisions of the State of Delaware, so long as
Wilmington Trust Company shall serve as Trustee hereunder. In all other
respects, including, without limitation, all matters governed by the Uniform
Commercial Code, and if Wilmington Trust Company shall cease to serve as Trustee
hereunder, this Agreement shall be governed by and construed in accordance with
the internal laws (as opposed to conflicts of law provisions) and decisions of
the State of New York.
Section 9.13. Counterparts. This Agreement may be executed in
separate counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Collateral Trust Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
ACE CASH EXPRESS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.
By: Integrated Payment Systems Inc.,
agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
WILMINGTON TRUST COMPANY, not in its
individual capacity (except as otherwise
expressly provided in this Agreement) but
solely as Trustee
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
Exhibit 10.31
ASSIGNMENT OF DEPOSIT ACCOUNTS
AND
SECURITY AGREEMENT
by and between
ACE CASH EXPRESS, INC.
and
WILMINGTON TRUST COMPANY, as Trustee
-------------------
Dated as of November 15, 1996
<PAGE>
ASSIGNMENT OF DEPOSIT ACCOUNTS
AND SECURITY AGREEMENT
This ASSIGNMENT OF DEPOSIT ACCOUNTS AND SECURITY AGREEMENT (this "Security
--------
Agreement") dated as of November 15, 1996 is by and between ACE CASH EXPRESS,
- ---------
INC. (doing business sometimes under the name of Ace America's Cash Express), a
Texas corporation (the "Debtor"), and WILMINGTON TRUST COMPANY, a Delaware
------
banking corporation, not in its individual capacity but solely as Trustee (the
"Trustee").
- --------
W I T N E S S E T H:
WHEREAS, the Debtor and American Express Travel Related Services Company,
Inc., a New York corporation ("AMEX") have entered into that certain 1992 Master
----
Agreement dated as of October 14, 1992 (the "1992 Master Agreement"), as amended
---------------------
by the First Amendment to 1992 Master Agreement dated as of December 1, 1992
(the "First Master Agreement Amendment"), as further amended by those certain
--------------------------------
letter agreements dated respectively on or about December 6, 1993, October 26,
1994, August 2, 1994 and July 13, 1995, as further amended by the Second
Amendment to 1992 Master Agreement dated as of September 8, 1995 (the "Second
------
Master Agreement Amendment"), as further amended by that certain letter
- --------------------------
agreement dated February 1, 1996 (the "February 1996 Letter Agreement"), and as
------------------------------
further amended by the Third Amendment to 1992 Master Agreement dated as of the
date hereof (the "Third Master Agreement Amendment") (the 1992 Master Agreement,
--------------------------------
as amended by the foregoing Amendments and Letter Agreements, and as hereafter
amended, is hereinafter referred to as the "Master Agreement");
----------------
WHEREAS, the February 1996 Letter Agreement provides, in part, that the
provisions in the 1992 Master Agreement relating to MoneyGram/SM/ Money Transfer
Services, the MoneyGram/SM/ Agency and Trust Agreement, the operations of the
Debtor in respect thereof and Proceeds (or Trust Funds) in respect thereof shall
be deemed severed and deleted from the provisions of the 1992 Master Agreement;
WHEREAS, the Debtor and AMEX have entered into that certain Amended and
Restated Assignment of Deposit Accounts and Security Agreement dated as of
December 1, 1992, as amended, (the "AMEX Security Agreement") and other Security
-----------------------
Documents (as defined in the Collateral Trust Agreement (as hereinafter
defined)) pursuant to which the Debtor assigned certain deposit accounts and
granted a security interest in all assets, other than real property, of the
Debtor to AMEX to secure the AMEX Obligations (as hereinafter defined);
<PAGE>
WHEREAS, the Debtor and Principal Mutual Life Insurance Company, an Iowa
corporation ("Principal Mutual"), have entered into that certain Note Purchase
----------------
Agreement dated as of the date hereof (the "Principal Mutual Note Agreement"),
-------------------------------
pursuant to which Principal Mutual has agreed to purchase from the Debtor
$20,000,000 in aggregate principal amount of the Debtor's 9.03% Senior Secured
Notes due 2003 and, in return, the Debtor has agreed, among other things, to
assign certain deposit accounts and grant a security interest in certain assets
to the Trustee to secure the Principal Mutual Obligations (as hereinafter
defined);
WHEREAS, AMEX and Principal Mutual have agreed that it is in their best
interests for the Debtor to enter into this Security Agreement which grants the
Trustee, for the benefit of AMEX, Principal Mutual, other Noteholders (as
defined in the Collateral Trust Agreement) and other Beneficiaries (as defined
in the Collateral Trust Agreement), a security interest in the Collateral (as
hereinafter defined);
WHEREAS, AMEX and Principal Mutual have agreed that it is in their best
interests for the Debtor, the Trustee, AMEX and Principal Mutual to enter into
the Collateral Trust Agreement dated as of the date hereof (the "Collateral
----------
Trust Agreement") which sets forth the respective rights and interests of the
- ---------------
Trustee, AMEX, the Noteholders and any other Beneficiaries in and to the
Collateral; and
WHEREAS, AMEX is willing, to the extent provided in Section 8.1 of the
Collateral Trust Agreement, to subordinate the security interests granted to it
pursuant to the AMEX Security Agreement and other Security Documents provided
the Trustee, Principal Mutual and the Debtor execute and deliver, and the other
Noteholders and Beneficiaries, if any, agree to be bound by, the Collateral
Trust Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, all terms describing items or types of
-----------
collateral defined in the Uniform Commercial Code in effect in the State of New
York shall have the meanings given therein unless otherwise defined herein,
capitalized terms used herein that are not otherwise defined in this Security
Agreement shall have the meanings ascribed to them in the Collateral Trust
Agreement, and the following terms shall have the meanings given in this
Section 1.
- ---------
1.1. The term "AMEX Obligations" shall mean all existing and future
----------------
obligations and liabilities of the Debtor to AMEX and/or its assignee under the
Master Agreement, the AMEX Security Agreement and any and all other agreements,
documents
2
<PAGE>
and instruments heretofore, now or hereafter executed in connection therewith or
which relate thereto other than the principal amount of Revolving Commitment
Advances made in excess of $18.5 million (plus interest, fees and expenses
thereon) without the consent required pursuant to Section 8.5 of the Collateral
Trust Agreement. The term AMEX Obligations shall not include obligations or
liabilities of the Debtor to AMEX in connection with MoneyGram/SM/ Money
Transfer Services, the MoneyGram/SM/ Agency and Trust Agreement, the operations
of the Debtor in respect thereof or any other MoneyGram/SM/-based obligations or
liabilities; provided nothing contained herein is intended to change the
--------
Debtor's obligations thereunder with respect to moneys to be transmitted to
AMEX.
1.2. The term "Beneficiary Obligations" shall mean the AMEX
-----------------------
Obligations, the Principal Mutual Obligations and all existing and future
obligations and liabilities of the Debtor to any and all Beneficiaries under all
Beneficiary Agreements and any and all agreements, documents and instruments
executed in connection therewith or which relate thereto other than (i) with
respect to AMEX, the principal amount of Revolving Commitment Advances made in
excess of $18.5 million (plus interest, fees and expenses thereon) without the
consent required pursuant to Section 8.5 of the Collateral Trust Agreement, (ii)
with respect to Principal Mutual and the other Noteholders, the principal amount
advanced or loaned by Principal Mutual or any other Noteholder made in excess of
$20 million (plus interest, fees and expenses thereon) without the consent
required pursuant to Section 8.4 of the Collateral Trust Agreement and (iii)
with respect to any other Beneficiary, the principal amount advanced or loaned
by such Beneficiary made in excess of the limitation agreed to by such
Beneficiary pursuant to Section 8.9(c)(Z) of the Collateral Trust Agreement
(plus interest, fees and expenses thereon) without the consent required by
Section 8.9(d) of the Collateral Trust Agreement.
1.3. The term "Center" shall mean a location where the Debtor conducts
------
check cashing and related business. All of the Debtor's Centers are identified
on Schedule 1 to the Collateral Trust Agreement, and the term Center shall
----------
include, without limitation, each and every location where the Debtor conducts
check cashing and related business irrespective of whether such location is
listed on Schedule 1 to the Collateral Trust Agreement or is timely disclosed on
----------
a Certificate of Update.
1.4. The term "Certificate of Update" shall mean a Certificate signed
---------------------
by a Responsible Officer of the Debtor which sets forth any changes during the
prior month to Schedules 1, 2, 3, 4, 5, 6 and 7 to the Collateral Trust
----------- - - - - - -
Agreement.
1.5. The term "Collateral" shall mean and include:
----------
3
<PAGE>
a. All of the Deposit Accounts;
b. All of the Receivables;
c. All of the Inventory;
d. All of the Equipment;
e. All documents and instruments (whether negotiable or
nonnegotiable), chattel paper, checks (of any nature), money orders (in blank
form or completed), drafts, notes, investments, securities, acceptances,
certificates of deposit, trust receipts, and any other writings evidencing a
right to the payment of money, and all cash and currency, whether now or
hereafter owned by the Debtor, whether or not in the possession of the Debtor
(collectively, the "Instruments");
-----------
f. All certificates of title, documents of title, certificates
and policies of insurance, fidelity bonds, whether now or hereafter owned by the
Debtor, and whether or not in the possession of the Debtor;
g. All trademarks, trade names, service marks, registration
marks, logos and the like, whether now or hereafter owned by the Debtor;
h. (i) All of the Debtor's rights as a consignee or an unpaid
vendor, whether now owned or hereafter acquired; (ii) all additional amounts,
whether now owned or hereafter acquired, due to the Debtor from any Person,
irrespective of whether such additional amounts have been specifically assigned
to the Trustee; and (iii) all of the Debtor's right, title and interest in other
property, including warranty claims, relating to any goods whatsoever securing
the Obligations;
i. All of the Debtor's ledger sheets, files, records, books of
account, business papers and documents (including, but not limited to, computer
programs, source codes, object codes, tapes and related electronic data
processing software and system documentation and manuals), whether now owned or
hereafter acquired;
j. All of the Debtor's rights under the agreements and
contracts with Custodial Agents set forth in Schedule 2 to the Collateral Trust
----------
Agreement and such other agreements or contracts whether now or hereafter
entered into by the Debtor for the collection, safekeeping and/or deposit of
checks, drafts and other instruments or Collateral, together with all renewals,
extensions, amendments and modifications thereof (all such contracts and
agreements and rights of the Debtor thereunder are herein collectively called
the "Custodial Agreement Rights");
--------------------------
4
<PAGE>
k. All of the Debtor's other tangible and intangible assets,
including, but not limited to, any and all general intangibles and contract
rights, whether or not specifically enumerated above and whether now owned or
hereafter acquired; and
l. All accessions or accretions to, substitutes for and
proceeds and products of the assets of the Debtor described in the above
subsections a. through k., in whatever form, and all insurance proceeds and
proceeds of tort claims paid or payable in connection with the loss or damage of
any of the assets of the Debtor described in the above subsections a. through
k.;
excluding, however, from the above subsections a. through l., all hazardous and
nonhazardous wastes, including, but not limited to, recyclable waste materials.
Notwithstanding the foregoing or any other provision of the Security
Documents, the Trustee acknowledges and agrees that the Collateral shall not
include (i) any of the food stamp coupons or any other items held in trust by
the Debtor or any of the rights of the Debtor under that certain Food Stamp
Issuing Agent Contract with the Texas Department of Human Services, or (ii) any
of the lottery tickets or similar lottery items, together with any Deposit
Accounts established for purposes of complying with any applicable
jurisdiction's lottery statutes or governing regulations or any applicable
lottery contracts, any and all rights of the Debtor under lottery contracts and
applications with lottery authorities, and all cash and currency held in trust
by the Debtor and due to any of the various state lottery authorities, or (iii)
any instruments or contracts evidencing loans to consumers (provided cash
payments and other proceeds made or received on or in connection with such
instruments or contracts shall not be excluded), or (iv) any demand accounts
(whether interest-bearing or not, and if interest-bearing, then all interest
accrued and paid or payable thereon, whether now or hereafter established and
maintained from time to time by Debtor, and all moneys from time to time in or
credited to any and all such deposit accounts, including all earnings or profits
therefrom, in the form of interest or otherwise) held by the Debtor as agent for
third parties containing funds owned by such third parties to be used for the
payment of utility bills, to the extent (in the case of each of clause (i), (ii)
and (iv)) a grant of any security interest therein would be void or otherwise
impermissible in respect of such contract or property. Nothing contained in
this Section 1.5 or elsewhere in this Security Agreement shall be deemed or
-----------
interpreted to limit or otherwise diminish the exception provided for in (x)
Section 25 of the 1992 Master Agreement related to the sale, abandonment or
other disposal of worn-out tangible property in the ordinary course of business,
(y) Section 6.2.P. of the
5
<PAGE>
First Master Agreement Amendment, or (z) Section 9.1 of the Principal Mutual
Note Agreement which defines "Asset Disposition", in part, to exclude a transfer
made in the ordinary course of the Debtor's business involving property that is
either inventory held for sale or is no longer required in the operation of the
Debtor's business.
1.6. The term "Custodial Agent" shall mean an armored car service
---------------
organization utilized by the Debtor to transport Collateral from Centers to
Depositories at which Deposit Accounts are maintained. All of the Debtor's
Custodial Agents, and all of the Debtor's agreements with its Custodial Agents,
are identified on Schedule 2 to the Collateral Trust Agreement, and the term
----------
Custodial Agent shall include, without limitation, each and every armored car
service organization utilized by the Debtor irrespective of whether it is listed
on Schedule 2 to the Collateral Trust Agreement or is timely disclosed on a
----------
Certificate of Update.
1.7. The term "Custodial Agreement Rights" shall have the meaning set
--------------------------
forth in Section 1.5.j of this Security Agreement.
-------------
1.8. The term "Debtor" shall mean Ace Cash Express, Inc., together with
------
its successors and assigns. The Debtor also transacts business under the trade
name(s) identified on Schedule 3 to the Collateral Trust Agreement.
----------
1.9. The term "Deposit Accounts" shall mean all demand, time, savings,
----------------
passbook and other like accounts (including any account evidenced by a
certificate of deposit), whether interest-bearing or not, and if interest-
bearing then all interest accrued and paid or payable thereon, whether now or
hereafter established and maintained from time to time by the Debtor, and all
moneys from time to time in or credited to any and all such deposit accounts,
including all earnings or profits therefrom in the form of interest or
otherwise. All of the Debtor's Deposit Accounts are identified on Schedule 4 to
----------
the Collateral Trust Agreement, and the term Deposit Account shall include,
without limitation, each and every account established and maintained by the
Debtor at a Depository irrespective of whether such account is listed on
Schedule 4 to the Collateral Trust Agreement or is timely disclosed on a
- ----------
Certificate of Update.
1.10. The term "Depository" shall mean each financial institution at which
----------
a Deposit Account is maintained.
1.11. The term "Equipment" shall mean and include all of the Debtor's
---------
equipment, whether now owned or hereafter acquired, and includes all goods for
use in the Debtor's business (including, without limitation, all vehicles, motor
vehicles,
6
<PAGE>
mobile goods, machinery, furniture and trade fixtures) with all parts, equipment
and attachments relating thereto. The Equipment is located at the Locations of
Collateral identified on Schedule 5 to the Collateral Trust Agreement.
----------
1.12. The term "Instruments" shall have the meaning set forth in Section
----------- -------
1.5.e of this Security Agreement.
- -----
1.13. The term "Inventory" shall mean and include all of the Debtor's
---------
inventory, whether now owned or hereafter acquired, including, without
limitation, all Instruments, cash and currency maintained by the Debtor for sale
at its operating locations. The Inventory is located at the Locations of
Collateral identified on Schedule 5 to the Collateral Trust Agreement.
----------
1.14. The term "Obligations" shall mean and include, collectively, the
-----------
AMEX Obligations, the Principal Mutual Obligations, the Beneficiary Obligations,
all other obligations secured by this Security Agreement and all obligations due
the Trustee under the Collateral Trust Agreement.
1.15. The term "Obligor" shall mean any Person, other than the Debtor,
-------
obligated on or with respect to any Receivable, Instrument, document, chattel
paper or general intangible, however such obligation may arise or be evidenced,
whether such liability is direct or indirect, contingent or mature, primary or
secondary.
1.16. The term "Permitted Lien" shall mean the liens and security
--------------
interests in the assets of the Debtor permitted to exist under the Master
Agreement, the Security Documents, the Collateral Trust Agreement, the Principal
Mutual Note Agreement and all other Beneficiary Agreements, including, without
limitation, the liens and security interests in favor of AMEX pursuant to the
AMEX Security Agreement and the Master Agreement, which liens and security
interests are subordinate to the liens and security interests of the Trustee as
described in Section 8.1 of the Collateral Trust Agreement. A lien shall not be
a Permitted Lien unless it is permitted under each of the Master Agreement, each
Security Document, the Collateral Trust Agreement, the Principal Mutual Note
Agreement and each other Beneficiary Agreement.
1.17. The term "Principal Mutual Obligations" shall mean all existing and
----------------------------
future obligations and liabilities of the Debtor to Principal Mutual and the
other Noteholders under the Principal Mutual Note Agreement and any and all
other agreements, documents and instruments executed in connection therewith or
which relate thereto other than the principal amount advanced or loaned by
Principal Mutual or any other Noteholder made in excess of $20 million (plus
interest, fees and expenses thereon) without
7
<PAGE>
the consent required pursuant to Section 8.4 of the Collateral Trust Agreement.
1.18. The term "Receivables" shall mean and include the following,
-----------
whether now existing or hereafter arising: all of the Debtor's accounts and
rights to payment for goods sold or leased or for services rendered, all sums of
money due or becoming due with respect thereto, documents, instruments or
agreements pertaining thereto, all guaranties and security therefor, and
including all goods giving rise thereto and the rights pertaining to such goods
(e.g., the right of stoppage in transit), and all related insurance and proceeds
----
payable with respect to claims thereunder.
2. GRANT OF SECURITY INTEREST. To secure the full and prompt payment,
--------------------------
observance and performance of all of the Obligations and the Secured Debt (the
Obligations and the Secured Debt being hereinafter referred to collectively as
the "Liabilities"), the Debtor hereby assigns, as a pledge, the Deposit Accounts
-----------
to the Trustee, and grants to the Trustee a continuing security interest in all
of the Collateral, wherever located, whether in the Debtor's possession or in
the possession and control of a third party for the Debtor's or the Trustee's
account. The Debtor agrees that all the Debtor's ledger sheets, files, records,
books of account, business papers and documents shall, until delivered to or
removed by the Trustee, be kept by the Debtor in trust for the Trustee and
without cost to the Trustee in appropriate containers in safe places. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by the Debtor shall be deemed to include the foregoing security interest grant,
whether or not the same appears therein.
3. CUSTODY, INSPECTION, COLLECTION AND MAINTENANCE OF THE COLLATERAL AND
---------------------------------------------------------------------
RECORDS.
- -------
3.1. The Debtor will safeguard and protect all of the Collateral and
make no disposition thereof, except for the disposition of Inventory in the
ordinary and usual course of the Debtor's business or as otherwise permitted
under each of the Master Agreement, the Principal Mutual Note Agreement and each
other Beneficiary Agreement.
3.2. The Debtor shall maintain books and records pertaining to the
Collateral in such detail, form and scope as it currently does, or as the
Trustee, AMEX, the Required Noteholders or any other Beneficiary hereafter shall
reasonably require. At all reasonable times, the Trustee, AMEX, the
8
<PAGE>
Noteholders and all other Beneficiaries shall have full access to, and the right
to audit, check, inspect and make abstracts and copies from, the Debtor's books,
records, audits, correspondence and all other papers relating to the Collateral.
The Trustee, AMEX, the Noteholders and all other Beneficiaries, and their
respective agents, may enter upon any of the Debtor's premises at any time
during business hours and at any other reasonable time, and from time to time,
for the purpose of inspecting the Collateral and any and all records pertaining
thereto. The Trustee acknowledges that the Debtor's security procedures may
preclude unannounced inspections of some aspects of the Debtor's business, and
the Debtor agrees to cooperate fully with the Trustee in the exercise of its
rights hereunder. At any time an AMEX Event of Default, a Principal Mutual Event
of Default or an Event of Default (as defined in any other Beneficiary's
Beneficiary Agreement) exists, the Debtor shall pay when billed the reasonable
costs and expenses (including attorneys' fees) incurred by the Beneficiaries in
connection with any inspections in accordance with this Section 3.2. Nothing in
-----------
this Section 3.2 shall in any way diminish the Debtor's obligations under
-----------
Section 15 of Exhibit A to the 1992 Master Agreement, Sections 6.1.G and 7.1 of
the First Master Agreement Amendment or Section 7.5 of the Principal Mutual Note
Agreement.
3.3. The Debtor hereby irrevocably authorizes and directs all
accountants and auditors employed by the Debtor or the Trustee at any time
during the term of this Security Agreement during reasonable business hours
(unless the Trustee has received a Notice of Actionable Default and such Notice
of Actionable Default has not been withdrawn, then at any time) to exhibit and
deliver to the Trustee copies of any of the Debtor's financial statements, trial
balances or other accounting records of any sort in the accountant's or
auditor's possession, and to disclose to the Trustee any information they may
have concerning the Debtor's financial status and business operations. The
Debtor hereby authorizes all federal, state and municipal authorities to furnish
to the Trustee copies of reports or examinations relating to the Debtor, whether
made by the Debtor or otherwise; provided that the Trustee notifies the Debtor
--------
of the Trustee's receipt of such reports and examinations; and provided further
-------- -------
that the Trustee shall provide copies of such reports and examinations to each
other Beneficiary. At any time an AMEX Event of Default, a Principal Mutual
Event of Default or an Event of Default (as defined in any other Beneficiary's
Beneficiary Agreement) exists, the Debtor shall pay when billed the reasonable
costs and expenses (including attorneys' fees) incurred by the Beneficiaries in
connection with this Section 3.3. Nothing in this Section 3.3 shall in any way
----------- -----------
diminish the Debtor's obligations under Section 15 of Exhibit A to the 1992
Master Agreement, Sections 6.1.G and 7.1 of the First Master Agreement Amendment
or Section 7.5 of the Principal Mutual Note Agreement.
3.4. The Debtor will, immediately upon learning thereof, report to the
Trustee all matters materially affecting the loss, value, enforceability or
collectability of any material
9
<PAGE>
portion of the Collateral, and the Trustee shall forward a copy of such reports
to each Beneficiary.
3.5. Except as otherwise expressly provided herein, nothing herein
contained shall be construed to constitute the Debtor as the Trustee's agent for
any purpose whatsoever, and neither the Trustee nor any Beneficiary shall be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof, unless the same results from the Trustee's gross negligence
or willful misconduct. The Trustee does not, by any provision contained herein
or in any assignment or otherwise, assume any of the Debtor's obligations under
any contract or agreement assigned to the Trustee, and the Trustee shall not be
responsible in any way for the performance by the Debtor of any of the terms and
conditions thereof, except as the Trustee hereafter shall assume such
responsibility expressly in writing.
3.6. The Debtor has paid and shall continue to pay, when due, all
taxes, assessments and other charges levied or assessed upon any of the
Collateral; provided, however, the Debtor shall not be required to pay any such
-------- -------
taxes, assessments or other charges if any such nonpayment will not have a
Material Adverse Effect, or if (a) the amount, applicability or validity thereof
is currently being contested in good faith by appropriate action promptly
initiated and diligently conducted, (b) the Debtor shall have set aside on its
books reserves (segregated to the extent required by GAAP) reasonably determined
by the Debtor to be adequate with respect thereto, and (c) the Debtor has
notified the Trustee of such circumstances in detail reasonably satisfactory to
the Trustee.
3.7. The Debtor presently complies with, and shall continue to comply
with, all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the Collateral or any part thereof or
to the operation of the Debtor's business, noncompliance with which would have a
Material Adverse Effect. The Debtor may, however, contest or dispute any acts,
rules, regulations, orders and directions of those bodies or officials in any
reasonable manner; provided that the Trustee is satisfied that the contest or
--------
dispute will not have a Material Adverse Effect on the Trustee's security
interest in the Collateral.
3.8. The Trustee may at any time take such steps as the Trustee deems
necessary to protect the Trustee's security interest in and to preserve the
Collateral, including, but not limited to, the hiring of such security guards or
the placing of other security protection measures as the Trustee may deem
appropriate. The Trustee may, upon the receipt of a Notice of Actionable
Default and during such time as such Notice of
10
<PAGE>
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn pursuant to the Collateral Trust Agreement, employ
and maintain at any of the Debtor's premises a custodian who shall have full
authority to do all acts necessary to protect the Trustee's security interest in
the Collateral. The Debtor agrees to cooperate fully with all of the Trustee's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as the Trustee may direct. All of the Trustee's reasonable expenses
of preserving the Collateral, including any expenses relating to the
compensation and bonding of a custodian, shall be charged to the Debtor's
account and shall be deemed a part of the Obligations.
3.9. All costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred by the Trustee in all efforts made to enforce payment
of the Liabilities or otherwise affect collection of any of the Collateral, as
well as all costs and expenses, including attorneys' fees and legal expenses,
incurred in connection with the entering into a proposed or actual modification
to this Security Agreement or the enforcement of this Security Agreement and/or
instituting, maintaining, preserving, protecting, enforcing or foreclosing the
Trustee's security interest in any of the Collateral, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to the Trustee's transactions with the
Debtor, shall be charged to the Debtor's account and shall be deemed a part of
the Obligations.
3.10. The Debtor shall bear the full risk of loss with respect to the
Instruments, Inventory or Equipment in which the Trustee has a security
interest, except for any loss caused by the Trustee's gross negligence or
willful misconduct. At the Debtor's own cost and expense, the Debtor shall keep
all of the Instruments, Inventory and Equipment insured, with reputable
insurance companies in amounts reasonably acceptable to the Trustee, against the
hazards of fire, flood, sprinkler leakage, hazards covered by extended coverage
insurance and such other hazards as may be required by the Trustee pursuant to
the Collateral Trust Agreement; provided that such insurance coverage shall be
--------
consistent with industry practices. The Debtor shall cause to be delivered to
the Trustee the insurance policies or binders therefor and, at least fifteen
(15) days prior to the expiration of any such insurance, additional policies or
duplicates thereof, or binders, evidencing the renewal or replacement of such
insurance and the payment of the premiums therefor. Such policies shall
provide, in a manner reasonably satisfactory to the Trustee, that any losses
thereunder shall be payable first to the Trustee as the Trustee's interest may
appear. Each insurance policy to be provided under this Section 3.10 shall
------------
contain an agreement by the insurer that it will not cancel such policy except
upon at least thirty (30) calendar days' prior written notice to the Trustee,
and that any
11
<PAGE>
loss otherwise payable thereunder shall be payable notwithstanding any act or
negligence of the Debtor which might, absent such agreement, result in a
forfeiture of all or part of such insurance payment. In the event of any loss
thereunder, the insurers are directed by the Debtor to make payment for such
loss to the Trustee as its interest may appear if (a) the loss involves claims
which exceed in the aggregate Twenty Five Thousand and 00/100 Dollars
($25,000.00) or (b) the Trustee has received a Notice of Actionable Default and
such Notice of Actionable Default has not been withdrawn, otherwise the payment
for such losses shall be made directly to the Debtor. If any insurance losses
are paid by check, draft or other instrument payable to the Debtor and the
Trustee jointly, the Trustee may endorse the Debtor's name thereon and do such
other things as the Trustee may deem advisable to reduce the same to cash. All
loss recoveries received by the Trustee upon any such insurance and not remitted
to the Debtor may be applied to the Liabilities in the order provided in Section
4 of the Collateral Trust Agreement. The Debtor shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Section 3.10, unless the Trustee is included therein as a named
------------
insured, with loss payable as required in this Section 3.10. The Debtor shall
------------
immediately notify the Trustee whenever any such separate insurance is applied
for and shall promptly deliver to the Trustee the policy or policies or binders
evidencing the same.
3.11. Until the Debtor's authority to do so is terminated by the Trustee
following receipt by the Trustee of Notice of Actionable Default, the Debtor
will, at the Debtor's sole cost and expense, but on the Trustee's behalf and for
the Trustee's account, collect in trust for the Trustee all Instruments, cash
and currency included in the Collateral and received or receivable in the
ordinary course of its business (including all amounts unpaid on the Debtor's
Receivables), and shall not commingle such collections with the Debtor's other
funds or use the same except as permitted by the Master Agreement, the Principal
Mutual Note Agreement and any other Beneficiary Agreement. In the event of any
commingling, such collected amounts shall be deemed impressed with a trust for
the benefit of the Trustee.
3.12. At any time following receipt by the Trustee of a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn pursuant to the Collateral Trust Agreement,
without notice to the Debtor, the Trustee shall have the right to send notice of
the assignment of and the Trustee's security interest in Receivables to any
Obligor of the Debtor or any third party holding or otherwise concerned with any
of the Collateral. Thereafter, following the Trustee's receipt of a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall
12
<PAGE>
not have been withdrawn pursuant to the Collateral Trust Agreement, the Trustee
shall have the sole right to collect Receivables and take possession of the
Collateral. Any of the Trustee's actual, but reasonable, accrued collection
expenses under such circumstances, including, but not limited to, stationery and
postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, shall be charged to
the Debtor's account and be deemed a part of the Obligations.
3.13. Upon the Trustee's request and upon the creation of any Receivables,
or at such intervals as the Trustee may require, the Debtor shall provide the
Trustee with such schedules, documents and/or information regarding the
Receivables as the Trustee reasonably may require. The Trustee shall have the
right to confirm and verify all Receivables and do whatever the Trustee
reasonably may deem necessary to protect the Trustee's security interest. The
items to be provided under this Section 3.13 are to be in form reasonably
------------
satisfactory to the Trustee and executed by the Debtor and delivered to the
Trustee from time to time solely for the Trustee's convenience in maintaining
records of the Collateral, and the Debtor's failure to deliver any of such items
to the Trustee shall not affect, terminate, modify or otherwise limit the
Trustee's security interest in any of the Collateral.
3.14. The Debtor shall not, without the Trustee's consent, compromise or
adjust any of the Receivables (or extend the time for payment thereof) or grant
any additional discounts, allowances or credits thereon other than, in each
case, in the ordinary and usual course of the Debtor's business.
3.15. If any of the Receivables includes a charge for any tax payable to
any governmental taxing authority, the Trustee is hereby authorized in its
discretion to pay the amount thereof to the proper taxing authority for the
Debtor's account and to charge the Debtor's account therefor, such amount shall
be deemed a part of the Obligations. The Debtor shall notify the Trustee if any
of the Receivables includes any tax due to any such taxing authority, and in the
absence of the Debtor's notice or the Trustee's actual knowledge of the
inclusion of any tax due, the Trustee shall have the right to retain the full
proceeds of such Receivables and shall not be liable for any taxes that may be
due from the Debtor by reason of the sale and delivery creating such
Receivables.
3.16. The Trustee shall have the irrevocable right, upon the receipt of a
Notice of Actionable Default and during such time as such Notice of Actionable
Default shall not have been withdrawn pursuant to the Collateral Trust
Agreement, to receive, endorse, assign and/or deliver in the name of the Trustee
or the Debtor any check, draft or other Instrument, and
13
<PAGE>
the Debtor hereby waives notice of presentment, protest and nonpayment of any
Instrument so endorsed. The Debtor hereby irrevocably appoints the Trustee or
the Trustee's designee as the Debtor's attorney-in-fact with power to endorse
the Debtor's name upon any Instruments or other evidences of payment or
Collateral that may come into the Trustee's possession; to sign the Debtor's
name on any invoice relating to any of the Receivables, drafts against Obligors,
assignments and verifications of Receivables and notices to Obligors; to send
verifications of Receivables to any Obligor; to notify the postal authorities to
change the address for delivery of mail addressed to the Debtor to such address
as the Trustee may designate; to sign the Debtor's name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by the Trustee to preserve, protect or perfect the Trustee's interest in the
Collateral and to file the same; and to do all other acts and things necessary
to carry out the full intent of this Security Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission, nor for any
error of judgment or mistake of fact or law, unless resulting from gross
negligence or willful misconduct; this power being coupled with an interest is
irrevocable while any of the Liabilities remain unpaid. Notwithstanding the
generality of the foregoing provisions, the Trustee acknowledges that its
exercise of such powers and authority shall be solely in a manner consistent
with, and for the purpose of, enforcement, maintenance and protection of its
rights under this Security Agreement and the Collateral Trust Agreement for the
purposes thereof.
3.17. The Trustee shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any Instrument, or for any damage resulting therefrom unless resulting from its
gross negligence or willful misconduct. When entitled to exercise its rights
and powers hereunder, the Trustee may, without consent from the Debtor, sue upon
or otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or release the
Obligor thereon; provided that the Trustee shall provide the Debtor written
--------
notice of any actions taken by the Trustee pursuant to this Section 3; provided
--------- --------
further, however, that the Trustee's failure to provide the Debtor with such
- ------- -------
written notice shall not affect the validity of the Trustee's actions taken
hereunder.
3.18. The Inventory subject to the Trustee's security interest may not be
taken or removed from the location(s) indicated in Schedule 5 to the Collateral
----------
Trust Agreement, except if the Inventory is deposited into a Deposit Account or
is moved
14
<PAGE>
to a new location and the Debtor has previously filed a financing statement
(which is substantially similar to the financing statements filed by the Debtor
in connection with the execution of this Security Agreement) in the applicable
jurisdiction with respect to such new location.
3.19. Following the Trustee's receipt of a Notice of Actionable Default
and during such time as such Notice of Actionable Default shall not have been
withdrawn pursuant to the Collateral Trust Agreement, then upon notice to the
Debtor, the Inventory subject to the Trustee's security interest shall not be
sold or taken or removed from the location(s) indicated in Schedule 5 to the
----------
Collateral Trust Agreement, except for deposit into a Deposit Account or except
with the Trustee's prior written consent and upon substitution of other
Collateral in form and amount satisfactory to the Trustee in the Trustee's sole
discretion.
3.20. The Debtor shall keep and maintain the Equipment in good order and
repair, ordinary wear and tear excepted, at the location(s) indicated in
Schedule 5 to the Collateral Trust Agreement (except that, as long as the
- ----------
Equipment remains subject to a perfected security interest in favor of the
Trustee, the Debtor may move the Equipment from one location specified in
Schedule 5 to the Collateral Trust Agreement, to another location specified in
- ----------
Schedule 5 to the Collateral Trust Agreement), and shall not move, sell or
- ----------
otherwise dispose of the Equipment without the prior written consent of the
Trustee, except for disposals and sales in the ordinary course of business or
Equipment which is moved to a new location and the Debtor has previously filed a
financing statement (which is substantially similar to the financing statements
filed by the Debtor in connection with the execution of this Security Agreement)
in the applicable jurisdiction with respect to such new location.
3.21. The Equipment shall be and shall remain personal property, and
nothing shall affect the character of the Equipment or cause the Equipment to
become part of realty, or prevent the Trustee from removing it from the premises
on which it is located or to which it may be attached following receipt by the
Trustee of a Notice of Actionable Default and during such time as such Notice of
Actionable Default shall not have been withdrawn pursuant to the Collateral
Trust Agreement.
3.22. The Debtor shall provide the Trustee, with copies to AMEX, the
Noteholders and each other Beneficiary, on or within ten (10) days after the end
of each month, a Certificate of Update.
4. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Debtor hereby makes the
-----------------------------------------
following representations, covenants and warranties, which shall be deemed to be
incorporated by
15
<PAGE>
reference, as true and correct in all material respects, in (a) each request for
an Advance or Revolving Commitment Advance under the Master Agreement and at the
time of the funding thereof by AMEX and (b) any request for an advance or the
funding thereof in connection with any other Indebtedness of the Debtor to AMEX,
the Noteholders or any other Beneficiary for borrowed money, and each of the
following representations, covenants and warranties shall be deemed repeated and
confirmed, in all material respects, with respect to each item of the Collateral
as it is created or otherwise acquired by the Debtor:
4.1. The information set forth herein with respect to the definitions of
"Custodial Agent," "Debtor," "Deposit Accounts," "Inventory" and "Equipment," as
defined in Section 1 of this Security Agreement, and the agreements with
---------
Custodial Agents listed in Schedule 2 to the Collateral Trust Agreement, is
----------
complete and accurate in all material respects as of the date of this Security
Agreement.
4.2. The execution, delivery and performance hereof and of any other
document executed and delivered by the Debtor in connection with the Obligations
are within the Debtor's corporate powers, have been duly authorized by the
Debtor, and comply in all material respects with any applicable law, rule or
regulation or the terms of the Debtor's current Restated Articles of
Incorporation, Bylaws or other applicable documents, instruments or agreements
relating to the Debtor's corporate organization or governance or material to the
conduct of the Debtor's business, or of any indenture or other material
agreement or undertaking to which the Debtor is a party or by which the Debtor
is bound, except as permitted under each of the Master Agreement, the Principal
Mutual Note Agreement and any other Beneficiary Agreement.
4.3. There is no litigation or proceeding pending or, to the best
knowledge of the Debtor, threatened against the Debtor or any of its assets
which, if determined adversely to the Debtor, reasonably may be expected to
result in a material adverse change in the Debtor's financial condition or
materially affect a material portion of the assets of the Debtor, the authority
of the Debtor to enter into this Security Agreement or the validity or
enforceability of this Security Agreement or the priority of the Trustee's lien.
4.4. At the time the Collateral becomes subject to the Trustee's security
interest: (a) the Debtor shall be the sole owner of and fully authorized to
sell, transfer, pledge and/or grant a first security interest in each and every
item of the Collateral, which interests shall be prior to the already existing
secured interests in favor of AMEX; (b) all documents, instruments and
agreements shall be true and correct and in all respects what they purport to
be; (c) all signatures and
16
<PAGE>
endorsements that appear thereon shall be genuine and all signatories and
endorsers shall have full capacity to contract; and (d) none of the transactions
underlying or giving rise to the Collateral shall violate in any material
respect any applicable state or federal laws or regulations, and all documents
or instruments relating to the Collateral shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms (subject to exceptions for insolvency laws and equitable principles).
4.5. The Debtor shall from time to time take such actions as the Trustee
may from time to time reasonably request in writing by way of obtaining,
executing, delivering and/or filing financing statements, landlord's or
mortgagee's waivers, and other notices and amendments and renewals thereof, and
the Debtor shall take any and all steps and observe such formalities as may be
necessary or as the Trustee may reasonably request, in order to create and
maintain a valid first lien upon, pledge of, or paramount security interest in
the Collateral, except with respect to any Permitted Lien. All charges,
expenses and fees which the Trustee may incur in filing any of the foregoing,
and any local taxes relating thereto, shall be charged to the Debtor's account
and be deemed a part of the Obligations, or, at the Trustee's option, shall be
paid to the Trustee immediately upon demand. The Debtor hereby authorizes the
Trustee to (a) execute and file at any time or times one or more financing
statements with respect to all or part of the Collateral, signed only by the
Trustee, and (b) file the original or a photocopy of this Security Agreement as
a financing statement.
4.6. Until termination and release of the security interests granted
pursuant to this Security Agreement as provided in the Collateral Trust
Agreement, the security interest in the Collateral hereby granted to the Trustee
shall continue in full force and effect. Until such time, the Debtor shall not,
without the Trustee's prior written consent, pledge, sell, assign, transfer,
create a security interest in, or encumber or allow to be encumbered in any way,
any part of the Collateral to anyone other than the Trustee, except for the sale
of Inventory in the ordinary course of business, the disposition of property
which no longer has any valuable utility or use in the Debtor's operations and
Permitted Liens. The Debtor hereby agrees to defend the Trustee's interest in
the Collateral against any and all persons whatsoever.
4.7. The Debtor shall execute and deliver, or cause to be executed and
delivered, to the Trustee, with a copy to each Beneficiary, from time to time,
upon the Trustee's reasonable request (in writing), such supplemental
agreements, statements, assignments, and transfers, or instructions or documents
relating to the Collateral, and such other instruments as the Trustee so
17
<PAGE>
requests, in order that the full intent of this Security Agreement may be
carried into effect.
4.8. All balance sheets, earnings statements and other financial data
which have been or may hereafter be furnished to the Trustee did and do and
shall fairly represent the Debtor's financial condition as of the dates thereof
and/or the results of the Debtor's operations for the period for which the same
are furnished and have been and shall be prepared in accordance with GAAP,
except that interim financial statements will not contain footnotes and will be
subject to year-end adjustments, and any material adverse change in such
financial condition or the Debtor's operations since the date of each such
report shall be disclosed at the time of delivery thereof. The Debtor shall
continue to furnish whatever information or reports concerning the Collateral
and the Debtor's financial condition that the Trustee may reasonably request
during the term of this Security Agreement. All other information, reports and
other papers and data furnished to the Trustee are and shall be, at the time the
same are so furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give the Trustee a true and
accurate knowledge of the subject matter; provided, however, that any
-------- -------
information, reports and other papers or data furnished by the Debtor to the
Trustee as (a) budgets or forecasts shall be only what the Debtor believes to be
reasonable under the circumstances, and (b) drafts of documents shall be subject
to completion by any subsequent drafts and the final version of such documents.
The Trustee acknowledges that only the annual financial statements of the Debtor
will be audited. The Debtor agrees that it shall provide each Beneficiary
copies of any documents provided to the Trustee pursuant to this Section 4.8.
-----------
4.9. To the best knowledge of the Debtor, (a) each of the Receivables is
and shall be a good and valid account representing the amount of the undisputed
bona fide indebtedness incurred by the customer therein named, for a fixed sum
as set forth in the invoice relating thereto with respect to an absolute sale
and delivery of goods by the Debtor, or work, labor and/or services rendered by
the Debtor, and (b) none of the Receivables is or shall be subject to any
defense, setoff, counterclaim, discount or allowance, except as permitted by
Section 3.14 or as disclosed in writing by the Debtor to the Trustee.
- ------------
4.10. The Debtor shall give the Trustee written notice of each office at
which the Debtor keeps its records pertaining to accounts, contract rights and
general intangibles and the location of the Debtor's chief executive office.
Until and except as such notice is given, all such records shall be kept at the
Debtor's address as it appears in Section 9.2 of the Collateral Trust Agreement.
The Debtor shall promptly (but in any event no later than five (5) days after
the Debtor first has
18
<PAGE>
knowledge of any event described in clause (c) and (d) below in this Section
-------
4.10) give the Trustee written notice of: (a) any change in the location of
- ----
such records, its chief executive office, the Inventory, the Equipment or its
corporate name; (b) any additional trade name under which the Debtor transacts
business; (c) the filing of any liens or judgments against the assets of the
Debtor; and (d) any litigation or proceedings which if determined adversely to
the Debtor reasonably may be expected to have a Material Adverse Effect.
4.11. (a) The Debtor and the Trustee have delivered or will be delivering
letters of instruction to, and have obtained or will be obtaining agreements
from, the Depositories with respect to the Deposit Accounts. Such letters of
instruction shall be substantially similar to Exhibit A or B to the Collateral
--------- -
Trust Agreement, as required by Section 4.14 of this Agreement, except for
------------
changes approved by AMEX; provided such changes approved by AMEX do not (i)
--------
prejudice the Noteholders to a greater extent than any other Beneficiary (other
than the Trustee) or (ii) substantially adversely affect the security interests
and liens granted to the Trustee under this Security Agreement. To enable the
Depositories' continuing compliance with all such instructions or agreements,
the Debtor agrees that all cash, checks and other Instruments received in its
operations shall be deposited initially by or for the account of the Debtor only
in those Deposit Accounts designated as either a "Currency Account" (with
respect to cash) or a "Deposit Account" (with respect to checks and other
Instruments) in each such letter of instruction, except for cash retained at or
delivered to the premises at which the Debtor conducts its business or funds
transfers between Deposit Accounts, in either case as permitted by such
instructions or agreements.
(b) No deposit, account, certificate of deposit, check, note, draft
or other instrument has been or shall be received by the Debtor unless the same
is pledged and assigned to the Trustee, and each check, draft and all other
Instruments are or shall be (i) duly endorsed by the Debtor "for deposit only"
to a Deposit Account (or an equivalent endorsement), (ii) delivered to the
Trustee, a Custodial Agent or another designated agent, bailee or trustee for
the Trustee no later than the next Business Day following receipt by the Debtor
and (iii) deposited into a Deposit Account no later than the next Business Day
following the date the Debtor receives the same; provided that, for purposes of
--------
subclauses (ii) and (iii), the Debtor need not so deliver or deposit checks made
payable to the Debtor (including post-dated checks) until the aggregate amount
thereof received by the Debtor from time to time shall exceed Fifty Thousand and
00/100 Dollars ($50,000.00).
(c) Except for cash in Centers and cash in possession of Custodial
Agents, all cash received by the Debtor
19
<PAGE>
has been and shall, unless otherwise approved by the Trustee in writing,
continue to be deposited in one or more Deposit Accounts. Except as otherwise
expressly permitted herein or in the Collateral Trust Agreement, cash, checks,
drafts and other Instruments used or arising in connection with business
operations at the Centers shall be delivered, picked up and otherwise moved or
transported only by a Custodial Agent.
(d) The Debtor is and shall remain in full compliance with all
agency and trust agreements with Custodial Agents and Depositories, and all
representations, warranties and certifications of the Debtor, and, to the best
knowledge of the Debtor, all representations, warranties and certifications of
the Custodial Agent or Depository, as applicable, contained therein are and
shall continue to be true and correct in all material respects, and, to the best
knowledge and belief of the Debtor, all Custodial Agents and Depositories are
and shall continue to be in full compliance therewith.
4.12. With respect to any Deposit Account for which a Depository shall not
agree to provide a copy of the periodic bank statement therefor directly to the
Trustee, the Debtor agrees to provide a copy of such statement (exclusive of all
detail relating to items thereon) to the Trustee, and at the request of a
Beneficiary to such Beneficiary, by facsimile transmission no later than the
next Business Day following the date such statement is received by the Debtor.
The Debtor shall promptly provide a copy of any such detail to the Trustee and
each requesting Beneficiary by mail or courier for delivery on the next Business
Day following the facsimile transmission of the statement without detail.
4.13. Schedules 1, 2, 3, 4 and 5 to the Collateral Trust Agreement, as
----------- - - - -
amended and revised pursuant to Section 3.22 of this Security Agreement, are
------------
complete and accurate in all material respects.
4.14. At all times (i) at least 80% of the Debtor's Centers shall only use
Depositories which are bound by effective agreements substantially similar to
Exhibit A to the Collateral Trust Agreement and (ii) at least 95% of the
- ---------
Debtor's Centers shall only use Depositories which are bound by effective
agreements substantially similar to Exhibit A or B to the Collateral Trust
--------- -
Agreement.
4.15. At all times at least 95% of the Debtor's Centers shall only use
Custodial Agents which are bound by effective agreements substantially similar
to Exhibit C to the Collateral Trust Agreement; provided, with respect to any
--------- --------
Center acquired after the date hereof, if (i) on the date of such acquisition,
such Center is bound by an agreement with a Custodial Agent, (ii) such Custodial
Agent, despite the Debtor's
20
<PAGE>
reasonable efforts, will not execute a letter substantially similar to Exhibit C
---------
to the Collateral Trust Agreement, and (iii) the Debtor cannot terminate such
Center's agreement with such Custodial Agent, then such Center shall not be
considered in determining whether the Debtor is in compliance with the foregoing
95% test (so long as at least 90% of the Debtor's Centers use Custodial Agents
which are bound by effective agreements substantially similar to Exhibit C to
---------
the Collateral Trust Agreement); provided further that the Debtor shall
-------- -------
terminate such Center's agreement with such Custodial Agent as soon as possible
and shall enter into an agreement with a Custodial Agent which will execute a
letter substantially similar to Exhibit C to the Collateral Trust Agreement.
---------
4.16. The Debtor shall not grant any liens or security interests in
any of its property to any Person except for Permitted Liens.
4.17. Between the date which is 54 months after the date hereof and
the date which is 56 months after the date hereof (and every 60 months
thereafter) the Debtor shall provide a legal opinion issued by its outside
counsel addressed to each Beneficiary confirming the perfection of the liens and
security interests granted hereunder and specifying any action required to be
taken between the date of such opinion and the date of such next opinion to
maintain the perfection of the Trustee's liens and security interests.
5. THE TRUSTEE'S RIGHTS AND REMEDIES.
---------------------------------
5.1. Following receipt by the Trustee of a Notice of Actionable
Default and during such time as such Notice of Actionable Default shall not have
been withdrawn pursuant to the Collateral Trust Agreement:
(a) The Trustee may at any time, without further notice to the
Debtor, notify the Obligors and other Persons whose obligations have been
assigned, or in which a security interest has been granted hereunder, that such
obligations have been assigned, or a security interest therein has been granted,
to the Trustee and/or that payments thereunder or in respect thereof shall be
made directly to the Trustee or to the Trustee's designee. If requested by the
Trustee, the Debtor will so notify the Obligors and other Persons whose
obligations to the Debtor have been assigned or in which a security interest has
been granted hereunder. The Trustee may in its own name or in the name of others
(including, without limitation, the Debtor) communicate with such Obligors and
other Persons, enforce payment or collect any of the Collateral by legal
proceedings or otherwise, and adjust, settle or compromise the amount or payment
thereof;
21
<PAGE>
(b) All payments received by the Debtor under or in connection with
any of the Collateral shall be held by the Debtor in trust for the Trustee,
shall be segregated from other funds of the Debtor and shall, forthwith upon
receipt by the Debtor, be turned over to the Trustee, in the same form as
received by the Debtor (duly indorsed to the Trustee, if required) for deposit
in the Collateral Account; and
(c) Any and all such payments so received by the Trustee (whether
from the Debtor or otherwise) shall be deposited in the Collateral Account and
held as part of the Trust Estate subject to withdrawal and distribution by the
Trustee as provided in the Collateral Trust Agreement.
5.2. Following receipt by the Trustee of a Notice of Actionable Default
and during such time as such Notice of Actionable Default shall not have been
withdrawn pursuant to the terms and provisions of the Collateral Trust
Agreement, the Trustee may exercise in respect of the Collateral, in addition to
all other rights and remedies provided for herein, the Collateral Trust
Agreement or otherwise available to it, all the rights and remedies of a secured
party on default under the Uniform Commercial Code (whether or not the Uniform
Commercial Code applies to the affected Collateral), and under all other
applicable law as in effect in any relevant jurisdiction. In addition, the
Trustee may also:
(a) require the Debtor to, and the Debtor hereby agrees that it will
at its expense and upon request of the Trustee forthwith, assemble all or any
part of the Collateral as directed by the Trustee and make such Collateral
available to the Trustee at a place to be designated by the Trustee, which place
shall be reasonably convenient to the Trustee and the Debtor, whether at the
premises of the Debtor or otherwise;
(b) enter, with or without process of law and without breach of the
peace, any premises where any of the Collateral or the books and records of the
Debtor related thereto are or may be located and, without charge or liability to
the Trustee, seize and remove such Collateral and such books and records from
such premises or remain upon such premises and use the same for the purpose of
enforcing any and all rights and remedies of the Trustee under this Security
Agreement; and
(c) sell, lease, assign, grant an option or options to purchase or
otherwise dispose of all or any part of the Collateral in one or more parcels,
at public or private sale or sales, at any exchange, broker's board or at any of
the Trustee's offices or elsewhere, at such prices as the Trustee may deem best,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable; provided, however, that the Debtor
-------- -------
shall not be credited with the
22
<PAGE>
net proceeds of any such credit sale, future delivery or lease of the Collateral
until the cash proceeds thereof are actually received by the Trustee. The
Debtor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to the Debtor of the time and place of any public
sale, or the time after which any private sale is to be made, shall constitute
reasonable notification. No notification required by law need be given to the
Debtor if the Debtor has signed, after the receipt by the Trustee of a Notice of
Actionable Default, a statement renouncing any right to notification of sale or
other intended disposition. The Trustee shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Trustee may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Any Beneficiary shall have the
right upon any such public sale or sales and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Debtor
which right or equity is hereby expressly waived and released. In the event of
a sale of Collateral, or any part thereof, to a Beneficiary following the
occurrence of an Actionable Default, such Beneficiary shall not deduct or offset
from any part of the purchase price to be paid therefor any indebtedness owing
to it by the Debtor. Any and all Proceeds received by the Trustee with respect
to any sale of, collection from or other realization upon all or any part of the
Collateral whether consisting of monies, checks, notes, drafts, bills of
exchange, money orders or commercial paper of any kind whatsoever, shall be
deposited by the Trustee in the Collateral Account and shall be held by the
Trustee as part of the Trust Estate, subject to withdrawal and distribution by
the Trustee as provided in the Collateral Trust Agreement. The Trustee is
hereby granted a license or other right to use, without charge, the Debtor's
labels, copyrights, patents, rights of use of any name, trade names, trademarks
and advertising matter, or any property of a similar nature, in advertising for
sale and selling any Collateral.
5.3. To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands against the Trustee or the Beneficiaries arising out
of the repossession, retention or sale of the Collateral, or any part or parts
thereof, except any such claims, damages and awards arising out of the gross
negligence or willful misconduct of the Trustee or the Beneficiaries, as the
case may be. In no event, however, does the Debtor waive any obligations of the
Trustee or the Beneficiaries under applicable law to act in a commercially
reasonable manner.
5.4. The Debtor recognizes that in the event the Debtor fails to perform,
observe or discharge any of its obliga-
23
<PAGE>
tions or liabilities under this Security Agreement, no remedy at law will
provide adequate relief to the Trustee and the Trustee shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
5.5. The rights and remedies provided under this Security Agreement
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law or equity.
6. WAIVERS.
-------
6.1. The Debtor hereby waives notice of nonpayment of any of the
Obligations, demand, presentment, protest and notice thereof with respect to any
and all Instruments, notice of acceptance thereof, notice of loans or advances
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
6.2. No failure, omission or delay on the part of the Trustee in
exercising any right, remedy, option or power under this Security Agreement, or
in giving or insisting upon strict performance by the Debtor hereunder or in
giving notice hereunder shall operate as a waiver of the same or any other power
or right, and no single or partial exercise of any such power or right shall
preclude any other or further exercise thereof or the exercise of any other such
power or right. The Trustee, notwithstanding any such failure, shall have the
right thereafter to insist upon the strict performance by the Debtor of any and
all of the terms and provisions of this Security Agreement to be performed by
the Debtor. The collection and application of proceeds, the entering and taking
possession of the Collateral, and the exercise of the rights of the Trustee
contained in the Security Documents, including, without limitation, this
Security Agreement, shall not cure or waive any Actionable Default, or affect
any Notice of Actionable of Default, or invalidate any acts done pursuant to
such notice. No waiver by the Trustee of any breach or default of or by any
party hereunder shall be deemed to alter or affect the Trustee's rights under
this Security Agreement with respect to any prior or subsequent default.
6.3. The Debtor waives and releases the benefit of all valuation,
appraisal, redemption and exemption laws to the extent permitted by applicable
law. In the event the Trustee seeks to take possession of any of the Collateral
by replevin or other court process, the Debtor hereby irrevocably waives (a) any
bonds, and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession and (b) any demand for
possession of the Collateral
24
<PAGE>
prior to the commencement of any suit or action to recover possession thereof.
7. MISCELLANEOUS.
-------------
7.1. THIS SECURITY AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
INTERPRETED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. Notwithstanding the general limitations set forth in Section 22.1 of the
Master Agreement, Section 11.7(b) of the Principal Mutual Note Agreement, any
applicable provisions of any other Beneficiary Agreements, the Debtor hereby
consents and submits to the jurisdiction of any local, state or federal court
located within a jurisdiction in which any of the Collateral shall be located
for purposes of any action related to such Collateral that is commenced by the
Trustee to enforce or foreclose its security interest hereunder. The Debtor
warrants and represents that it has appointed CT Corporation as its registered
agent in the jurisdictions of Arkansas, Arizona, Colorado, Florida, Georgia,
Indiana, Louisiana, Maryland, Missouri, North Carolina, New Mexico, Ohio,
Oklahoma, South Carolina, Tennessee, Virginia, Washington and the District of
Columbia, and covenants with the Trustee that such registered agent shall not be
changed without written notice to, and the written consent of, the Trustee. The
Debtor hereby waives any right it may have to transfer or change the venue of
any litigation brought against it by the Trustee in accordance with this Section
-------
7.1.
- ---
7.2. If at any time the AMEX Obligations are assigned to First Data,
or an Affiliate or Subsidiary of First Data, all references to AMEX in this
Security Agreement shall be deemed to include AMEX and such assignee until all
obligations of the Debtor to AMEX under the Master Agreement have been
satisfied, at which time all references to AMEX shall be deemed to be to such
assignee.
7.3. Neither this Security Agreement nor any portion or provisions
hereof may be changed, modified, amended, waived, supplemented, discharged,
canceled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the parties hereto.
7.4. All notices or other communications hereunder shall be given in
the manner and to the addresses set forth in Section 9.2 of the Collateral Trust
Agreement.
7.5. The Debtor agrees that checks and other instruments delivered to
the Trustee in payment or on account of the Obligations constitute conditional
payment only until payment is actually received in immediately payable funds by
the Trustee, and, subject to the provisions of Sections 3.4.3.C and 3.4.3.F of
the 1992 Master Agreement and Section 5.5 of the Second Master
25
<PAGE>
Agreement Amendment (as each may be amended or restated), Section 4 of the
Principal Mutual Note Agreement and similar provisions in any other Beneficiary
Agreements, the Debtor waives the right to direct the application of any and all
payments at any time or times hereafter received by the Trustee on account of
the Obligations. The Debtor agrees that the Beneficiaries shall have the
continuing exclusive right to apply and reapply any and all such payments in
such manner as such Beneficiary may deem advisable, notwithstanding any entry by
such Beneficiary upon any of its books and records.
7.6. If any part of this Security Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
7.7. The captions in this Security Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Security Agreement.
7.8. THE DEBTOR, TO THE MAXIMUM EXTENT IT MAY LEGALLY DO SO, HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE
OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS SECURITY
AGREEMENT OR ANY OTHER RELATED DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR
RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO
SUCH DOCUMENTS, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING AND IRRESPECTIVE OF WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT IT MAY LEGALLY DO SO, THE DEBTOR
HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS SECTION 7.8 WITH ANY
-----------
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO
WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
(Initials)
the Debtor
--------------
7.9. NOTHING IN THIS SECURITY AGREEMENT, THE COLLATERAL TRUST
AGREEMENT OR ANY OTHER SECURITY DOCUMENT SHALL BE CONSTRUED AS, AND AMEX HAS NOT
INTENDED THERE TO BE, A WAIVER OF ANY RIGHTS AMEX MAY HAVE UNDER APPLICABLE
STATE OR FEDERAL LAWS (INCLUDING FEDERAL BANKRUPTCY LAWS) RELATING TO THE
OBLIGATIONS OF ACE TO REMIT TRUST FUNDS TO AMEX. HOWEVER, IF AT ANY TIME AFTER
THE TRUSTEE HAS RECEIVED A NOTICE OF ACTIONABLE DEFAULT, THE APPLICATION OF SUCH
LAWS WOULD RESULT IN ANY RECOVERIES BY AMEX, AMEX SHALL REMIT SUCH RECOVERIES TO
THE
26
<PAGE>
TRUSTEE FOR DISTRIBUTION IN ACCORDANCE WITH SECTION 4.4 OF THE COLLATERAL TRUST
-----------
AGREEMENT.
7.10. To the extent that any of the Beneficiaries receive payments on
the Secured Debt or receive Proceeds of Collateral which are subsequently
invalidated, declared to be fraudulent or preferential, or are required to be
repaid to a trustee, receiver or any other Person under the Bankruptcy Code or
under state, federal or common law, then, to the extent the payments or Proceeds
are so repaid, the Secured Debt or part thereof which was intended to be
satisfied shall be revived and will continue to be in full force and effect as
if those payments or Proceeds had never been received by such Beneficiary.
7.11. This Security Agreement may be executed and delivered in
counterparts, all of which taken together shall constitute this Security
Agreement. Delivery of an executed signature page by any of the parties by
facsimile transmission shall be deemed execution and delivery of this Security
Agreement for all purposes hereof. Notwithstanding execution and delivery of
this Security Agreement by facsimile transmission as provided above, the parties
shall undertake to provide each other with original executed copies of this
Security Agreement within two (2) Business Days following the date hereof. In
making proof of this Security Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
7.12. Any financing statement (or any amendment or supplement thereto)
delivered by the Debtor to the Trustee shall be considered to continue to be
valid and in full force and effect, notwithstanding its filing in the public
records at a later time when the person who signed such statement on behalf of
the Debtor is no longer in an official capacity with the Debtor.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement or caused this Security Agreement to be executed and delivered by
their duly authorized officers as of the date first set forth above.
ACE CASH EXPRESS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Trustee
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
28
<PAGE>
EXHIBIT 10.32
THIRD AMENDMENT TO 1992 MASTER AGREEMENT
THIS THIRD AMENDMENT ("Third Amendment") is dated as of November 15, 1996,
by and between AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a New
York corporation, having a principal office at 200 Vesey Street, World Financial
Center, American Express Tower, New York, New York 10286 ("Amex"), and ACE CASH
EXPRESS, INC., a Texas corporation having its principal office at 1231 Greenway
Drive, Suite 800, Irving, Texas 75038 ("Agent").
RECITALS
A. Amex and Agent have entered into that certain 1992 Master Agreement
dated as of October 14, 1992 ("1992 Master Agreement").
B. Amex and Agent have entered into that certain First Amendment to 1992
Master Agreement dated as of December 1, 1992 ("First Amendment").
C. Amex and Agent modified the 1992 Master Agreement (as amended by the
First Amendment) pursuant to those certain letter agreements dated respectively
on or about December 6, 1993, and October 26, 1994 (collectively herein the
"Letter Agreements").
D. Amex and Agent supplemented the 1992 Master Agreement (as amended by
the First Amendment and the Letter Agreements) by those certain letter
agreements dated respectively on or about August 2, 1994, and July 13, 1995, but
the provisions of such letter agreements are not affected by any amendment,
modification or supplement set forth in this Third Amendment.
E. Amex and Agent have entered into that certain Second Amendment to 1992
Master Agreement dated as of September 8, 1995 ("Second Amendment").
F. Amex and Agent amended and modified the 1992 Master Agreement (as
amended through the Second Amendment) pursuant to a letter agreement dated
effective February 1, 1996 ("1996-1 Letter Agreement").
G. Contemporaneously with this Third Amendment, Agent has entered into
that certain Note Purchase Agreement dated as of November 15, 1996 ("Principal
Mutual Note Agreement") with Principal Mutual Life Insurance Company, an Iowa
corporation ("Principal Mutual"), pursuant to which Principal Mutual is
committed and agrees to purchase Agent's 9.03% Senior Secured Notes due November
15, 2003, in the aggregate amount of $20,000,000 and a principal use of the
proceeds of which shall be to refinance and pay the Indebtedness of Agent to
Amex in respect
<PAGE>
of that certain Revolving Advance Commitment and the outstanding unpaid
Revolving Commitment Advances in respect thereof (as such terms are defined in
the Second Amendment), together with accrued but unpaid interest thereon and
costs and fees, as provided in this Third Amendment.
H. Amex has agreed to continue to make available to Agent the Revolving
Advance Commitment as set forth and described in the Second Amendment (as the
terms and conditions thereof are amended pursuant to this Third Amendment).
I. Contemporaneously with this Third Amendment, Amex, Agent, Principal
Mutual and Wilmington Trust Company, a Delaware banking corporation in its
capacity as trustee ("Wilmington Trust"), have entered into that certain
Collateral Trust Agreement dated as of November 15, 1996 ("Intercreditor
Collateral Trust Agreement"), which among other things provides for certain
intercreditor agreements, undertakings, relationships, prioritization of
distributions upon foreclosure and liquidation of collateral subject thereto,
and other agreements and arrangements among Agent, Amex and Principal Mutual
(and any other Beneficiaries, as defined and permitted in the Intercreditor
Collateral Trust Agreement) and for the delivery of that certain Assignment of
Deposit Accounts and Security Agreement between Agent and Wilmington Trust of
even date therewith together with other security documents and instruments by
Agent and others (such assignment of deposits and security agreement and other
security documents and instruments [as any of the same may be hereafter amended,
modified or restated] herein collectively or individually the "Wilmington Trust
Security Document(s)") to secure Agent's undertakings, agreements, obligations
and liabilities under or with respect to the Master Agreement and other Security
Documents, the Principal Mutual Note Agreement, other Beneficiary Agreement(s)
(as defined in the Intercreditor Collateral Trust Agreement), the Intercreditor
Collateral Trust Agreement and the Wilmington Trust Security Documents.
Pursuant to and subject to the terms of the Intercreditor Collateral Trust
Agreement, Amex has agreed to subordinate its security interests and Lien
pursuant to the Security Documents to the security interests and Lien existing
in favor of Wilmington Trust pursuant to the Wilmington Trust Security
Documents.
J. Because of the transactions described in Recitals G, H and I, the
parties have agreed to certain amendments to the 1992 Master Agreement (as
heretofore amended), and the purpose of this Third Amendment is to memorialize
such amendments and related agreements.
IN CONSIDERATION of the foregoing and the mutual agreements set forth
herein, the parties agree as follows:
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<PAGE>
ARTICLE I
AMENDMENTS
Section 1.1. Amendments to 1992 Master Agreement.
A. Section 3.2. Amendment. By reason of the 1996-1 Letter Agreement
and the 1996 MoneyGram/SM/ Master Agreement (as referred to and defined therein,
and so used herein), the parties acknowledge that Section 3.2 set forth in the
1992 Master Agreement and any provision elsewhere in the 1992 Master Agreement
related to MoneyGram Money Transfer Services and the MoneyGram Agreement (as
incorporated in the 1992 Master Agreement at Section 1 thereof) are no longer a
part of the 1992 Master Agreement (as amended), except that said 1992 Master
Agreement and the 1996 MoneyGram/SM/ Master Agreement are cross-defaulted to
each other so long as Amex (or IPS or its Affiliates) shall be the party other
than Agent to both such agreements.
B. Section 3.4 Amendments. Subclause (v) set forth in Section 3.4
of the 1992 Master Agreement is amended and restated in its entirety to read as
follows: "(v) paying for capital assets or any amounts, sums or obligations due
under or in respect of the 1996 MoneyGram/SM/ Master Agreement,". For purposes
of Subsection 3.4.2.C. of the 1992 Master Agreement, the form of certification
required to be supplied by Agent in connection with each Advance Request shall
be in the form of the Certificate for Advance Requests attached as Exhibit A
---------
hereto.
C. Section 3.5.1 Amendment. The cross-reference phrase "[as said
section is set forth in Section 1.2.P. of the Second Amendment]" relating to
Section 6.5 of the First Amendment which is contained in Section 3.5.1 of the
First Amendment (as said Section 3.5.1 is amended and restated at Section 1.1.J.
of the Second Amendment) in the definition of "Liquid Security Amount" is
amended and restated in its entirety to read "[as said Section 6.5 is amended
and restated at Section 1.2.E. of the Third Amendment]."
D. Sections 4.1 and 4.3 Amendments. The parties acknowledge that
the provisions relating to MoneyGram Money Transfer Services and the MoneyGram
Agreement in Sections 4.1 and 4.3 of the 1992 Master Agreement have been
superseded by reason of the 1996-1 Letter Agreement and the 1996 MoneyGram/SM/
Master Agreement and, consequently, such provisions have no further application
for purposes of the Master Agreement. Additionally, Agent agrees that the third
sentence of said Section 4.3 pertaining to Agent's right to participate in
public test marketing, the fourth sentence of said Section 4.3 pertaining to
substitute payment instruments and the last sentence of said Section 4.3,
pertaining to Agent's right to terminate the Master Agreement upon a certain
determination being made by Agent, shall
- 3 -
<PAGE>
each be deemed deleted from said Section 4.3 and without any further force or
effect as of the date of this Third Amendment. Also, with respect to the
remaining provisions of said Section 4.3, Agent and Amex acknowledge and agree
that any assignment by Amex pursuant thereto may be on a location-by-location
basis and, therefore, Agent, on a system-wide basis, will be offering both
American Express(R) Money Orders as well as those of a permitted assignee until
such conversion is completed. Therefore, during the conversion period and until
Amex has been paid all sums due it under the Master Agreement with respect to
Amex Money Orders (including Money Orders i) sold by Agent or ii) lost, stolen
or misappropriated by or from Agent and paid by Amex) (such aggregate period
hereafter referred to in this Section as the "Period"), the term "Money Orders"
shall refer to both Amex Money Orders and Money Orders of the permitted
assignee. Additionally, during the Period, the definitions of "Amex
Indebtedness", "Trust Funds", "Amex Fees" and "Obligations" shall be deemed to
include (as appropriate) sums owed by Agent with respect to both Amex Money
Orders and the Money Orders of the permitted assignee. After the Period, any
reference to "Amex" (including any variation or derivative thereof, e.g., "Amex
Fees" or "Amex Indebtedness") in the Master Agreement or any other Security
Document (excluding for this particular purpose the 1996 MoneyGram/SM/ Master
Agreement, Intercreditor Collateral Trust Agreement and the Wilmington Trust
Security Documents) thereafter shall be deemed to refer to any such permitted
assignee of Amex or any permitted assignee of such permitted assignee (in each
case, all as the circumstances or context may require) in the place and stead of
Amex.
E. Subsection 5.6.A Amendment. For purposes of Subsection 5.6.A. of
the First Amendment, Amex agrees that instruments and post-dated checks received
by Agent in respect of small consumer loans permitted by the provisions of
Section 6.5 of the First Amendment (as said Section 6.5 is amended and restated
at Section 1.2.E. of this Third Amendment) shall not be required to be pledged
and assigned to Amex or deposited by Agent as required by said Subsection 5.6.A.
upon such receipt, but, upon the occurrence of the date of any such post-dated
check, Agent shall comply with the provisions of such Subsection 5.6.A. as to
such check (as though Agent had received such check on such date).
F. Section 5.7 Amendments. The cross-reference phrase "[as said
section is set forth in Section 1.2.P. of the Second Amendment]" relating to
Section 6.5 of the First Amendment which is contained in Section 5.7 of the
First Amendment (as said Section 5.7 is set forth at Section 1.1.L. of the
Second Amendment) is amended and restated in its entirety to read "[as said
Section 6.5 is amended and restated at Section 1.2.E. of the Third Amendment]".
Notwithstanding any general deletion of the references to "MoneyGram" in the
Master Agreement even after such time as the party other than Agent to the 1996
MoneyGram/SM/ Master Agreement is not Amex or IPS or its Affiliates, the
reference in
- 4 -
<PAGE>
the last sentence of Section 5.7 to "MoneyGram" shall not be deemed deleted.
G. Section 5.8 Amendments. Agent acknowledges and agrees that the
proceeds of Agent's notes issued to Principal Mutual pursuant to the Principal
Mutual Note Agreement will be used in substantial part to refinance and pay the
outstanding balance of Revolving Commitment Advances, together with accrued but
unpaid interest, costs and commitment fees as of the date such notes are first
issued, as provided for in Section 5.8 of the 1992 Master Agreement (as said
Section 5.8 is set forth at Section 1.1.L. of the Second Amendment). Amex and
Agent agree that their respective undertakings and agreements contained in the
Intercreditor Collateral Trust Agreement shall be deemed or considered to
satisfy each of their respective obligations under said Section 5.8 with respect
to the Obligations and the security in favor of Amex therefor. Additionally,
from and after the date of funding of the refinancing of the outstanding
Revolving Commitment Advances through the Principal Mutual Note Agreement as
described above, said Section 5.8 shall be deemed amended and restated in its
entirety to read as follows: "Intentionally Omitted".
H. Section 5.9 Amendment. Notwithstanding any general deletion of
such references in the Master Agreement even after such time as the party other
than Agent to the 1996 MoneyGram/SM/ Master Agreement is not Amex or IPS or its
Affiliates, the references in Section 5.9 of the 1992 Master Agreement (as said
Section 5.9 is set forth at Section 1.1.L. of the Second Amendment) to
"MoneyGram" and the "MoneyGram Agency and Trust Agreement" shall not be deemed
deleted.
I. Amendments to Sections 8, 9 and 10. The parties acknowledge that
any provisions relating to MoneyGram Money Transfer Services and the MoneyGram
Agreement in Sections 8, 9 and 10 of the 1992 Master Agreement have been
superseded by reason of the 1996-1 Letter Agreement and the 1996 MoneyGram/SM/
Master Agreement and, consequently, have no further application for purposes of
the 1992 Master Agreement.
J. Section 12 Amendment. In Section 12 of the 1992 Master Agreement,
the Facsimile No. for Agent is amended to read "(972) 550-5150."
K. Section 27 Amendment. On page 13 of the Second Amendment the
Subsection captioned "Section 27 Amendment" is erroneously designated as
Subsection "L" and effective as of the date of the Second Amendment, such
designation shall be amended to read "Q". The last sentence of Section 27 of
the 1992 Master Agreement is amended and restated in its entirety to read as
follows: "As of November 15, 1996, Agent conducts its business at its Centers
in each of the following jurisdictions: Arizona,
- 5 -
<PAGE>
Arkansas, Colorado, District of Columbia, Florida, Georgia, Indiana, Louisiana,
Maryland, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina,
Tennessee, Texas, Virginia and Washington, and Agent shall notify Amex in
writing of its intent to conduct business in any other jurisdiction at least
thirty (30) days prior to actual commencement of the conduct of business in such
jurisdiction, unless Amex (in its sole discretion) shall agree in writing to
shorten such notice period as to any such jurisdiction."
L. Section 29 Amendment. The parties acknowledge that the references
to Sections 2 and 3.2 in Section 29 of the 1992 Master Agreement (as said
Section 29 is added and set forth at Section 1.7 of the First Amendment) have no
further application for purposes of such section.
Section 1.2. Amendments to First Amendment.
A. Section 6.2.J. Amendment. Subparagraph J of Section 6.2 set
forth in the First Amendment is hereby amended and restated in its entirety to
read as follows:
"J. Money Orders and MoneyGrams. No money order shall be issued or
---------------------------
sold and no wire transfer of money on behalf of Agent's customers shall be
made to or for any Person, except as permitted by the Master Agreement or
the 1996 MoneyGram/SM/ Master Agreement, as applicable; provided that,
following the date neither Amex nor IPS or any of its Affiliates at the
time shall be the other party to the 1996 MoneyGram/SM/ Master Agreement,
the foregoing restriction related to such wire transfers of money and the
1996 MoneyGram/SM/ Master Agreement shall be considered to no longer
apply."
B. Section 6.2.K. Amendment. Clauses (vii) and (viii) of Section
6.2.K. set forth in the First Amendment (as such clauses are amended and
restated at Section 1.2.J. of the Second Amendment) are amended and restated in
their entirety to read as follows:
"(vii) grants of options under the Option Plan exercisable to
purchase up to 1,170,000 shares of Employee Stock; (viii) issuances of up
to 1,170,000 shares of Employee Stock upon the exercise of options granted
under the Option Plan;"
C. Section 6.2.N. Amendments. The reference to "Section 1.1.K. of
the Second Amendment" contained in subclause (xii) of Subsection 6.2.N. of the
First Amendment (as amended and restated at Section 1.2.K. of the Second
Amendment) is in error, and, effective as of the date of the Second Amendment,
is amended to read "Section 1.1.L. of the Second Amendment". Also, Amex
- 6 -
<PAGE>
agrees that the Lien(s) granted pursuant to the Intercreditor Collateral Trust
Agreement and the Wilmington Trust Security Documents are in compliance with and
shall be considered as Permitted Liens for purposes of said subclause (xii) of
Section 6.2.N.
D. Section 6.2.T. Amendment. There shall be added to Section 6.2
set forth in the First Amendment the following Subparagraph T:
"T. Principal Mutual Note Agreement, Beneficiary Agreement,
-------------------------------------------------------
Intercreditor Collateral Trust Agreement and Wilmington Trust Security
----------------------------------------------------------------------
Documents. Agent (for itself and its Subsidiaries) shall not permit to
---------
occur an event of default under or in respect of the Principal Mutual Note
Agreement, Agent's note(s) issued to Principal Mutual pursuant thereto, any
Beneficiary Agreement (including any notes or instruments of Agent issued
to the Beneficiary thereunder pursuant thereto), the Intercreditor
Collateral Trust Agreement or any of the Wilmington Trust Security
Documents, as any such event of default shall be defined in and governed by
the express terms of such agreements, notes, instruments or documents."
E. Section 6.5 Amendment. Section 6.5 of the First Amendment (as
said Section 6.5 is set forth at Section 1.2.P. of the Second Amendment) is
further amended and restated in its entirety to read as follows:
"6.5 Agent Consumer Loan Program. Notwithstanding any provision to
---------------------------
the contrary set forth in Section 6.1 or 6.2 of the First Amendment, but
subject to any restrictions set forth in this Section 6.5, Agent may offer
and make small consumer loans at its locations (including, for purposes of
this Section 6.5, franchisee locations); provided that, Agent shall
continue to maintain the Coverage Ratio, as provided in Section 3.5.1. of
the First Amendment (as said Section 3.5.1. is amended and restated at
Section 1.1.J. of the Second Amendment and amended at Section 1.1.C. of the
Third Amendment), and shall comply with any state or local law or
regulation governing the conduct of such operations. No proceeds of any
Advance , together with the proceeds of any outstanding Advances previously
made to Agent, in excess of $1,000,000 in the aggregate shall be used to
fund any such small consumer loans, unless Amex shall approve a higher
amount (such approval to be in Amex's sole and absolute discretion). Any
instruments or contracts evidencing such loans shall not serve as security
(provided payments to Agent made on or in connection with such instruments
or contracts shall not
- 7 -
<PAGE>
be excluded) for any amounts due Amex under Sections 3.4 and 5 of the 1992
Master Agreement (as said Sections 3.4 and 5 are amended and/or restated in
the Second and Third Amendments or any subsequent amendment of the Master
Agreement) or in respect of any other Obligations notwithstanding any
provision to the contrary in any of the Security Documents. For purposes
of this Section 6.5, a "small consumer loan" shall mean any direct cash
advance or loan through a location of Agent (or Agent franchisee location)
to an individual consumer that is considered a consumer loan or the
equivalent (as defined by relevant local law); provided that, such loan
shall not exceed $5,000.00 per each such loan or advance or $10,000.00 in
the aggregate at any time outstanding to any one Person (including a spouse
or any relative living in the same household) and the proceeds of such loan
or advance are borrowed by such Person for personal or household purposes
and not for business purposes."
F. Section 8.1.K. Amendment. Section 8.1.K. set forth in the First
Amendment is amended and restated in its entirety to read as follows:
"K. Cross-Default. The occurrence of a default or event of default
-------------
(as defined in the relevant agreement, including application of any notice
or grace period) by Agent or its Subsidiaries under the terms of any of the
following: (i) any Collection Agreement; (ii) any Indebtedness of Agent or
its Subsidiaries; (iii) any leases of real property used for executive and
regional offices of Agent and for locations of Centers, or other leases
pursuant to the terms of which Agent would incur annual aggregate payment
obligations of more than $200,000; (iv) the Principal Mutual Note Agreement
(and any promissory notes of Agent issued pursuant thereto); (v) any
Beneficiary Agreement (and any notes or instruments of Agent issued
pursuant thereto); (vi) the Intercreditor Collateral Trust Agreement; or
(vii) the Wilmington Trust Security Documents."
G. Section 8.2 Amendment. So long as the Intercreditor Collateral
Trust Agreement shall be in full force and effect, the parties acknowledge and
agree that any foreclosure upon the Assets of Agent or its Subsidiaries and
payment of the proceeds thereof to Amex as permitted by the applicable
provisions of Section 8.2 of the First Amendment or any Security Document will
be subject to the provisions relating to lien subordination and collateral
proceeds distribution set forth in the Intercreditor Collateral Trust Agreement.
H. Section 9.2 Amendments. The definitions set forth in Section 9.2
of the First Amendment (including as amended
- 8 -
<PAGE>
pursuant to the Second Amendment) shall be further amended (and restated, as
applicable) as follows:
"Affiliate". Of any Person, means any other Person who (a) directly
---------
or indirectly, controls, is controlled by or is under common control with
such Person, or (b) directly or indirectly owns a five percent (5%) or
greater legal or beneficial interest in such Person; provided that,
irrespective of the ownership percentage interest or control that IPS or
its Affiliates may have therein, MoneyGram Payment Systems, Inc., a
Delaware corporation, shall not be considered an Affiliate of IPS or its
Affiliates if the common stock of MoneyGram Payment Systems, Inc. is
publicly traded, or (c) is an officer or director of such Persons.
"Beneficiary". Has the meaning set forth in the Intercreditor
-----------
Collateral Trust Agreement.
"Beneficiary Agreement". Has the meaning set forth in the
---------------------
Intercreditor Collateral Trust Agreement.
"Centers". Means all of Agent's places of business as identified on
-------
Schedule 9 (as amended from time to time) and such additional places of
----------
business of Agent permitted in accordance with the provisions of Section
6.2 of the First Amendment (as such Section 6.2 is amended) or otherwise
approved by Amex in writing from time to time in its sole discretion.
"Centers" shall not include any locations or places of business franchised
by Agent or any of its Subsidiaries (as franchisor) so long as such
franchisee is not offering or selling Money Orders as a subagent of Agent
pursuant to the Master Agreement.
"Employee Stock". Means up to 1,170,000 shares of Agent's common
--------------
voting Stock issued pursuant to the exercise of stock options granted to
employees or directors of Agent pursuant to the Option Plan.
"Indebtedness". Means, with respect to any Person, any and all
------------
liabilities and obligations of such Person, which, in accordance with GAAP,
would be classified as indebtedness, whether made available to such Person
in the form of a derivative debt instrument or agreement or one or more
letters of credit, including standby letters of credit, or whether such
liabilities or obligations are direct or indirect, primary or secondary,
contingent, as surety or otherwise, including Capital Leases.
"IPO"; "IPO Event"; and "IPO Proceeds". The definitions of "IPO",
--- --------- ------------
"IPO Event"; and "IPO Proceeds" no longer have any application for purposes
of the Master Agreement.
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<PAGE>
"IPS." Means Integrated Payment Systems Inc., a Delaware corporation.
---
"Intercreditor Collateral Trust Agreement." Has the meaning set
----------------------------------------
forth in Recital I of the Third Amendment.
"Money Orders." Has the meaning assigned to such term in Section 1
------------
(as amended or restated) of the Money Order Trust Agreement and,
additionally, shall be deemed to refer to any substitute money order or
similar payment instrument permitted pursuant to Section 4.3 of the 1992
Master Agreement (as said Section 4.3 is amended at Section 1.1.D. of the
Third Amendment).
"MoneyGram Agency and Trust Agreement." The parties acknowledge and
------------------------------------
agree that at such time as the party other than Agent for purposes of the
MoneyGram Agency and Trust Agreement is not Amex or IPS or its Affiliates,
the definition of "MoneyGram Agency and Trust Agreement" shall be deemed
deleted and without any further application thereafter for purposes of the
Master Agreement.
"1996-1 Letter Agreement." Has the meaning set forth in Recital F of
-----------------------
the Third Amendment.
"1996 MoneyGram/SM/ Master Agreement." Has the meaning set forth in
-----------------------------------
the 1996-1 Letter Agreement, and includes any amendments to such master
agreement.
"Permitted Financial Obligations." Subclause (k) of the definition of
-------------------------------
"Permitted Financial Obligations" no longer has any application by reason
of the deletion of Section 10.3 of the 1992 Master Agreement (as said
Section 10.3 was set forth at Section 1.3 of the First Amendment) pursuant
to the Second Amendment (at Section 1.1.M. thereof). Subclause (m) of the
definition of "Permitted Financial Obligations" set forth in the First
Amendment (as such subclause (m) is amended and restated at Section 1.2.R.
of the Second Amendment) is amended and restated in its entirety to read as
follows:
"(m) Indebtedness (i) incurred up to the aggregate principal
amount outstanding at any time or from time to time of initially up to
$20,000,000 pursuant to and as permitted by the Principal Mutual Note
Agreement (after taking into account any scheduled or mandatory
repayment(s) thereof), or (ii) incurred by Agent pursuant to a
Beneficiary Agreement to which Amex has consented (in its absolute
- 10 -
<PAGE>
discretion) in writing; provided that, any Lien or security interest
securing such obligation shall be subject to and governed by the
Intercreditor Collateral Trust Agreement and the Wilmington Trust
Security Documents.
"Preliminary Prospectus." The definition of "Preliminary Prospectus"
----------------------
is not considered to have any further application.
"Principal Mutual." Has the meaning set forth in Recital G of the
----------------
Third Amendment.
"Principal Mutual Note Agreement." Has the meaning set forth in
-------------------------------
Recital G of the Third Amendment.
"Refinancing Period." The definition of "Refinancing Period" is not
------------------
considered to have any further application.
"Registration Statement." The definition of "Registration Statement"
----------------------
is not considered to have any further application.
"Third Amendment." Means the Third Amendment to the 1992 Master
---------------
Agreement dated as of November 15, 1996, between Amex and Agent, as it
thereafter may be amended.
"Trust Funds." Has the meaning set forth in the Money Order Trust
-----------
Agreement and shall be deemed to include "Proceeds" (as defined in the
MoneyGram Agreement) when the context so requires; provided that, such term
shall not be deemed to include "Proceeds" at such time as the party other
than Agent to the 1996 MoneyGram/SM/ Master Agreement shall be a Person
other than Amex or IPS or its Affiliates.
"Wilmington Trust." Has the meaning set forth in Recital I of the
----------------
Third Amendment.
"Wilmington Trust Security Documents." Has the meaning set forth in
-----------------------------------
Recital I of the Third Amendment.
Section 1.3. Amendment to Master Agreement. Notwithstanding any provision
to the contrary contained in the Master Agreement or in any other Security
Document (excluding the 1996 MoneyGram/SM/ Master Agreement, the Intercreditor
Collateral Trust Agreement and the Wilmington Trust Security Documents), each
and all unpaid Obligations due Amex or any permitted assignee shall be due and
payable on (i) the agreed maturity date of such Obligation(s) or (ii) the date
the Master Agreement shall expire or shall be terminated, whichever of
subclauses (i) or (ii) shall first occur.
- 11 -
<PAGE>
ARTICLE II
PRINCIPAL MUTUAL NOTE AGREEMENT
Section 2.1. Consent to Principal Mutual Indebtedness. Provided that the
requirements of Sections 2.2 and 2.3 below shall be satisfied and the loan to
Agent pursuant to the Principal Mutual Note Agreement shall be used to pay the
Revolving Commitment Advances, together with accrued but unpaid interest thereon
and costs and fees, outstanding at the date of such loan, Amex consents to
Agent's and its Subsidiaries' execution and delivery of the Principal Mutual
Note Agreement (and promissory notes issued pursuant thereto), the Intercreditor
Collateral Trust Agreement and the Wilmington Trust Security Documents, and such
agreements, documents and instruments shall be considered as approved exceptions
for purposes of the provisions of Section 25 of the 1992 Master Agreement and
Sections 6.2.A., 6.2.G., 6.2.L.(iv), 6.2.N.(xi) and 6.2.P. of the First
Amendment and any and all other provisions of the Master Agreement and the other
Security Documents that may be considered violated by Agent's execution and
delivery of such agreements, documents or instruments but for the consent
contained in this Section 2.1.
Section 2.2. Repayment of Revolving Commitment Advances. At such time as
Agent shall enter into the Principal Mutual Note Agreement and shall be entitled
to make a draw upon such credit facility, Agent immediately shall cause a
portion of the loan of funds pursuant to such agreement to be paid directly to
Amex in an amount equal to all Revolving Commitment Advances outstanding at the
date of such payment, together with accrued but unpaid interest thereon and
associated costs and fees, if any.
Section 2.3. Execution and Delivery of Wilmington Trust Documents.
Contemporaneously with their execution and delivery of this Third Amendment,
Amex and Agent and its Subsidiaries shall each execute and deliver, as required
by Amex and/or Principal Mutual, respectively, the Intercreditor Collateral
Trust Agreement and each of the Wilmington Trust Security Documents, and Agent
shall cause Principal Mutual and Wilmington Trust to execute and deliver the
Intercreditor Collateral Trust Agreement and each of the Wilmington Trust
Security Documents, as applicable.
Section 2.4. Default and Covenant Not to Sue. Upon the occurrence of an
Event of Default and during its continuance, Agent acknowledges that Amex shall
have no obligation to make any Advance or Revolving Commitment Advance pursuant
to the Master Agreement or to consider any Advance Request or Revolving
Commitment Advance Request from Agent, and, during such continuance period, any
obligation of Amex to Agent under or in respect of any such request or related
commitment is deemed suspended until such Event of Default shall have been
cured.
- 12 -
<PAGE>
Notwithstanding the fact that Amex may honor any Advance Request or Revolving
Commitment Advance Request made by Agent during the suspension of any such
facility or commitment, Amex nonetheless shall be entitled to refuse to consider
or honor any future Advance Request or Revolving Commitment Advance Request at
any time and from time to time in its sole and absolute discretion as Amex may
consider appropriate, and no course of dealing or implied agreement shall be
considered to have been established by reason of any Advance or Revolving
Commitment Advance made by Amex in response to any such Advance Request or
Revolving Advance Commitment Request after the occurrence of an Event of Default
and during its continuance notwithstanding Amex's entitlement to refuse to
consider or honor any such request. Agent acknowledges and agrees that Amex's
exercise of discretion in such regard will be in Amex's sole and absolute
discretion, and Agent agrees that neither it nor any of its Subsidiaries shall
commence or bring, directly or indirectly, any action or proceeding for any
legal or equitable remedy or relief based on a claim, irrespective of the kind,
nature, theory or basis for such claim, against Amex for any act, action or
omission on the part of Amex that is permitted or authorized by the provisions
of this Section 2.4 or elsewhere in the Master Agreement with respect to the
subject matter of this Section 2.4. Nothing contained in this Section 2.4 shall
be interpreted as or deemed to impose any limit or restriction on the exercise
by Amex of any of its rights or remedies under the Master Agreement upon the
occurrence and during the continuance of an Event of Default.
Section 2.5. Agreement to Alternative Security Arrangements. So long as
each of the Intercreditor Collateral Trust Agreement and Wilmington Trust
Security Documents shall continue in full force and effect and Agent shall
comply with the provisions thereof, Agent shall be considered in compliance with
the provisions of the Master Agreement and other Security Documents as to any
Lien or security interest required to be granted to and maintained in favor of
Amex pursuant to the Master Agreement. At such time as the Intercreditor
Collateral Trust Agreement and the Wilmington Trust Security Documents shall no
longer be in force and effect, the provisions of this Section 2.5 shall be
deemed without any further force or effect (unless Amex in its sole discretion
expressly agrees otherwise) and Agent, thereupon, shall comply strictly with all
requirements set forth in the Security Documents. Nothing contained in this
Section 2.5 shall be interpreted as changing or providing for any moratorium or
extension with respect to any payment date or due date as to any Obligations set
forth in the Master Agreement. Further, for purposes of clarification,
"Security Documents" (as defined in Section 9.2 of the First Amendment) shall
not include the Principal Mutual Note Agreement or any other Beneficiary
Agreement (other than the Master Agreement), and, so long as such agreements and
documents continue in full force and effect, the Intercreditor Collateral Trust
Agreement and the Wilmington Trust Security
- 13 -
<PAGE>
Documents (to the extent the provisions thereof are for the benefit of Amex)
shall be considered "Security Documents" for purposes of the Master Agreement.
Section 2.6. Effect of Wilmington Trust Documents. The parties
acknowledge and agree that no provision contained in any of the Intercreditor
Collateral Trust Agreement or the Wilmington Trust Security Documents shall be
considered to amend or otherwise provide or serve as a basis for interpreting
any provision, term or covenant contained in the Master Agreement or any other
Security Document, except as expressly set forth in Section 2.5 above.
ARTICLE III
REPRESENTATIONS AND COVENANTS
Section 3.1. Acknowledgement. Agent acknowledges, states represents,
warrants and confirms that it has no claims against Amex based on breach,
default or non-performance under or in respect of the Master Agreement or any
Security Document as of the date of this Third Amendment, and, therefore, Agent
further acknowledges, represents, admits and confirms that it does not have any
legal right, basis or theory of any kind of nature whatsoever on which to base,
invoke or obtain legal or equitable relief, whether injunctive or otherwise, in
order to abate, postpone or terminate enforcement by Amex of any of the
Obligations or other obligations, undertakings and covenants arising from the
Master Agreement or any other Security Documents up to and including the date of
the execution and delivery of this Third Amendment by Amex and Agent.
Section 3.2. No Defaults. Agent represents to Amex that there is not
currently existing any action, event, condition, fact or set of circumstances
which would constitute an Event of Default or Potential Default under or in
respect of the Master Agreement or any Security Document by reason of any
action, inaction or omission of Agent in respect thereof, except as set forth in
Schedule 3.2 (Third Amendment) attached hereto.
Section 3.3. Revised Schedules. Attached to this Third Amendment are the
following revised schedules:
i) Schedule 5 (Section 5 of the First Amendment other than as to
Section 5.9 thereof which is no longer applicable);
ii) Litigation Schedule (Section 5.12 of the First Amendment, as
amended);
iii) Schedule 6 (Section 6.2 of the First Amendment, as amended);
and
- 14 -
<PAGE>
iv) Schedule 9 (Section 5 of the First Amendment, as amended).
as of the date of the execution and delivery of this Third Amendment by Agent,
and the same shall be deemed substituted for the schedules previously provided
to Amex for purposes of the First Amendment (as in effect prior to the date of
the Third Amendment).
Section 3.4. Additional Schedules and List. Agent represents that (i)
attached to this Third Amendment as Schedule 3.4 (Third Amendment) is a true,
correct and complete list of all Subsidiaries of Agent, including their
respective states of incorporation and the jurisdictions in which they are
qualified to do business or in which any of their Assets are located, and (ii)
the list of the jurisdictions set forth in Section 27 of the 1992 Master
Agreement (as said list for purposes of Section 27 is amended and restated at
Section 1.1.J. of this Third Amendment) is a true, correct, and complete list of
all the jurisdictions in which Agent conducts business or in which any of its
Assets are located as of the date of this Third Amendment. Such list shall be
updated at the same time as the schedules referred to in Section 3.3 shall be
updated in the future pursuant to the Master Agreement.
Section 3.5. Closing Deliveries by Agent. Agent shall make the following
deliveries:
A. Upon Execution. At or contemporaneously with its execution and
delivery of this Third Amendment, Agent shall pay all outstanding legal fees due
Amex's outside counsel in respect of this Third Amendment, and Agent shall
deliver to Amex the following:
(1) Certificate of Corporate Action by Agent. A certificate of
----------------------------------------
the Secretary or an Assistant Secretary of Agent, dated as of the date of
Agent's execution and delivery of this Third Amendment, attesting to all
corporate actions taken by Agent, including certified resolutions of Agent's
Board of Directors, authorizing the execution, delivery and performance of Agent
in respect of the Principal Mutual Note Agreement, the documents referred to in
Section 6.2.T. of the First Amendment (as said Section 6.2.T. is set forth at
Section 1.2.E. of this Third Amendment), this Third Amendment and each other
document delivered or to be delivered pursuant to this Third Amendment.
(2) Incumbency and Signature Certificate. A certificate of the
------------------------------------
Secretary or an Assistant Secretary, dated the same date as the certificate
provided pursuant to subclause (1) immediately preceding, certifying the names
and true signatures of the officers of Agent authorized to execute this Third
Amendment
- 15 -
<PAGE>
and any other documents to be delivered by Agent pursuant to the Master
Agreement or any Security Document.
(3) Financing Statements. UCC Financing Statements in proper
--------------------
form for filing and executed by Ace Cash Express, Inc. (and also in its
tradenames) for the following jurisdictions: Indiana and Washington.
ARTICLE IV
GENERAL
Section 4.1. Effective Date of Amendments. Any amendment to either the
1992 Master Agreement or the First or Second Amendments effected or implemented
by this Third Amendment shall be deemed effective as of the date of this Third
Amendment, unless another date is expressly provided therefor.
Section 4.2. No Waiver. Notwithstanding the fact that the warranties and
representations set forth in, or Schedules attached to, this Third Amendment at
the date of its execution or in any delivery made or to be made pursuant to this
Third Amendment at the date thereof may take into account changes in the
circumstances from the Effective Date of the 1992 Master Agreement through the
date of this Third Amendment or such delivery, nothing contained in this Third
Amendment or any other Security Document delivered pursuant hereto shall be
deemed to constitute a waiver or consent on the part of Amex with respect to any
Event of Default or Potential Default under or in respect of the Master
Agreement that existed prior to or at the date of this Third Amendment, unless
such Event of Default or Potential Default shall have been waived or consented
to expressly in this Third Amendment or as set forth in a separate writing.
Section 4.3. Waiver of Defaults. Amex hereby waives the Events of Default
or Potential Defaults or event of default or defaults set forth and described on
Schedule 3.2 (Third Amendment) attached to this Third Amendment, but only to the
extent expressly set forth on and adequately described in such schedule and not
otherwise.
Section 4.4. Master Agreement. This Third Amendment is not intended to,
and shall not, affect or impair any rights or obligations of Agent or Amex under
the Master Agreement (as in effect immediately prior to the date of this Third
Amendment) to the extent that the same do not conflict with or are not
inconsistent with the terms of this Third Amendment. Except as otherwise
provided for in this Third Amendment or pursuant hereto, all other provisions of
the Master Agreement shall continue in full force and effect, and the parties
hereby reaffirm and confirm said Master Agreement as continuing and binding on
each party and in full force and effect, provided, however, in the event of any
--------- --------
- 16 -
<PAGE>
conflict or inconsistency between the terms of this Third Amendment and either
the 1992 Master Agreement, the First Amendment, the Second Amendment or any
other amendment of any of thereof preceding the date of this Third Amendment,
the provisions of this Third Amendment shall control.
Section 4.5. Capitalized Terms. Capitalized terms used herein shall have
the meanings ascribed to them in the Master Agreement, including as
supplemented, amended or modified pursuant to this Third Amendment.
Section 4.6. Survival. All warranties, representations, and covenants
made by Agent in this Third Amendment or in any certificate or other exhibit
schedule or instrument delivered by Agent pursuant to or as required by this
Third Amendment shall be considered to have been relied upon by Amex and shall
survive the delivery to Amex of any such document or any extension of the
Obligations (or any part thereof) regardless of any investigation made by or on
behalf of Amex.
Section 4.7. Amendment. This Third Amendment may not be amended or
modified, except by a written instrument signed by all the parties.
Section 4.8. Counterparts. This Third Amendment may be executed and
delivered in counterparts, all of which when taken together shall constitute the
Third Amendment. Delivery of an executed signature page by any of the parties
by facsimile transmission shall be execution and delivery of this Third
Amendment for all purposes hereof. Notwithstanding execution and delivery of
this Third Amendment by facsimile transmission as provided above, the parties
shall undertake to provide each other with original executed copies of this
Third Amendment within two (2) Business Days following the execution date of
this Third Amendment. In making proof of this Third Amendment, it shall not be
necessary to produce or account for more than one such counterpart.
(Signatures On Next Page)
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
signed by their authorized officers or agent as of the date first above written.
ACE CASH EXPRESS, INC.
(a Texas corporation)
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Date Signed:
------------------------
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
By: Integrated Payment Systems Inc. (Agent)
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date Signed:
----------------------------
- 18 -
<PAGE>
THIRD AMENDMENT TO 1992 MASTER AGREEMENT
BETWEEN
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
AND
ACE CASH EXPRESS, INC. AND ITS SUBSIDIARIES
Schedule 3.2 (Third Amendment)
Events of Default or Potential Defaults
Waived by Amex
(See attached Request for Waiver dated December 4, 1996)
<PAGE>
THIRD AMENDMENT TO 1992 MASTER AGREEMENT
BETWEEN
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
AND
ACE CASH EXPRESS, INC. AND ITS SUBSIDIARIES
Schedule 3.4 (Third Amendment)
List of Subsidiaries
<TABLE>
<CAPTION>
Other Jurisdiction(s)
in Which Qualified to
State of do Business or
Name of Subsidiary Incorporation Assets Located
------------------ ------------- ---------------------
1
- -
<S> <C> <C> <C>
1. Check Express, Inc. Florida None
2. Check Express Florida, Inc. Florida None
3. Check Express USA, Inc. Florida None
4. Check Express Finance, Inc. Florida None
5. Check-X-Change Corporation California None
6. Check Express South Carolina, Inc. Florida None
7. Peterlyn, Inc. Washington None
</TABLE>
<PAGE>
THIRD AMENDMENT TO 1992 MASTER AGREEMENT
BETWEEN
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
AND
ACE CASH EXPRESS, INC. AND ITS SUBSIDIARIES
EXHIBIT A
Form of Advance Request and Certification
<PAGE>
ADVANCE REQUEST AND CERTIFICATION
Reference is made to that certain 1992 Master Agreement, as amended ("Master
Agreement"), between Ace Cash Express, Inc. ("Agent") and American Express
Travel Related Services Company, Inc. ("Amex"). Capitalized terms used herein
and not defined herein shall have the meanings ascribed to them in the Master
Agreement.
Pursuant to the terms of the Master Agreement, Agent hereby requests an
Advance pursuant to Section 3.4 of the 1992 Master Agreement (as said Section
3.4 is amended from time to time) in the amount of $_______________.
Agent's cash needs for the ______-day period are $___________ (net of
available cash).
After the taking of such Advance, Agent will not be in violation of the
Maximum Amount limitations imposed by Sections 3.4.1 and 3.5 (as each such
section has been amended) set forth in the 1992 Master Agreement.
Coverage Ratio Computation:
A. Amex Indebtedness:
-----------------
Total Trust Funds (excluding Proceeds) Pending
Remittance and Aggregate Unpaid Advances
$_________
B. Liquid Security Amount/1/:
----------------------
(1) Collected and Uncollected Balances of Deposit
Accounts/2/ $_________
(2) Deposits in Transit/2/ _________
(3) Cash Equivalents and Other Liquid Assets/2/ _________
(4) Cash in Centers/3/ _________
Total Liquid Security Amount $_________
C. Coverage Ratio: A : B
-------------- --- ---
Advances Outstanding Limitation:
Agent hereby certifies to Amex that the Advance requested above, together with
the outstanding principal balance of all Advances previously made to Agent by
Amex, does not exceed the limitation on Advances outstanding imposed pursuant to
Section 3.5.2 of the 1992 Master Agreement (as said Section 3.5.2 is amended and
restated at Section 1.1.K. of the Second Amendment).
Agent hereby certifies to Amex that the foregoing is true, correct, accurate
and complete.
- ---------------
/1/ Computed in accordance with the provisions of Section 3.5.1 of the 1992
Master Agreement (as said Section 3.5.1 is amended from time to time).
/2/ Limited to items in which Amex has a perfected first priority security
interest.
/3/ Limited to aggregate amount equal to number of Agent locations multiplied
by $25,000.
- 22 -
<PAGE>
Dated: ___________, 199__ ACE CASH EXPRESS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY RFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 48,311
<SECURITIES> 0
<RECEIVABLES> 5,040
<ALLOWANCES> 0
<INVENTORY> 1,344
<CURRENT-ASSETS> 55,185
<PP&E> 35,650
<DEPRECIATION> 14,190
<TOTAL-ASSETS> 112,926
<CURRENT-LIABILITIES> 56,415
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 26,385
<TOTAL-LIABILITY-AND-EQUITY> 112,926
<SALES> 39,118
<TOTAL-REVENUES> 39,118
<CGS> 0
<TOTAL-COSTS> 36,544
<OTHER-EXPENSES> 42
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,113
<INCOME-PRETAX> 1,419
<INCOME-TAX> 556
<INCOME-CONTINUING> 863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 863
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
