SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest event reported): April 25, 1997
MONACO FINANCE, INC.
(Exact name of registrant as specified in its charter)
Colorado
(State of other jurisdiction of incorporation)
0-18819 84-1088131
(Commission File Number) (IRS Employer Identification No.)
370 17th Street, Suite 5060
Denver, Colorado 80202
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303) 592-9411
N/A
(Former name or former address, if changed since last report.)
Total number of pages is 32.
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MONACO FINANCE, INC.
FORM 8-K
April 25, 1997
ITEM 5. OTHER EVENTS
On April 25, 1997, the Registrant executed a Conversion and Rights
Agreement (the "Conversion Agreement") with Pacific USA Holdings Corp.
("Pacific"). The Conversion Agreement converted the entire $3,000,000
outstanding principal amount of a secured loan made by Pacific to the Regis-
trant into 1.5 million restricted shares of the Registrant's Class A Common
Stock. The Conversion Agreement also released the Registrant from all liabil-
ity under the Loan Agreement executed on October 29, 1996 between the Reg-
istrant and Pacific pursuant to which the $3 million loan was made.
On April 25, 1997, Morris Ginsburg, the Registrant's President, and Irwin
L. Sandler, the Registrant's Executive Vice President and Secretary/Treasurer,
agreed to grant an option (the "Option") to purchase all shares of the
Registrant's common stock owned by them to SPGC, LLC ("SPGC") at $4.00 per
share. The Option is subject to execution of a definitive option agreement
acceptable to the parties. The option agreement will also provide that
Messrs. Ginsburg and Sandler may "put" 50% of the shares owned or controlled
by them to SPGC on the second anniversary of the effectiveness of the Option
and the other 50% on the third anniversary of the Option at $4.00 per share.
Messrs. Ginsburg and Sandler have agreed to deliver to SPGC irrevocable
proxies for all shares owned or controlled by them upon effective of the
Option. The Option will become effective when SPGC provides security for the
prompt payment of the "put" price in the form of cash, letter of credit or
other collateral satisfactory to Messrs. Ginsburg and Sandler. SPGC is a
limited liability corporation controlled by The Stone Pine Companies, a
privately held group of financial services companies. In connection with the
Option, the Registrant has engaged SPGC to provide strategic advisory and
investment banking services.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following documents are filed as exhibits to this Current Report on
Form 8-K.
Exhibit 1 - Conversion and Rights Agreement dated as of April 25, 1997
between the Registrant and Pacific USA Holdings Corp.
Exhibit 2 - Press Release of Registrant.
Exhibit 3 - Letter Agreement dated April 11, 1997.
<PAGE>
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 hereunto duly authorized.
MONACO FINANCE, INC.
Date: May 9, 1997 By: /s Irwin L.Sandler
----------------------
Irwin L. Sandler
Executive Vice President
<PAGE>
EXHIBIT 1
CONVERSION AND RIGHTS AGREEMENT
THIS CONVERSION AND RIGHTS AGREEMENT (the "Agreement") dated as of April
25, 1997, is made by and between Monaco Finance, Inc., a Colorado corporation
(the "Company") and Pacific USA Holdings Corp., a Texas corporation
("Pacific").
RECITALS
WHEREAS, the Company and Pacific entered into a Loan Agreement (the "Loan
Agreement"), dated October 29, 1996, pursuant to which Pacific made a loan to
the Company (the "Loan") evidenced by that certain promissory note dated
October 29, 1996 (the "Note") in the principal amount of Three Million and
No/100 Dollars ($3,000,000.00); and
WHEREAS, the outstanding principal amount of the Loan as of the Effective
Date (as defined below) is Three Million and No/100 Dollars ($3,000,000.00)
(the "Outstanding Principal Amount"); and
WHEREAS, the Company and Pacific entered into a Pledge and Security
Agreement dated as of October 29, 1996 whereby the Company pledged the
Collateral (as defined therein) to secure the obligations of the Company under
the Loan Agreement; and
WHEREAS, the Company and Pacific desire to (i) convert the Outstanding
Principal Amount of the Note into shares of Class A Common Stock of the
Company, (ii) release all of the Company's liability under the Loan Agreement
and the Note, (iii) release all Collateral securing the obligations of the
Company under the Loan Agreement and the Note and (iv) accomplish certain
related purposes, all as set forth herein.
AGREEMENT
NOW, THEREFORE, in exchange for good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties do
hereby covenant and agree as follows:
Section 1. Definitions
The following terms when used in this Agreement shall have the following
meanings:
"Change in Control" means a change in control of the Company of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act, whether or not the
Company is then subject to such reporting requirement, provided that, without
limitation, such a change in control shall be deemed to have occurred if (x)
any person (as such term is used in Section 13(d) and 14(d)(2) of the Exchange
Act), other than those persons in control of the Company on the date hereof,
shall acquire the power, directly or indirectly, to direct the management or
policies of the Company or shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of 25%
or more of the combined voting power of the Company's then outstanding
securities, or (y) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board of Directors of
the Company shall cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities and Exchange Act of 1934, and the
rules and regulations promulgated thereunder, as amended.
"Excluded Transaction" shall have the meaning set forth in the Letter
Agreement.
"Fiduciary Out Transaction" shall have the meaning set forth in the
Letter Agreement.
"IBL" shall have the meaning set forth in the Letter Agreement.
"Letter Agreement" means the agreement dated April 11, 1997 among the
Company, SPG, LLC, The Stone Pine Companies, Greenwich Capital Markets, Inc.,
Morris Ginsburg and Irwin L. Sandler, a copy of which is attached hereto as
Exhibit "A".
"Registrable Securities" means (i) the Conversion Shares and (ii) any
capital stock of the Company issued as a dividend or other distribution with
respect thereto, or in exchange for or in replacement of, the Conversion
Shares.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, as amended.
Section 2. Conversion
(a) The parties hereby agree that as of the Effective Date, the
Outstanding Principal Amount of the Loan shall be converted into Class A
Common Stock of the Company, par value $.01 per share ("Common Stock"). The
number of shares of Common Stock to be delivered to Pacific by the Company
upon such conversion ("Conversion Shares") shall be determined by dividing the
Outstanding Principal Amount of the Loan by the Conversion Price.
(b) The Conversion Price shall be equal to the greater of (i) the
Closing Price of the Common Stock on the Nasdaq National Market System
("NASDAQ") on the business day immediately preceding the Effective Date
($1.91) and (ii) the per share book value ($1.96) of the Common Stock based on
the Company's unaudited financial statements for the quarter ended March 31,
1997; provided that, in no event shall the Conversion Price be less than
$2.00 per share.
The Closing Price on the Effective Date shall be the last reported sales price
regular way or, in case no such reported sales take place on the Effective
Date, the average of the reported closing bid and asked prices regular way, in
either case on NASDAQ.
(c) The Company hereby agrees to deliver, on the Effective Date, the
Conversion Shares to Pacific per its instructions. At Pacific's request, the
Company shall register the Conversion Shares in the name of a wholly owned
subsidiary. In such event, the term "Pacific" shall include such wholly owned
subsidiary.
(d) If within twelve (12) months after the funding of the IBL, the
Company consummates an Excluded Transaction or Fiduciary Out Transaction, on
the closing date of such transaction, the Market Value of the Conversion
Shares shall be determined by multiplying the number of the Conversion Shares
times the price of the last trade of the Common Stock on the NASDAQ on such
date ("Determination Date"). If, on the Determination Date, the Market Value
of the Conversion Shares is less than $3,000,000 ("Shortfall"), the Company
shall pay Pacific an amount equal to the Shortfall on the Determination Date.
The gross proceeds of the sale of any portion of the Conversion Shares sold
prior to the Determination Date shall be added to the Market Value of the
Conversion Shares prior to calculating whether or not there is a Shortfall.
Section 3. Request for Registration
(a) Pacific (so long as it or any of its affiliates own at least 25%
of the Registrable Securities) may request in a written notice that the
Company file a registration statement under the Securities Act covering the
registration of all or part of the Registrable Securities. Following receipt
of any notice under this Section 3(a) the Company shall use its best efforts
to cause to be registered under the Securities Act all Registrable Securities
that Pacific has requested be registered in accordance with the manner of
disposition specified in such notice by Pacific.
(b) If Pacific intends to have the Registrable Securities distributed
by means of an underwritten offering, then Pacific shall enter into an
underwriting agreement in customary form with the underwriter or underwriters.
An underwriter or underwriters shall be selected by Pacific and shall be
approved by the Company, which approval shall not be unreasonably withheld;
provided (i) that all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of Pacific, (ii) that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement shall be conditions precedent to the
obligations of Pacific, and (iii) that Pacific shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties to or agreements regarding
Pacific, the Registrable Securities and Pacific's intended method of
distribution and any other representations required by law or reasonably
required by the underwriter.
(c) The Company shall not be obligated to effect more than two
registrations pursuant to this Section 3; provided that a registration
requested pursuant to this Section 3 shall not be deemed to have been effected
for purposes of this Section 3 unless (i) it has been declared effective by
the Commission, (ii) it has remained effective for the period set forth in
Section 6(a), (iii) the offering of Registrable Securities pursuant to such
registration is not subject to any stop order, injunction or other order of
requirement of the Commission (other than any such stop order, injunction, or
other requirement of the Commission prompted by any act or omission of
Pacific).
(d) If the Board of Directors of the Company, in its good faith
judgment, determines that any registration of Registrable Securities should
not be made or continued due to a valid need not to disclose confidential
information or because it would materially interfere with any material
financing, acquisition, corporate reorganization or merger or other material
transaction involving the Company (collectively, a "Valid Business Reason"),
the Company may postpone filing a registration statement relating to a request
for registration under this Section 3 until such Valid Business Reason no
longer exists, but in no event for more than three months from the date of the
notice referred to below, and, in case any such registration statement has
been filed the Company may cause such registration statement to be withdrawn
and its effectiveness terminated or may postpone amending or supplementing
such registration statement; and the Company shall give written notice (a
"Delay Notice") of its determination to postpone or withdraw a registration
statement and of the fact that the Valid Business Reason for such postponement
or withdrawal no longer exists, in each case, promptly after the occurrence
thereof. Upon the request of Pacific, the Company will disclose to Pacific
the nature of such Valid Business Reason in reasonable detail; provided that
Pacific executes a confidentiality agreement reasonably satisfactory to the
Company; provided further that any such confidentiality agreement shall
terminate upon the earlier of the public disclosure of such Valid Business
Reason or three months from the date of such Delay Notice. Notwithstanding
the foregoing provisions of this subparagraph (d), no registration statement
filed and subsequently withdrawn by reason of any existing or anticipated
Valid Business Reason as hereinabove provided shall count as one of the two
registration statements referred to in the limitation in Section 3(c) and the
Company shall be entitled to serve only one Delay Notice (i) within any period
of 180 consecutive days, or (ii) with respect to any three consecutive
registrations requested pursuant to this Section 3 or Section 5.
(e) In the event that Pacific shall determine for any reason not to
proceed with a registration at any time before the registration statement has
been declared effective by the SEC, and (i) Pacific requests the Company to
withdraw such registration statement, if theretofore filed with the SEC, with
respect to the Registrable Securities covered thereby, or if the offering is
not consummated for any reason and (ii) Pacific agrees to bear its expenses
incurred in connection therewith and to reimburse the Company for the expenses
incurred by it attributable to the registration of such Registrable
Securities, then Pacific shall not be deemed to have exercised its right to
require the Company to register Registrable Securities pursuant to this
Section 3.
(f) Without the written consent of Pacific, neither the Company nor
any other holder of securities of the Company may include securities in a
registration pursuant to this Section 3 if in the good faith judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Registrable Securities or
require the exclusion of any portion of the Registrable Securities to be
registered.
Section 4. Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act on any form (other than Form S-4 or Form
S-8) that would permit the inclusion of the Registrable Securities in
connection with the proposed offer and sale for money of any of its securities
by it or any of its security holders, the Company will give written notice of
its determination to Pacific. Upon the written request of Pacific given
within 30 days after receipt of any such notice from the Company, the Company
will, except as herein provided, cause all such shares of Registrable
Securities for which Pacific has so requested registration, to be included in
such registration statement, all to the extent requisite to permit the sale or
other disposition by Pacific of the Registrable Securities to be so
registered; provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration initiated by
it. If any registration pursuant to this Section 4 shall be underwritten in
whole or in part, the Company may require that the Registrable Securities
requested for inclusion pursuant to this Section be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If, in the written opinion of the
managing underwriter, the total amount of securities to be so registered,
including the Registrable Securities, will exceed the maximum amount of the
Company's securities that can be marketed (a) at a price reasonably related to
the then current market value of such securities, or (b) without otherwise
materially and adversely affecting the entire offering, then the Company shall
include in such registration (i) first, all the securities the Company
proposes to sell for its own account or is required to register on behalf of
any third party exercising rights similar to those granted in Section 3(a) and
without having the adverse effect referred to above, and (ii) second, to the
extent that the number of securities which the Company proposes to sell for
its own account pursuant to this Section 4 or is required to registered on
behalf of any third party exercising rights similar to those granted in
Section 3(a) is less than the number of equity securities which the Company
has been advised can be sold in such offering without having the adverse
effect referred to above, all Registrable Securities requested to be included
in such registration by Pacific pursuant to this Section 4; provided that if
the number of Registrable Securities requested to be included in such
registration by Pacific pursuant to this Section 4, together with the number
of securities to be included in such registration pursuant to clause (i) of
this Section 4, exceeds the number which the Company has been advised can be
sold in such offering without having the adverse effect referred to above, the
number of such Registrable Securities requested to be included in such
registration by Pacific shall be limited to such extent.
Section 5. Registration on Form S-3. If at any time (a) Pacific
requests in writing that the Company file a registration statement on Form S-3
or any successor thereto for a public offering of all or any portion of the
Registrable Securities held by Pacific, the reasonably anticipated aggregate
price to the public of which would exceed $1,000,000, and (b) the Company is a
registrant entitled to use Form S-3 or any successor thereto, then the Company
shall use its best efforts to register as soon as practicable under the
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such request, the
Registrable Securities specified in such request. Whenever the Company is
required by this Section 5 to use its best efforts to effect the registration
of Registrable Securities, each of the limitations, procedures and
requirements of Section 3(b) and (d) shall apply to such registration;
provided, however, that there shall be no limitation on the number of
registrations on From S-3 that may be requested and obtained under this
Section 5. The Company will use its best efforts to qualify and maintain its
qualification as a registrant entitled to use Form S-3 or any successor
thereto.
Section 6. Obligations of the Company. Whenever required under Section
3 or Section 5 to use its best efforts to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective for the period of
the distribution contemplated thereby determined as provided hereafter;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement, and furnish to Pacific copies of any
such amendments and supplements prior to their being used or filed with the
Commission;
(c) furnish to Pacific such numbers of copies of the registration
statements and the prospectus included therein (including each preliminary
prospectus and any amendments or supplements thereto in conformity with the
requirements of the Securities Act) and such other documents and information
as Pacific may reasonably request and make available for inspection by the
parties referred to in Section 6(d) below such financial and other information
and books and records of the Company, and cause the officers, directors,
employees, counsel and independent certified public accountants of the Company
to respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act;
(d) provide (i) Pacific, (ii) the underwriters (which term, for
purposes of this Agreement, shall include a person deemed to be an underwriter
within the meaning of Section 2(11) of the Securities Act), if any, thereof,
(iii) the sales or placement agent, if any, therefor, (iv) counsel for such
underwriters or agent, and (v) not more than one counsel for Pacific the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto;
(e) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities
or blue sky laws of such jurisdictions within the United States and Puerto
Rico as shall be reasonably appropriate for the distribution of the
Registrable Securities covered by the registration statement; provided,
however, that the Company shall not be required in connection therewith or as
a condition thereto to qualify to do business in or to file a general consent
to service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph (e) be obligated to do so; and provided
further, that the Company shall not be required to qualify such Registrable
Securities in any jurisdiction in which the securities regulatory authority
requires that Pacific submit its Registrable Securities to the terms,
provisions and restrictions of any escrow, lockup or similar agreement(s) for
consent to sell Registrable Securities in such jurisdiction unless Pacific
agrees to do so;
(f) promptly notify Pacific, the sales or placement agent, if any,
and the managing underwriter or underwriters, if any, and confirm such advice
in writing (i) when such registration statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective amendment
has been filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
comments by the Commission or by any Blue Sky securities commissioner or
regulator of any state with respect thereto or any request by the Commission
for amendments or supplements to such registration statement or prospectus or
for additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement or the
initiation or threatening of any proceedings for the purpose, (iv) if at any
time the representations and warranties of the Company contained in any
underwriting agreement or other customary agreement cease to be true and
correct in all material respects, or (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for the sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(h) promptly notify Pacific at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make, in light of the circumstances under which they were made, the
statements therein not misleading, and at the request of Pacific promptly
prepare and furnish to Pacific a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make, in light of
the circumstances under which they were made, the statements therein not
misleading;
(i) furnish, at the request of Pacific, if the method of distribution
is by means of an underwriting on the date that the Registrable Securities are
delivered to the underwriters for sale pursuant to such registration or if
such Registrable Securities are not being sold through underwriters, on the
date that the registration statement with respect to such Registrable
Securities becomes effective, (1) a signed opinion, dated such date, of the
independent legal counsel representing the Company for the purpose of such
registration, addressed to the underwriters, if any, and if such Registrable
Securities are not being sold through underwriters, then to Pacific as to such
matters as such underwriters or Pacific, as the case may be, may reasonably
request and as would be customary in such a transaction; and (2) letters dated
such date and the date the offering is priced from the independent certified
public accountants of the Company, addressed to the underwriters, if any, and
if such Registrable Securities are not being sold through underwriters, then
to Pacific, and if such accountants refuse to deliver such letters to Pacific,
then to the Company (i) stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the opinion
of such accountants, the financial statements and other financial data of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and (ii)
covering such other financial matters (including information as to the period
ending not more than five (5) business days prior to the date of such letters)
with respect to the registration in respect of which such letter is being
given as such underwriters or Pacific, as the case may be, may reasonably
request and as would be customary in such a transaction;
(j) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Securities
to be so included in the registration statement;
(k) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which may
be required to effect registration or the offering or sale in connection
therewith or to enable Pacific to offer, or to consummate the disposition of,
their Registrable Securities;
(l) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed.
For purposes of Sections 6(a) and 6(b), and with respect to (i) registration
required pursuant to Section 3, (A) the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be deemed
to extend until each underwriter has completed the distribution of all
securities purchased by it and (B) the period of distribution of Registrable
Securities in any other registration shall be deemed to extend until the
earlier of the sale of all Registrable Securities covered thereby and six (6)
months after the effective date thereof, and (ii) registrations required
pursuant to Section 5, the period of distribution of Registrable Securities in
any registration (firm commitment underwritten or otherwise) shall be deemed
to extend until the earlier of the sale of all Registrable Securities covered
thereby and three (3) months after the effective date thereof.
Pacific agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (h) of this Section 6,
Pacific will forthwith discontinue disposition of the Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until Pacific's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (h) of this Section 6, and, if so directed
by the Company, Pacific will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in Pacific's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that any period of time during
which Pacific must discontinue disposition of the Registrable Securities shall
not be included in the determination of a period of distribution for purposes
of Sections 6(a) and 6(b).
Section 7. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement,
that Pacific shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition
of such securities as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
Section 8. Expenses of Registration. All expenses incurred in
connection with the first registration effected pursuant to Section 3, and
each registration pursuant to Section 4 and Section 5 of this Agreement,
excluding underwriter's discounts and commissions, but including without
limitation all registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees (including the expense of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance), fees of the National Association of Securities
Dealers, Inc. (the "NASD") or listing fees, messenger and deliver expenses,
all fees and expenses of complying with state securities or blue sky laws, and
fees and disbursements of counsel for the Company and Pacific, shall be paid
by the Company; provided, however, that if a registration request pursuant to
Section 3 of this Agreement is subsequently withdrawn at the request of
Pacific, Pacific shall bear such expenses; and provided further, that if a
registration request pursuant to Section 5 of this Agreement is subsequently
withdrawn at the request of Pacific, the Company shall not be required to pay
any expenses of such registration proceeding, and Pacific shall bear such
expenses. Pacific shall bear and pay the underwriting commissions and
discounts applicable to securities offered for their account in connection
with any registration, filings, and qualifications made pursuant to this
Agreement. In addition, Pacific shall pay all expenses incurred in connection
with the second registration effected pursuant to Section 3.
Section 9. Underwriting Requirements. In connection with any
underwritten offering, the Company shall not be required under Section 4 to
include Registrable Securities in such underwritten offering, unless Pacific
accepts the terms of the underwriting of such offering that have been
reasonably agreed upon between the Company and the underwriters selected by
the Company.
Section 10. Rule 144 and Rule 144A Information. With a view to making
available the benefits of certain rules and regulations of the Commission
which may at any time permit the sale of the Registrable Securities to the
public without registration, at all times, the Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to Pacific forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of such
Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company as Pacific may reasonably request in
availing itself of any rule or regulation of the Commission allowing Pacific
to sell any Registrable Security without registration.
Notwithstanding anything contained in this Section 10, the Company may cease
to file reports with the Commission under Section 12 of the Exchange Act if it
then is permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
Section 11. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless Pacific, its
directors and officers, each person who participates in the offering of such
Registrable Securities, including underwriters (as defined in the Securities
Act), and each person, if any, who controls Pacific or participating person
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of a material fact contained in such registration
statement, preliminary prospectus, final prospectus or amendments or
supplements thereto or arise out of or are based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the indemnity agreement contained in this Section 11(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld); provided, further, that
the Company shall not be liable to Pacific, its directors and officers,
participating person or controlling person in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by Pacific, its
directors and officers, participating person or controlling person; and
provided, further, that the Company will not be liable to Pacific, its
directors and officers, participating person or controlling person in any such
case for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any registration statement
or preliminary prospectus that is corrected in the final registration
statement and prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage, liability or action purchased
Registrable Securities but was not sent or given a copy of the final
prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Registrable Securities to such person in any
case where such delivery of the final registration statement and prospectus
(as amended or supplemented) is required by the Securities Act and such final
prospectus (as amended or supplemented) was previously delivered in a timely
manner to Pacific by the Company. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Pacific,
its directors and officers, participating person or controlling person, and
shall survive the transfer of such securities by Pacific.
(b) Pacific shall indemnify and hold harmless the Company, each of
its directors and officers, each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, and each agent and any underwriter for the Company (within
the meaning of the Securities Act) to the same extent as the foregoing
indemnity from the Company to Pacific but only with reference to written
information relating to Pacific furnished to the Company expressly for use in
connection with such registration; provided, however, that the indemnity
agreement contained in this Section 11(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Pacific (which consent shall not
be unreasonably withheld); and provided further, that the liability of Pacific
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense that is equal to the proportion that the net proceeds
from the sale of the shares sold by Pacific under such registration statement
bears to the total net proceeds from the sale of all securities sold
thereunder, but not in any event to exceed the net proceeds actually received
by Pacific from the sale of Registrable Securities by such registration
statement.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, or (ii) the name parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to the actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
Pacific, in the case of parties indemnified pursuant to the second preceding
paragraph, and by the Company in the case of the parties indemnified pursuant
to the first preceding paragraph. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reasons of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party, unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in the first or second
paragraph of this Section 11 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of material or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by
a party as a result of the losses, claims, damages or liabilities referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 11, Pacific shall
not be required to contribute any amount in excess of the amount of net
proceeds received by Pacific from the sale of Registrable Securities covered
by such registration statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 11
are not exclusive and shall not limit any right or remedies that may otherwise
be available to any indemnified party at law or in equity.
Section 12. Transfer of Registration Rights.
The registration rights of Pacific under this Agreement may be
transferred to (a) any transferee of such Registrable Securities who acquires
all Registrable Securities of Pacific or (b) any affiliate of Pacific.
Section 13. Grant of Proxy
As a condition precedent to the conversion pursuant to Section 2 hereof,
Pacific hereby grants (i) a proxy to vote 50% of all shares of Conversion
Shares delivered pursuant to Section 2 hereof to Morris Ginsburg and (ii) a
proxy to vote 50% of all shares of Conversion Shares delivered pursuant to
Section 2 hereof to Irwin Sandler. Such proxies shall be irrevocable and
shall be deemed to be coupled with an interest, until (and a termination shall
automatically occur) on the earlier to occur of the following events: (a)
Pacific sells any or all of the related Conversion Shares (in the event of a
partial sale, the proxy shall terminate only as to the shares sold), (b) there
is a Change in Control of the Company, (c) either Morris Ginsburg or Irwin
Sandler sell more than 20% of his shares of stock in the Company or transfer
the voting rights relating to more than 20% of his shares of stock in the
Company, (d) Morris Ginsburg or Irwin Sandler are no longer officers and
directors of the Company, or (e) December 31, 1998. Upon any sale by Pacific
of part of the Conversion Shares, each proxy will terminate on a prorata
basis.
Section 14. Discharge and Release of Rights to Collateral
Pacific hereby acknowledges that the conversion of the Outstanding
Principal Amount pursuant to Section 2 discharges any and all debts,
liabilities and obligations owing by the Company to Pacific pursuant to the
Note, the Loan Agreement, the Pledge and Security Agreement, and the Triparty
Agreement among the Company, Pacific and Norwest, except for interest accrued
and unpaid on the Note through the Effective Date. In connection therewith,
Pacific agrees to deliver the Note to the Company for cancellation, and Monaco
agrees to pay or cause to be paid, simultaneously with such delivery, all such
accrued and unpaid interest.
Pacific hereby releases and extinguishes all of its right,. title and
interest. including security interests, proxies, stock powers, liens, pledges,
financing statements, encumbrances, mortgages, claims and guarantees with
respect in and to the Collateral and all proceeds of the Collateral
(including, but not by way of limitation, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights to payment
of any and every kind, and every other forms of obligations and receivables
which at any time constitute all or part or are included in the proceeds of
any of the foregoing).
Pacific hereby agrees to (a) deliver to the Company the stock of MF
Receivables Corp. I, (b) notify Norwest that the Norwest Agreement is
terminated and that all future instructions regarding any amounts payable
pursuant to the Norwest Agreement shall be provided by the Company and (c)
execute and deliver to the Company any additional instruments or documents
reasonably necessary to effectuate the release and extinguishment set forth
above.
Section 15. Representations and Warranties of the Company
(a) Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the law of the
State of Colorado and each other State where the nature of its business
requires it to qualify, except to the extent that the failure to so qualify
would not in the aggregate materially adversely affect the ability of the
Company to perform its obligations hereunder.
(b) Authorization. The Company has the power, authority and legal
right to execute, deliver and perform under the terms of this Agreement and
the execution, delivery and performance of this Agreement has been duly
authorized by the Company by all necessary corporate and shareholder action.
(c) Binding Obligation. This Agreement, assuming due
authorization, execution and delivery by Pacific, constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
(whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought, whether a proceeding at law or in
equity.
(d) No Violation. The consummation of the transactions
contemplated by the fulfillment of the terms of this Agreement will not
conflict with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default under the
organizational documents or bylaws of the Company, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the Company is
a party or by which it is bound, or in the creation or imposition of any lien
upon any of its properties pursuant to the terms of such indenture, agreement,
mortgage, deed of trust or other such instrument, or violate any law, or any
order, rule or regulation applicable to the Company of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or any of its properties.
(e) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, or of any court, governmental agency or body or
official, required in connection with the execution and delivery of this
Agreement have been or will be taken or obtained on or prior to the Effective
Date.
(f) Conversion Shares. All of the Conversion Shares have been duly
authorized, and upon delivery thereof to Pacific in accordance with Section 2
hereof, shall be validly issued, fully paid and non-assessable, free and clear
of all pledges, liens, encumbrances and restrictions (other than as set forth
in this Agreement).
(g) Capital Stock. At the Effective Date, the authorized capital
stock of the Company consists of 17,750,000 shares of Class A Common Stock, of
which 5,640,379 shares are issued and outstanding, 2,250,000 shares of Class B
Common Stock, of which 1,311,715 shares are issued and outstanding, and
5,000,000 shares of preferred stock, no par value, of which no shares are
issued and outstanding.
(h) Securities Laws. Under the circumstances contemplated by
this Agreement and assuming the accuracy of the representations of Pacific in
Section 16 of this Agreement, the offer, issuance, sale and delivery of the
Conversion Shares will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements of the
Securities Act.
(i) SEC Filings. The Company has made all filings that it is
required to make with the Commission under the Securities Act and the Exchange
Act (the "Company SEC Reports"). As of their respective dates, the Company
SEC Reports did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 16. Representations and Warranties of Pacific.
(a) Organization and Good Standing. Pacific is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Texas and each other State where the nature of its business requires it to
qualify, except to the extent that the failure to so qualify would not in the
aggregate materially adversely affect the ability of Pacific to perform its
obligations hereunder.
(b) Authorization. Pacific has the power, authority and legal
right to execute, deliver and perform under the terms of this Agreement and
the execution, delivery and performance of this Agreement has been duly
authorized by Pacific by all necessary corporate action.
(c) Binding Obligation. This Agreement, assuming due
authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Pacific, enforceable against Pacific in
accordance with its terms except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
(whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought, whether a proceeding at law or in
equity.
(d) No Violation. The consummation of the transactions
contemplated by the fulfillment of the terms of this Agreement will not
conflict with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default under the
organizational documents or bylaws of Pacific, or any indenture, agreement,
mortgage, deed of trust or other instrument to which Pacific is a party or by
which it is bound, or in the creation or imposition of any lien upon any of
its properties pursuant to the terms of such indenture, agreement, mortgage,
deed of trust or other such instrument, or violate any law, or any order, rule
or regulation applicable to Pacific of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over Pacific or any of its properties.
(e) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, or of any court, governmental agency or body or
official, required in connection with the execution and delivery of this
Agreement have been or will be taken or obtained on or prior to the Effective
Date.
(f) Sole Owner. Pacific is the sole owner of the Note and has not
sold, assigned or otherwise conveyed any interest in the Note to any Person or
entity.
(g) Private Placement. Except as contemplated by this Agreement,
Pacific will acquire the Conversion Shares for investment, and not for the
interest of any other person, not for resale to any other person and not with
a view to or in connection with any sale or distribution.
Section 17. Opinion of the Company's Counsel. On or before the
Effective Date, the Company shall have delivered to Pacific an opinion,
satisfactory to Pacific, of Brownstein Hyatt Farber & Strickland, P.C.,
counsel for the Company, dated the Effective Date, substantially to the effect
that:
(a) The Company is a corporation duly organized and validly existing
in good standing under the laws of the state of its incorporation and has the
corporate power and authority to own and hold the properties owned and leased
by it and to carry on the business in which it is engaged. The Company has
the corporate power and authority to enter into this Agreement, to issue and
sell the Conversion Shares and to carry out the provisions of this Agreement.
(b) The Agreement has been duly authorized, executed and delivered by
the Company, is the legal, valid and binding agreement of the Company and is
enforceable against the Company in accordance with its terms, subject, as to
the enforcement of remedies, to (i) limitations under applicable, bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization, and other laws
affecting the rights of creditors generally and to judicial limitations on the
enforcement of the remedy of specific performance and other equitable remedies
and (ii) limitations as rights of indemnification or contribution may be
limited by principles of public policy.
(c) The Conversion Shares have been duly authorized, validly issued
and delivered by the Company. The Conversion Shares are fully paid and
nonassessable, and are entitled to the rights, preferences and provisions of
the Company's Articles of Incorporation and the benefits of the provisions of
this Agreement applicable thereto. The certificates evidencing the Conversion
Shares are in valid and sufficient form.
(d) All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors and shareholders of the
Company on or prior to such Effective Date in connection with the execution
and delivery of this Agreement, the offer, issuance and sale of the Conversion
Shares and the consummation of the transactions contemplated by this
Agreement, have been duly and validly taken.
(e) Assuming the accuracy of the representations made by Pacific in
Section 16 of this Agreement, the Company has obtained the approval or consent
of all governmental agencies or bodies required pursuant to the laws of the
State of Colorado or federal laws of the United States for the legal and valid
execution and delivery of this Agreement and the legal and valid offer,
issuance and sale of the Conversion Shares and for the performance of the
obligations of the Company under all provisions of this Agreement. The
Company is not in violation of any term, provision or condition of its
Articles of Incorporation or bylaws. Assuming the accuracy of the
representations made by Pacific in Section 16 of this Agreement, the
execution, delivery and performance of this Agreement, the offer, issuance and
sale of the Conversion Shares and the consummation of the transactions
contemplated by this Agreement will not result in any breach or violation of
the terms or provisions of, or constitute a default under, the Articles of
Incorporation or the bylaws of the Company, any laws of the State of Colorado
or the federal laws of the United States affecting the Company or its business
or any agreement known to such counsel to which the Company is a party with
any of its shareholders.
(f) Assuming the accuracy of the representations made by Pacific in
Section 16 of this Agreement, the offer, sale, issuance and delivery of the
Conversion Shares to Pacific under the circumstances contemplated by this
Agreement are exempt from the registration and prospectus delivery
requirements of the Securities Act and applicable securities laws of the State
of Colorado.
Section 18. Effective Date.
This Agreement shall become effective as of the date first above
written (the "Effective
Date") provided each of the parties hereto shall have executed this Agreement
or a counterpart
hereof.
Section 19. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall
be personally delivered, transmitted via facsimile or overnight courier
service or mailed first-class postage prepaid, registered or certified mail,
(a) if to Pacific:
Pacific USA Holdings Corp.
5999 Summerside Drive, Suite 112
Dallas, Texas 75252
Attn: Bill C. Bradley, Chief Executive Officer
Facsimile No. (972) 248-5023
With a Copy to:
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, Texas 77027
Attn: Cathryn L. Porter, Chief General Counsel
Facsimile No. (713) 871-0155
(b) if to Company:
Monaco Finance, Inc.
370 Seventeenth Street, Suite 5060
Denver, Colorado 80202
Attn: Irwin L. Sandler, Executive Vice President
Facsimile No. (303) 405-6496
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given on the date when
personally delivered or when transmitted by facsimile (if confirmation of
facsimile receipt has been given), on the date after being deposited with an
overnight courier service, or, if sent by mail, four days after deposit in the
United States mail, postage prepaid. Any party may change its address for
notice by notifying the other party pursuant to the above notice provisions.
Section 20. Miscellaneous.
(a) Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered will be deemed to be
an original but all of which together will constitute one and the same
instrument.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without regard
to the application of choice of law principles, except to the extent that such
laws are superseded by federal law.
(c) Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
(d) Amendments; No Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Pacific and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(e) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest
extent possible.
(f) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
IN WITNESS WHEREOF, this CONVERSION AND RIGHTS AGREEMENT has been signed
and delivered by the parties as of the date first above written.
MONACO FINANCE, INC.,
a Colorado corporation
By: /s/ Irwin L. Sandler
------------------------------------
Name: Irwin L. Sandler
Title: Executive Vice President
PACIFIC USA HOLDINGS CORP.,
a Texas corporation
By: /s/ Bill C. Bradley
------------------------------------
Name: Bill C. Bradley
Title: Chief Executive Officer
<PAGE>
EXHIBIT 2
FROM: MONACO FINANCE, INC.
370 17th Street, Suite 5060
Denver, CO 80202
Contact: Irwin L. Sandler, Executive Vice President
Tel. (303) 592-9411
____________________________________________________________________________
_
FOR IMMEDIATE RELEASE
MONACO FINANCE ANNOUNCES $3,000,000 SECURED DEBT/EQUITY CONVERSION
April 30, 1997; Denver, Colorado. Monaco Finance, Inc. (Nasdaq NMS:
MONFA) announced today that Pacific USA Holdings Corp. ("Pacific") has
converted its outstanding $3,000,000 loan to Monaco into 1.5 million shares of
the Company's restricted Class A Common Stock ("Monaco Shares").
In connection with the transaction, Pacific has granted a Proxy to vote
50% of the Monaco Shares to Morris Ginsburg, Chairman of the Company and the
remaining 50% to Irwin L. Sandler, the Company's Executive Vice President.
According to Morris Ginsburg, "we are pleased to have obtained $3,000,000
of additional equity on what we consider favorable terms. The closing price of
Monaco's stock on the date of the conversion was $1.91 per share and the
conversion price was $2.00. Our goals for the remainder of 1997 include
continued efforts to improve Monaco's financing flexibility. The conversion
of the Pacific loan is a positive step towards achieving these goals."
Monaco Finance, which is based in Denver and operates in 22 states, is
one of the nation's most experienced secondary auto finance companies
specializing in acquiring from automobile dealerships retail installment
contracts of purchasers of new and late model automobiles. Monaco has
developed sophisticated credit evaluation systems and state-of-the-art loan
monitoring programs to provide a solid platform for future growth.
# # #
<PAGE>
EXHIBIT 3
April 11, 1997
Mr. Morris Ginsburg
President
Monaco Finance, Inc.
370 17th Street
Suite 5050
Denver, CO 80209
Dear Morris:
This letter confirms our understanding that Greenwich Capital Markets,
Inc. ("Greenwich") and SPGC, LLC ("SPGC") have agreed to provide Monaco
Finance, Inc. ("Monaco" or the "Company") with an interim bridge loan in the
amount of $1,200,000 (the "Interim Bridge Loan" or "IBL") and that The Stone
Pine Companies ("Stone Pine"), through SPGC, will provide working capital,
access to funding sources and strategic advice to Monaco. Simultaneous with
the earlier to occur of the funding of the Interim Bridge Loan or the
execution of the Conversion Agreement (as hereinafter defined), the Company
and SPGC will commence providing strategic advisory and investment banking
services to the Company on an exclusive basis, as described in further detail
in paragraph 8. In the event that Greenwich so requests, MFB will deposit the
promissory note(s) evidencing the Interim Bridge Loan and the Greenwich Notes
(as hereinafter defined) into a grantor trust (provided that such deposit has
no material adverse tax impact on Monaco or any of its affiliates), and such
grantor trust will issue to Greenwich certificates having terms substantially
identical to the IBL or the Greenwich Notes, as the case may be. References
herein to the "Company" include affiliates of the Company and any entity that
the Company or any of its affiliates may form to pursue any of the
transactions contemplated herein. If appropriate in connection with providing
the financing and services hereunder, SPGC may utilize the resources of one or
more or its affiliates, in which case references herein to SPGC will include
such affiliates. All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the Pledge and Security
Agreement between Monaco and Pacific U.S.A. Holdings Corp. ("PUSA"), dated as
of October 29, 1996 (the "October Pledge"), or in the $3,000,000 Installment
Note from Monaco to PUSA, dated November 1, 1996 (the "PUSA Note").
INTERIM BRIDGE LOAN. Greenwich, as lead lender, together with SPGC
as a 50% participant, will make the Interim Bridge Loan to MFB Funding Corp.
("MFB"), the Company's wholly-owned bankruptcy remote special purpose
corporation, in the principal amount of $1,200,000. Greenwich, PUSA and MFB
will simultaneously execute a Pledge and Security Agreement (the "Pledge"), on
terms acceptable to such parties that will, among other things, grant to
Greenwich a first lien on all of the issued and outstanding common stock ("MF
Stock") of MF Receivables Corp. I ("MF") to collateralize the IBL and
subordinate the security interest of PUSA in the MF Stock to the security
interest of Greenwich (which subordinated security interest will ultimately be
restored to a senior position upon the payment of the IBL). The IBL shall be
due and payable on June 16, 1997, provided that, if the IBL is not paid in
full by such date, the Company will repay the IBL on a monthly basis in equal
installments of $200,000 in principal, plus accrued interest, on each of June
16, 1997, July 16, 1997, August 16, 1997, September 16, 1997, October 16, 1997
and November 16, 1997, with the effect that the IBL will be paid in full on
November 16, 1997. The IBL will have a stated interest rate of 15% per annum
and will provide for payment of a commitment fee to Greenwich in the amount of
$60,000. The IBL may be prepaid at any time without penalty, and shall be
subject to certain mandatory prepayments, all as described in further detail
in paragraph 13. The conditions to Greenwich's funding of the IBL are as set
forth in Annex A attached hereto and incorporated herein by reference.
GREENWICH NOTES. Greenwich shall have the exclusive option to
refinance the IBL by funding the Greenwich Notes, subject to the right of
first refusal in favor of Rothschild, Inc., pursuant to the Commitment Letter
entered into by the Company and Greenwich dated March 27, 1997 (the
"Commitment Letter").
WARRANTS FOR COMMON STOCK. As additional consideration for the
funding of the Interim Bridge Loan or the Greenwich Notes, as may be
applicable, and for so long as consulting services are performed pursuant to
paragraph 8, upon the funding of debt financing, industry classified at or
below subordinated debt (including, without limitation, the Interim Bridge
Loan and the Greenwich Notes), the Company will issue to SPGC warrants to
purchase 300,000 shares of the Company's Class A Common Stock, $.01 par value
per share ("Common Stock"), for each $1,000,000 of funding provided. The
warrants to be issued upon these fundings will have an exercise price of $4
per share and a term of five (5) years.
PUT/CALL AGREEMENT. Concurrently with the success of SPGC in
assisting the Company in obtaining any one of the Finance Benchmarks (as that
term is defined in paragraph 10), SPGC will enter into an Option Agreement
with Morris Ginsburg, Sandler Family Partners, Ltd., and Irwin L. Sandler
(collectively, the "Shareholders") (the "Option Agreement"), pursuant to which
SPGC or its designees or assignees will own an option to purchase all shares
of the Common Stock owned or controlled by the Shareholders (the "Option") and
the Shareholders will be granted a corresponding put to SPGC (the "Put"). The
Put will be exercisable with respect to up to 50% of the shares owned or
controlled by the Shareholders following the second anniversary of the
effective date of the Option Agreement, and 50% following the third
anniversary of such effective date (the "Effective Date" or, as an adjective,
"Effective"). The Option Agreement will be Effective when SPGC provides
security for the prompt performance of its obligation to pay the Put price in
the form of cash, a letter of credit or other collateral reasonably acceptable
to the Shareholders and sufficient, upon payment, collection or sale to pay
the amount due from SPGC upon a full exercise of the Option (i.e., without
regard to any provision for partial or installment exercise or installment
payment) under the Option Agreement. Such security will be held in escrow,
pursuant to an escrow agreement, the terms and conditions of which will be
acceptable to SPGC and the Shareholders. Upon any exercise of the Option, the
amount of the security required hereunder shall be reduced by the amount paid
by SPGC in exercising the Option. Unless the Option Agreement is Effective
within 180 days after its execution, thereafter it shall automatically be void
and of no effect whatsoever. Upon the Effectiveness of the Option Agreement,
SPGC may exercise the Option at any time during the term of the Option
Agreement. Messrs. Ginsburg and Sandler agree that they will not transfer any
shares of Common Stock owned by them or over which they have any power of
disposition as of the date of this letter agreement for a period beginning on
the date of this letter agreement and ending 180 days after the date of this
letter agreement.
GINSBURG/SANDLER PROXIES AND EMPLOYMENT ARRANGEMENTS. Concurrently
with the Effectiveness of the Option Agreement, Morris Ginsburg and Irwin
Sandler will deliver to SPGC irrevocable proxies for all shares of Common
Stock then owned or controlled by them or their affiliates, including any
family members, controlled corporations or trusts or other entities in which
they hold sole or shared voting or investment power, together with all
additional shares of Common Stock which they may acquire during the term of
the proxy, including shares acquired by options owned or to be owned in the
future. Such proxies will also include all shares as to which Messrs.
Ginsburg and Sandler have voting or investment power by proxy or contract,
provided that Messrs. Ginsburg and Sandler shall not be required by this
provision to take any action which would require them to act in violation of
any fiduciary obligation to the owner of shares of Common Stock as to which
they have voting or investment power by proxy or contract. Concurrently with
the Effectiveness of the Option Agreement, SPGC will cause to be delivered to
Messrs. Ginsburg and Sandler employment agreements on terms to be mutually
agreed upon by SPGC and Messrs. Ginsburg and Sandler. The execution of such
employment agreements is a condition precedent to the effectiveness of the
Option Agreement. Such employment agreements, among other terms, will provide
annual base compensation of $300,000 for Mr. Ginsburg and $250,000 for Mr.
Sandler, will have a three-year term, will provide for non-competition
restrictions on Messrs Ginsburg and Sandler for a period of two years
following termination of employment, and will provide Messrs. Ginsburg and
Sandler with bonus compensation, subject to Board of Director discretion, as
well as stock options and other benefits available to executive-level
employees of the Company.
ADDITIONAL FUNDING RIGHT. At the time the Interim Bridge Loan is
funded and subject to any required approvals from regulatory agencies,
shareholders and/or lenders of the Company, SPGC will have the right to
purchase from the Company, during the twelve-month period following the
funding of the Interim Bridge Loan, up to $10 million in principal amount of
the Company's 12% Senior Subordinated Notes, convertible to Common Stock at $4
per share and otherwise on substantially the same terms as set forth in the
Subordinated Note Purchase Agreement, dated January 9, 1996, among the
Company, Black Diamond Advisors Inc. and the other parties thereto. This
Additional Funding Right shall be void in the event that the Company
consummates an Excluded Transaction or Fiduciary Out Transaction, as
hereinbelow described in paragraphs 8 and 13.
BOARD REPRESENTATION. Upon the funding of the Interim Bridge Loan,
the Company and Messrs. Ginsburg and Sandler will use their best efforts to
provide SPGC with the right to designate one director to the Company's Board
of Directors. Upon the Effectiveness of the Option Agreement, the Company and
Messrs. Ginsburg and Sandler will use their best efforts to provide SPGC with
the right to designate four directors to the Company's Board of Directors, or
such larger number as will then be sufficient to provide SPGC with effective
control of the Company's Board of Directors. It is understood and agreed
that this best efforts commitment of the Company and Messrs. Ginsburg and
Sandler may require them, among other things, to procure resignations from
directors sitting on the Company's Board of Directors as of the date of this
letter agreement. SPGC will agree to use its best efforts to cause Messrs.
Ginsburg and Sandler to continue as members of the Company's Board of
Directors at all times until SPGC exercises the Option in full and pays to
Messrs. Ginsburg and Sandler the entire exercise price payable under the
Option Agreement.
CONSULTING SERVICES. Upon the earlier to occur of (i) funding of the
Interim Bridge Loan or (ii) PUSA's executing, on terms acceptable to Monaco,
an agreement to convert the PUSA Note to Common Stock (the "Conversion
Agreement") at a price per share of Common Stock (the "Conversion Shares")
equal to the greater of (i) the price of the last trade of the Common Stock on
the Nasdaq National Market System on the date of PUSA's execution of the
Conversion Agreement or (ii) the book value of the Common Stock based on
Monaco's unaudited financial statements for the quarter ended on and as of
March 31, 1997 (provided that in no event shall the Conversion Price be less
than $2.00 per share), the Company will engage SPGC to evaluate and assist the
Company in negotiating the Company's strategic alternatives and to act as the
exclusive advisor to the Company on all financing and capital formation
activities, sale of assets or stock, merger and acquisition transactions and
investor relations. The Company will compensate SPGC for the services
described under this paragraph 8 at a rate of $20,000 per month for a period
of six months, commencing with the month during which the Company is
successful in assisting the Company in obtaining any of the Finance
Benchmarks, plus reimbursement of the amount of any out-of-pocket expenses
approved in advance by the Company, provided that no single expense in excess
of $300 will be reimbursed unless approved in advance in writing by the
Company. It is understood and agreed that, if a Finance Benchmark is not
obtained by six months after the date of the execution hereof ("Finance
Benchmark Date"), Monaco will not be obligated to pay SPGC the aforementioned
consulting fees. Subsequent to the Finance Benchmark Date, consulting fees,
if any, paid by Monaco to SPGC will be contingent upon terms mutually
acceptable to both Monaco and SPGC. The Company will also compensate SPGC
upon consummation of transactions (whether or not SPGC is the source or finder
of any such transactions or the party to such transactions) on terms
reasonable and customary in the investment banking industry, as mutually
agreed upon by the Company and SPGC (the "Success Fees"), provided that no
Success Fees will be payable upon the consummation of any transaction between
the Company and any entity identified on Schedule A hereto (the "Excluded
Transactions") which is the subject of an agreement in principle executed by
the parties within 120 days after the date of the funding of the Interim
Bridge Loan and which Excluded Transaction is consummated within 12 months
after the date of the date of the funding of the Interim Bridge Loan. Except
for consulting fees, if any, as above described, the consulting services
described in this paragraph 8 will be performed for an initial period of 6
months and may thereafter be continued if the Company and SPGC agree on
mutually acceptable terms, provided that the Company will have the right to
earlier terminate the consulting services in the event that SPGC fails to
exercise the right of first refusal under paragraph 10. Other than Excluded
Transactions, transactions and prospective relationships in process at the
time of termination will remain covered by the agreement described in this
paragraph 8 for a period of 12 months following such termination for purposes
of determining the Company's responsibility for the payment of Success Fees.
POTENTIAL TRANSACTION. In the event Monaco believes in good faith
that it will be entering into an agreement for the sale or change of control
of the Company, at least 10 days prior to execution of such agreement, it
agrees to advise SPGC of such potential sale or change of control and, to the
extent known, the proposed terms thereof, with the effect that, in the event
that the Company receives a bona fide offer for the purchase of the majority
its assets, business or capital stock, Monaco will commence negotiations with
SPGC for the acquisition of such shares, assets or business for a period of 10
days, so long as SPGC indicates that it is willing to match such terms,
demonstrates in a manner reasonably acceptable to the Company its ability to
timely and fully perform under the terms of such offer and SPGC executes a
definitive agreement for such acquisition acceptable to Monaco within such
10-day period.
POTENTIAL RIGHT OF FIRST REFUSAL. SPGC intends to utilize its best
efforts on behalf of the Company to (i) fund the Greenwich Notes as described
in the Commitment Letter, (ii) obtain equity financing for the Company in the
minimum amount of $5,000,000 on terms acceptable to the Company, (iii) obtain
loan servicing for the Company in the minimum amount of $125,000,000 on terms
acceptable to the Company, (iv) obtain PUSA's execution of the Conversion
Agreement on or before April 25, 1997 (the "Conversion Termination Date"), or
(v) obtain subordinated debt financing in the minimum amount of $5,000,000 on
terms acceptable to the Company (clauses (i) through (v) of this paragraph 10
are hereinafter collectively referred to as "Finance Benchmarks").
Notwithstanding the foregoing, the Finance Benchmark described in clause (iv)
of this paragraph 10, if not obtained on or before the Conversion Termination
Date, shall immediately thereafter become null and void and become
automatically deleted as Finance Benchmark. In the event SPGC is successful
in assisting the Company in obtaining any one of the Finance Benchmarks, upon
successful closing of such Finance Benchmark, SPGC shall have a right of first
refusal as follows: In the event that the Company receives a bona fide offer
for the purchase of the majority its assets, business or capital stock, SPGC
will, for a period of 10 business days after the receipt of such offer, have
the exclusive right to acquire such shares, assets or business by matching any
offer of a third party and timely and fully performing under the terms of such
offer.
Any rights SPGC may have, as described in paragraphs 9 and 10, shall
automatically terminate in the event that a Finance Benchmark is not obtained
within 180 days after the effective date of this Agreement.
RESTRICTED SECURITIES. Any warrants or options awarded pursuant to
this letter agreement, and any Common Stock acquired upon exercise thereof,
will be restricted as to transfer, provided that the warrant holder or
optionee will be granted reasonable and customary anti-dilution and
registration rights, as more particularly described in a warrant or option
agreement on terms acceptable to the parties.
REQUIRED AUTHORIZATIONS AND CONSENTS. The Company will promptly
proceed to obtain such authorizations and consents as it deems necessary or
appropriate to enter into this letter agreement and to consummate the
transactions contemplated hereby.
NO NEGOTIATIONS, ETC.
(a) Except as to Excluded Transactions, from the date of the
funding of the Interim Bridge Loan, neither the Company nor either of Messrs.
Ginsburg or Sandler will directly or indirectly, solicit, initiate or
encourage submission of any proposal or offer from any person or entity
relating to any recapitalization, merger, consolidation or acquisition or
purchase of all or a material portion of the assets of, or any material equity
interest in, the Company or other similar transaction or business combination
involving the Company except with SPGC, or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other person or entity to do or
seek such proposal or transaction unless, as such proposal or transaction
("Fiduciary Out Transaction") relates to the Company, the Company has been
advised by legal counsel to the Company or to the Board of Directors that the
Board of Directors would be in violation of its fiduciary obligations to the
stockholders of the Company by the Company's failure to so act . The Company
or Messrs. Ginsburg or Sandler, as the case may be, will promptly notify SPGC
if any such proposal or offer, or any inquiry from or contact with any person
with respect thereto, is made and will promptly provide SPGC with such
information regarding such proposal, offer, inquiry or contact as SPGC may
request.
(b) Notwithstanding anything herein to the contrary, from the
date on which PUSA executes the Conversion Agreement, neither the Company nor
either of Messrs. Ginsburg or Sandler will, directly or indirectly, solicit,
initiate or encourage submission of any proposal or offer from any person or
entity relating to any recapitalization, merger, consolidation or acquisition
or purchase of all or a material portion of the assets of, or any material
equity interest in, the Company or other similar transaction or business
combination involving the Company except with SPGC, or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person or
entity to do or seek such proposal or transaction, other than in connection
with a Fiduciary Out Transaction. By way of clarification, the agreement of
the Company and Messrs. Ginsburg and Sandler under this subparagraph (b) shall
be absolute and without any exception for Excluded Transactions provided in
the subparagraph (a) of this paragraph 13. The Company or Messrs. Ginsburg or
Sandler, as the case may be, will promptly notify SPGC if any such proposal or
offer, or any inquiry from or contact with any person with respect thereto, is
made and will promptly provide SPGC with such information regarding such
proposal, offer, inquiry or contact as SPGC may request.
(c) In the event the PUSA Note is converted to equity in the
Company pursuant to the Conversion Agreement, and the Company subsequently and
within 12 months after the funding of the IBL, consummates an Excluded
Transaction or Fiduciary Out Transaction, on the closing date of such
transaction, the Market Value of the Conversion Shares shall be determined by
multiplying the number of the Conversion Shares times the price of the last
trade of the Common Stock on the Nasdaq National Market System on such date
("Determination Date"). If, on the Determination Date, the Market Value of
the Conversion Shares is less than $3,000,000 ("Shortfall"), Monaco shall pay
PUSA an amount equal to the Shortfall on the Determination Date. The gross
proceeds of the sale of any portion of the Conversion Shares sold prior to the
Determination Date shall be added to the Market Value of the Conversion Shares
prior to calculating whether or not there is a Shortfall.
(d) In the event PUSA releases the MF Stock pursuant to the
Pledge and the Company, within 12 months after funding of the IBL, consummates
an Excluded Transaction or Fiduciary Out Transaction, on the closing date of
such transaction, the Company shall be obligated to immediately pay in full
the PUSA Note, together with any accrued and unpaid interest. In addition, in
the event that the Company consummates an Excluded Transaction or Fiduciary
Out Transaction, the Company shall be obligated to immediately pay in full the
Interim Bridge Loan if not yet paid in full, together with any accrued and
unpaid interest.
EXPENSES. Upon PUSA's execution of the Conversion Agreement, the
Company will be unconditionally obligated to reimburse Greenwich (on
Greenwich's behalf and on behalf of SPGC and Stone Pine) for (i) all costs of
obtaining a rating of the Greenwich Notes by a nationally recognized credit
rating agency, which costs will not exceed $30,000, and (ii) all costs and
expenses in connection with the negotiation and preparation of this letter
agreement and the documentation for the transactions contemplated by this
letter agreement, in an amount not to exceed $100,000.
LIQUIDATED DAMAGES. In the event that the Company enters into an
agreement in principle to sell control of the Company in an Excluded
Transaction or a Fiduciary Out Transaction within 120 days after the funding
of the Interim Bridge Loan, which agreement in principle and sale transaction
is consummated within 12 months after the funding of the Interim Bridge Loan,
the Company will pay to SPGC as liquidated damages (and not as a penalty) the
sum of $120,000, which payment will be made no later than concurrently with
the consummation of such Excluded Transaction or Fiduciary Out Transaction.
EFFECTIVENESS. This letter agreement will become effective
following the acceptance by the execution hereof by Messrs. Ginsburg and
Sandler and the Company, on the earlier to occur of (i) SPGC's obtaining on
behalf of the Company any Finance Benchmark on or before June 30, 1997, or
(ii) the funding of the IBL by May 1, 1997, provided that such deadline shall
be automatically extended, at the request of SPGC or Greenwich for an
additional 10 days to complete definitive documentation for the IBL.
If the terms of this letter agreement are acceptable to you, please
execute and date a copy of this letter in the spaces provided below.
Very truly yours,
SPGC, LLC
BY: STONE PINE ACQUISITION
COMPANY, L.L.C., MEMBER
By: /s/ Donald R. Jackson
------------------------------------
Donald R. Jackson
Chief Financial Officer
THE STONE PINE COMPANIES
By: /s/ Donald R. Jackson
------------------------------------
Managing Director
GREENWICH CAPITAL MARKETS, INC.
By: /s/ Thomas Proger Kaplan
------------------------------------
Senior Vice President
<PAGE>
ACCEPTED AND AGREED TO:
MONACO FINANCE, INC.
By: /s/ Irwin L. Sandler
------------------------------------
Irwin L. Sandler, EVP
/s/ Morris Ginsburg
------------------------------------
MORRIS GINSBURG
/s/ Irwin L. Sandler
------------------------------------
IRWIN L. SANDLER
