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 JULY 31, 1997
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 0-26686
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0465087
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
675 BERING DRIVE, SUITE 710
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 977-2600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [ ].
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
SHARES
OUTSTANDING AT
CLASS AUGUST 29, 1997
- ---------------------------- --------------------------------------------------
COMMON STOCK-$.001 PAR VALUE 5,566,669
================================================================================
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
AND SUBSIDIARIES
FORM 10-Q
JULY 31, 1997
TABLE OF CONTENTS
PAGE NO.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1997 and
July 31, 1997........................ 3
Consolidated Statements of Operations
for the Three Months
Ended July 31, 1996 and 1997......... 4
Consolidated Statement of
Shareholders' Equity for the Three
Months Ended July 31, 1997........... 5
Consolidated Statements of Cash Flows
for the Three Months Ended
July 31, 1996 and 1997............... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..... 17
SIGNATURES................................... 17
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- APRIL 30, 1997 AND JULY 31, 1997
APRIL 30, JULY 31,
1997 1997
--------------- ------------
(UNAUDITED)
ASSETS
- -------------------------------------
Receivables Held for Investment,
net................................ $ 118,299,063 $122,764,234
Cash and Short-Term Investments,
including restricted cash of
$3,550,391 and $3,981,050.......... 5,967,358 6,633,366
Other Receivables:
Due from servicer............... 8,427,565 7,959,662
Accrued interest................ 1,923,360 1,985,835
Assets Held for Sale................. 1,072,463 1,927,328
Other Assets:
Funds held under reinsurance
agreement..................... 2,563,454 2,045,929
Deferred financing costs and
other, net of accumulated
amortization and depreciation
of $553,143 and $609,397...... 1,101,947 1,409,048
Deferred income tax asset,
net........................... 387,876 472,913
--------------- ------------
Total assets............... $ 139,743,086 $145,198,315
=============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Debt:
Secured credit facilities....... $ 112,894,131 $118,181,739
Other Liabilities:
Due to dealers.................. 342,697 287,706
Accounts payable and accrued
liabilities................... 2,460,685 1,786,040
Current income taxes payable.... 109,472 421,782
--------------- ------------
Total liabilities.......... 115,806,985 120,677,267
--------------- ------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.001 par value,
10,000,000 shares authorized,
5,566,669 and 5,566,669,
shares issued and
outstanding................... 5,567 5,567
Additional paid-in capital...... 18,464,918 18,464,918
Retained earnings............... 5,465,616 6,050,563
--------------- ------------
Total shareholders'
equity..................... 23,936,101 24,521,048
--------------- ------------
Total liabilities and
shareholders' equity....... $ 139,743,086 $145,198,315
=============== ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1997
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
JULY 31, JULY 31,
1996 1997
------------ ------------
Interest Income...................... $ 4,500,031 $ 4,853,298
Interest Expense..................... 1,560,597 1,819,265
------------ ------------
Net interest income........ 2,939,434 3,034,033
Provision for Credit Losses.......... 359,606 711,000
------------ ------------
Net Interest Income After Provision
for Credit Losses.................. 2,579,828 2,323,033
------------ ------------
Other Income:
Late fees and other............. 171,949 179,626
------------ ------------
Operating Expenses:
Servicing fees.................. 352,314 426,694
Salaries and benefits........... 618,503 656,159
Other........................... 597,144 498,629
------------ ------------
Total operating expenses... 1,567,961 1,581,482
------------ ------------
Income Before Provision for Income
Taxes.............................. 1,183,816 921,177
------------ ------------
Provision for Income Taxes:
Current......................... 319,812 421,267
Deferred........................ 112,252 (85,037)
------------ ------------
Total provision for income
taxes.................... 432,064 336,230
------------ ------------
Net Income........................... $ 751,752 $ 584,947
============ ============
Net Income Per Common Share.......... $0.14 $0.11
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Balance, April 30, 1997.............. $5,567 $ 18,464,918 $ 5,465,616 $ 23,936,101
Net income...................... -- -- 584,947 584,947
------- -------------- ------------ --------------
Balance, July 31, 1997............... $5,567 $ 18,464,918 $ 6,050,563 $ 24,521,048
======= ============== ============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1997
(UNAUDITED)
1996 1997
--------------- ---------------
Cash Flows From Operating Activities:
Net income...................... $ 751,752 $ 584,947
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities --
Depreciation and
amortization expense..... 406,700 550,497
Provision for credit
losses................... 359,606 711,000
Charge-offs, net of
recoveries............... (301,401) (629,433)
(Increase) decrease in:
Accrued interest
receivable............... 54,627 (62,475)
Restricted cash............ 402,378 (430,659)
Deferred financing costs
and other................ (32,897) (346,542)
Funds held under
reinsurance agreement.... (64,832) 517,525
Due from servicer.......... (1,004,386) 467,903
Deferred income tax asset,
net...................... -- (85,037)
Federal income tax
receivable............... 295,523 --
Increase (decrease) in:
Due to dealers............. (177,337) (54,991)
Accounts payable and
accrued liabilities...... (216,114) (674,645)
Current income taxes
payable.................. (49,503) 312,310
Deferred income tax
liability, net........... 112,252 --
--------------- ---------------
Net cash provided by
operating
activities.......... 536,368 860,400
--------------- ---------------
Cash Flows From Investing Activities:
Purchase of receivables......... (20,398,180) (18,316,433)
Principal payments from
receivables................... 10,661,681 12,426,545
Purchase of furniture and
equipment..................... (28,874) (22,772)
--------------- ---------------
Net cash used in
investing
activities.......... (9,765,373) (5,912,660)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from advances on
secured debt.................. 19,586,478 16,179,881
Principal payments made on
secured debt............... (10,242,185) (10,892,272)
--------------- ---------------
Net cash provided by
financing
activities.......... 9,344,293 5,287,609
--------------- ---------------
Increase in Cash and Short-Term
Investments........................ 115,288 235,349
Cash and Short-Term Investments at
Beginning of Period................ 3,601,269 2,416,967
--------------- ---------------
Cash and Short-Term Investments at
End of Period...................... $ 3,716,557 $ 2,652,316
=============== ===============
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period
for --
Interest................... $ 1,454,800 $ 1,843,788
Income taxes............... 73,792 108,957
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996 AND 1997
1. THE COMPANY
ORGANIZATION. First Investors Financial Services Group, Inc. (First
Investors) together with its direct and indirect subsidiaries (collectively
referred to as the Company) is principally involved in the business of acquiring
and holding for investment retail installment contracts secured by new and used
automobiles and light trucks (receivables) originated by factory authorized
franchised dealers. As of July 31, 1997, approximately 45 percent of receivables
held for investment were located in Texas. The Company currently operates in 17
states.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of First Investors and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The results for the interim periods are not necessarily indicative of the
results of operations that may be expected for the fiscal year. In the opinion
of management, the information furnished reflects all adjustments which are of a
normal recurring nature and are necessary for a fair presentation of the
Company's financial position as of July 31, 1997, and the results of its
operations for the three months ended July 31, 1996 and 1997, and its cash flows
for the three months ended July 31, 1996 and 1997.
The consolidated financial statements for the interim periods have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information not misleading.
Certain reclassifications have been made to the 1996 amounts to conform
with the 1997 presentation.
EARNINGS PER SHARE. Earnings per share amounts are calculated based on net
income available to common shareholders after preferred dividends, if any. The
weighted average common shares outstanding for the three months ended July 31,
1996 and 1997, were 5,566,669.
3. RECEIVABLES HELD FOR INVESTMENT
Net receivables consisted of the following:
APRIL 30, JULY 31,
1997 1997
--------------- ---------------
Receivables.......................... $ 115,742,904 $ 120,144,970
Unamortized premium and deferred
fees............................... 3,738,156 3,882,828
Allowance for credit losses.......... (1,181,997) (1,263,564)
--------------- ---------------
Net receivables................. $ 118,299,063 $ 122,764,234
=============== ===============
7
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORE PROGRAM. At July 31, 1997, the Company had investments in receivables
pursuant to the core program with an aggregate principal balance of
$116,885,869.
Activity in the allowance for credit losses for the three months ended July
31, 1997, was as follows:
Balance, beginning of period......... $ 1,181,997
Provision for credit losses.......... 711,000
Charge-offs, net of recoveries....... (629,433)
------------
Balance, end of period............... $ 1,263,564
============
PARTICIPATING PROGRAM. At July 31, 1997, the Company had investments in
receivables pursuant to the dealer recourse program with an aggregate principal
balance of $3,259,101. The Company was reimbursed by participating dealers for
$1,374 of expenses incurred during the three months ended July 31, 1997. During
the three months ended July 31, 1997, excess interest of $3,250 was remitted to
the dealers pursuant to this program.
The following table summarizes activity in the dealer reserves for the
three months ended July 31, 1997.
Balance, beginning of period......... $ 339,602
Additions............................ 8,517
Charges to dealer reserve accounts,
net of recoveries.................. (67,812)
----------
Balance, end of period............... $ 280,307
==========
4. DEBT
Borrowings under the warehouse credit facility and commercial paper
facility were $48,860,000 and $69,321,739, respectively, at July 31, 1997, and
had weighted average interest rates, including the effect of facility fees,
program fees, dealer fees, and hedge instruments, as applicable, of 6.31 percent
and 6.16 percent, respectively. The effect of the hedge instrument on the
weighted average interest rate is immaterial.
The Company's credit facilities bear interest at floating interest rates
which are reset on a short-term basis whereas its receivables bear interest at
fixed rates which are generally at the maximum rates allowable by law and do not
generally vary with changes in interest rates. To manage the risk of fluctuation
in the interest rate environment, the Company enters into interest rate swaps
and caps to lock in what management believes to be an acceptable net interest
spread. However, the Company will be exposed to limited rate fluctuation risk to
the extent it cannot perfectly match the timing of net advances from its credit
facilities and acquisitions of additional interest rate protection agreements.
On July 18, 1997, the Company, through its wholly-owned subsidiary, First
Investors Financial Services, Inc. ("FIFS"), completed a $6 million working
capital facility with NationsBank of Texas, N.A. as agent for the banks party
thereto. The purpose of the facility is to support the Company's working capital
needs and for other general corporate purposes. Under the terms of the facility,
the Company may borrow, repay and reborrow up to the lesser of $6 million or a
borrowing base. The initial term of the facility expires on July 10, 1998, and
is renewable annually at the option of the lenders. In the event that the
lenders elect not to renew, any borrowings outstanding at maturity will be
converted to a term loan which would amortize quarterly in equal increments to
fully amortize the balance within one year from the maturity date. Borrowings
under the working capital facility bear interest at a rate selected by the
8
<PAGE>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company at the time of the advance of either the base rate, defined as the
higher of the prime rate or the federal funds rate plus 0.5 percent, the LIBOR
rate plus three percent or a rate agreed to by the Company and the banks. The
facility also provides for the payment of other fees including an upfront fee,
an annual agency fee and a fee of 0.375 percent per annum on the unused portion
of the facility.
The document governing the working capital facility contains numerous
covenants governing the Company's business, the observance of certain covenants
and other matters. The Company serves as a guarantor of the indebtedness which
is additionally secured by the pledge of the outstanding stock of FIFS and two
of FIFS' primary subsidiaries. Under the terms of the guaranty, the Company is
prohibited from paying dividends to shareholders without the consent of the
banks.
5. SHAREHOLDERS' EQUITY
STOCK OPTION PLAN. On July 15, 1997 the Compensation Committee granted
options covering a total of 59,000 shares of Common Stock to key employees of
the Company. The exercise price is $7.375 per share and the options vest in
cumulative annual increments of 20 percent beginning on July 15, 1998.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Net income for the three months ended July 31, 1997 was $584,947, a
decrease of 22% from that reported for the comparable period in the preceding
year of $751,752. Earnings per common share was $0.11 for the three months ended
July 31, 1997, compared to $0.14 per common share for the prior period.
NET INTEREST INCOME
The continued profitability of the Company during these periods has been
achieved by the growth of the receivables portfolio and effective management of
net interest income. The following table summarizes the Company's growth in
receivables and net interest income (dollars in thousands):
AS OF OR FOR THE
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
Investment in receivables:
Number.......................... 9,284 10,989
Principal balance............... $ 103,136 $ 120,251
Average principal balance of
receivables outstanding during
the
period........................ $ 98,465 $ 117,808
THREE MONTHS ENDED
JULY 31,
--------------------
1996 1997
--------- ---------
Interest income(1)................... $ 4,500 $ 4,853
Interest expense..................... 1,561 1,819
--------- ---------
Net interest income............. $ 2,939 $ 3,034
========= =========
- ------------
(1) Amounts shown are net of yield participations paid to dealers pursuant to
the participating program of $20 and $3, respectively.
The following table sets forth information with regard to the Company's net
interest spread, which represents the difference between the effective yield on
receivables and the Company's average cost of debt, and its net interest margin
(averages based on month-end balances):
THREE MONTHS
ENDED
JULY 31,
--------------------
1996 1997
--------- ---------
Effective yield on receivables(1).... 18.3% 16.5%
Average cost of debt(2).............. 6.5 6.3
--------- ---------
Net interest spread(3)............... 11.8% 10.2%
========= =========
Net interest margin(4)............... 11.9% 10.3%
========= =========
- ------------
(1) Represents interest income as a percentage of average receivables
outstanding.
(2) Represents interest expense as a percentage of average debt outstanding.
(3) Represents yield on receivables less average cost of debt.
(4) Represents net interest income as a percentage of average receivables
outstanding.
10
<PAGE>
Net interest income is the difference between interest earned from the
receivables portfolio and interest expense incurred on the credit facilities
used to acquire the receivables. Net interest income increased for the three
months ended July 31, 1997 to $3.034 million from $2.939 million for the
comparable period in the preceding year. Net interest income in 1997 represents
an increase of 3% from the same period in 1996.
Changes in the principal amount and rate components associated with the
receivables and debt can be segregated to analyze the periodic changes in net
interest income. The following table analyzes the changes attributable to the
principal amount and rate components of net interest income (dollars in
thousands):
THREE MONTHS ENDED
JULY 31,
1996 TO 1997
-------------------------------------
INCREASE DUE TO
CHANGE IN
----------------------
AVERAGE
PRINCIPAL AVERAGE TOTAL NET
AMOUNT RATE INCREASE
--------- ------- ---------
Interest income...................... $ 884 $ (531 ) $ 353
Interest expense..................... 312 (54 ) 258
--------- ------- ---------
Net interest income.................. $ 572 $ (477 ) $ 95
========= ======= =========
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1997 AND 1996 (DOLLARS IN THOUSANDS)
INTEREST INCOME. Interest income for the 1997 period increased to $4,853
compared with $4,500 for the comparable period in 1996 and reflects an increase
of 8%. The increase in interest income is due to an increase in the average
principal balance of receivables held of 20% from the 1996 to 1997 comparable
period. The increase in average principal balance of receivables held for the
three months ended offset a 1.8% decline in the effective yield realized on the
receivables. Management attributes the decrease in yield to a reduction in
financing fees paid by dealers and an increase in the percentage of receivables
on which rate participation is paid to dealers as incentive to utilize the
Company's financing programs.
INTEREST EXPENSE. Interest expense in 1997 increased to $1,819 as compared
to $1,561 in 1996. The increase of 17% was due to an increase in the weighted
average borrowings outstanding of 20%. The weighted average cost of debt
declined 0.2% in the three month period as compared to 1996, reflecting a
general decline in market rates and the positive impact of the Company's hedging
programs.
NET INTEREST INCOME. Net interest income increased to $3,034 in 1997, an
increase of 3% over the comparable 1996 period. The increase resulted from the
growth of the receivables portfolio which offset a decline of 1.6% in the net
interest spread over the prior year period.
PROVISION FOR CREDIT LOSSES. The provision for credit losses for 1997
increased to $711 as compared to $360 in 1996. The increase was the result of
the growth of the Company's receivables portfolio and the continued strategy of
building loan loss reserve in excess of net charge-offs.
LATE FEES AND OTHER INCOME. Other income increased to $180 in 1997 from
$172 in 1996. Other income primarily represents interest income earned on
short-term marketable securities and money market instruments.
SERVICING FEE EXPENSES. Servicing fee expenses increased to $427 in 1997
from $352 in 1996. Since these costs vary with the volume of receivables
serviced, this increase was primarily attributable to the growth in the number
of receivables serviced, which increased by 1,705 from 1996 to 1997.
11
<PAGE>
SALARIES AND BENEFIT EXPENSES. Salaries and benefits increased to $656 in
1997 from $619 in 1996. The increase was due to an expansion of the Company's
operations.
OTHER EXPENSES. Other expenses decreased to $499 from $597 for the three
months ended. The decrease was primarily due to higher relative expense levels
in the 1996 period resulting from an expansion of the Company's operations and
to a lesser extent, the implementation of certain overhead expense controls in
the 1997 period.
INCOME BEFORE PROVISION FOR INCOME TAXES. During 1997, income before
provision for income taxes decreased to $921 or 22% from the comparable period
in 1996. This change was a result of the decrease in net interest income after
provision for credit losses of $257 partially offset by an increase in operating
expenses of $14.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH FLOWS. On October 4, 1995 the Company sold 1.9
million shares of common stock in a public offering and received proceeds of
$19.4 million, net of underwriting discounts and commissions. Approximately $7
million of the proceeds were used to prepay promissory notes plus accrued
interest, to redeem outstanding preferred stock including accrued dividends and
redemption premium, and to pay issuance costs.
The Company's business requires significant cash flow to support its
operating activities. The principal cash requirements include (i) amounts
necessary to acquire receivables from dealers and fund required reserve
accounts, (ii) amounts necessary to fund premiums for credit enhancement
insurance, and (iii) amounts necessary to fund costs to retain receivables,
primarily interest expense and servicing fees. The Company also requires a
significant amount of cash flow for working capital to fund fixed operating
expenses, primarily salaries and benefits.
The Company's most significant cash flow requirement is the acquisition of
receivables from dealers. The Company funds the purchase price of the
receivables through the use of a $55 million warehouse credit facility provided
to F.I.R.C., Inc. ("FIRC") a wholly-owned special purpose financing subsidiary
of the Company. The current warehouse credit facility generally permits the
Company to draw advances up to the outstanding principal balance of qualified
receivables. The Company paid $18.3 million for receivables acquired for the
three months ended July 31, 1997, compared to $20.4 million paid in the
comparable 1996 period. Receivables that have accumulated in the warehouse
credit facility may be transferred to a commercial paper conduit facility at the
option of the Company. The commercial paper facility provides additional
liquidity of up to $105 million to fund the Company's investment in the
receivables portfolio. Substantially all of the Company's receivables are
pledged to collateralize these credit facilities.
On October 22, 1996, the Company entered into a $105 million commercial
paper conduit financing through Enterprise Funding Corporation, a commercial
paper conduit administered by NationsBank, N.A.. The financing was provided to a
special-purpose, wholly-owned subsidiary of the Company, First Investors Auto
Receivables Corporation ("FIARC"). It replaced an existing $75 million
commercial paper conduit facility which was provided by Enterprise Funding to
FIRC. Credit enhancement for the new $105 million facility is provided to the
commercial paper investors by a surety bond issued by MBIA Insurance
Corporation. Credit enhancement for the replaced $75 million facility was
provided by an Auto Loan Protection Insurance ("ALPI") policy issued by
National Union Fire Insurance Company of Pittsburgh and reinsured by the
Company's captive insurance subsidiary. The ALPI policy continues to provide
credit enhancement for the $55 million warehouse credit facility.
Receivables originally purchased by the Company are financed with
borrowings under the warehouse credit facility. Once a sufficient amount of
receivables have been accumulated, the receivables are transferred from FIRC to
FIARC with advances under the commercial paper facility used to repay borrowings
under the warehouse credit facility. Once receivables are transferred to the
FIARC subsidiary and pledged as collateral for commercial paper borrowings,
12
<PAGE>
the ALPI policy with respect to the transferred receivables is cancelled with
any unearned premiums returned to FIRC. FIARC may borrow up to 90% of the face
amount of the receivables being transferred. In addition, a cash reserve equal
to 1% of the outstanding borrowings under the commercial paper facility must be
maintained in a reserve account for the benefit of the creditors and surety bond
provider.
The current term of the warehouse credit facility expires on April 15,
1998, at which time the outstanding balance will be payable in full, subject to
certain notification provisions allowing the Company a period of six months in
order to endeavor to refinance the facility in the event of termination. The
term of the facility has been extended on six occasions since its inception in
October 1992. The commercial paper facility was provided for a term of one year,
expiring October 21, 1997. If the facility were not extended, receivables
pledged as collateral would be allowed to amortize; however, no new receivables
would be allowed to be transferred from the warehouse credit facility.
Management considers its relationship with all of the Company's lenders to be
satisfactory and has no reason to believe either the warehouse credit facility
or the commercial paper facility will not be renewed.
The Company's most significant source of cash flow is the principal and
interest payments received from the receivables portfolio. The Company received
such payments in the amount of $17.9 million and $14.6 million for the three
months ended July 31, 1997 and 1996, respectively. Such cash flow funds
repayment of amounts borrowed under the warehouse credit and commercial paper
facilities and other holding costs, primarily interest expense and servicing and
custodial fees. During the three months ended, the Company required net cash
flow of $5.9 million in 1997 and $9.7 million in 1996 (cash required to acquire
receivables net of principal payments on receivables) to fund the growth of its
receivables portfolio.
The following table summarizes borrowings under the warehouse credit
facility and the commercial paper facility (dollars in thousands):
AS OF OR FOR THE
THREE MONTHS
ENDED
JULY 31,
--------------------
1996 1997
--------- ---------
WAREHOUSE CREDIT FACILITY:
At period-end:
Balance outstanding............. $ 52,390 $ 48,860
Weighted average interest
rate(1)........................ 6.28% 6.31%
During period(2):
Maximum borrowings
outstanding.................... $ 52,779 $ 48,860
Weighted average balance
outstanding.................... 48,375 45,200
Weighted average interest
rate........................... 6.36% 6.14%
COMMERCIAL PAPER FACILITY:
At period-end:
Balance outstanding............. $ 48,003 $ 69,321
Weighted average interest
rate(1)........................ 6.12% 6.16%
During period(2):
Maximum borrowings
outstanding.................... $ 48,003 $ 74,843
Weighted average balance
outstanding.................... 47,463 69,818
Weighted average interest
rate........................... 6.67% 6.45%
- ------------
(1) Based on interest rates, facility fees and hedge instruments applied to
borrowings outstanding at period-end.
(2) Based on month-end balances.
13
<PAGE>
INTEREST RATE MANAGEMENT. The Company's credit facilities bear interest at
floating interest rates which are reset on a short-term basis whereas its
receivables bear interest at fixed rates which are generally at the maximum
rates allowable by law and do not generally vary with changes in interest rates.
To manage the risk of fluctuation in the interest rate environment, the Company
enters into interest rate swaps and caps with notional principal amounts which
approximate the balance of its debt outstanding to lock in what management
believes to be an acceptable net interest spread. However, the Company will be
exposed to limited rate fluctuation risk to the extent it cannot perfectly match
the timing of net advances from its credit facilities and acquisitions of
additional interest rate protection agreements. At July 31, 1997, the Company
was a party to a swap agreement with NationsBank of Texas, N.A. pursuant to
which the Company's interest rate exposure is fixed, through August 1997, at a
rate of 5.545% on a notional amount of $100 million. The effect of the hedge
instrument on the weighted average interest rate is immaterial.
DELINQUENCY AND CREDIT LOSS EXPERIENCE
The Company's results of operations, financial condition and liquidity may
be adversely affected by nonperforming receivables. The Company seeks to manage
its risk of credit loss through (i) prudent credit evaluations and effective
collection procedures, (ii) providing recourse to dealers under its
participating program for a period of time and thereafter secured by cash
reserves in the event of losses and (iii) insurance against certain losses from
independent third party insurers. As a result of its recourse programs and third
party insurance, the Company is not exposed to credit losses on its entire
receivables portfolio. The following table summarizes the credit loss exposure
of the Company (dollars in thousands):
<TABLE>
<CAPTION>
JULY 31,
-----------------------------------------------
1996 1997
--------------------- ---------------------
RECEIVABLES RESERVE RECEIVABLES RESERVE
BALANCE BALANCE BALANCE BALANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Core Program:
Insured by third party
insurer....................... $ 4,321 $ -- $ 1,685 $ --
Other receivables(1)............ 90,749 688 (2) 115,201 1,264 (2)
Participating Program................ 8,066 620 (3) 3,259 280 (3)
----------- -----------
$ 103,136 $ 120,145
=========== ===========
Allowance for credit losses as a
percentage of other
receivables(1)..................... 0.8 % 1.1 %
Dealer reserves as a percentage of
participating program
receivables........................ 7.7 % 8.6 %
</TABLE>
- ------------
(1) Represents receivables reinsured by Company's insurance affiliate or
receivables on which no credit loss insurance exists.
(2) Represents the balance of the Company's allowance for credit losses.
(3) Represents the balance of the dealer reserve accounts.
The Company considers a loan to be delinquent when the borrower fails to
make a scheduled payment of principal and interest. Accrual of interest is
suspended when the payment from the borrower is over 60 days past due.
Generally, repossession procedures are initiated 60 to 90 days after the payment
default.
CORE PROGRAM. Under the core program, the Company retains the credit risk
associated with the receivables acquired. The Company purchases credit
enhancement insurance from third party insurers which covers the risk of loss
upon default and certain other risks. Until March 1994, such insurance absorbed
substantially all credit losses. In April 1994, the Company established a
captive insurance subsidiary to reinsure certain risks under the credit
enhancement
14
<PAGE>
insurance coverage for all receivables acquired in March 1994 and thereafter.
With the completion of the $105 million commercial paper conduit financing in
October 1996, credit loss insurance and the Company's reinsurance liability is
cancelled upon the transfer of receivables to FIARC utilizing commercial paper
borrowings. A provision for credit losses of $711,000 has been recorded for the
three months ended July 31, 1997, for losses which are reinsured by the
Company's captive insurance subsidiary and for losses on receivables pledged as
collateral under the commercial paper conduit facility.
The allowance for credit losses represents management's estimate of losses
for receivables that may become uncollectable. In making this estimate,
management analyzes portfolio characteristics in the light of its underwriting
criteria, delinquency and repossession statistics, historical loss experience,
and size, quality and concentration of the receivables, as well as external
factors such as future economic outlooks. The allowance for credit losses is
based on estimates and qualitative evaluations and ultimate losses will vary
from current estimates. These estimates are reviewed periodically and as
adjustments, either positive or negative, become necessary, are reported in
earnings in the period they become known.
PARTICIPATING PROGRAM. Under the Company's participating program, the
dealer retains the credit risk for a period of time, usually twelve to eighteen
months. In the event of payment default, the dealer is obligated to repurchase
the receivable. A specified portion of the purchase price is set aside in a
reserve account to secure performance of the dealer's repurchase obligation.
Receivables purchased from each dealer are aggregated into pools of specified
size for purposes of tracking the dealer's participation. When the dealer's
participation in a pool is terminated, a portion of the reserve account
exceeding a specified percentage is released to the dealer and the balance is
retained in the reserve account to fund credit losses until all receivables in
the pool are paid in full. As a result of establishing relationships only with
franchised dealers and securing each dealer's repurchase obligation with a
funded reserve account, the Company has incurred no losses under the
participating program.
As a result of a shift in the preference of dealers to sell receivables to
the Company under the core program rather than the participating program, the
participating program accounted for only 3% of the aggregate receivables held by
the Company as of July 31, 1997, representing a 5% decrease from 8% on July 31,
1996. Management believes that this trend will continue and that the
significance of the participating program by comparison to the core program,
will diminish over future periods.
15
<PAGE>
The following table summarizes the status and collection experience of
receivables acquired by the Company (dollars in thousands):
<TABLE>
<CAPTION>
AS OF OR FOR THE THREE MONTHS ENDED JULY 31,
----------------------------------------------------
1996 1997
----------------------- -----------------------
NUMBER NUMBER
OF LOANS AMOUNT(1) OF LOANS AMOUNT(1)
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
CORE PROGRAM:
Delinquent amount outstanding:
30 - 59 days.................... 106 $ 1,702 200 $ 3,048
60 - 89 days.................... 26 452 59 906
90 days or more................. 33 515 99 1,723
--- --------- --- ---------
Total delinquencies.................. 165 $ 2,669 358 $ 5,677
--- --------- --- ---------
Total delinquencies as a percentage
of outstanding receivables acquired
pursuant to the core program....... 1.9% 2.0% 3.3% 3.5%
Net charge-offs as a percentage of
average receivables outstanding
during the period which were
acquired pursuant to the core
program(2)(3)...................... -- 1.4% -- 2.2%
PARTICIPATING PROGRAM:
Delinquent amount outstanding:
30 - 59 days.................... 24 $ 222 16 $ 86
60 - 89 days.................... 5 26 7 69
90 days or more................. 9 124 16 149
--- --------- --- ---------
Total delinquencies.................. 38 $ 372 39 $ 304
--- --------- --- ---------
Total delinquencies as a percentage
of participating program
receivables........................ 3.4% 3.6% 6.5% 7.4%
Net charge-offs as a percentage of
average receivables outstanding
during the period which were
acquired pursuant to the
participating program.............. -- 0% -- 0%
</TABLE>
- ------------
(1) Amounts of delinquent receivables outstanding and total delinquencies as a
percent of outstanding receivables acquired pursuant to the core program are
based on gross receivables balances, which include principal outstanding
plus unearned interest income.
(2) Does not give effect to reimbursements under the Company's credit
enhancement insurance policies with respect to charged-off receivables. The
Company recognized no charge-offs prior to March 1994 since all credit
losses were reimbursed by third-party insurers. Subsequent to that time the
primary coverage has been reinsured by an affiliate of the Company under
arrangements whereby the Company bears the entire risk of credit losses, and
charge-offs have accordingly been recognized.
(3) The percentages have been annualized and are not necessarily indicative of
the results for a full year.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) 10.39 -- First Amendment to the Amended and Restated Credit Agreement dated January 31,
1997 by and among F.I.R.C., Inc. and NationsBank of Texas, N.A., individually and
as agent for the banks party thereto.
10.40 -- Second Amendment to the Amended and Restated Credit Agreement dated May 15, 1997
by and among F.I.R.C., Inc. and NationsBank of Texas, N.A., individually and as
agent for the banks party thereto.
10.41 -- Employment Agreement dated July 16, 1997 between First Investors Financial
Services, Inc. and Tommy A. Moore, Jr.
10.42 -- Credit Agreement dated as of July 18, 1997 between First Investors Financial
Services, Inc. and NationsBank of Texas, N.A., individually and as agent for the
banks party thereto.
10.43 -- Pledge and Security Agreement dated as of July 18, 1997 by and among First
Investors (Vermont) Holdings, Inc. and NationsBank of Texas, N.A., as agent for
the banks party thereto.
10.44 -- Pledge Agreement dated as of July 18, 1997 by and among First Investors Financial
Services, Inc. and NationsBank of Texas, N.A., as agent for the banks party
thereto.
</TABLE>
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.
<TABLE>
<CAPTION>
FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
(Registrant)
<S> <C>
Date: September 10, 1997 By: /s/TOMMY A. MOORE, JR.
TOMMY A. MOORE, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: September 10, 1997 By: /s/BENNIE H. DUCK
BENNIE H. DUCK
SECRETARY, TREASURER AND CHIEF FINANCIAL OFFICER
</TABLE>
17
EXHIBIT 10.39
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 31, 1997 (the "AMENDMENT") is made by and among F.I.R.C.,
Inc., a Delaware corporation (the "BORROWER"), the financial institutions listed
on the signature pages hereof (each individually a "BANK" and collectively, the
"BANKS"), and NationsBank of Texas, N.A. (in its individual capacity,
"NATIONSBANK") as agent for the Banks (in such capacity, the "AGENT").
Capitalized terms used herein which are not otherwise defined shall have the
same meaning herein as in the Credit Agreement referred to below.
WITNESSETH:
WHEREAS, the Borrower, the Banks, and the Agent are parties to that
certain Amended and Restated Credit Agreement, dated as of October 30, 1996 (as
amended hereby, the "CREDIT AGREEMENT");
WHEREAS, the Borrower uses the proceeds of Advances under the Credit
Agreement to purchase Receivables from First Investors pursuant to the Purchase
Agreement;
WHEREAS, First Investors and the Borrower have requested, and the Banks
have agreed, that the source of Receivables purchased by First Investors for
sale to the Borrower be diversified from First Investor's existing base of
automobile dealers to include Farragut Financial Corporation, a wholly-owned
subsidiary of First Investors ("FFC") and that the Credit Agreement be amended
to reflect such agreement as is more fully set forth hereinbelow;
WHEREAS, FFC will conduct a refinancing program (the "REFINANCING
PROGRAM") wherein Auto Refinance Source, Inc. ("ARSI") will solicit loans on
behalf of FFC for refinancing through direct mailings to customers which have
recently financed automobiles;
WHEREAS, ARSI will assign any loans generated under the Refinancing
Program to FFC, which will assign the same to First Investors;
WHEREAS, to the extent that First Investors sells its rights in such loans
to the Borrower pursuant to the terms and conditions of the Purchase Agreement,
the proceeds of Advances for such purchase by the Borrower will be transferred
from First Investors to FFC to the original lenders to refinance such loans;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein set forth and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower, the Banks
and the Agent hereby agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.01 of the Credit Agreement is hereby amended by
deleting subsection (r) of the definition "Eligible Receivables" and
substituting in lieu thereof the following subsection (r):
-1-
<PAGE>
(r) (i) it would constitute an "Eligible Receivable" under the
Enterprise Agreement (excluding, however, clauses (c), (e), (g),
(h), (x) and (aa) of the definition of Eligible Receivable as set
forth in such agreement) and (ii) conforms to the representations
made by FIARC in Section 3.1 of Article III of the Enterprise
Agreement; PROVIDED, HOWEVER, that clause (i) of this subsection (r)
shall not be applicable to any Receivable generated under any
Originator Agreement between First Investors and Farragut Financial
Corporation, a wholly-owned subsidiary of First Investors, until
July 31, 1997.
(b) Section 1.01 of the Credit Agreement is hereby further amended
by deleting subsection (ab) of the definition "Eligible Receivables" and
substituting in lieu thereof the following subsection (ab):
(ab) which was originated by an Originator approved by First
Investors and which Originator is subject to an Originator Agreement
providing for the bona fide sale of such Receivable in the ordinary
course of such Originator's business and which if acquired by First
Investors pursuant to a "bulk purchase" from another Originator has
been approved by the Bank Collateral Agent, acting upon written
instructions of the Agent;
(c) Section 1.01 of the Credit Agreement is hereby further amended
by deleting the definition "Originator" and by substituting in lieu
thereof the following definition:
"ORIGINATOR" shall mean a bank, finance company, car rental
company or factory authorized dealer or its affiliates which has
entered into an Originator Agreement, including, but not limited to,
Farragut Financial Corporation, a wholly-owned subsidiary of First
Investors.
(d) Section 1.01 of the Credit Agreement is hereby further amended
by deleting the definition "Originator Agreement" and by substituting in
lieu thereof the following definition:
"ORIGINATOR AGREEMENT" shall mean the agreement between First
Investors and an Originator relating to the purchase of a Receivable
resulting from a financed or refinanced loan.
(e) Section 1.01 of the Credit Agreement is hereby further amended
by adding the following new defined term thereto:
"FIRST AMENDMENT TO CREDIT AGREEMENT" means that certain First
Amendment to Amended and Restated Credit Agreement, dated as of
January 31, 1997, by and among the Borrower, the Banks and the
Agent.
2. CONDITIONS PRECEDENT. This Amendment shall become effective as of the
later of (i) January 31, 1997 and (ii) when the Agent shall have received
counterparts of this Amendment duly executed by the Borrower. In connection with
the foregoing, the Agent shall give prompt notice to the Borrower and the Banks
of the effective date hereof.
-2-
<PAGE>
3. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT; NO DEFAULT. The
Borrower hereby represents and warrants that, as of the effective date hereof
and after giving effect to the amendments and waivers contemplated herein, (a)
the representations and warranties contained in the Credit Agreement, as hereby
amended, and in the other Loan Documents, are true in all material respects on
and as of the date hereof to the extent such representations and warranties do
not expressly relate to a specific point in time; and (b) no Default or Event of
Default under the Credit Agreement or the other Loan Documents has occurred or
is continuing.
4. AMENDMENT INCLUDED IN REFERENCES. On and after the date hereof, each
reference (a) in the Credit Agreement to "this Agreement", "hereunder", "herein"
or words of like import or (b) in the other Loan Documents to the "Credit
Agreement" shall mean and be a reference to the Credit Agreement, as hereby
amended.
5. RATIFICATION OF CREDIT AGREEMENT. Except as expressly affected by the
provisions set forth herein, the Credit Agreement, as hereby amended, shall
remain in full force and effect and is, together with the other Loan Documents
to which it is a party, hereby ratified and confirmed by the Borrower. The
execution, delivery, and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as an amendment or waiver of any right, power
or remedy of the Agent or the Banks under the Credit Agreement, the other Loan
Documents, or any other document or instrument executed in connection with the
Credit Agreement or the other Loan Documents, nor constitute a waiver of any
other provision of the Credit Agreement.
6. FURTHER ASSURANCES. The Borrower agrees to do, execute, acknowledge and
deliver all and every such further acts and instruments as the Agent may request
for the better assuring and confirming unto the Agent and the Banks all and
singular the rights granted or intended to be granted hereby or hereunder.
7. COSTS AND EXPENSES. Pursuant to Section 10.04 of the Credit Agreement,
the Borrower agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation, reproduction, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under the Credit Agreement as hereby
amended).
8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts each of which shall constitute an original but when taken together
shall constitute but one agreement.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND SHALL BE
BINDING UPON THE BORROWER, THE AGENT, THE BANKS AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
10. FINAL AGREEMENT. THE WRITTEN CREDIT AGREEMENT, AS AMENDED BY
THIS AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. SUCH
WRITINGS SUPERSEDE ALL PRIOR PROPOSALS, NEGOTIATIONS, AGREEMENTS AND
-3-
<PAGE>
UNDERSTANDINGS RELATING TO THE SUBJECT MATTER OF SUCH DOCUMENTS. EACH OF THE
PARTIES HERETO CERTIFIES THAT IT IS NOT RELYING ON ANY STATEMENT,
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF ANY KIND EXCEPT FOR THOSE SET
FORTH IN THIS AGREEMENT AND SUCH OTHER DOCUMENTS.
11. SEPARABILITY. Each of the undersigned agrees that if any of the
foregoing provisions shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions will not
be affected or impaired.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers duly authorized,
have executed this Amendment as of this 31st day of January, 1997 to be
effective as of the day and year stated in paragraph 2 above.
F.I.R.C., INC., a Delaware corporation
By: /S/ Tommy A. Moore, Jr.
Tommy A. Moore, Jr.
President
NATIONSBANK OF TEXAS, N.A., as Agent and as
a Bank
By: /S/ Billy B. Greer
Billy B. Greer
Vice President
THE SUMITOMO BANK LTD.,
CHICAGO BRANCH
By: /S/ John J. O'Neill
John J. O'Neill
Vice President and Office Manager, Houston
Office
By: /S/ Bruce Portillo
Bruce Portillo
Vice President, Houston Office
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /S/ David M. Anderson
David M. Anderson
Vice President
[Signature Page - First Amendment to
Amended and Restated Credit Agreement - Page 1 of 1]
EXHIBIT 10.40
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of May 15, 1997, to be effective as of April 30, 1997 (the
"AMENDMENT") is made by and among F.I.R.C., Inc., a Delaware corporation (the
"BORROWER"), the financial institutions listed on the signature pages hereof
(each individually a "BANK" and collectively, the "BANKS"), and NationsBank of
Texas, N.A. (in its individual capacity, "NATIONSBANK") as agent for the Banks
(in such capacity, the "AGENT"). Capitalized terms used herein which are not
otherwise defined shall have the same meaning herein as in the Credit Agreement
referred to below.
WITNESSETH:
WHEREAS, the Borrower, the Banks, and the Agent are parties to that
certain Amended and Restated Credit Agreement, dated as of October 30, 1996, as
amended by First Amendment to Amended and Restated Credit Agreement, dated as of
January 31, 1997 (as further amended hereby, the "CREDIT AGREEMENT");
WHEREAS, the Borrower uses the proceeds of Advances under the Credit
Agreement to purchase Receivables from First Investors pursuant to the Purchase
Agreement;
WHEREAS, First Investors and the Borrower have requested, and the Banks
have agreed, to certain amendments to the Credit Agreement as is more fully set
forth hereinbelow;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein set forth and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower, the Banks
and the Agent hereby agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.01 of the Credit Agreement is hereby amended by adding
the phrase ", installment notes" after the phrase "installment sales
contracts" in the definition of "ALPI Insurance", such that the
definition, as amended, reads as follows:
"ALPI INSURANCE" means the policy or policies of insurance
covering each of the underlying installment sales contracts,
installment notes or other written evidence of any Obligor's
obligation arising out of the purchase of a Financed Vehicle held by
the Borrower issued by National Union Fire Insurance Company of
Pittsburgh, PA in the form attached hereto as EXHIBIT A and the
policy of insurance issued by Agricultural Excess and Surplus
Insurance Co. issued October 6, 1992 or such other insurance as is
satisfactory in form and substance to the Banks.
(b) Section 1.01 of the Credit Agreement is hereby further amended
by adding the phrase "or an installment note" after the phrase
"installment sales contract" to subsection (aa) of the definition
"Eligible Receivables", such that subsection (aa) of such definition, as
amended, reads as follows:
-1-
<PAGE>
(aa) the Obligor of which has not previously defaulted on an
automobile installment sales contract or an installment note
purchased by First Investors at the time such Receivable becomes a
part of the Collateral;
(c) Section 1.01 of the Credit Agreement is hereby further amended
by adding the following new defined term thereto:
"SECOND AMENDMENT TO CREDIT AGREEMENT" means that certain
Second Amendment to Amended and Restated Credit Agreement, dated as
of May 15, 1997, to be effective as of April 30, 1997, by and among
the Borrower, the Banks and the Agent.
2. CONDITIONS PRECEDENT. This Amendment shall become effective when and
only when the Agent shall have received (i) counterparts of this Amendment duly
executed by the Borrower and the Banks and (ii) such other documents or
instruments as the Agent may reasonably request. In connection with the
foregoing, the Agent shall give prompt notice to the Borrower and the Banks of
the effective date hereof.
3. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT; NO DEFAULT. The
Borrower hereby represents and warrants that, as of the effective date hereof
and after giving effect to the amendments and waivers contemplated herein, (a)
the representations and warranties contained in the Credit Agreement, as hereby
amended, and in the other Loan Documents, are true in all material respects on
and as of the date hereof to the extent such representations and warranties do
not expressly relate to a specific point in time; and (b) no Default or Event of
Default under the Credit Agreement or the other Loan Documents has occurred or
is continuing.
4. AMENDMENT INCLUDED IN REFERENCES. On and after the date hereof, each
reference (a) in the Credit Agreement to "this Agreement", "hereunder", "herein"
or words of like import or (b) in the other Loan Documents to the "Credit
Agreement" shall mean and be a reference to the Credit Agreement, as hereby
amended.
5. RATIFICATION OF CREDIT AGREEMENT. Except as expressly affected by the
provisions set forth herein, the Credit Agreement, as hereby amended, shall
remain in full force and effect and is, together with the other Loan Documents
to which it is a party, hereby ratified and confirmed by the Borrower. The
execution, delivery, and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as an amendment or waiver of any right, power
or remedy of the Agent or the Banks under the Credit Agreement, the other Loan
Documents, or any other document or instrument executed in connection with the
Credit Agreement or the other Loan Documents, nor constitute a waiver of any
other provision of the Credit Agreement.
6. WAIVER REGARDING AMENDMENT OF RECEIVABLE DOCUMENTS. Each of the Banks
hereby (i) acknowledges that as of the date hereof the Borrower is entering into
that certain Second Amendment to Amended and Restated Purchase Agreement and
that certain Second Amendment to Amended and Restated Servicing Agreement, each
in substantially the form of the 4/30/97 draft, and (ii) with respect to the
amendments described in clause (i) above, waives the restriction in Section 7.14
-2-
<PAGE>
of the Credit Agreement related thereto and agrees that such amendments
described in clause (i) above will not constitute a breach of the Credit
Agreement. The Banks shall not be deemed to have waived, relinquished, modified
or qualified any of their rights or remedies under the Loan Documents by virtue
of this Amendment, except as specifically set forth herein.
7. FURTHER ASSURANCES. The Borrower agrees to do, execute, acknowledge and
deliver all and every such further acts and instruments as the Agent may request
for the better assuring and confirming unto the Agent and the Banks all and
singular the rights granted or intended to be granted hereby or hereunder,
including the recording, registering, filing, re-recording, re-registering and
refiling of financing statements, continuation statements or other instruments
or documents as is necessary to preserve and protect the interest of the Agent
and the Banks in and to the Receivables.
8. COSTS AND EXPENSES. Pursuant to Section 10.04 of the Credit Agreement,
the Borrower agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation, reproduction, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under the Credit Agreement as hereby
amended).
9. COUNTERPARTS. This Amendment may be executed in one or more
counterparts each of which shall constitute an original but when taken together
shall constitute but one agreement.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND SHALL
BE BINDING UPON THE BORROWER, THE AGENT, THE BANKS AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
11. FINAL AGREEMENT. THE WRITTEN CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. SUCH WRITINGS SUPERSEDE ALL PRIOR PROPOSALS,
NEGOTIATIONS, AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER OF
SUCH DOCUMENTS. EACH OF THE PARTIES HERETO CERTIFIES THAT IT IS NOT RELYING ON
ANY STATEMENT, REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF ANY KIND
EXCEPT FOR THOSE SET FORTH IN THIS AGREEMENT AND SUCH OTHER DOCUMENTS.
12. SEPARABILITY. Each of the undersigned agrees that if any of the
foregoing provisions shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions will not
be affected or impaired.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers duly authorized,
have executed this Amendment as of the date first above written, to be effective
as of the day and year stated in paragraph 2 above.
F.I.R.C., INC., a Delaware corporation
By: /S/ Tommy A. Moore, Jr.
Tommy A. Moore, Jr.
President
NATIONSBANK OF TEXAS, N.A., as Agent and as
a Bank
By: /S/ Billy B. Greer
Billy B. Greer
Vice President
THE SUMITOMO BANK LTD.,
CHICAGO BRANCH
By: /S/ John J. O'Neill
John J. O'Neill
Vice President and Office Manager, Houston
Office
By: /S/ Bruce Portillo
Bruce Portillo
Vice President, Houston Office
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /S/ David M. Anderson
David M. Anderson
Vice President
[Signature Page - Second Amendment to Amended
and Restated Credit Agreement - Page 1 of 1]
EXHIBIT 10.41
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is by and between First
Investors Financial Services, Inc., a Texas corporation (the "Employer"), and
Tommy A. Moore, Jr., a resident of Harris County, Texas (the "Employee"), who
agree as follows:
1. EMPLOYMENT AND TERM. Employer hereby employs Employee and Employee
hereby accepts employment at the salary and upon the terms and conditions herein
set forth, to work for Employer in the capacities set forth herein for a term
beginning on the date hereof and ending on July 15, 1998.
2. DUTIES.
A. It is anticipated that Employee will serve as the President of
Employer and a member of the Board of Directors of Employer, but nothing herein
shall interfere with the authority of the Board of Directors of Employer to
elect corporate officers or the authority of its shareholders to elect
directors. Employee agrees, as long as he is the President of Employer, to
devote substantially all of his business time and efforts to his duties in such
capacity for the profit, benefit and advantage of Employer. Employee shall also
serve in such additional offices or capacities with Employer or its affiliates
to which he may be elected or appointed and as are consistent with his primary
duties hereunder.
B. The principal office of Employee shall be in
Houston, Texas where the principal portion of his duties shall be
performed.
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3. COMPENSATION.
A. As compensation for his services hereunder, Employer
shall pay Employee a salary of $150,000 per annum, payable in equal
semi-monthly installments as it accrues.
B. In addition to the salary provided by Section 3(A), above,
Employee may be paid an incentive bonus, at the sole discretion of the Board of
Directors, based on the financial performance of the Employer for its fiscal
year ending April 30, 1998. The manner of payment, amount and timing of such
bonus, if any, shall be at the sole discretion of the Board of Directors.
C. Employee shall be reimbursed by Employer for all reasonable
and necessary costs and expenses incurred by him in the performance of his
services hereunder, subject to compliance with such general policies as shall be
adopted by the Board of Directors on that subject. 4. TERMINATION. A. Employee's
employment pursuant to this Agreement may be terminated prior to expiration of
the term hereof only: (a) by the mutual agreement of Employer and Employee; (b)
by Employee's death, automatically on the date of death; or (c) by Employer, if
Employee (i) is disabled, or (ii) commits an act constituting a dishonest act or
material misconduct, or a fraudulent act or a felony under the laws of any state
or of the United States to which the Employer or Employee is subject, and such
act results (or is intended to result directly or indirectly) in the Employee's
substantial gain or personal enrichment to the detriment of the
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Employer. For purposes of this Agreement, the term "disabled" means the mental
or physical incapacity of the Employee to perform his usual duties for the
Employer for a period of 180 consecutive days or more. If there is any
disagreement between the Employee and the Employer with respect to whether the
Employee is disabled, then the Employer and Employee shall obtain a
determination from an impartial reputable physician selected for the purpose of
making such determination, whose decision shall be binding upon both parties. If
the Employer and the Employee cannot agree upon the selection of such physician,
the then president of the Houston Medical Society may make the selection of such
physician, which selection shall be binding upon all parties and such
physician's decision shall be binding upon all parties.
B. If Employee's employment is terminated in the manner and for
any reason specified in Section 4(A), Employer shall be obligated to pay
Employee only his annual salary prorated to the date of termination pursuant to
Section 3(A).
C. If Employee's employment is terminated in a manner and for any
reason other than those specified in Section 4(A), Employee shall receive within
thirty days after such termination, as liquidated damages and in complete
satisfaction of all obligations of Employer under this Agreement a sum equal to
the aggregate salary which would have been payable to Employee pursuant to
Section 3(A) during the remaining term of this Agreement had it not been
terminated.
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5. NON-COMPETITION. During the term of this Agreement and for a period
of three years from and after the termination of Employee's employment for any
reason whatsoever, Employee shall not, directly or indirectly, for his own
account of for the account of others, as an officer, director, shareholder,
owner, partner, employer, promoter, consultant, manager, employee or otherwise,
participate in the promotion, financing, ownership, operation or management of,
or assist in or carry on through a proprietorship, corporation, partnership, or
other form of business entity or otherwise, anywhere in the United States of
America, (i) the automobile finance business, which includes, without
limitation, the origination, purchase, carrying, servicing, sale, securitization
or other disposition of consumer paper or installment receivables, or (ii) any
other business or enterprise which is competitive with that engaged in by the
Employer as of the date of this Agreement. Provided, however, that nothing
contained herein shall be construed to prohibit the Employee, after the
termination of Employee's employment for any reason, from accepting employment
as a salaried employee of any recognized and established financial institution
or investment banking firm which was not founded or organized by Employee.
6. NON-INTERFERENCE. If Employee's employment is terminated
for any reason whatsoever, then and in that event, for a period of
three years thereafter, Employee shall not in any way, directly or
indirectly, (i) entice any persons to leave the employ of Employer,
(ii) employ any persons who have been employed by Employer within
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the six months immediately preceding, or (iii) do business with, or solicit
business of, any persons or entities who have been customers of Employer within
the two years immediately preceding.
7. CHOICE OF LAW. This Agreement shall be interpreted and construed in
accordance with and shall be governed by the laws of the State of Texas. In the
event of a dispute hereunder, it is agreed that venue lies in a court of
competent jurisdiction in Harris County, Texas. The rights created hereunder are
cumulative of any and all other rights of the Employer at law or in equity.
8. ASSIGNMENTS. Employer shall be permitted to assign this Agreement to
its successors or assigns, by reason of any merger, consolidation,
reorganization, sale of substantially all of Employer's assets or other business
combination, and all covenants and agreements hereunder shall inure to the
benefit of and be enforceable by or against its successors or assigns. The
rights and obligations of Employee under this Agreement are personal to him, and
no such rights, benefits or obligations shall be subject to voluntary or
involuntary alienation, assignment or transfer.
9. ENTIRE AGREEMENT. This Agreement embodies the final and
entire agreement between the parties hereto and supersedes all
prior commitments, agreements, representations, inducements and
understandings, whether written or oral, relating to the subject
matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous or subsequent oral agreements or
discussions. There are no oral agreements between the parties
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hereto. The provisions of this Agreement may be amended or waived
only by an instrument in writing signed by the parties hereto.
10. COUNTERPARTS. This Agreement shall be executed in
multiple counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement is executed in multiple counterparts in
Houston, Texas on the 16th day of July 1997.
First Investors Financial Services, Inc.
By: BENNIE H. DUCK, VICE PRESIDENT
Bennie H. Duck, Vice President
TOMMY A. MOORE, JR.
Tommy A. Moore, Jr.
GUARANTY
First Investors Financial Services Group, Inc., which owns indirectly all
of the capital stock of the Employer, hereby unconditionally guarantees the full
and timely performance by the Employer of all of its duties and obligations to
the Employee pursuant to the foregoing Employment Agreement.
First Investors Financial Services
Group, Inc.
By: Bennie H. Duck
Bennie H. Duck, Vice President
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EXHIBIT 10.42
CREDIT AGREEMENT
DATED AS OF JULY 18, 1997
AMONG
FIRST INVESTORS FINANCIAL SERVICES, INC.
AS BORROWER
AND
THE FINANCIAL INSTITUTIONS NOW OR HEREAFTER PARTIES HERETO
AS BANKS
AND
NATIONSBANK OF TEXAS, N.A.
AS AGENT
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. CERTAIN DEFINED TERMS......................................1
Section 1.02. COMPUTATION OF TIME PERIODS...............................13
Section 1.03. ACCOUNTING TERMS..........................................13
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01. THE ADVANCES..............................................13
Section 2.02. MAKING THE ADVANCES.......................................13
Section 2.03. FEES......................................................14
Section 2.04. REDUCTION OF THE COMMITMENTS..............................15
Section 2.05. EXTENSION OF TERMINATION DATE; TERM LOAN..................15
Section 2.06. INTEREST..................................................15
Section 2.07. ADDITIONAL INTEREST ON ADVANCES BASED ON THE LIBOR RATE...16
Section 2.08. INTEREST RATE DETERMINATION...............................17
Section 2.09. VOLUNTARY INTEREST CONVERSION OF ADVANCES.................17
ARTICLE III
CHANGE IN CIRCUMSTANCES, PAYMENTS AND PREPAYMENTS
Section 3.01. INCREASED COST AND REDUCED RETURN.........................18
Section 3.02. LIMITATION ON TYPES OF ADVANCES...........................19
Section 3.03. ILLEGALITY................................................19
Section 3.04. TREATMENT OF AFFECTED ADVANCES............................20
Section 3.05. COMPENSATION..............................................20
Section 3.06 TAXES.....................................................21
Section 3.07. PAYMENTS AND COMPUTATIONS.................................22
Section 3.08. VOLUNTARY PREPAYMENTS.....................................23
Section 3.09. MANDATORY PREPAYMENTS.....................................23
Section 3.10. SUBSTITUTION OF BANK......................................23
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PAGE
ARTICLE IV
CONDITIONS OF LENDING
Section 4.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES..................24
Section 4.02. CONDITIONS PRECEDENT TO EACH BORROWING (INCLUDING THE
INITIAL BORROWING)........................................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. EXISTENCE.................................................26
Section 5.02. POWER AND AUTHORIZATION...................................26
Section 5.03. NO CONFLICT OR RESULTANT LIEN.............................26
Section 5.04. NO CONSENT................................................26
Section 5.05. BINDING OBLIGATIONS.......................................26
Section 5.06. FINANCIAL CONDITION.......................................27
Section 5.07. LITIGATION................................................27
Section 5.08. USE OF PROCEEDS; MARGIN STOCK.............................27
Section 5.09. TAXES; GOVERNMENTAL CHARGES...............................27
Section 5.10. FULL DISCLOSURE...........................................27
Section 5.11. INVESTMENT COMPANY ACT....................................28
Section 5.12. ENVIRONMENTAL MATTERS.....................................28
Section 5.13. CAPITAL STRUCTURE.........................................28
Section 5.14. COMPLIANCE WITH LAW.......................................28
Section 5.15. ERISA.....................................................28
Section 5.16. NO DEFAULT OR EVENT OF DEFAULT............................28
Section 5.17. PERMITS AND LICENSES......................................29
Section 5.19. NO TERMINATION EVENT......................................29
Section 5.20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES................29
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
Section 6.01. COMPLIANCE WITH LAWS, ETC.................................29
Section 6.02. REPORTING AND NOTICE REQUIREMENTS.........................29
Section 6.03. TAXES AND LIENS...........................................32
Section 6.04. MAINTENANCE OF PROPERTY; INSURANCE........................32
Section 6.05. RIGHT OF INSPECTION.......................................33
Section 6.06. FURTHER ASSURANCES........................................33
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PAGE
ARTICLE VII
NEGATIVE COVENANTS
Section 7.01. LIENS, ETC................................................33
Section 7.02. DEBT......................................................34
Section 7.03. RESTRICTED PAYMENTS.......................................34
Section 7.04. MERGERS; CONSOLIDATIONS; SALE OR OTHER DISPOSITION
OF PROPERTY...............................................35
Section 7.05. INVESTMENTS, LOANS, AND ADVANCES..........................35
Section 7.06. USE OF PROCEEDS...........................................35
Section 7.07. TRANSACTIONS WITH AFFILIATES..............................35
Section 7.08. OTHER BUSINESS............................................35
Section 7.09. ISSUANCE OF SHARES........................................35
Section 7.10. ERISA.....................................................36
Section 7.11. ACQUISITIONS..............................................36
Section 7.12. CERTAIN FINANCIAL TESTS...................................37
Section 7.13. EXTENSION OR AMENDMENT OF CERTAIN DOCUMENTS...............37
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. EVENTS OF DEFAULT.........................................37
ARTICLE IX
THE AGENT
Section 9.01. APPOINTMENT, POWERS, AND IMMUNITIES.......................40
Section 9.02. RELIANCE BY AGENT.........................................40
Section 9.03. DEFAULTS..................................................41
Section 9.04. RIGHTS AS BANK............................................41
Section 9.05. INDEMNIFICATION...........................................41
Section 9.06. NON-RELIANCE ON AGENT AND OTHER BANKS.....................42
Section 9.07. RESIGNATION OF AGENT......................................42
Section 9.08. AGENT'S RELIANCE..........................................42
ARTICLE X
MISCELLANEOUS
Section 10.01.AMENDMENTS AND WAIVERS....................................42
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PAGE
Section 10.02.NOTICES, ETC..............................................43
Section 10.03.NO WAIVER; REMEDIES.......................................43
Section 10.04.EXPENSES; INDEMNIFICATION.................................43
Section 10.05.RIGHT OF SET-OFF; ADJUSTMENTS.............................44
Section 10.06.BINDING EFFECT............................................45
Section 10.07.ASSIGNMENTS AND PARTICIPATIONS............................45
Section 10.08.LIMITATION ON AGREEMENTS..................................46
Section 10.09.SEVERABILITY..............................................47
Section 10.10.GOVERNING LAW.............................................48
Section 10.11.SUBMISSION TO JURISDICTION; WAIVERS.......................48
Section 10.12.WAIVER OF JURY TRIAL......................................48
Section 10.13.EXECUTION IN COUNTERPARTS.................................48
Section 10.14.NO INSOLVENCY PETITION AGAINST BORROWER...................48
Section 10.15.FINAL AGREEMENT...........................................49
EXHIBITS:
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Consent to Extension
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Note
Exhibit E - Form of Assignment and Acceptance
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 18, 1997 (as the same may be
amended, modified, renewed or extended from time to time, this "AGREEMENT") is
made by and among First Investors Financial Services, Inc., a Texas corporation
(the "BORROWER"), the financial institutions listed on the signature pages
hereof and any other financial institution that may hereafter become a party
hereto pursuant to the provisions hereof (each individually a "BANK" and
collectively, the "BANKS"), and NationsBank of Texas, N.A. (in its individual
capacity, "NATIONSBANK"), as agent for the Banks (in such capacity, the
"AGENT").
WITNESSETH:
WHEREAS, the Borrower has requested that the Banks provide certain loans
to the Borrower for working capital and other general corporate purposes;
WHEREAS, the Banks have agreed to make such loans subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein set forth and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower, the Banks,
and the Agent hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. CERTAIN DEFINED TERMS. 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):
"ADVANCE" means any advance provided for under Section 2.01
hereof.
"AFFILIATE" means any Person which, directly or indirectly,
controls or is controlled by or is under common control with another
Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise.
"AGREED RATE" means, for any Interest Period for each Agreed Rate
Advance, a fixed interest rate per annum mutually agreed upon among the
Borrower and the Banks.
"AGREED RATE ADVANCE" means an Advance which bears interest at
the interest rate as provided in Section 2.06(c).
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"APPLICABLE LENDING OFFICE" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance
or an Agreed Rate Advance or such Bank's LIBOR Lending Office in the
case of a LIBOR Rate Advance.
"ANNUAL PERCENTAGE RATE" or "APR" has the meaning set forth in
the Purchase Agreement/FIRC.
"AVAILABLE AMOUNT" means, at any time, an amount equal to the
excess of (a) the lesser of (i) the Commitments at such time or (ii) the
Borrowing Base OVER (b) the aggregate principal amount of all Advances
then outstanding.
"BASE RATE" means, for any period, a fluctuating interest rate
per annum (rounded upwards to the nearest 1/16 of 1%) as shall be in
effect from time to time which rate per annum shall at all times be
equal to the higher of:
(a) the Prime Rate, or
(b) the Federal Funds Rate plus 1/2 of 1% per annum.
"BASE RATE ADVANCE" means an Advance which bears interest at the
interest rate as provided in Section 2.06(a).
"BORROWING" means a borrowing consisting of Advances of the same
Type made on the same day by the Banks.
"BORROWING BASE" means, at any time, an amount equal to the
lesser of (i) the Embedded Gain and (ii) $6,000,000.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to close in Dallas, Texas and, if the applicable
Business Day relates to any LIBOR Rate Advances, on which dealings are
carried on in the London interbank market.
"CAPITAL LEASE" means a lease which should, in accordance with
GAAP, be recorded as a capital lease on the balance sheet of the lessee.
"CLOSING DATE" means the date the Agreement becomes effective in
accordance with Article IV.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" means, as to any Bank, each Bank's Loan Percentage
of $6,000,000, as such amount may be reduced from time to time pursuant
to the terms and provisions hereof, and "COMMITMENTS" means,
collectively, all Banks' Commitments.
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"COMPLIANCE CERTIFICATE" means a certificate, duly executed by a
Responsible Officer, appropriately completed and in substantially the
form of EXHIBIT A hereto.
"CONSENT TO EXTENSION" means a consent to the extension of the
Termination Date executed by each Bank in the form of EXHIBIT B hereto.
"CREDIT GUIDELINES" has the meaning set forth in the Purchase
Agreement/FIRC.
"CREDIT INSURANCE" has the meaning set forth in the FIRC
Agreement.
"DEBT" means (without duplication), for any Person, (a)
indebtedness of such Person for borrowed money or arising out of any
extension of credit to or for the account of such Person (including,
without limitation, extensions of credit in the form of reimbursement or
payment obligations of such Person relating to letters of credit issued
for the account of such Person) or for the deferred purchase price of
property or services; (b) indebtedness of the kind described in clause
(a) of this definition which is secured by (or for which the holder of
such Debt has any existing right, contingent or otherwise, to be secured
by) any Lien upon or in Property (including, without limitation,
accounts and contract rights) owned by such Person, whether or not such
Person has assumed or become liable for the payment of such indebtedness
or obligations; (c) all obligations as lessee under any Capital Lease,
(d) all contingent liabilities and obligations under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (a) through (c) above, including, without
limitation, (i) any endorsement not for collection in the ordinary
course of business or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a
guaranty in respect of any such Debt; (ii) any agreement (A) to
purchase, or to advance or supply funds for the payment or purchase of,
any such Debt, (B) to purchase, sell, or lease property, products,
materials, supplies, transportation, or services, in order to enable
such Person to pay any such Debt or to assure the owner thereof against
loss regardless of the delivery or nondelivery of the property,
products, materials, supplies, transportation, or services, or (C) to
make any loan, advance, or capital contribution to, or other investment
in, or to otherwise provide funds to or for, such other Person in order
to enable such Person to satisfy any obligation (including any liability
for a dividend, stock liquidation payment or similar expense) or to
assure a minimum equity, working capital, or other balance sheet
condition in respect of any such obligation; and (iii) obligations under
surety, appeal, or custom bonds; (e) any obligation of a Person under or
in connection with a sale-leaseback or similar arrangement, including,
without limitation, any arrangement with any other party providing for
the leasing by such Person (as lessee) from such other party of any
Property which has been, or is to be, sold or transferred by such Person
to such other party or to any other Person to whom funds have been, or
are to be, advanced on the security of such Property or rental
obligations of such Person and (f) any and all obligations of such
Person under any interest rate swap, interest rate cap or other exchange
or rate protection agreement now existing or hereafter entered into by
such Person and NationsBank or any Affiliate of NationsBank.
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"DEFAULT" means any event which, with the lapse of time or giving
of notice, or both, would constitute an Event of Default.
"DETERMINATION DATE" means the last day of each calendar month.
"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" opposite
its name on the signature pages hereto, or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the
Agent.
"ELIGIBLE ASSIGNEE" means (i) a Bank; (ii) an affiliate of a
Bank; and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 10.07, approved by the
Borrower, such approval not to be unreasonably withheld or delayed by
the Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Bank and the Agent from the
Borrower within two Business Days after notice of such proposed
assignment has been provided by the assigning Bank to the Borrower;
PROVIDED, HOWEVER, that neither the Borrower nor an affiliate of the
Borrower shall qualify as an Eligible Assignee.
"EMBEDDED GAIN" has the meaning set forth in Paragraph 10(E) of
EXHIBIT A hereto.
"ENTERPRISE" means Enterprise Funding Corporation, a Delaware
corporation.
"ENTERPRISE AGREEMENT" means that certain Security Agreement
dated as of October 22, 1996, by and among FIARC, Enterprise, Texas
Commerce Bank National Association, MBIA Insurance Corporation,
NationsBank, N.A. and the Borrower, and any amendments, modifications,
renewals or extensions thereof.
"ENVIRONMENTAL PROTECTION STATUTE" means (a) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C.A. ss. 9601 ET SEQ.), as amended from time to time, and any and
all rules and regulations issued or promulgated thereunder ("CERCLA");
(b) the Resource Conservation and Recovery Act (as amended by the
Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.A. ss. 6901 ET
SEQ.), as amended from time to time, and any and all rules and
regulations promulgated thereunder ("RCRA"); (c) the Clean Air Act, 42
U.S.C.A. ss. 7401 ET SEQ., as amended from time to time, and any and all
rules and regulations promulgated thereunder; (d) the Clean Water Act of
1977, 33 U.S.C.A. ss. 1251 ET SEQ., as amended from time to time, and
any and all rules and regulations promulgated thereunder; (e) the Toxic
Substances Control Act, 15 U.S.C.A. ss. 2601 ET SEQ., as amended from
time to time, and any and all rules and regulations promulgated
thereunder; or (f) any other federal or state law, statute, rule, or
regulation enacted in connection with or relating to the protection or
regulation of the environment (including, without limitation, those
laws, statutes, rules, and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing, or
transporting of Hazardous Materials)
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and any rules and regulations issued or promulgated in connection with
any of the foregoing by any Governmental Authority, and "ENVIRONMENTAL
PROTECTION STATUTES"means, collectively, each of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA AFFILIATE" means any subsidiary or trade or business
(whether or not incorporated) which is a member of a group of which the
Borrower is a member and which is under common control within the
meaning of Section 414 of the Code and the rules and regulations
thereunder.
"ERISA EVENT" means any of the following events: (a) a
"Reportable Event" described in Section 4043 of ERISA and the
regulations issued thereunder (other than a "Reportable Event" not
subject to the provision for the 30-day notice to the Pension Benefit
Guaranty Corporation, under such regulations) or an event described in
Section 4068(f) of ERISA which may result in a material liability of the
Borrower or any ERISA Affiliate, (b) the withdrawal of the Borrower or
any ERISA Affiliate from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA or the
incurrence of liability by the Borrower or any ERISA Affiliate under
Section 4064 of ERISA, (c) the distribution of a notice of intent to
terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the
treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings to terminate a Plan by the
Pension Benefit Guaranty Corporation, or (e) any other event or
condition which might constitute grounds under ERISA or the Code for the
termination of, or the appointment of a trustee to administer, any Plan
or for the imposition of a lien on the assets of the Borrower or any
ERISA Affiliate in respect of any Plan or Multiemployer Plan which is
not corrected within 30 days.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"EVENTS OF DEFAULT" has the meaning specified in Section 8.01.
"EXCESS SERVICING CASH FLOW" means, at any time, the sum of (i)
any amounts distributed, or available to be distributed, pursuant to
Section 5(e)(v) of the FIRC Security Agreement, and (ii) any amounts
distributed, or available to be distributed, pursuant to Section
5.1(a)(xi) of the Enterprise Agreement.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day
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on such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it.
"FIARC" means First Investors Auto Receivables Corporation, a
Delaware corporation.
"FIFSG" means First Investors Financial Services Group, Inc., a
Texas corporation.
"FIIC" means First Investors Insurance Company, a Vermont
corporation.
"FIRC" means F.I.R.C., Inc., a Delaware corporation.
"FIRC AGREEMENT" means that certain Amended and Restated Credit
Agreement, dated as of October 30, 1996, as amended, among FIRC, the
financial institutions party thereto and NationsBank of Texas, N.A., as
agent, as the same may be further amended, restated, modified, renewed
or extended from time to time.
"FIRC COLLATERAL AGENT" means Texas Commerce Bank National
Association and any successor thereto appointed pursuant to Section 19
of the FIRC Security Agreement.
"FIRC SECURITY AGREEMENT" means that certain Amended and Restated
Collateral Security Agreement, dated as of October 30, 1996, among FIRC,
the FIRC Collateral Agent, and the agent and the banks parties to the
FIRC Agreement, as the same may be amended, restated, modified, renewed
or extended from time to time.
"FIVH" means First Investors (Vermont) Holdings, Inc., a Vermont
corporation.
"FIXED RATE" means the LIBOR Rate or the Agreed Rate.
"FIXED RATE ADVANCE" means a LIBOR Rate Advance or an Agreed Rate
Advance.
"FUNDED DEBT" means Debt of the Borrower incurred under the Notes
and this Agreement.
"FUTURE PLAN" has the meaning specified in Section 6.02(h)
hereof.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards
Board.
"GOVERNMENTAL AUTHORITY" means any (domestic or foreign) federal,
state, county, municipal, parish, provincial, or other government, or
any department, commission, board, court, agency (including, without
limitation, the Environmental Protection Agency), or any other
instrumentality of any of them or any other political subdivision
thereof, and any entity
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exercising executive, legislative, judicial, regulatory, or
administrative functions of, or pertaining to, government, including,
without limitation, any arbitration panel, any court, or any commission.
"GOVERNMENTAL REQUIREMENT" means any order, permit, law, statute
(including, without limitation, any Environmental Protection Statute),
code, ordinance, rule, regulation, certificate, or other direction or
requirement of any Governmental Authority.
"GUARANTY AGREEMENT" means the Guaranty Agreement, dated as of
July 18, 1997, by FIFSG in favor of the Agent and the Banks.
"HAZARDOUS MATERIALS" means (a) any "hazardous waste" as defined
by RCRA; (b) any "hazardous substance" as defined by CERCLA; (c)
asbestos; (d) polychlorinated biphenyls; (e) any substance the presence
of which on any of the Borrower's Properties is prohibited by any
Governmental Authority; (f) petroleum, including crude oil and any
fraction thereof, natural gas liquids, liquefied natural gas, and
synthetic gas useable for fuel (or mixtures of natural gas and such
synthetic gas); (g) drilling fluids, produced waters and other wastes
associated with the exploration, development, or production of crude
oil, natural gas, or geothermal energy; and (h) any other substance
which, pursuant to any Governmental Requirement, requires special
handling in its collection, storage, treatment, or disposal.
"HIGHEST LAWFUL RATE" means, with respect to each Bank, the
maximum nonusurious interest rate, if any, that at any time or from time
to time may be contracted for, taken, reserved, charged, or received
with respect to any Note or on other amounts, if any, due to such Bank
pursuant to this Agreement or any other Loan Document under laws
applicable to such Bank which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"INTEREST PERIOD" means, for each LIBOR Rate Advance or Agreed
Rate Advance comprising part of the same Borrowing, the period
commencing on the date of such Advance or the date of the conversion of
any Advance into such an Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case of a
LIBOR Rate Advance, one, two, three or six months, and (b) in the case
of an Agreed Rate Advance, 1 to (and including) 30 days, as the Borrower
may, upon notice received by the Agent, select in accordance with
Section 2.02 or 2.09; PROVIDED, HOWEVER, that:
(i) the duration of any Interest Period which commences
before the Termination Date and otherwise ends after such date
shall end on the Termination Date; and
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(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, PROVIDED that, in the case of a LIBOR
Rate Advance or an Agreed Rate Advance based on the LIBOR Rate,
if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day.
"INVESTMENT" of any Person means any investment so classified
under GAAP, and, whether or not so classified, includes (a) any direct
or indirect loan or advance made by it to any other Person, whether by
means of stock purchase, loan, advance or otherwise; (b) any capital
contribution to any other Person; and (c) any ownership or similar
interest in any other Person.
"LIBOR LENDING OFFICE" means, with respect to any Bank, the
office of such Bank specified as its "LIBOR Lending Office" opposite its
name on the signature pages hereto (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Bank as such
Bank may from time to time specify to the Borrower and the Agent.
"LIBOR RATE" means, for any Interest Period for each LIBOR Rate
Advance, an interest rate per annum equal to the average (rounded upward
to the nearest whole multiple of 1/16 of 1% per annum) of the rate per
annum at which deposits in U.S. dollars are offered to the Agent, or at
the Agent's option, an Affiliate of the Agent by prime banks in the
London interbank market at 11:00 A M. (London time) three Business Days
before the first day of such Interest Period in an amount substantially
equal to such LIBOR Rate Advance and for a period equal to such Interest
Period.
"LIBOR RATE ADVANCE" means an Advance which bears interest at the
interest rate as provided in Section 2.06(b).
"LIBOR RATE MARGIN" means 3.0% per annum.
"LIBOR RATE RESERVE PERCENTAGE" of any Bank for any Interest
Period for any LIBOR Rate Advance means the reserve percentage, if any,
actually incurred during such Interest Period (or if more than one such
percentage shall be incurred, the daily average of such percentages for
those days in such Interest Period during which any such percentage
shall be incurred) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.
"LIEN" means any claim, mortgage, deed of trust, pledge, security
interest, encumbrance, lien, or charge of any kind (including, without
limitation, any agreement to
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give any of the foregoing, any conditional sale or other title retention
agreement, or any lease in the nature thereof), or the interest of the
lessor under any Capital Lease.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Pledge
Agreement (FIRC and FIARC), the Pledge Agreement (FIFS), the Guaranty
Agreement, the Subordination Agreement and any document or instrument
executed in connection with the foregoing, including any interest rate
swap or other exchange agreement which hedges interest payable by the
Borrower under any of the foregoing.
"LOAN INTEREST EXPENSE" means, for any period, the aggregate
amount of interest paid or accrued during such period on the Advances
(net of any costs or amounts received by the Borrower under any interest
rate protection agreements with respect thereto in accordance with
GAAP).
"LOAN PARTY" means each of the Borrower and FIFSG.
"LOAN PERCENTAGE" means as to any Bank a fraction (expressed as a
percentage) the numerator of which shall be the aggregate original
principal amount of such Bank's Notes and the denominator of which shall
be the aggregate amount of all the Commitments.
"MAJORITY BANKS" means (a) at any time during the term of this
Agreement when NationsBank is the only Bank or when there is only one
Bank in addition to NationsBank, all of such Banks and (b) at any time
during the term of this Agreement when there are two or more Banks in
addition to NationsBank, Banks holding at least 66-2/3% of the aggregate
unpaid principal amount of the Notes held by Banks, or, if no such
principal amount is then outstanding, Banks having at least 66-2/3% of
the Commitments.
"MARGIN STOCK" shall have the meaning assigned to such term in
Regulation G, T, U and X.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on
(a) the financial condition, business, properties or operations of the
Borrower or (b) the ability of the Borrower to perform its respective
obligations under this Agreement, any Note or any other Loan Document to
which it is a party, or under the Purchase Agreement/FIRC or the
Purchase Agreement/Enterprise on a timely basis.
"MATTERS CONTESTED IN GOOD FAITH" shall mean matters (i) that the
Borrower or any Guarantor is contesting in good faith by appropriate
proceedings diligently and continuously pursued, (ii) of which the Agent
has been notified and is being kept informed in such detail as the Agent
may from time to time reasonably request, (iii) of which enforcement of
such contested item is effectively stayed during the period of the
contest, and (iv) with respect to which either (A) adequate reserves in
the nature of a cash deposit or pledge of bonds or other securities, or
a payment bond of a corporate surety in the face amount equal to the
total amount in controversy, reasonably satisfactory to the Agent, has
been furnished or (B)
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adequate provision therefor, reasonably satisfactory to the Agent, has
been set aside on the books of the Borrower or such Guarantor.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
is making or accruing or has made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, which (i) is maintained for employees
of the Borrower or an ERISA Affiliate and at least one entity other than
the Borrower or an ERISA Affiliate or (ii) was so maintained and in
respect of which the Borrower or an ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"NET EXCESS SERVICING CASH FLOW" means, for any calendar month,
the Excess Servicing Cash Flow for such calendar month LESS the
Operating Expenses for such calendar month.
"NET WORTH" means, with respect to any Person, as at any date,
the consolidated stockholders' equity of such Person and its
Subsidiaries, as determined on a consolidated basis in accordance with
GAAP.
"NOTE" or "NOTES" has the meaning specified in Section 2.02(d)
hereof and includes any amendments, modifications, renewals or
extensions thereof.
"NOTICE OF BORROWING" has the meaning specified in Section
2.02(a).
"NOTICE OF INTEREST CONVERSION" has the meaning specified in
Section 2.09.
"OPERATING EXPENSES" means, with respect to any Person, for any
calendar month, the total operating expenses of such Person and its
Subsidiaries (excluding servicing fee expenses), as determined on a
consolidated basis in accordance with GAAP.
"OTHER TAXES" has the meaning specified in subsection 3.06(b)
hereof
"PBGC PLAN" means any plan subject to Title IV of ERISA or
Section 412 of the Code.
"PERMITTED DEBT" has the meaning specified in Section 7.02.
"PERMITTED LIENS" means (i) Liens created pursuant to the FIRC
Agreement, the Enterprise Agreement or any documents entered into in
connection therewith, including any interest rate swap or other exchange
agreement which hedges interest payable under any of the foregoing, (ii)
non-consensual Liens imposed by operation of law including, without
limitation, landlord Liens for rent not yet due and payable, (iii) Liens
for state and local
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taxes, assessments or other governmental charges or levies not yet due
or that are Matters Contested in Good Faith, (iv) Liens to secure the
obligations of the Borrower under leases or lease agreements for the
payment of rent or hire of property of any kind whatsoever (real or
personal including, subject to Section 7.02(b), Capital Leases), (v) the
Lien on that certain trust account described in the Facultative
Reinsurance Agreement, dated as of April 15, 1994, as amended, modified
or extended from time to time, between FIIC and National Union Fire
Insurance Company of Pittsburgh, PA, which Lien secures the obligations
of FIIC thereunder, and (vi) Liens for materialmen, mechanics,
warehousemen, carriers, employees, workmen, repairmen, current wages, or
accounts payable not yet delinquent and arising in the ordinary course
of business; PROVIDED, HOWEVER, that any right to seizure, levy,
attachment, sequestration, foreclosure, or garnishment with respect to
Property of the Borrower by reason of such Lien has not matured, or has
been, and continues to be, effectively enjoined or stayed.
"PERSON" means an individual, partnership, estate, corporation
(including a business trust), association, joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"PLAN" means any employee benefit plan within the meaning of
Section 3(3) of ERISA, other than a Multiemployer Plan, maintained by
the Borrower or any ERISA Affiliate.
"PLEDGE AGREEMENT (FIFS)" means the Pledge Agreement (FIFS),
dated as of July 18, 1997, between FIVH and the Agent, and any
amendments, modifications, renewals or extensions thereof.
"PLEDGE AGREEMENT (FIRC AND FIARC)" means the Pledge Agreement
(FIRC and FIARC), dated as of July 18, 1997, between the Borrower and
the Agent, and any amendments, modifications, renewals or extensions
thereof.
"PLEDGED COLLATERAL" has the meaning set forth in the Pledge
Agreement (FIFS) and the Pledge Agreement (FIRC and FIARC).
"PRIME RATE" means the rate of interest most recently announced
publicly by NationsBank of Texas, N.A. in Dallas, Texas, from time to
time, as its prime rate, which rate shall fluctuate, with each such
change to be effective as of the date of such change in such rate;
PROVIDED that the prime rate is a reference rate and does not
necessarily represent the lowest rate charged to any customer.
"PROPERTY" means any interest or right in any kind of property or
asset, whether real, personal, or mixed, owned or leased, tangible or
intangible, and whether now held or hereafter acquired, including but
not limited to the capital stock of any Subsidiary.
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"PURCHASE AGREEMENT/FIRC" means the Amended and Restated Purchase
Agreement dated as of October 30, 1996 between the Borrower and FIRC, as
the same may be amended, restated, modified, renewed or extended from
time to time (subject to Section 7.13 hereof).
"PURCHASE AGREEMENT/ENTERPRISE" means the Purchase Agreement
dated as of October 22, 1996 between the Borrower and FIARC, as the same
may be amended, restated, modified, renewed or extended from time to
time (subject to Section 7.13 hereof).
"RECEIVABLES" has the meaning set forth in the Purchase
Agreement/FIRC.
"REGISTER" has the meaning specified in subsection 10.07(b)
hereof.
"REGULATION G", "REGULATION T", "REGULATION U", "REGULATION X" or
"REGULATION G, T, U OR X" means Regulation G, T, U or X, as the case may
be, of the Board of Governors of the Federal Reserve System, or any
successor or other regulation hereafter promulgated by said Board to
replace the prior Regulation G, T, U or X and having substantially the
same function.
"RESPONSIBLE OFFICER" means and includes the individual who is
the president of both the Borrower and FIFSG and the individual who is
the chief financial officer of the Borrower and FIFSG.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated
as of July 18, 1997, between FIVH and the Borrower in favor of the
Agent, as the same may be amended, restated, modified, renewed or
extended from time to time.
"SUBSIDIARY" means any corporation of which any Person, either
directly or indirectly, owns at the time more than 50% of the
outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (whether or not
at the time stock of any other class or classes of such corporation
shall have, or might have, voting power by reason of the happening of
any contingency), and shall include any such corporation which shall
become a Subsidiary after the date hereof.
"TAXES" has the meaning specified in subsection 3.06(a) hereof.
"TERMINATION DATE" means July 10, 1998 (as the same may be
extended pursuant to Section 2.05 hereof), or the earlier date of
termination in whole of the Commitments pursuant to Section 2.04 or
8.01.
"TERM LOAN" has the meaning specified in Section 2.05(b).
"TYPE" refers to the determination whether an Advance is a Base
Rate Advance, an Agreed Rate Advance, or a LIBOR Rate Advance (or a
Borrowing comprised of such Advances).
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"UCC" has the meaning set forth in the Pledge Agreement (FIFS)
and the Pledge Agreement (FIRC and FIARC).
Section 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
unless otherwise specified herein the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding."
Section 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
5.06.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01. THE ADVANCES. Each Bank severally agrees, on the terms and
conditions hereinafter set forth, to make Advances to the Borrower from time to
time on any Business Day during the period from the date hereof until the
Termination Date, in an aggregate amount not to exceed an amount equal to such
Bank's Loan Percentage of the Available Amount. Each Borrowing shall consist of
Advances of the same Type made on the same day by the Banks ratably according to
their respective Loan Percentage of the Available Amount. All LIBOR Rate
Advances shall be in an aggregate amount of not less than $500,000 or an
integral multiple thereof and all other Advances shall be in an aggregate amount
not less than $500,000 or an integral multiple of $100,000 in excess thereof.
Within the limits of each Bank's Loan Percentage of the Available Amount, the
Borrower may borrow, prepay pursuant to Sections 3.08 and 3.09 and reborrow
under this Section 2.01. The principal amount outstanding on the Advances shall
mature and, together with accrued and unpaid interest thereon, shall be due and
payable on the Termination Date.
Section 2.02. MAKING THE ADVANCES. (a) Each Borrowing shall be made on
the Borrower's oral notice, or on written notice in the form attached hereto as
EXHIBIT C ("NOTICE OF BORROWING") given by the Borrower to the Agent not later
than 11:00 A.M. (Dallas time) on the third Business Day prior to the date of the
proposed Borrowing. With respect to any oral notice, the Borrower shall promptly
thereafter confirm such notice by delivering a Notice of Borrowing. Each Notice
of Borrowing shall specify therein the requested (i) date of such Borrowing,
(ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such
Borrowing, and (iv) in the case of a Borrowing comprised of LIBOR Rate Advances
or Agreed Rate Advances, the initial Interest Period for each such Advance. The
Agent shall promptly deliver a copy of each Notice of Borrowing to each Bank
and, in the case of any Agreed Rate Borrowing, shall, after conferring with the
Borrower and the Banks, and with the consent of all Banks notify the Borrower
not later than 2:00 p.m. (Dallas time) on the Business Day prior to the
Borrowing, of the Agreed Rate with respect to such Borrowing. Each Bank shall,
before 12:00 noon (Dallas time) on the date of such Borrowing, make available
for the account of its Applicable Lending Office to the Agent at its address
referred to in
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Section 10.02, in immediately available funds, such Bank's ratable portion of
such Borrowing. After the Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article IV, the Agent will transfer such
funds to an account designated by the Borrower. Each Notice of Borrowing with
respect to LIBOR Rate or Base Rate Advances shall be irrevocable and binding on
the Borrower. In no event shall more than five Borrowings be outstanding at any
time.
(b) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's Loan Percentage of such Borrowing, the Agent may assume that such Bank
has made such portion available to the Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such Loan Percentage available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Advances comprising such Borrowing and (ii) in the case of such Bank,
the lesser of (A) the Federal Funds Rate or (B) the Highest Lawful Rate. If such
Bank shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Advance as part of such Borrowing for purposes of
this Agreement.
(c) The failure of any Bank to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Bank of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Bank shall
be responsible for the failure of any other Bank to make the Advance to be made
by such other Bank on the date of any Borrowing.
(d) The Borrower shall execute and deliver to the Agent for each Bank to
evidence the Advances made by such Bank pursuant to Section 2.01 hereof, a
revolving credit note (each such note a "NOTE" and more than one Note, the
"NOTES") in the amount of such Bank's Commitment. Each Note shall be
substantially in the form of EXHIBIT D with the blanks appropriately filled, and
shall mature on the Termination Date.
Section 2.03. FEES. (a) The Borrower agrees to pay to the Agent for the
account of each Bank a commitment fee on the daily average unused amount of each
such Bank's Commitment from the date hereof until the Termination Date, at the
rate of .375% per annum, payable on July 30, 1997 for the period from the
Closing Date until such date, and thereafter, on the 30th day of each April,
July, October and January for the preceding calendar quarter and continuing
until the Termination Date. The fees payable under this Section 2.03(a) shall be
calculated by the Agent on the basis of a 360-day year, for the actual days
(including the first day but excluding the last day) occurring in the period for
which such fee is payable. Each such determination by the Agent shall be
conclusive and binding for all purposes, absent manifest error.
(b) The Borrower shall pay the Agent an administrative agency fee from
time to time and a structuring fee on the Closing Date in accordance with the
terms of a letter agreement, dated as of July 18, 1997, between the Agent and
the Borrower.
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Section 2.04. REDUCTION OF THE COMMITMENTS. The Borrower shall have the
right, upon at least three Business Days' notice to the Agent, to terminate in
whole or reduce ratably in part the unused portions of the respective
Commitments of the Banks, PROVIDED that each partial reduction shall be in the
aggregate amount of $2,000,000 or an integral multiple thereafter of $500,000.
Section 2.05. EXTENSION OF TERMINATION DATE; TERM LOAN. (a) On the date
which is a Business Day no less than forty-five (45) and no more than sixty (60)
days prior to the then-current Termination Date, the Borrower may elect to
notify the Agent in writing of its request for an extension of such Termination
Date for a period of three hundred sixty four (364) days from such Termination
Date. Promptly after receipt of such request, the Agent shall notify the Banks
of such request by sending each Bank a Consent to Extension for its execution.
Each Bank shall return the executed Consent to Extension or notify the Agent in
writing of its rejection of the request on or prior to a date which is thirty
(30) days after the date of receipt of the request for extension and which, in
any event, is on or prior to fifteen (15) Business Days prior to the
then-current Termination Date. In the event that any Bank fails to so notify the
Agent on or prior to such date, the request shall be deemed to have been
rejected by such Bank. The Commitments shall be extended hereunder only upon the
consent of all Banks whereupon the Termination Date and the maturity date of
each Note shall be deemed to be extended to a date which is three hundred sixty
four (364) days after the then-current Termination Date.
(b) In the event that the Borrower does not elect to request an
extension or the Banks reject any such request, the aggregate unpaid principal
amount of all Advances outstanding as of the Termination Date shall be converted
into a term loan (the "TERM LOAN"), payable in four equal principal installments
on the 30th day of each March, June, September and December following such
Termination Date, with interest thereon payable at the rates per annum and on
the dates provided herein with respect to Advances.
(c) In the event of the renewal and extension of the Commitments and the
maturity date of the Notes pursuant to Section 2.05(a) or in the event of the
conversion of the Advances to a Term Loan pursuant to Section 2.05(b), the terms
and conditions of this Agreement and the other Loan Documents will apply during
such renewal and extension or term loan period and from and after the date of
such extension or conversion the term "Termination Date" shall mean the maturity
date of the Notes as so renewed and extended or converted.
Section 2.06. INTEREST. The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Bank from the date of such Advance
until such principal amount shall be paid in full, at the times and at the rates
per annum set forth below:
(a) BASE RATE ADVANCES. During such periods as such Advance is a Base
Rate Advance, a rate per annum equal at all times to the lesser of (i) the Base
Rate in effect from time to time or (ii) the Highest Lawful Rate, payable on the
last Business Day day of each calendar month and on the Termination Date,
PROVIDED that any amount of principal which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, payable on
demand, at a rate per annum equal at all times
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to the lesser of (i) two percent (2%) per annum above the Base Rate in effect
from time to time or (ii) the Highest Lawful Rate.
(b) LIBOR RATE ADVANCES. During such periods as such Advance is a LIBOR
Rate Advance, a rate per annum equal at all times during each Interest Period
for such Advance to the lesser of (i) the sum of the LIBOR Rate for such
Interest Period for such Advance plus the LIBOR Rate Margin or (ii) the Highest
Lawful Rate, payable, together with additional interest due under Section 2.07
hereof, on the last day of such Interest Period and on the Termination Date;
PROVIDED that any amount of principal which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, payable on
demand, at a rate per annum equal at all times to the lesser of (i) two percent
(2%) per annum above the Base Rate in effect from time to time or (ii) the
Highest Lawful Rate.
(c) AGREED RATE ADVANCE. During such periods as such Advance is an
Agreed Rate Advance, a rate per annum equal at all times during such Interest
Period for such Advance to the lesser of (i) the Agreed Rate for such Interest
Period for such Advance or (ii) the Highest Lawful Rate, payable on the last day
of such Interest Period and on the Termination Date; PROVIDED that any amount of
principal which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the lesser of (i) two percent (2%) above the
Base Rate in effect from time to time or (ii) the Highest Lawful Rate.
(d) INTEREST COMPUTATION. Computations of interest pursuant to this
Article II shall be made by the Agent with respect to Base Rate Advances, Agreed
Rate Advances or the Term Loan based on the Prime Rate, on the basis of a year
of 365 or 366 days, as the case may be, and with respect to Advances of any
other type (including Base Rate Advances based on the Federal Funds Rate) or the
Term Loan when it is based on the Federal Funds Rate, on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. Each determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
Section 2.07. ADDITIONAL INTEREST ON ADVANCES BASED ON THE LIBOR RATE.
Subject to Section 10.08 hereof, the Borrower shall pay to each Bank, so long as
such Bank shall be required under regulations of the Board of Governors of the
Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities, additional interest
on the unpaid principal amount of each Advance of such Bank during such periods
as such Advance is a LIBOR Rate Advance or an Agreed Rate Advance based on the
LIBOR Rate, from the date of such Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times to the remainder obtained
by subtracting (i) the LIBOR Rate for such Interest Period for such Advance from
(ii) the rate obtained by dividing such LIBOR Rate by a percentage equal to 100%
minus the LIBOR Rate Reserve Percentage of such Bank actually incurred for such
Interest Period, payable on each date on which interest is payable on such
Advance pursuant to Section 2.06 hereof. A certificate as to amounts required to
be paid under this Section 2.07 submitted to the Borrower and the Agent by such
Bank and setting forth in reasonable detail the amount or amounts to be paid to
it hereunder shall be conclusive absent manifest error.
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Section 2.08. INTEREST RATE DETERMINATION. (a) The rate of interest for
(i) each LIBOR Rate Advance specified in a Notice of Borrowing or a Notice of
Interest Conversion, shall be determined by the Agent two (2) Business Days
before the first day of the Interest Period applicable for such Advance and (ii)
for each Agreed Rate Advance specified in a Notice of Borrowing or a Notice of
Interest Conversion shall be determined by the Agent, the Banks and the Borrower
as set forth in Section 2.02(a) hereof. The Agent shall give prompt notice to
the Borrower and the Banks of the applicable interest rate determined by the
Agent for purposes of Section 2.06(a), (b) or (c) hereof, and each such
determination by the Agent shall be conclusive, absent manifest error.
(b) If the Borrower shall fail to deliver to the Agent a Notice of
Interest Conversion in accordance with Section 2.09 hereof, to select the
duration of any Interest Period for the principal amount outstanding under any
LIBOR Rate Advance or Agreed Rate Advance prior to the last day of the Interest
Period applicable to such Advance, the Agent will forthwith so notify the
Borrower and the Banks and such Advances will automatically, on the last day of
the then existing Interest Period therefor, convert into Base Rate Advances.
Section 2.09. VOLUNTARY INTEREST CONVERSION OF ADVANCES. The Borrower
may on any Business Day, upon the Borrower's oral or written notice ("NOTICE OF
INTEREST CONVERSION") given by the Borrower to the Agent not later than 11:00 A
M. (Dallas time) on the second Business Day prior to the date of the proposed
interest conversion in the case of LIBOR Rate or Agreed Rate Advances, (i)
convert all Advances of one Type into Advances of another Type, (ii) convert all
LIBOR Rate Advances for a specified Interest Period into LIBOR Rate Advances for
a different Interest Period or (iii) convert all Agreed Rate Advances for a
specified Interest Period into Agreed Rate Advances for a different Interest
Period; PROVIDED, HOWEVER, with respect to any oral Notice of Interest
Conversion, the Borrower shall promptly confirm such notice in writing; PROVIDED
FURTHER that, any conversion of any LIBOR Rate Advances into LIBOR Rate Advances
for a different Interest Period, or into Base Rate Advances, or of Agreed Rate
Advances into Agreed Rate Advances for a different Interest Period, or into Base
Rate Advances shall be made on, and only on, the last day of an Interest Period
for such LIBOR Rate Advances or Agreed Rate Advances, as the case may be;
PROVIDED FURTHER that no conversion into a LIBOR Rate Advance or an Agreed Rate
Advance will be permitted if at the time of receipt by the Agent of the Notice
of Interest Conversion, a Default or Event of Default shall have occurred and be
continuing. Each such Notice of Interest Conversion shall specify therein the
requested (i) date of such interest conversion, (ii) the Advances to be
converted, and (iii) if such interest conversion is into Advances constituting
LIBOR Rate Advances or Agreed Rate Advances, as the case may be, the duration of
the Interest Period for each such Advance. The Agent shall promptly deliver a
copy of each Notice of Interest Conversion to each Bank. Each Notice of Interest
Conversion shall be irrevocable and binding on the Borrower. In no event shall
more than five (5) Interest Periods be in effect at any time with respect to
LIBOR Rate Advances.
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ARTICLE III
CHANGE IN CIRCUMSTANCES, PAYMENTS AND PREPAYMENTS
Section 3.01. INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable law, rule,
or regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Bank (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any Fixed Rate
Advances, its Note, or its obligation to make Fixed Rate Advances, or
change the basis of taxation of any amounts payable to such Bank (or its
Applicable Lending Office) under this Agreement or its Note in respect
of any Fixed Rate Advances (other than taxes imposed on the overall net
income of such Bank by the jurisdiction in which such Bank has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than, in the
case of LIBOR Rate Advances or Agreed Rate Advances based on the LIBOR
Rate, any change by way of imposition or increase of reserve
requirements included in the LIBOR Rate Reserve Percentage) relating to
any extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Bank (or its Applicable
Lending Office), including the Commitment of such Bank hereunder; or
(iii) shall impose on such Bank (or its Applicable Lending
Office) or on the United States market for certificates of deposit or
the London interbank market any other condition affecting this Agreement
or its Note or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making, converting into, continuing or
maintaining any Fixed Rate Advances or to reduce any sum received or receivable
by such Bank (or its Applicable Lending Office) under this Agreement or its Note
with respect to any Fixed Rate Advances, then the Borrower shall pay to such
Bank on demand such amount or amounts as will compensate such Bank for such
increased cost or reduction. If any Bank requests compensation by the Borrower
under this Section 3.01(a), the Borrower may, by notice to such Bank (with a
copy to the Agent), suspend the obligation of such Bank to make or continue
Advances of the Type with respect to which such compensation is requested, or to
convert Advances of any other Type into Advances of such Type, until the event
or condition giving rise to such request ceases to be in effect (in which case
the provisions of Section
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3.04 shall be applicable); PROVIDED that such suspension shall not affect the
right of such Bank to receive the compensation so requested.
(b) If, after the date hereof, any Bank shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Bank or any
corporation controlling such Bank as a consequence of such Bank's obligations
hereunder to a level below that which such Bank or such corporation could have
achieved but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then from time to
time upon demand the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
(c) Each Bank shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to it. Any Bank claiming compensation under
this Section shall furnish to the Borrower and the Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
Section 3.02. LIMITATION ON TYPES OF ADVANCES. If on or prior to the
first day of any Interest Period for any Fixed Rate Advance:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
LIBOR Rate for such Interest Period; or
(b) the Majority Banks determine (which determination shall be
conclusive) and notify the Agent that the LIBOR Rate will not adequately
and fairly reflect the cost to the Banks of funding LIBOR Rate Advances
for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Banks shall be under no obligation to make
additional Advances of such Type, continue Advances of such Type, or to convert
Advances of any other Type into Advances of such Type and the Borrower shall, on
the last day(s) of the then current Interest Period(s) for the outstanding
Advances of the affected Type, either prepay such Advances or convert such
Advances into another Type of Advance in accordance with the terms of this
Agreement.
Section 3.03. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to make, maintain, or
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fund LIBOR Rate Advances hereunder, then such Bank shall promptly notify the
Borrower thereof and such Bank's obligation to make or continue LIBOR Rate
Advances and to convert other Types of Advances into LIBOR Rate Advances shall
be suspended until such time as such Bank may again make, maintain, and fund
LIBOR Rate Advances (in which case the provisions of Section 3.04 shall be
applicable).
Section 3.04. TREATMENT OF AFFECTED ADVANCES. If the obligation of any
Bank to make a particular Type of Fixed Rate Advance or to continue, or to
convert Advances of any other Type into, Advances of a particular Type shall be
suspended pursuant to Section 3.01 or 3.03 hereof (Advances of such Type being
herein called "AFFECTED ADVANCES" and such Type being herein called the
"AFFECTED TYPE"), such Bank's Affected Advances shall be automatically converted
into Base Rate Advances on the last day(s) of the then current Interest
Period(s) for Affected Advances (or, in the case of a conversion required by
Section 3.03 hereof, on such earlier date as such Bank may specify to the
Borrower with a copy to the Agent) and, unless and until such Bank gives notice
as provided below that the circumstances specified in Section 3.01 or 3.03
hereof that gave rise to such conversion no longer exist:
(a) to the extent that such Bank's Affected Advances have been so
converted, all payments and prepayments of principal that would
otherwise be applied to such Bank's Affected Advances shall be applied
instead to its Base Rate Advances; and
(b) all Advances that would otherwise be made or continued by
such Bank as Advances of the Affected Type shall be made or continued
instead as Base Rate Advances, and all Advances of such Bank that would
otherwise be converted into Advances of the Affected Type shall be
converted instead into (or shall remain as) Base Rate Advances.
If such Bank gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.01 or 3.03 hereof that gave rise to the
conversion of such Bank's Affected Advances pursuant to this Section 3.04 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Advances of the Affected Type made by other
Banks are outstanding, such Bank's Base Rate Advances shall be automatically
converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Advances of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Advances held by the Banks holding Advances of
the Affected Type and by such Bank are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Commitments.
Section 3.05. COMPENSATION. Upon the request of any Bank, the Borrower
shall pay to such Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or conversion of a Fixed Rate
Advance for any reason (including, without limitation, the acceleration
of the Advances pursuant to Section 8.01) on a date other than the last
day of the Interest Period for such Advance; or
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(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
Article IV to be satisfied) to borrow, convert, continue, or prepay a
Fixed Rate Advance on the date for such borrowing, conversion,
continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, continuation, or conversion under this Agreement.
Section 3.06 TAXES. (a) Any and all payments by the Borrower to or for
the account of any Bank or the Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, EXCLUDING, in the case of each Bank and
the Agent, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Bank (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan Document
to any Bank or the Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.06) such Bank or the Agent receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law, and (iv) the Borrower shall furnish to the
Agent, at its address referred to in Section 10.02, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "OTHER TAXES").
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 3.06) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower or the
Agent (but only so long as such Bank remains lawfully able to do so), shall
provide the Borrower and the Agent with (i) Internal Revenue Service Form 1001
or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this
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Agreement is effectively connected with the conduct of a trade or business in
the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Bank is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Agreement or any of
the other Loan Documents.
(e) For any period with respect to which a Bank has failed to provide
the Borrower and the Agent with the appropriate form pursuant to Section 3.06(d)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 3.06(a) or
3.06(b) with respect to Taxes imposed by the United States; PROVIDED, HOWEVER,
that should a Bank, which is otherwise exempt from or subject to a reduced rate
of withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 3.06, then such Bank will agree to
use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Bank, is not otherwise
disadvantageous to such Bank.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 3.06 shall survive the termination of the Commitments and the
payment in full of the Notes.
Section 3.07. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 11:00 a.m. (Dallas
time) on the day when due in U.S. dollars to the Agent at its address referred
to in Section 10.02 in immediately available funds (each such payment received
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or fees
(to the extent received by the Agent) ratably to the Banks for the account of
their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Bank (to the extent received by the
Agent) to such Bank for the account of its Applicable Lending Office, in each
case to be applied in accordance with the terms of this Agreement.
(b) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
PROVIDED HOWEVER, if such extension would cause payment of interest on or
principal of LIBOR Rate Advances or Agreed Rate Advances based on the LIBOR Rate
to be
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made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(c) Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent the
Borrower shall not have so made such payment in full to the Agent, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the lesser of (i) the Federal Funds Rate or (ii) the Highest Lawful
Rate.
Section 3.08. VOLUNTARY PREPAYMENTS. The Borrower may at any time and
from time to time, prepay an Advance, in whole or in part, (a) in the case of a
LIBOR Rate Advance or an Agreed Rate Advance, upon at least two Business Days'
written notice, provided that in the event Borrower prepays Fixed Rate Advances
in whole or in part on a day which is not the last day of the Interest Period
applicable thereto, the provisions of Section 3.05 shall apply and (b) in the
case of a Base Rate Advance or the Term Loan, upon same Business Day written
notice; PROVIDED, HOWEVER, that all such prepayments shall be made together with
accrued interest to the date of such prepayment on the principal amount prepaid
without premium or penalty thereon. Each notice of prepayment shall specify the
prepayment date and the principal amount of each Advance(s) (or portion thereof)
to be prepaid, and shall be irrevocable and the payment amount specified in such
notice shall be due and payable on the prepayment date described in such notice,
together with accrued and unpaid interest on the amount prepaid. Partial
prepayments with respect to any Advance shall be in an aggregate principal
amount of $500,000 or greater integral multiples of $10,000.
Section 3.09. MANDATORY PREPAYMENTS. (a) If at any time the aggregate
outstanding principal balance of the Advances exceeds an amount equal to the
lesser of the Borrowing Base or the Commitments at such time, then the Borrower
shall immediately pay to the Agent for the ratable account of the Banks the
amount of such excess, together with accrued and unpaid interest thereon.
(b) Promptly after the receipt thereof, the Borrower will pay, or cause
to be paid, to the Agent 100% of the proceeds received by the Borrower or any
Subsidiary, net of selling expenses and taxes paid, if any, (i) to the extent
such net proceeds exceed $1,000,000, from any sale, transfer or assignment of
any Property (other than (x) Receivables pursuant to the Purchase Agreement/FIRC
or the Purchase Agreement/Enterprise, (y) receivables held by the Borrower for
re-sale to third parties or (z) in the ordinary course of business) of the
Borrower or any Subsidiary and (ii) from the issuance by the Borrower, FIFSG or
any of their respective Subsidiaries of any shares of capital stock or other
equity securities, or rights, warrants or options to purchase or acquire any
shares or other equity securities.
Section 3.10. SUBSTITUTION OF BANK. In the event the Borrower is
required to pay any material amounts to any Bank pursuant to Section 3.01(a) or
(b), Section 3.05 or Section 3.06 hereof, the Borrower may give at least
forty-five (45) days prior notice to such Bank (with copies to the
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Agent) that it wishes to seek one or more Eligible Assignees (which may be one
or more of the Banks) to assume the Commitments of such Bank and to purchase its
outstanding Advances and Notes and the Agent will use its best efforts to assist
Borrower in obtaining an Eligible Assignee, PROVIDED, HOWEVER, that if more than
one Bank requests that Borrower pay substantially and proportionately equal
additional amounts under any such sections and Borrower elects to seek an
Eligible Assignee(s) to assume the Commitments of any one of such affected
Banks, Borrower must seek Eligible Assignee(s) to assume the Commitments of all
of such affected Banks. Each Bank requesting compensation pursuant to Section
3.01(a) or (b), Section 3.05 or Section 3.06 hereof agrees to sell its
Commitments, Advances, Notes and interest in this Agreement in accordance with
Section 10.07 to any such Eligible Assignee for an amount equal to the sum of
the outstanding unpaid principal of and accrued interest on such Advances and
Notes PLUS all other fees and amounts (including, without limitation, any
compensation claimed by such Bank under any such sections) due such Bank
hereunder calculated, in each case, to the date such Commitments, Advances,
Notes and interest are purchased. Upon such sale or prepayment, said Bank shall
have no further Commitment or other obligation to Borrower hereunder or under
any Note.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. The obligation
of each Bank to make its initial Advance is subject to the condition precedent
that the Agent shall have received on or before the day of the initial Borrowing
the following, each dated such day, in form and substance satisfactory to the
Agent and (except for the Notes) in sufficient copies for each Bank:
(a) The Notes, duly executed by the Borrower and payable to the order of
each Bank.
(b) This Agreement, duly executed by the Borrower.
(c) The Pledge Agreement (FIRC and FIARC), duly executed by the
Borrower.
(d) The Pledge Agreement (FIFS), duly executed by FIVH.
(e) The Guaranty Agreement, duly executed by FIFSG.
(f) The Subordination Agreement, duly executed by FIVH and the Borrower.
(g) A certified copy of the Purchase Agreement/Enterprise, together with
all amendments thereto.
(h) A certificate of the Secretary of each of the Borrower, FIVH and
FIFSG, certifying (1) the names and true signatures of its officers authorized
to sign each Loan Document to which it is a party and the notices and other
documents to be delivered by it pursuant to any such Loan Document; (2) its
By-laws and Articles or Certificate of Incorporation as in effect on the date of
such
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certification; and (3) the resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance by it of each Loan Document
to which it is a party, the notices and other documents to be delivered by it
pursuant to any such Loan Document, and the transactions contemplated
thereunder.
(i) Certificates of appropriate officials as to the existence and good
standing of (i) the Borrower in its jurisdiction of incorporation and (ii) each
of FIVH and FIFSG in its jurisdiction of incorporation.
(j) (i) A favorable opinion of Buck, Keenan & Owens, L.L.P., counsel for
the Borrower, FIFSG and FIVH and (ii) a favorable opinion of Paul, Frank &
Collins, Inc., special Vermont counsel for FIVH, each in form and substance
satisfactory to the Agent and the Banks.
(k) Acknowledgment copies of proper Financing Statements (Form UCC-1),
duly filed on or before the Closing Date, naming the Borrower as the debtor and
the Agent as the secured party, or other, similar instruments or documents, as
may be necessary or, in the opinion of the Agent, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the Agent's and the
Banks' security interests in all Pledged Collateral in which an interest may be
assigned under the Pledge Agreement (FIFS) and the Pledge Agreement (FIRC and
FIARC).
(l) Certified copies of Requests for Information or Copies (Form UCC-11)
(or a similar search report certified by a party acceptable to the Agent), dated
on or before the Closing Date, listing all effective financing statements which
name any of the Borrower, FIFSG or FIVH (under its present name and any previous
name) as debtor and which are filed in the jurisdictions in which filings were
made pursuant to subsection (k) of this Section 4.01, together with copies of
such financing statements as the Agent may reasonably request.
(m) Such other documents and instruments with respect to the
transactions contemplated hereby as the Agent may reasonably request.
Section 4.02. CONDITIONS PRECEDENT TO EACH BORROWING (INCLUDING THE
INITIAL BORROWING). The obligation of each Bank to make an Advance on the
occasion of each Borrowing (including the initial Borrowing) shall be subject to
the further conditions precedent that on the date of such Borrowing:
(a) the Agent shall have received a Notice of Borrowing in accordance
with the terms of this Agreement;
(b) both before and after giving effect to the Borrowing, the aggregate
amount of outstanding Advances shall not exceed an amount equal to the lesser of
the Borrowing Base or the Commitments at such time; and
(c) the Agent shall have received such other approvals, information,
opinions or documents as any Bank through the Agent may reasonably request.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement, the Borrower
represents and warrants to the Banks (which representations and warranties will
survive the delivery of any Note and the making of any Advance) that:
Section 5.01. EXISTENCE. The Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of Texas and is duly
qualified or licensed to do business in all jurisdictions where the Property
owned or the business transacted by it makes such qualification necessary and
where the failure to be so qualified would have a Material Adverse Effect.
Section 5.02. POWER AND AUTHORIZATION. The Borrower is duly authorized
and empowered to execute, deliver, and perform its obligations under each Loan
Document, and all corporate or other action on the Borrower's part requisite for
the due execution, delivery, and performance of each Loan Document, has been
duly and effectively taken. The Borrower is duly authorized and empowered to
borrow under this Agreement and all corporate action on the Borrower's part
requisite for borrowing by the Borrower hereunder has been duly and effectively
taken.
Section 5.03. NO CONFLICT OR RESULTANT LIEN. The execution, delivery,
and performance by the Borrower of each Loan Document, the Borrowings hereunder
by the Borrower as contemplated herein, and the effectuation of the transactions
contemplated by any Loan Document, do not and will not violate any provision of,
or result in a default under, the Borrower's Articles of Incorporation or other
charter documents or By-laws or any material agreement to which the Borrower is
a party, or Governmental Requirement to which the Borrower is subject, or result
in the creation or imposition of any Lien upon any Property of the Borrower,
except as contemplated hereby. No Default or Event of Default has occurred and
is continuing.
Section 5.04. NO CONSENT. No authorization or approval or other action
by, and no notice to or filing with, any Person or any Governmental Authority is
required for the due execution, delivery, and performance by the Borrower of
this Agreement or any other Loan Document, the Borrowings hereunder as
contemplated herein, or the effectuation of the transactions contemplated under
any Loan Document.
Section 5.05. BINDING OBLIGATIONS. Each Loan Document constitutes the
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its respective terms, except as such enforceability may be (a)
limited by the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the enforcement of
creditor's rights generally, and (b) subject to the effect of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at equity or at law).
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Section 5.06. FINANCIAL CONDITION. The certified consolidated audited
balance sheet of FIFSG and its Subsidiaries as at April 30, 1996, and the
related certified consolidated statements of income and stockholder's equity and
cash flow statements of FIFSG and its Subsidiaries for the Borrower's annual
fiscal period ending April 30, 1996 and the unaudited consolidated balance sheet
of FIFSG and its Subsidiaries as at January 31, 1997 and the related unaudited
consolidated statements of income and changes in stockholders' equity and cash
flow statements for the fiscal quarter then ended, certified by an officer of
FIFSG, copies of which have been furnished to each Bank, have been prepared in
accordance with GAAP and in accordance with FIFSG's and each Subsidiary's
accounting practices consistently applied, and certified by a Responsible
Officer as presenting fairly the consolidated financial condition of FIFSG and
its Subsidiaries as at such date and the results of the operations of FIFSG and
its Subsidiaries for the period ended on such date, all in accordance with GAAP,
and that, in the case of FIFSG and its Subsidiaries on a consolidated basis,
since April 30, 1996, and in the case of each of the Borrower, FIFSG and their
respective Subsidiaries, since January 31, 1997, there has been no material
adverse change in its condition (financial or otherwise), business, prospects,
Properties or operations. The Borrower has no Debt except for Permitted Debt.
Section 5.07. LITIGATION. There are no actions, suits, or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower, FIARC or FIRC, or the Properties of the Borrower, FIARC or FIRC,
which could, individually or in the aggregate, reasonably be determined to have
a Material Adverse Effect.
Section 5.08. USE OF PROCEEDS; MARGIN STOCK. The proceeds of each
Advance will be used by the Borrower for working capital and general corporate
purposes. Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Advance will be used (A) to purchase or carry any
Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock; (B) to reduce or retire any Debt which was originally
incurred to purchase or carry any such Margin Stock; (C) for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
Regulation G, T, U or X; or (D) to acquire any security of any Person who is
subject to Sections 13 and 14 of the Securities Exchange Act. Neither the
Borrower, nor any Person acting on behalf of the Borrower, has taken or will
take any action which might cause any Loan Document to violate Regulation G, T,
U or X or any other regulation of the Board of Governors of the Federal Reserve
System.
Section 5.09. TAXES; GOVERNMENTAL CHARGES. The Borrower has filed or
caused to be filed all federal, state, and foreign income tax returns which are
required to be filed, and has paid or caused to be paid all taxes as shown on
such returns or on any assessment received by it to the extent that such taxes
have become due, except to the extent that noncompliance with this Section would
not have a Material Adverse Effect.
Section 5.10. FULL DISCLOSURE. All information heretofore or
contemporaneously furnished by or on behalf of the Borrower or FIFSG in writing
to the Agent or any Bank for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all other such information hereafter
furnished by or on behalf of the Borrower or FIFSG in writing to the Agent
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or any Bank will be, (i) true and accurate in all material respects on the date
as of which such information is dated or certified and (ii) not incomplete by
omitting to state any material fact necessary to make such information not
misleading in light of the circumstances under which such information was
provided. There is no fact known to the Borrower or FIFSG which is reasonably
likely to have a Material Adverse Effect, which has not been disclosed herein or
in such other written documents, information or certificates furnished to the
Agent and the Banks for use in connection with the transactions contemplated
hereby.
Section 5.11. INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
Section 5.12. ENVIRONMENTAL MATTERS. The Borrower is in compliance with
all Environmental Protection Statutes.
Section 5.13. CAPITAL STRUCTURE. FIRC, FIARC, FIIC, and Farragut
Financial Corporation, a Delaware corporation, are the only Subsidiaries of the
Borrower. All of the issued and outstanding shares of capital stock of the
Borrower are fully paid and nonassessable and are owned beneficially and of
record by FIVH, a wholly-owned subsidiary of FIFSG. The Borrower has not granted
or issued, or agreed to grant or issue, any options, warrants or similar rights
to any Person to acquire any shares of, or other securities convertible into,
the Borrower's capital stock.
Section 5.14. COMPLIANCE WITH LAW. The business and operations of the
Borrower as conducted at all times have been and are in compliance in all
material respects with all applicable Governmental Requirements.
Section 5.15. ERISA. Neither the Borrower nor any ERISA Affiliate has
ever established, maintained, contributed to or been obligated to contribute to,
and neither the Borrower nor any ERISA Affiliate has any liability or obligation
with respect to any PBGC Plan, Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any ERISA Affiliate has any present intention to
establish a PBGC Plan, a Multiemployer Plan or a Multiple Employer Plan. Neither
the Borrower nor any ERISA Affiliate has ever established, maintained,
contributed to or been obligated to contribute to any employee welfare benefit
plan (as defined in Section 3(1) of ERISA) which provides benefits to retired
employees (other than as required by Section 601 of ERISA). The Borrower and any
ERISA Affiliate are in compliance in all material respects with all applicable
provisions of ERISA and the Code with respect to each Plan, including the
fiduciary provisions thereof, and each Plan is, and has been, maintained in
compliance with ERISA and, where applicable, the Code. Full payment when due has
been made of all amounts which the Borrower or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as contributions to
such Plan as of the date hereof.
Section 5.16. NO DEFAULT OR EVENT OF DEFAULT. No event has occurred or
is continuing which constitutes a Default or Event of Default hereunder or under
any Loan Document or a default or event of default under the FIRC Agreement or
the Enterprise Agreement.
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Section 5.17. PERMITS AND LICENSES. All material permits, licenses and
other governmental authorizations necessary for the Borrower to carry on its
business have been obtained and are in full force and effect and the Borrower is
not in material breach of the foregoing. The Borrower owns or possesses adequate
licenses or other valid rights to use trade names, other intellectual property,
and applications therefor which are material to the conduct of the business,
operations or financial condition of the Borrower.
Section 5.18. COMPLIANCE WITH CREDIT INSURANCE. The Credit Guidelines
(as defined in the Purchase Agreement/FIRC) at all times have been and are in
compliance with the underwriting standards under the Credit Insurance.
Section 5.19. NO TERMINATION EVENT. No event has occurred or is
continuing which constitutes a "Termination Event" under the Enterprise
Agreement.
Section 5.20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Borrower in each Loan Document shall
survive the delivery of the Notes and the making of any Advance, and shall
continue for a period of two years after the repayment of the Notes and the
termination of the Commitments, and any investigation at any time made by or on
behalf of the Agent or any Bank shall not diminish any Bank's right to rely
thereon.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any Note shall remain unpaid or any Bank shall have any
Commitment hereunder, the Borrower agrees, unless the Majority Banks shall
otherwise consent in writing, as follows:
Section 6.01. COMPLIANCE WITH LAWS, ETC. The Borrower will comply in all
material respects with all applicable laws (including, without limitation, all
Environmental Protection Statutes), rules, regulations and orders of any
Governmental Authority.
Section 6.02. REPORTING AND NOTICE REQUIREMENTS. The Borrower will
furnish or cause to be furnished to the Agent for delivery to the Banks:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in
any event within forty-five (45) days after the end of each fiscal
quarter of FIFSG (including the last quarter), unaudited consolidated
and consolidating balance sheets of FIFSG and its Subsidiaries as of the
end of such quarter and unaudited consolidated and consolidating
statements of income and consolidated stockholder's equity and cash flow
statements of FIFSG and its Subsidiaries for the period commencing at
the end of the previous fiscal year of FIFSG and ending with the end of
such fiscal quarter, setting forth in each consolidating financial
statement in comparative form corresponding consolidating figures for
the corresponding period in the immediately preceding fiscal year of
FIFSG, all in reasonable detail and certified by a Responsible Officer
as presenting fairly the consolidated and consolidating financial
position
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of FIFSG and its Subsidiaries as of the date indicated and the results
of their operations for the period indicated in conformity with GAAP,
consistently applied, subject to changes resulting from year-end
adjustments.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within one hundred twenty (120) days after the end of each fiscal
year of FIFSG, audited consolidated statements of income and
stockholder's equity and cash flow statements of FIFSG and its
Subsidiaries for such fiscal year, and audited consolidated balance
sheets of FIFSG and its Subsidiaries as of the end of such fiscal year,
setting forth in each case in comparative form corresponding
consolidated figures from the immediately preceding audit, together with
unaudited consolidating schedules to such financial statements, all in
reasonable detail and satisfactory in form, substance, and scope to the
Agent, together with the unqualified opinion of Arthur Andersen & Co. or
such other independent certified public accountants of recognized
national standing as are selected by FIFSG and satisfactory to the
Agent, stating that such financial statements fairly present the
consolidated financial position of FIFSG and its Subsidiaries as of the
date indicated and the consolidated results of their operations and
changes in financial position for the period indicated in conformity
with GAAP, consistently applied (except for such inconsistencies which
may be disclosed in such report), and that the audit by such accountants
in connection with such consolidated financial statements has been made
in accordance with GAAP.
(c) NOTICE OF DEFAULT. Immediately after any officer of the
Borrower knows or has reason to know that any Default or Event of
Default has occurred, a written statement of such officer of the
Borrower setting forth the details of such Default or Event of Default
and the action which the Borrower has taken or proposes to take with
respect thereto.
(d) NOTICE OF LITIGATION. Promptly after any officer of the
Borrower obtaining knowledge of the commencement thereof, notice of any
litigation, legal, administrative, or arbitral proceeding,
investigation, or other action of any nature against FIFSG or the
Borrower which could reasonably be expected to have a Material Adverse
Effect, and upon request by the Agent or any Bank, details regarding
such litigation which are satisfactory to the Agent or such Bank.
(e) SECURITIES FILINGS. Promptly after the sending or filing
thereof and in any event within fifteen (15) days thereof, copies of all
reports which FIFSG sends to any of its security holders, and copies of
all reports (including each regular and periodic report) and each
registration statement or prospectus which FIFSG or the Borrower files
with the Securities and Exchange Commission or any national securities
exchange.
(f) ERISA NOTICES. Promptly after the filing or receiving
thereof, copies of all reports and notices which the Borrower files
under ERISA with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or which the
Borrower receives from such Governmental Authorities or Pension Benefit
Guaranty Corporation.
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(g) COMPLIANCE CERTIFICATE; FIARC COMPLIANCE CERTIFICATE. (i) On
or before the 30th day of each calendar month during the term of this
Agreement, a Compliance Certificate which shall demonstrate compliance
with the financial covenants set forth in Section 7.12 as of the end of
the preceding calendar month and for the three immediately preceding
calendar months, shall set forth the Borrowing Base, determined as of
the Determination Date, together with a certification of such amounts by
a Responsible Officer of the Borrower, and shall state that no Default
or Event of Default has occurred or is continuing, or if any such
condition or event exists, specifying the nature and period of existence
thereof and what action the Borrower has taken or is taking with respect
thereto and (ii) on or before the 15th day of each calendar month during
the term of this Agreement, a copy of the "Monthly Debtor's Certificate"
delivered by FIARC to Enterprise pursuant to the Enterprise Agreement.
(h) ERISA NOTICES, INFORMATION AND COMPLIANCE.
(i) As soon as possible and in any event within ten days
after the Borrower or any of its ERISA Affiliates knows of the
occurrence of any of the following, a certificate of the chief
financial officer of the Borrower (or, if applicable, of the
ERISA Affiliate) setting forth the details as to such occurrence
and the action, if any, which the Borrower or ERISA Affiliate is
required or proposes to take, together with any notices required
or proposed to be given or filed with or by the Borrower, an
ERISA Affiliate, the Pension Benefit Guaranty Corporation, or
plan administrator with respect thereto:
(A) the establishment or adoption of any PBGC Plan,
Multiemployer Plan or Multiple Employer Plan by the
Borrower or any ERISA Affiliate on or after the date
hereof (a "FUTURE PLAN");
(B) the occurrence of an ERISA Event with respect
to any Future Plan;
(C) the existence of an accumulated funding
deficiency with respect to any Future Plan;
(D) the making of an application to the Secretary
of the Treasury for a waiver or modification of the
minimum funding standard (including any required
installment payments) or extension of any amortization
period under Section 412 of the Code with respect to any
Future Plan;
(E) the institution of a proceeding pursuant to
Section 515 of ERISA to collect delinquent contributions
from the Borrower or an ERISA Affiliate with respect to a
Future Plan;
(F) the occurrence of any "prohibited transaction"
as described in Section 406 of ERISA or in Section 4975 of
the Code, in connection with any Plan or any trust created
thereunder; or
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(G) the failure to pay when due all amounts that
the Borrower or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as a
contribution to such Plan; and
(ii) As soon as possible and in any event within ten days
from receipt or, if applicable, filing, a complete copy of the
annual report (Form 5500) of each Plan required to be filed with
the Internal Revenue Service, copies of any other reports or
notices which the Borrower or an ERISA Affiliate files with the
Internal Revenue Service, Pension Benefit Guaranty Corporation or
the United States Department of Labor or which the Borrower or an
ERISA Affiliate receives from such Governmental Authority, and
copies of any notice, complaint or other documentation of any
pending or threatened lawsuit or claim relating in any respect to
any Plan established or maintained by the Borrower or an ERISA
Affiliate or to which the Borrower or an ERISA Affiliate
contributes which may have a Material Adverse Effect on the
Borrower or an ERISA Affiliate.
(i) DELIVERY OF ENTERPRISE NOTICES. A copy of (i) any notice
received by FIARC from Enterprise or any other Person under the
Enterprise Agreement promptly upon receipt thereof and (ii) any notice
FIARC delivers pursuant to Section 3.2(l) of the Enterprise Agreement
promptly upon the delivery or sending thereof.
(j) HEDGE POSITION REPORTING. Within thirty (30) days after the
end of each fiscal quarter of the Borrower (including the last quarter),
a report of the Borrower's hedge position identifying all hedge
agreements to which the Borrower is a party.
(k) NOTICE WITH RESPECT TO CERTAIN ENTERPRISE EVENTS. Promptly
upon occurrence, notice of any modification or amendment to the
Enterprise Agreement, or any Potential Termination Event under the
Enterprise Agreement.
(l) OTHER INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower as any
Bank through the Agent may from time to time reasonably request.
Section 6.03. TAXES AND LIENS. The Borrower will pay and discharge, or
will cause to be paid and discharged, promptly all taxes, assessments, and
governmental charges or levies imposed upon the Borrower or upon the income of
any Property of the Borrower as well as all claims of any kind (including,
without limitation, claims for labor, materials, supplies, and rent) when due,
except to the extent that (a) such taxes, assessments, charges or levies are
Matters Contested in Good Faith or (b) noncompliance with this Section would not
have a Material Adverse Effect.
Section 6.04. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Borrower will
at all times maintain, preserve, protect, and keep, or cause to be maintained,
preserved, protected, and kept, its Property in good repair, working order, and
condition (ordinary wear and tear excepted) and, from time to time, will make,
or cause to be made, all repairs, renewals, replacements, extensions, additions,
betterments, and improvements to its Property as are appropriate, so that (a)
the Borrower
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maintains its current line of business, and (b) the business carried on in
connection therewith may be conducted properly and efficiently at all times.
(b) The Borrower will at all times insure or cause to be insured by
financially sound and reputable insurers, all Property of a character usually
insured by Persons engaged in the same business as, or similar business to that
of, the Borrower and its Subsidiaries against risk of loss, damage or liability
of the kinds and amounts customarily insured against by such Persons and to
carry such other insurance as is usually carried by such Persons.
Section 6.05. RIGHT OF INSPECTION. The Borrower will permit any officer,
or employee of, or agent designated by, the Agent or any Bank to visit and
inspect any of the Properties of the Borrower, examine the Borrower's corporate
books or the Borrower's or FIFSG's financial records, take copies and extracts
therefrom, and discuss the affairs, finances, and accounts of the Borrower and
FIFSG with the Borrower's officers or certified public accountants, all at such
reasonable times and as often as the Agent or any Bank may reasonably desire.
Section 6.06. FURTHER ASSURANCES. The Borrower shall deliver to the
Agent within 90 days after the beginning of each calendar year, beginning with
the calendar year 1998, an opinion of independent counsel of the Borrower dated
as of a date during such 90-day period, either (a) stating that, in the opinion
of such counsel, (1) such action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and re-filing of financing
statements, continuation statements or other instruments or documents as is
necessary to preserve and protect the interest of the Agent and the Banks in and
to the Pledged Collateral and reciting the details of such action or referring
to prior opinions of counsel in which such details are given, and (2) all
financing statements, continuation statements and any other necessary documents
have been executed and filed that are necessary fully to preserve and protect
the perfected interest of the Agent and the Banks in and to the Pledged
Collateral, and reciting the details of such filings or referring to prior
opinions of counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no such action is necessary to preserve and protect
such interest.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Bank shall have any
Commitment hereunder, the Borrower agrees, without the written consent of the
Majority Banks, as follows:
Section 7.01. LIENS, ETC. The Borrower will not, and will not permit any
Subsidiary to, grant, permit, create or suffer to exist any Lien, upon or with
respect to, or otherwise pledge, hypothecate or encumber, or permit to be
pledged, hypothecated or encumbered, any Property of the Borrower or such
Subsidiary, including, without limitation, the Pledged Collateral or any
Receivables, whether now owned or hereafter acquired, other than Permitted Liens
and Liens created under any Loan Document; PROVIDED that, anything in the
foregoing or elsewhere in any Loan Document to the contrary notwithstanding, the
Borrower will not enter into, and will not permit any
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Subsidiary to enter into, any agreement that (i) prohibits the creation or
assumption of any Lien upon, or the pledge, hypothecation or encumbrance of, any
Property of the Borrower or such Subsidiary in favor of any Person, including
without limitation the Banks or (ii) requires any obligation of the Borrower to
be secured if any obligation of the Borrower to the Banks is secured in favor of
another Person, including without limitation the Banks.
Section 7.02. DEBT. The Borrower will not, and will not permit any
Subsidiary to, create or suffer to exist any Debt except as set forth below, all
of which shall be "PERMITTED DEBT":
(a) Debt of the Borrower to the Agent or the Banks evidenced by any Loan
Document;
(b) Debt of the Borrower for obligations of any kind whatsoever under
Capital Leases; PROVIDED, that the aggregate amount of such obligations does not
exceed $250,000 in any period of twelve consecutive months;
(c) Debt of the Borrower or a Subsidiary under any interest rate swap or
other exchange agreement entered into with or approved by NationsBank;
(d) Intercompany obligations among Borrower, FIFSG and their respective
Subsidiaries for reasonable net rent allocation, reasonable management fees,
dividends declared, equity investments and intercompany debt service, including,
but not limited to, that certain unsecured loan by FIVH to the Borrower pursuant
to which the Borrower may borrow, repay and reborrow an amount, as of the
Closing Date, not to exceed $25,000,000, as evidenced by that certain promissory
note, dated April 23, 1997, issued by the Borrower and payable to the order of
FIVH, as such note may be amended, modified, extended or increased from time to
time;
(e) Debt of FIRC pursuant to the FIRC Agreement and Debt of FIARC
pursuant to the Enterprise Agreement;
(f) Debt of the Borrower for repurchase obligations under the Purchase
Agreement/FIRC, the Purchase Agreement/Enterprise, the Servicing Agreement (as
defined in the FIRC Agreement), that certain Servicing Agreement, dated as of
October 22, 1996, between General Electric Capital Corporation and FIARC, or
other repurchase obligations related to the sale of receivables in the ordinary
course of business;
(g) Debt of FIIC under the Facultative Reinsurance Agreement, dated as
of April 15, 1994, as amended, modified or extended from time to time, between
FIIC and National Union Fire Insurance Company of Pittsburgh, PA; and
(h) Debt of the Borrower with respect to repossessions of financed
vehicles in the ordinary course of business.
Section 7.03. RESTRICTED PAYMENTS. Except as permitted under Section
7.02(d) or as otherwise approved in writing by the Agent, neither the Borrower
or FIFSG will declare or make any dividend payment or other distribution of
Properties, cash, rights, obligations, or securities on
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account of any shares of any class of capital stock of the Borrower or FIFSG, as
applicable, or purchase, redeem, retire, or otherwise acquire for value any
shares of any class of capital stock of the Borrower or FIFSG, as applicable, or
any warrants, rights, or options to acquire any such shares, now or hereafter
outstanding.
Section 7.04. MERGERS; CONSOLIDATIONS; SALE OR OTHER DISPOSITION OF
PROPERTY. The Borrower will not, and will not permit any Subsidiary to, merge or
consolidate with or into, any other Person, or sell, assign, convey, transfer,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) any of its Property (whether now owned or hereafter acquired) to
any Person other than (i) to pay expenses or satisfy obligations incurred in the
ordinary course of business, (ii) the transfer and assignment of Receivables to
FIRC pursuant to the Purchase Agreement/FIRC and to FIARC pursuant to the
Purchase Agreement/Enterprise or (iii) the transfer and assignment to third
parties of receivables held by the Borrower for re-sale to such third parties.
Section 7.05. INVESTMENTS, LOANS, AND ADVANCES. Except as provided in
Section 7.02 and under the other Loan Documents, the Borrower will not make or
permit to remain outstanding any Investment, endorse, or otherwise be or become
contingently liable directly or indirectly, in connection with the obligations,
stock, or dividends of, or own, purchase or acquire any stock, obligations, or
securities of, or any other interest in, or make any capital contribution to,
any Person, or otherwise make, incur, create, assume, or suffer to exist any
contingent liability or any Investment of the Borrower to purchase or acquire
any assets; PROVIDED, HOWEVER, that this Section shall not prohibit any such
investment, loan or advance which, in the aggregate at any one time with respect
to a Person, does not exceed $50,000.
Section 7.06. USE OF PROCEEDS. The Borrower will not use, nor permit the
use of, all or any portion of any Advance for any purpose except as described in
Section 5.08 hereof.
Section 7.07. TRANSACTIONS WITH AFFILIATES. Except as provided under the
Loan Documents and except in respect of any management fee to be paid by the
Borrower to FIFSG or by FIRC to the Borrower, the Borrower will not directly or
indirectly enter into any transaction with any Affiliate (including, without
limitation, any transaction involving the payment of management fees or
directors' fees to any Affiliate), except for transactions (including any loans
or advances by or to any Affiliate otherwise in compliance under the Agreement)
in good faith, the terms of which are fair and reasonable to the Borrower, and
are at least as favorable as the terms which could be obtained by the Borrower
in a comparable transaction made on an arm's-length basis between unaffiliated
parties.
Section 7.08. OTHER BUSINESS. The Borrower will not engage in any
material business or enterprise, other than the business or enterprise of
originating automobile loan receivables for sale or for investment, without the
consent of the Agent.
Section 7.09. ISSUANCE OF SHARES. The Borrower will not issue, sell, or
otherwise dispose of any shares of its capital stock or other equity securities,
or rights, warrants, or options to purchase or acquire any shares or equity
securities, other than as otherwise expressly permitted by other Sections of
this Agreement.
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Section 7.10. ERISA. The Borrower shall not and shall not permit any
ERISA Affiliate to:
(a) do any of the following, which in the aggregate would
reasonably be expected to have a Material Adverse Effect:
(i) engage in any transaction which it knows or has reason
to know could result in a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code;
(ii) fail to make any payments when due to any
Multiemployer Plan that the Borrower or an ERISA Affiliate may be
required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto;
(iii) incur withdrawal liability under ERISA to a
Multiemployer Plan;
(iv) voluntarily terminate or, in the case of a
"substantial employer" as defined in Section 4001(a)(2) of ERISA,
withdraw from any Plan if such termination or withdrawal could
result in the imposition of a Lien on the Borrower or an ERISA
Affiliate under Section 4068 of ERISA;
(v) fail to make any required contribution when due to any
Plan subject to Section 412(n) of the Code that with the passage
of time would likely result in a Lien upon the properties or
assets of the Borrower or an ERISA Affiliate;
(vi) adopt any amendment to a Plan the effect of which is
to increase the "current liability" under the Plan as defined in
Section 302(d)(7) of ERISA;
(vii) act or fail to act, and, as a result thereof, an
event similar to any of those referred to in clauses (i) to (vi)
would likely occur under the applicable laws of a foreign
country; or
(b) permit the present value of all benefits (irrespective of
whether vested) under all Plans that have assets less than benefits
(irrespective of whether vested), to exceed the "current value" as
defined in Section 3(26) of ERISA of the assets of such Plans by an
aggregate amount of ten thousand dollars ($10,000.00); or
(c) permit the adoption, implementation or amendment of any
unfunded deferred compensation agreement or other arrangement of a
similar nature irrespective of whether subject to the funding
requirements of ERISA which could reasonably be expected to have a
Material Adverse Effect.
Section 7.11. ACQUISITIONS. The Borrower will not acquire any of the
assets, Property, capital stock or other equity interests of any other Person
(i) by purchase or lease (including, without limitation, the assumption of any
lease) except in the ordinary course of business or (ii) by merger.
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Section 7.12. CERTAIN FINANCIAL TESTS.
(a) The Borrower will not permit the ratio of Net Excess Servicing Cash
Flow to Funded Debt, as determined as of each Determination Date by annualizing
the Net Excess Servicing Cash Flow for the immediately preceding three calendar
months, to be less than 2.0 to 1.0.
(b) The Borrower will not permit the "Receivable Portfolio Balance"
under the FIRC Agreement at any time to be less than $20,000,000.
(c) The Net Worth of FIFSG shall not at any time be less than
$15,000,000.
Section 7.13. EXTENSION OR AMENDMENT OF CERTAIN DOCUMENTS. Except with
the prior written approval of the Agent (other than with respect to extensions
of the Credit Insurance referred to in clause (i) of this Section), the Borrower
will not, and will not permit FIRC or FIARC to, extend, amend or otherwise
modify the terms of (i) the Credit Insurance, (ii) Section 5(e) of the FIRC
Security Agreement or Articles VI or VII of the FIRC Agreement, (iii) Section
3.2 or Section 5.1(a) of the Enterprise Agreement, (iv) the Purchase
Agreement/FIRC, (v) the Purchase Agreement/Enterprise, or (vi) the Borrower's
Articles of Incorporation or Bylaws.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur:
(a) The Borrower shall fail to pay any principal of or interest
on any Note or fees or other amounts due under the Note or this
Agreement or any other Loan Document in an amount of at least $10,000,
when the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower or in a
certificate of an officer of the Borrower under or in connection with
any Loan Document shall prove to have been incorrect in any material
respect when made; or
(c) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 6.02 or in Article VII; or
(d) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in any Loan Document (other than those
set forth in (a), (b) and (c) above) on its part to be performed or
observed, or FIFSG shall fail to perform or observe any term, covenant,
or agreement contained in the Guaranty Agreement on its part to be
performed or observed, if such failure shall remain unremedied for
thirty (30) days after the occurrence of such event; or
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(e) The Borrower shall fail to pay any principal of or premium or
interest on any Debt which is outstanding in a principal amount of at
least $250,000 in the aggregate when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event constituting a
default (however defined) shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement
or instrument; or
(f) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days,
or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or
for any substantial part of its property) shall occur; or the Borrower
shall take any corporate action to authorize any of the actions set
forth above in this subsection (f); or
(g) Any final judgment or order for the payment of money which,
individually or in the aggregate, shall be in excess of $250,000 at any
time, shall be rendered against the Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment
or order or (ii) there shall be any period of thirty (30) consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(h) The occurrence of an "Event of Default" under the FIRC
Agreement or under any and all documents executed by FIRC or the
Borrower in connection therewith, including any interest rate swap or
other exchange agreement which hedges interest payable under the FIRC
Agreement; or
(i) (i) The Borrower shall cease to own a majority of the issued
and outstanding stock of each of FIRC and FIARC and (ii) FIFSG shall
cease to indirectly own a majority of the issued and outstanding stock
of the Borrower; or
(j) With respect to any Future Plan, other than a Multiemployer
Plan within the meaning of Section 4001(a)(3) of ERISA, (1) such Future
Plan shall fail to satisfy the minimum funding standard or a waiver of
such standard or extension of any amortization period is sought under
Section 412 of the Code; (2) such Future Plan is or is proposed to be
terminated and as a result thereof liability in excess of $1,000,000 can
be asserted under Title
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IV of ERISA as against the Borrower or ERISA Affiliate; (3) such Future
Plan shall have an unfunded current liability in excess of $1,000,000;
or (4) there has been a withdrawal from any such Future Plan and as a
result liability in excess of $1,000,000 can be asserted under Section
4062(e) or 4063 of ERISA against the Borrower or any ERISA Affiliate;
or, with respect to any Future Plan that is a Multiemployer Plan under
Section 4001(a)(3) of ERISA, such Future Plan is insolvent or in
reorganization or the Borrower or an ERISA Affiliate has withdrawn, or
proposes to withdraw, either totally or partially, from such Future Plan
and, in any case, in the opinion of the Agent, the Borrower or its ERISA
Affiliate might reasonably be anticipated to incur a liability which
would have a Material Adverse Effect on the business, operations,
conditions (financial or otherwise) or prospects of the Borrower or
ERISA Affiliates; or with respect to any Plan other than a Future Plan,
the Borrower or its ERISA Affiliate could reasonably be anticipated to
incur a liability which would have a Material Adverse Effect on the
business, operations or conditions (financial or otherwise) or prospects
of the Borrower or its ERISA Affiliates; or
(k) The occurrence of a "Termination Event" under the Enterprise
Agreement (other than with respect to the events specified in Section
6.1(f), (j), (t), or (u) thereof) or the occurrence of any other default
or event of default under any and all documents executed by FIARC or the
Borrower in connection therewith, including any interest rate swap or
other exchange agreement which hedges interest payable under the
Enterprise Agreement; or
(l) This Agreement or any of the other Loan Documents shall at
any time for any reason cease to be the legal, valid and binding
obligation of the Borrower, FIFSG or any of their respective
Subsidiaries that is a party to such Loan Document, or shall cease to be
in full force and effect, or shall be declared to be null and void, or
the validity or enforceability thereof shall be contested by the
Borrower, FIFSG or any of their respective Subsidiaries, or the
Borrower, FIFSG or any of their respective Subsidiaries shall renounce
the same or deny that it has any further liability hereunder or
thereunder; or
(m) The departure of both of the following executives from the
Borrower: Tommy A. Moore, Jr. and Bennie H. Duck, if replacements for
such individuals acceptable to the Agent are not made within 90 days; or
(n) A material breach by the Borrower of its obligations under
any interest rate cap on the interest rate payable by FIARC under the
Enterprise Agreement which interest rate cap offsets a counter position
of FIARC under such interest rate position,
then, and in any such event, the Agent (i) shall send notice of the occurrence
of such Default or Event of Default to the Borrower, (ii) shall at the request,
or may with the consent, of the Majority Banks, by notice to the Borrower,
declare the obligation of each Bank to make Advances to be terminated, whereupon
the same shall forthwith terminate, and (iii) shall at the request, or may with
the consent, of the Majority Banks, by notice to the Borrower, declare the
Notes, all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived
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by the Borrower; PROVIDED, HOWEVER, that in the event of an actual or deemed
entry of an order for relief with respect to the Borrower under the United
States Bankruptcy Code, (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
ARTICLE IX
THE AGENT
Section 9.01. APPOINTMENT, POWERS, AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 9.05 and
the first sentence of Section 9.06 hereof shall include its affiliates and its
own and its affiliates' officers, directors, employees, and agents): (a) shall
not have any duties or responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for any Bank; (b) shall not be
responsible to the Banks for any recital, statement, representation, or warranty
(whether written or oral) made in or in connection with any Loan Document or any
certificate or other document referred to or provided for in, or received by any
of them under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or any other
document referred to or provided for therein or for any failure by any Loan
Party or any other Person to perform any of its obligations thereunder; (c)
shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any Loan
Party or the satisfaction of any condition or to inspect the property (including
the books and records) of any Loan Party or any of its Subsidiaries or
affiliates; (d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Document; and (e) shall not be responsible
for any action taken or omitted to be taken by it under or in connection with
any Loan Document, except for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
Section 9.02. RELIANCE BY AGENT. The Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any Loan Party), independent accountants, and
other experts selected by the Agent. The Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until the
Agent receives and accepts an Assignment and Acceptance executed in accordance
with Section 10.07 hereof. As to any matters not expressly provided for by this
Agreement, the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining
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from acting) upon the instructions of the Majority Banks, and such instructions
shall be binding on all of the Banks; PROVIDED, HOWEVER, that the Agent shall
not be required to take any action that exposes the Agent to personal liability
or that is contrary to any Loan Document or applicable law or unless it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking any such
action.
Section 9.03. DEFAULTS. The Agent shall not be deemed to have knowledge
or notice of the occurrence of a Default or Event of Default unless the Agent
has received written notice from a Bank or the Borrower specifying such Default
or Event of Default and stating that such notice is a "Notice of Default". In
the event that the Agent receives such a notice of the occurrence of a Default
or Event of Default, the Agent shall give prompt notice thereof to the Banks.
The Agent shall (subject to Section 9.02 hereof) take such action with respect
to such Default or Event of Default as shall reasonably be directed by the
Majority Banks, PROVIDED THAT, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Banks.
Section 9.04. RIGHTS AS BANK. With respect to its Commitment and the
Advances made by it, NationsBank (and any successor acting as Agent) in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as the
Agent, and the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. NationsBank (and any
successor acting as Agent) and its affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to, make investments in,
provide services to, and generally engage in any kind of lending, trust, or
other business with any Loan Party or any of its Subsidiaries or affiliates as
if it were not acting as Agent, and NationsBank (and any successor acting as
Agent) and its affiliates may accept fees and other consideration from any Loan
Party or any of its Subsidiaries or affiliates for services in connection with
this Agreement or otherwise without having to account for the same to the Banks.
Section 9.05. INDEMNIFICATION. The Banks agree to indemnify the Agent
(to the extent not reimbursed under Section 10.04(b) hereof, but without
limiting the obligations of the Borrower under such Section) ratably in
accordance with their respective Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including by any Bank) in any way relating to or arising out of any Loan
Document or the transactions contemplated thereby or any action taken or omitted
by the Agent under any Loan Document (including any of the foregoing arising
from the negligence of the Agent); PROVIDED that no Bank shall be liable for any
of the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Bank agrees to reimburse the Agent promptly upon demand for its ratable
share of any costs or expenses payable by the Borrower under Section 10.04, to
the extent that the Agent is not promptly reimbursed for such costs and expenses
by the Borrower. The agreements contained in this Section shall survive payment
in full of the Advances and all other amounts payable under this Agreement.
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Section 9.06. NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Loan Parties and their Subsidiaries and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under the Loan Documents.
Except for notices, reports, and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition, or business of any Loan
Party or any of its Subsidiaries or affiliates that may come into the possession
of the Agent or any of its affiliates.
Section 9.07. RESIGNATION OF AGENT. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Majority Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Banks and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article IX shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
Section 9.08. AGENT'S RELIANCE. The Borrower shall notify the Agent in
writing of the names of its officers and employees authorized to request an
Advance on behalf of the Borrower and shall provide the Agent with a specimen
signature of each such officer or employee. The Agent shall be entitled to rely
conclusively on such officer's or employee's authority to request an Advance on
behalf of the Borrower until the Agent receives written notice from the Borrower
to the contrary. The Agent shall have no duty to verify the authenticity of the
signature appearing on any Notice of Borrowing, and, with respect to any oral
request for an Advance, the Agent shall have no duty to verify the identity of
any Person representing himself as one of the officers or employees authorized
to make such request on behalf of the Borrower. Neither the Agent nor any Bank
shall incur any liability to the Borrower in acting upon any telephonic notice
referred to above which the Agent or such Bank believes in good faith to have
been given by a duly authorized officer or other Person authorized to borrow on
behalf of the Borrower or for otherwise acting in good faith.
ARTICLE X
MISCELLANEOUS
Section 10.01.AMENDMENTS AND WAIVERS. Any provision of this Agreement or
any other Loan Document may be amended or waived if, but only if, such amendment
or waiver is in writing
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and is signed by the Borrower and the Majority Banks (and, if Article IX or the
rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that
no such amendment or waiver shall, unless signed by all the Banks (i) increase
the Commitments of the Banks, (ii) reduce the principal of or rate of interest
on any Advance or any fees or other amounts payable hereunder, (iii) postpone
the Termination Date or any date fixed for the payment of any scheduled
installment of principal of or interest on any Advance or any fees or other
amounts payable hereunder or for termination of any Commitment, or (iv) change
the percentage of the Commitments or of the unpaid principal amount of the
Notes, or the number of Banks, which shall be required for the Banks or any of
them to take any action under this Section or any other provision of this
Agreement, (v) release FIFSG from its obligations under the Guaranty Agreement,
(vi) release all or substantially all of the Pledged Collateral, (vii) change
the requirements hereunder to exercise any waiver of a payment default or
payment amount, or (viii) amend this Section 10.01.
Section 10.02.NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including by telex or facsimile
transmission) and shall be effective when actually delivered, or in the case of
telex notice, when sent, answerback received, or in the case of facsimile
transmission, when received and telephonically confirmed, addressed as follows:
if to the Borrower, at its address at 675 Bering, Suite 710, Houston, Texas
77057, Attention: Chief Financial Officer, Telephone: (713) 977-2600, Facsimile:
(713) 260-0028; if to any Bank, at its Domestic Lending Office as specified
opposite its name on the signature page hereof; and if to the Agent, at its
address at 700 Louisiana, Houston, Texas 77002, Attention: Vice President,
Corporate Finance Group, Telephone: (713) 247-6679, Facsimile: (713) 247-6360;
PROVIDED, HOWEVER, that any payments or any Notices of Borrowing or Notices of
Interest Conversion shall be sent to the Agent at its address at 901 Main
Street, Dallas, Texas 75201, Attention: Ms. Renita Cummings; with copies to the
Agent at 700 Louisiana, Houston, Texas 77002, Attention: Vice President,
Corporate Finance Group; or, as to the Borrower, any Bank or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties.
Section 10.03.NO WAIVER; REMEDIES. No failure on the part of any Bank or
the Agent to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 10.04.EXPENSES; INDEMNIFICATION. (a) The Borrower agrees to pay
on demand all costs and expenses of the Agent in connection with the
syndication, preparation, execution, delivery, administration, modification, and
amendment of this Agreement, the other Loan Documents, and the other documents
to be delivered hereunder, including, without limitation, the reasonable fees
and expenses of counsel for the Agent (including the cost of internal counsel)
with respect thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Banks, if any (including,
without limitation, reasonable attorneys' fees and expenses and the cost of
internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Loan Documents and the
other documents to be delivered hereunder.
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(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Bank and each of their affiliates and their respective officers, directors,
employees, agents, and advisors (each, an "INDEMNIFIED PARTY") from and against
any and all claims, damages, losses, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees) that may be incurred
by or asserted or awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation, or proceeding or preparation of
defense in connection therewith) the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances (including any of the foregoing arising from the negligence of the
Indemnified Party), except to the extent such claim, damage, loss, liability,
cost, or expense is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct. In the case of an investigation, litigation or
other proceeding to which the indemnity in this Section 10.04(b) applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. The Borrower agrees not to assert any claim against the
Agent, any Bank, any of their affiliates, or any of their respective directors,
officers, employees, attorneys, agents, and advisers, on any theory of
liability, for special, indirect, consequential, or punitive damages arising out
of or otherwise relating to the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 10.04 shall survive the payment in full of the Advances and all
other amounts payable under this Agreement.
Section 10.05.RIGHT OF SET-OFF; ADJUSTMENTS. (a) Upon the occurrence and
during the continuance of any Event of Default, each Bank (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank (or any of its affiliates) to
or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Bank, irrespective of whether such Bank shall have made
any demand under this Agreement or such Note and although such obligations may
be unmatured. Each Bank agrees promptly to notify the Borrower after any such
set-off and application made by such Bank; PROVIDED, HOWEVER, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Bank may have.
(b) If any Bank (a "BENEFITTED BANK") shall at any time receive any
payment of all or part of the Advances owing to it, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Bank, if any, in respect of such other Bank's
Advances owing to it, or interest thereon, such benefitted Bank shall purchase
for cash from the other Banks a
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participating interest in such portion of each such other Bank's Advances owing
to it, or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Banks; PROVIDED, HOWEVER, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that any Bank so purchasing a participation from a Bank pursuant
to this Section 10.05(b) may, to the fullest extent permitted by law, exercise
all of its rights of payment (including the right of set-off) with respect to
such participation as fully as if such Person were the direct creditor of the
Borrower in the amount of such participation.
Section 10.06.BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Agent and when the Agent
shall have been notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Agent and each Bank and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Banks.
Section 10.07.ASSIGNMENTS AND PARTICIPATIONS. (a) Each Bank may assign
to one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Advances, its Note, and its Commitment); PROVIDED, HOWEVER, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Bank or an
assignment of all of a Bank's rights and obligations under this Agreement, any
such partial assignment shall be in an amount at least equal to $1,000,000 or an
integral multiple of $500,000 in excess thereof;
(iii) each such assignment by a Bank shall be of a constant, and
not varying, percentage of all of its rights and obligations under this
Agreement and the Note; and
(iv) the parties to such assignment shall execute and deliver to
the Agent for its acceptance an Assignment and Acceptance in the form of EXHIBIT
E hereto, together with any Note subject to such assignment and a processing fee
of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Bank hereunder and
the assigning Bank shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if required, new
Notes are issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with Section 3.06.
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(b) The Agent shall maintain at its address referred to in Section 10.02
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Banks and the
Commitment of, and principal amount of the Advances owing to, each Bank from
time to time (the "REGISTER"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Banks may treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of EXHIBIT E hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Bank may sell participations to one or more Persons in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and its Advances); PROVIDED, HOWEVER, that (i) such
Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the participant shall be entitled to the benefit of
the yield protection provisions contained in Article III and the right of
set-off contained in Section 10.05, and (iv) the Borrower shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, and such Bank shall retain the sole right to
enforce the obligations of the Borrower relating to its Advances and its Note
and to approve any amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Advances
or Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Advances or Note, or extending its Commitment).
(e) Notwithstanding any other provision set forth in this Agreement, any
Bank may at any time assign and pledge all or any portion of its Advances and
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Bank from its obligations hereunder.
(f) Any Bank may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants).
Section 10.08.LIMITATION ON AGREEMENTS. (a) All agreements between the
Borrower, the Agent, or any Bank, whether now existing or hereafter arising and
whether written or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of demand being made in respect of an
amount due under any Loan Document or otherwise, shall the amount paid, or
agreed to be paid, to the Agent or any Bank for the use, forbearance, or
detention of the money to be loaned under this Agreement, the Notes or any other
Loan Document or otherwise or for the
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<PAGE>
payment or performance of any covenant or obligation contained herein or in any
other Loan Document exceed the Highest Lawful Rate. If, as a result of any
circumstances whatsoever, fulfillment of any provision hereof or of any of such
documents, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable usury law, then,
IPSO FACTO, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if, from any such circumstance, the Agent or any Bank shall ever
receive interest or anything which might be deemed interest under applicable law
which would exceed the Highest Lawful Rate, such amount which would be excessive
interest shall be applied to the reduction of the principal amount owing on
account of such Bank's Note or the amounts owing on other obligations of the
Borrower to the Agent or any Bank under any Loan Document and not to the payment
of interest, or if such excessive interest exceeds the unpaid principal balance
of any Note and the amounts owing on other obligations of the Borrower to the
Agent or any Bank under any Loan Document, as the case may be, such excess shall
be refunded to the Borrower. All sums paid or agreed to be paid to the Agent or
any Bank for the use, forbearance, or detention of the indebtedness of the
Borrower to the Agent or any Bank shall, to the extent permitted by applicable
law, be amortized, prorated, allocated, and spread throughout the full term of
such indebtedness until payment in full of the principal (including the period
of any renewal or extension thereof) so that the interest on account of such
indebtedness shall not exceed the Highest Lawful Rate. Notwithstanding anything
to the contrary contained in any Loan Document, it is understood and agreed that
if at any time the rate of interest which accrues on the outstanding principal
balance of any Note shall exceed the Highest Lawful Rate, the rate of interest
which accrues on the outstanding principal balance of any Note shall be limited
to the Highest Lawful Rate, but any subsequent reductions in the rate of
interest which accrues on the outstanding principal balance of any Note shall
not reduce the rate of interest which accrues on the outstanding principal
balance of any Note below the Highest Lawful Rate until the total amount of
interest accrued on the outstanding principal balance of any Note equals the
amount of interest which would have accrued if such interest rate had at all
times been in effect. The terms and provisions of this Section 10.08 shall
control and supersede every other provision of all Loan Documents.
(b) The Agent, the Banks and the Borrower agree that (i) if Article
5069-1.04 of the Texas Revised Civil Statutes Annotated, as amended, is
applicable to the determination of the Highest Lawful Rate, the indicated rate
ceiling computed from time to time pursuant to Section (a) of such Article shall
apply, PROVIDED that, to the extent permitted by such Article, the Agent may
from time to time by notice to the Borrower revise the election of such interest
rate ceiling as such ceiling affects the then current or future balances of the
Advances; and (ii) the provisions of Chapter 15 of Title 79 of the Texas Revised
Civil Statutes Annotated, as amended, shall not apply to this Agreement or any
Note.
Section 10.09.SEVERABILITY. In case any one or more of the provisions
contained in any Loan Document or in any instrument contemplated thereby, or any
application thereof, shall be invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of the remaining provisions contained
therein, and any other application thereof, shall not in any way be affected or
impaired thereby. Each covenant contained in any Loan Document shall be
construed (absent an express contrary provision herein) as being independent of
each other covenant contained therein, 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.
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<PAGE>
Section 10.10.GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of Texas.
Section 10.11.SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF TEXAS, THE
COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND
APPELLATE COURTS FROM ANY THEREOF;
(b) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY REGISTERED OR
CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL POSTAGE PREPAID) TO THE
BORROWER AT THE ADDRESS SPECIFIED IN SECTION 10.02 OR AT SUCH OTHER ADDRESS OF
WHICH THE AGENT OR ANY BANK SHALL HAVE BEEN NOTIFIED IN WRITING PURSUANT TO
SECTION 10.02.
(d) NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL IN ANY WAY
AFFECT THE RIGHT OF THE AGENT OR ANY BANK OR THE BORROWER TO BRING ANY ACTION
ARISING OUT OF OR RELATING TO THE NOTES OR THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COMPETENT COURT ELSEWHERE HAVING JURISDICTION OVER THE BORROWER,
THE AGENT OR ANY BANK, AS THE CASE MAY BE, OR ITS PROPERTY.
Section 10.12.WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.13.EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 10.14.NO INSOLVENCY PETITION AGAINST BORROWER. Each of the Agent
and the Banks hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of the Notes and termination of the
Commitments, it will not institute against, or join any
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<PAGE>
other Person in instituting against, the Borrower any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law. This Section
10.14 shall survive the termination of this Agreement.
Section 10.15.FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE NOTES AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, have executed this Agreement as of the date first above written.
FIRST INVESTORS FINANCIAL SERVICES,
INC., a Texas corporation
By: /s/ TOMMY A. MOORE, JR.
Tommy A. Moore, Jr.
President
Note Face Principal NATIONSBANK OF TEXAS, N.A., in its
Amount: $6,000,000 individual capacity as a Bank and as Agent
Domestic Lending Office:
901 Main Street
Dallas, Texas 75201 By: /s/ BILLY B. GREER
Billy B. Greer
Vice President
LIBOR Lending Office:
901 Main Street
Dallas, Texas 75201
[Signature Page - Credit Agreement - Page 1 of 1]
<PAGE>
EXHIBIT A
FORM OF
COMPLIANCE CERTIFICATE
Pursuant to the Credit Agreement dated as of July 18, 1997 (as amended,
supplemented or otherwise modified from time to time, the "AGREEMENT", the terms
defined therein being used herein as therein defined) by and among First
Investors Financial Services, Inc. (the "BORROWER"), NationsBank of Texas, N.A.,
as Agent (the "AGENT"), and certain financial institutions now or hereafter a
party thereto (the "BANKS"), I, Tommy A. Moore, Jr. do hereby certify to the
Agent and each of the Banks that I am the duly elected, qualified and acting
President of the Borrower, and do hereby further certify to the Agent and each
of the Banks as follows:
1. The Borrower has fulfilled its obligations under the Agreement and all
representations and warranties made in the Loan Documents continue to be
true and correct, except to the extent that such representations and
warranties relate solely to an earlier date.
2. No Default or Event of Default has occurred or is continuing with
respect to the terms and conditions of the Agreement or any other Loan
Document.
3. The aggregate outstanding principal balance of the Advances does not and
will not exceed the Available Amount.
4. The following calculations of the following covenants are true and
correct as of ____________, 199__, [INSERT PRECEDING DETERMINATION DATE]
and are based upon the terms and conditions contained in the Agreement.
5. SECTION 7.12(A) NET EXCESS SERVICING CASH FLOW TO FUNDED DEBT:
Month Ended
____, 19__ ____, 19__ ____, 19__
(A) Amounts available to be
distributed per Section
5(e)(v) of the FIRC Security
Agreement (captioned "(EXCESS
TO GRANTOR)" on FIRC
Collateral Agent's
Disbursement Statement): __________ __________ __________
(B) Amounts available to be
distributed per Section
5.1(a)(xi) of the Enterprise
Agreement (Line 52, "To the
A-1
<PAGE>
Debtor (any remaining funds)"
on Monthly Debtor's
Certificate delivered pursuant
to Enterprise Agreement: __________ __________ __________
Annualized
3 Mos. x 4
----------
(C) Excess Servicing Cash Flow
((A)+(B)) __________ __________ __________ $_________
Month Ended Annualized
____, 19__ ____, 19__ ____, 19__ 3 Mos. x 4
----------
(D) Less: Operating Expenses:
$__________ $__________ $__________ $_________
(E) Net Excess Servicing Cash
Flow ((C) - (D)): $_________
Month Ended
____, 19__
(F) Funded Debt: $_________
(G) Ratio of Net Excess
Servicing Cash Flow to Funded
Debt ((E) / (F)): __________
Maximum Permitted: 2.0
Compliance: Yes/No
6. SECTION 7.12(B) RECEIVABLE PORTFOLIO BALANCE:
"Receivable Portfolio Balance" under FIRC
Agreement: $ _______________
Minimum Required: $20,000,000
Compliance: Yes/No
A-2
<PAGE>
7. SECTION 7.12(C) NET WORTH OF FIFSG:
Net Worth of FIFSG: $ __________________
Minimum Required: $15,000,000
Compliance: Yes/No
8. ARTICLE VII (OTHER THAN SECTION 7.12): [REPORT ANY NON-COMPLIANCE]
9. BORROWING BASE AND AVAILABLE AMOUNT:
(A) Fixed Amount: $ 6,000,000
(B) Receivable Portfolio Balance:
(i) FIRC Agreement $ _______________________
(ii) Enterprise Agreement $ _______________________
(C) Total Portfolio ((B)(i) + (B)(ii)): $ _______________________
(D) Embedded Gain Percentage (select
from table below based on combined
delinquency of Total Portfolio): _________________________%
Rolling 3-Month Embedded
Delinquency (%) Gain (%)
--------------- --------
(less than) 3.0% 12%
(greater than or equal to) 3.0% (less than) 5.0% 10%
(greater than or equal to) 5.0% (less than) 8.5% 5%
(greater than or equal to) 8.5% 0%
(E) Embedded Gain (50% x (C) x (D))
(the "EMBEDDED GAIN"): $ _______________________
(F) Borrowing Base (lesser of (A) or (E)): $ _______________________
(G) Available Amount (lesser of
Commitment or Borrowing Base): $ _______________________
(H) Aggregate outstanding principal
balance of the Advances $ _______________________
A-3
<PAGE>
Available Amount Compliance: Yes/No
IN WITNESS WHEREOF, I have executed this Compliance Certificate in the
name and on behalf of Borrower this _____ day of ____________, 199__.
FIRST INVESTORS FINANCIAL SERVICES, INC.
By: ________________________________
Name: _____________________________
Title: ____________________________
A-4
<PAGE>
EXHIBIT B
FORM OF
CONSENT TO EXTENSION
[Letterhead of Agent]
_______________, 199___
The Banks Party to the Credit
Agreement Hereinafter Defined
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
July 18, 1997 (as amended, restated, modified and supplemented from time to
time, the "CREDIT AGREEMENT") by and among First Investors Financial Services,
Inc., a Texas corporation (the "BORROWER"), NationsBank of Texas, N.A., a
national banking association (the "AGENT"), and each other lender now or
hereafter party thereto, being as of the date hereof, the lenders listed on the
signature pages hereto (each individually, including without limitation, the
Agent, a "BANK" and collectively, the "BANKS"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement.
The Borrower has requested an extension of the Termination Date. In
accordance with Section 2.05 of the Credit Agreement, the Agent, on behalf of
the Borrower, hereby requests each Bank's consent to the extension of the
maturity date for its respective Commitment from _______________, 19_____, being
the current Termination Date, to _______________, 19_____. Upon receipt of
consent from each and every Bank, (A) the Termination Date and the maturity date
of each Note shall be deemed to be and shall be extended to _______________,
19_____, and (B) the term "Termination Date" as used in the Credit Agreement and
the other documents executed in connection therewith shall be amended to mean
and shall mean the maturity date of the Notes as so renewed and extended.
Except as hereby expressly amended, this letter shall not constitute a
waiver of any existing or future Defaults or Events of Default under the Credit
Agreement, or an amendment or waiver of any term or provision of the Credit
Agreement, or of any of the documents related thereto, or a waiver of the rights
or remedies of the Agent or the Banks, as the case may be, to insist upon future
compliance with each term, covenant, condition, or provision of the Credit
Agreement or any other documents related thereto (including, without limitation,
Section 2.05 specifically referred to above), and the Credit Agreement and each
other document related thereto shall continue to be binding upon and shall
continue to inure to the benefit of the Borrower, the Agent, the Banks, and
their respective successors and assigns. The consent and amendment evidenced by
this letter shall not become effective until copies of this letter shall have
been executed by Borrower and each of the Banks and returned to the Agent as set
forth below. It shall not be necessary for the Borrower and each Bank to execute
the same counterpart of this letter, so long as identical counterparts of this
letter are executed by the Borrower and the Banks.
B-1
<PAGE>
Please evidence your consent by signing in the appropriate signature
block(s) below and returning a fax of this letter to the attention of
______________________ at ________________, by 5:00 p.m. (Houston time) on
_______________, 19_____. Execute and return all sets of the signature pages for
_______________ delivery by overnight mail to ____________________. Please
contact ____________________ if you have any questions or comments.
THIS CONSENT LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS. THE WRITTEN CREDIT AGREEMENT, AS AMENDED
HEREBY, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Very truly yours,
NATIONSBANK OF TEXAS, N.A., as Agent
and as a Bank
By: _______________________________
Name: ____________________________
Title: ___________________________
[INSERT OTHER LENDERS]
The undersigned has requested the Banks to consent to the foregoing, and
as an inducement to so consent, and in consideration of the Banks' execution of
the foregoing, the undersigned hereby (a) agrees that the same will in no way
release, diminish, impair, reduce, or otherwise adversely affect the obligations
and liabilities of the undersigned under the Credit Agreement or any other
agreements, documents, or instruments executed by the undersigned to create
Liens or to secure any of the indebtedness under the Credit Agreement, all of
which obligations and liabilities are, and shall continue to be, in full force
and effect and (b) represents and warrants to the Agent and the Banks that, as
of the date hereof, no event has occurred and is continuing which constitutes a
Default or Event of Default under the Credit Agreement. This consent and
acknowledgment shall be binding upon the undersigned and its successors and
assigns and shall inure to the benefit of the Banks and their respective
successors and assigns.
FIRST INVESTORS FINANCIAL SERVICES, INC.
By: _______________________________
Name: ____________________________
Title: ___________________________
B-2
<PAGE>
EXHIBIT C
FORM OF
NOTICE OF BORROWING
_______________, 19___
NationsBank of Texas, N.A.,
as Agent for the Banks
party to the Credit Agreement defined below
Attention: Corporate Finance Group
Ladies and Gentlemen:
The undersigned, First Investors Financial Services, Inc., a Texas
corporation (the "BORROWER"), refers to that certain Credit Agreement dated as
of July 18, 1997 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT", the terms defined therein being used herein as
therein defined), among the Borrower, certain financial institutions now or
hereafter party thereto (the "BANKS"), and NationsBank of Texas, N.A., as Agent
(the "AGENT") and hereby gives you notice, irrevocably, pursuant to Section 2.02
of the Credit Agreement that the Borrower hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "PROPOSED BORROWING") as required by Section
2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is ____________, 19___.
(ii) The Type of Advance(s) comprising the Proposed Borrowing is: [BASE
RATE][LIBOR RATE][AGREED RATE].
(iii) The aggregate amount of the Proposed Borrowing is $______________.
[(IV) THE INITIAL INTEREST PERIOD FOR EACH [LIBOR RATE][AGREED RATE]
ADVANCE COMPRISING THIS PROPOSED BORROWING IS: __________________________.]
The Borrower hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:
(A) The representations and warranties contained in Article V of the
Credit Agreement are true and correct before, and will be true and correct after
giving effect to, the Proposed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date;
(B) No Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application of the
proceeds therefrom; and
C-1
<PAGE>
(C) The aggregate outstanding principal amount of the Advances after
giving effect to the Proposed Borrowing does not exceed the Available Amount.
With respect to the Proposed Borrowing requested in this Notice of
Borrowing, please wire transfer such Borrowing to the Borrower's account as
follows:
FIRST INVESTORS FINANCIAL SERVICES, INC.,
a Texas corporation
By: _______________________________
Name: ____________________________
Title: ___________________________
C-2
<PAGE>
EXHIBIT D
FORM OF
NOTE
$________________________ Houston, Texas ___________________, 19__
FOR VALUE RECEIVED, FIRST INVESTORS FINANCIAL SERVICES, INC., a Texas
corporation together with its successors, the "BORROWER"), hereby promises to
pay to the order of _________________________________________________________
(the "BANK"), at the office of _________________________________, the principal
sum of ______________________________ DOLLARS ($_____________) (or such lesser
amount as shall equal the aggregate unpaid principal amount of Advances made by
the Bank to the Borrower under the Credit Agreement referred to below or, if
such Advances are converted pursuant to Section 2.05(b) of the Credit Agreement,
the aggregate unpaid principal amount of the Term Loan), in lawful money of the
United States of America and in immediately available funds, on the date(s) and
in the principal amount(s) provided in the Credit Agreement (as defined below)
and to pay interest on the unpaid principal amount of each such Advance (or the
Term Loan, as the case may be), at such office, in like money and funds, for the
period commencing on the date of such Advance (or with respect to the Term Loan,
from the date such Advance is converted into the Term Loan) until such Advance
(or the Term Loan, as applicable) shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement. This Note is one of the Notes
referred to in the Credit Agreement, and, to the extent and subject to the
conditions set forth in the Credit Agreement, the Advances (but not the Term
Loan) evidenced by this Note may be borrowed, repaid and reborrowed.
The Bank is hereby authorized by the Borrower to endorse on the schedule
(or a continuation thereof) attached to this Note, the amount and date of each
Advance (and the amount and date of the Term Loan, if applicable) made by the
Bank to the Borrower under the Credit Agreement, and the amount and date of each
payment or prepayment of principal of such Advance (or Term Loan) received by
the Bank, PROVIDED that any failure by the Bank to make any such endorsement
shall not affect the obligations of the Borrower under the Credit Agreement or
under this Note in respect of such Advances (or Term Loan).
This Note is one of the Notes referred to in the Credit Agreement dated
as of July 18, 1997 (as may be amended, restated, modified and supplemented and
in effect from time to time, the "CREDIT AGREEMENT"; capitalized terms used in
this Note and not otherwise defined have the respective meanings assigned to
them in the Credit Agreement) among the Borrower, the financial institutions
named therein (including the Bank) and NationsBank of Texas, N.A. as Agent, and
evidences the Advances (or Term Loan) made by the Bank thereunder. This Note is
secured by the Pledge Agreement (FIFS) and the Pledge Agreement (FIRC and
FIARC).
The Credit Agreement, among other things, provides for the acceleration
of the maturity of this Note upon the occurrence of certain events and for
prepayments of Advances (or Term Loan) upon the terms and conditions specified
therein.
D-1
<PAGE>
This Note shall be governed by and construed in accordance with the laws
of the State of Texas (without regard to conflicts of law principles).
FIRST INVESTORS FINANCIAL SERVICES, INC.,
a Texas corporation
By: _______________________________
Name: ____________________________
Title: ___________________________
D-2
<PAGE>
SCHEDULE
This Note evidences Advances (or a Term Loan) made under the within
described Credit Agreement to the Borrower in the principal amounts set forth
below, which Advances were made on the dates (or which Advances were converted
into the Term Loan on the date) set forth below, subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
Principal Amount
of Advance (or
Term Loan, if Date of Payment Amount Paid Balance
Date Made Applicable Or Prepayment Or Prepaid Outstanding
--------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
</TABLE>
D-3
<PAGE>
EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of July 18, 1997, (as
the same may be amended, restated, modified, renewed or extended from time to
time, the "CREDIT AGREEMENT") among First Investors Financial Services, Inc., a
Texas corporation (the "BORROWER"), the Banks (as defined in the Credit
Agreement) and NationsBank of Texas, N.A., as agent for the Banks (the "AGENT").
Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on SCHEDULE 1 hereto agree
as follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on SCHEDULE 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Advances owing to the Assignee will be as set forth on SCHEDULE 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note held by the Assignor and requests that the Agent
exchange such Note for new Notes payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto and to
the Assignor in an amount equal to the Commitment retained by the Assignor, if
any, as specified on SCHEDULE 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Sections 5.06 and 6.02 thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
E-1
<PAGE>
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Bank; and (vi)
attaches any U.S. Internal Revenue Service or other forms required under Section
3.06.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance and recording by the Agent. The effective
date for this Assignment and Acceptance (the "EFFECTIVE DATE") shall be the date
of acceptance hereof by the Agent, unless otherwise specified on SCHEDULE 1.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of SCHEDULE 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused SCHEDULE 1
to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
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SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
Assignee's Commitment: $________
Aggregate outstanding principal amount
of Advances assigned: $________
Principal amount of Note payable to Assigner: $________
Principal amount of Note payable to Assignor: $________
Effective Date (if other than date
of acceptance by Agent): *________, 19__
[NAME OF ASSIGNOR], as Assignor
By: ______________________
Title:
Dated: ____________, 19 ___
[NAME OF ASSIGNEE], as Assignee
By: ______________________
Title:
Domestic Lending Office:
LIBOR Lending Office:
* This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
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Accepted [and Approved] **
this ___ day of ___________, 19 _
NATIONSBANK ___________, N.A.
By: ________________________
Title:
[Approved this ____ day
of ____________, 19__
[NAME OF BORROWER]
By: _____________________]**
Title:
** Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee".
E-4
EXHIBIT 10.43
PLEDGE AND SECURITY AGREEMENT
(FIFS)
THIS PLEDGE AND SECURITY AGREEMENT (FIFS), dated as of July 18, 1997 (as
the same may be amended, modified, renewed or extended from time to time, this
"AGREEMENT"), is made by FIRST INVESTORS (VERMONT) HOLDINGS, INC., a Vermont
corporation, as pledgor (the "PLEDGOR") to NATIONSBANK OF TEXAS, N.A., a
national banking association, as agent (the "AGENT") for the ratable benefit of
the financial institutions listed on the signature pages of, and any other
financial institution that may become a party to, the Credit Agreement referred
to below (collectively, the "BANKS"), as secured party (in such capacity, the
Agent is referred to as the "SECURED PARTY").
PRELIMINARY STATEMENTS:
(1) The Pledgor is the owner of the shares (the "PLEDGED SHARES") of stock
described in SCHEDULE I hereto and issued by the corporation named therein.
(2) The Banks, the Agent and First Investors Financial Services, Inc., a
Texas corporation and a wholly-owned subsidiary of the Pledgor (the "BORROWER"),
have entered into that certain Credit Agreement, dated as of July 18, 1997 (as
hereafter amended, restated, modified, extended or renewed from time to time,
the "CREDIT AGREEMENT"). As the owner of the Pledged Shares of the Borrower, the
Pledgor has received, or will receive, direct or indirect benefit from the
making of this Agreement. It is a condition precedent to the effectiveness of
the Credit Agreement that the Pledgor shall have executed and delivered this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and for other good and valuable consideration, the
adequacy, receipt and sufficiency of which are hereby acknowledged, and in order
to induce the Banks to make Advances under the Credit Agreement, the Pledgor
hereby agrees as follows:
SECTION 1. DEFINED TERMS AND RELATED MATTERS.
(a) The capitalized terms used herein which are defined in the
Credit Agreement and not otherwise defined herein shall have the meanings
specified therein.
(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.
(c) Unless otherwise defined herein or in the Credit Agreement, the
terms defined in Articles 8 and 9 of the Uniform Commercial Code as
enacted in the State of Texas (the "UCC") are used herein as therein
defined.
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SECTION 2. PLEDGE. The Pledgor hereby pledges and delivers to the Secured
Party, for the ratable benefit of the Banks, and hereby grants to the Secured
Party, for the ratable benefit of the Banks, a security interest in, the
property described in subsections (a) and (b) of this Section 2 (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all 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 Pledged Shares; and
(b) all additional shares of stock of any issuers of the Pledged
Shares from time to time acquired by the Pledgor in any manner, and the
certificates representing such additional shares, and all 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 such
shares.
The inclusion of proceeds in this Agreement does not authorize the Pledgor
to sell, dispose of or otherwise use the Pledged Collateral in any manner not
specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures the prompt and
complete (a) payment of all obligations of the Borrower to the Agent and to any
or each Bank now or hereafter existing under the Credit Agreement, the Notes and
the other Loan Documents, as any of the same may be hereafter amended, restated,
modified, extended or renewed from time to time, with or without notice to the
Pledgor, (b) payment by Pledgor of all of its obligations under this Agreement,
(c) performance of all covenants and conditions by the Borrower, the Pledgor,
FIRC, FIARC, FIFSG or any other Person contained in any Loan Document to which
it is a party (including, without limitation, the covenants and conditions
contained herein), whether for principal, interest, fees, expenses or otherwise
(all such obligations, covenants and conditions described in the foregoing
clauses (a), (b) and (c) being hereinafter collectively referred to as the
"OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments
representing or evidencing the Pledged Collateral have been delivered to and
held by or on behalf of the Secured Party pursuant hereto in suitable form for
transfer by delivery, or accompanied by duly executed instruments of transfer or
assignment, in blank, all in form and substance satisfactory to the Secured
Party. The Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing the Pledged Collateral in
its possession for certificates or instruments of smaller or larger
denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is a corporation duly organized, legally existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and is duly qualified or licensed as a foreign corporation in
all jurisdictions where the Property owned or the business transacted by
it makes such qualification necessary and where the failure to be so
qualified would have a material adverse effect on (i) the financial
condition, business,
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properties or operations of the Pledgor or (ii) the ability of the Pledgor
to perform its obligations under this Agreement or under any other Loan
Document to which it is a party on a timely basis or which would otherwise
impair the ability of Pledgor to perform its obligations under this
Agreement.
(b) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in accordance
with and subject to the terms and conditions contained therein, except as
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (ii) subject to the general effect of
general principles of equity.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Pledgor of its obligations hereunder will conflict
with, result in or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon the property of the
Pledgor (other than pursuant to this Agreement), nor violate any law,
rule, regulation or any judgment, order, writ, injunction or decree of any
court, administrative agency or other governmental authority, or any
agreement or other instrument known to the Pledgor or to which the Pledgor
is a party or by which its property is bound. It is not necessary for the
Pledgor to obtain approval from any court to enter into this Agreement or
to execute, deliver and perform the obligations created hereunder.
(d) The Pledgor has received, or will receive, direct or indirect
benefit from the making of this Agreement.
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Pledgor, threatened against or affecting the Pledgor
which, if adversely determined, would have a material adverse effect on
(i) the financial condition, business, properties or operations of Pledgor
or (ii) the ability of Pledgor to perform its obligations under this
Agreement or under the other Loan Documents to which it is a party on a
timely basis or which would otherwise impair the ability of Pledgor to
perform its obligations under this Agreement.
(f) The Pledgor is not in default in any manner in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement to which the Pledgor is a
party, the non-performance, non-observance or non-fulfillment of which
would have a material adverse effect on (i) the financial condition,
business, properties or operations of Pledgor or (ii) the ability of
Pledgor to perform its obligations under this Agreement or under the other
Loan Documents to which it is a party on a timely basis or which would
otherwise impair the ability of Pledgor to perform its obligations under
this Agreement.
(g) The Pledgor is not in violation of any Governmental Requirement
which violation (in the event such violation was asserted by any Person)
would have a material adverse effect on (i) the financial condition,
business, properties or operations of Pledgor or
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<PAGE>
(ii) the ability of Pledgor to perform its obligations under this
Agreement or under the other Loan Documents to which it is a party on a
timely basis or which would otherwise impair the ability of Pledgor to
perform its obligations under this Agreement.
(h) The Pledged Shares have been duly authorized and validly issued
and are fully paid and nonassessable under the laws of the jurisdiction of
incorporation of the issuer thereof.
(i) The Pledgor is the legal owner of the Pledged Collateral
referred to in subsection (a) of Section 2 hereof and holds such Pledged
Collateral free and clear of any Lien, other than Permitted Liens, and the
Pledgor has not sold, granted any option with respect to, assigned,
transferred or otherwise disposed of any of its respective rights or
interests in or to the Pledged Collateral.
(j) This Agreement and the delivery of the Pledged Collateral to the
Secured Party create a valid first priority Lien in the Pledged Collateral
securing the payment of the Obligations.
(k) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority which has not been received is
required for (i) the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement; (ii) the execution, delivery or performance of
this Agreement by the Pledgor; or (iii) the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally).
(l) The Pledged Shares constitute 100% of the issued and outstanding
shares of common stock of the issuer thereof.
SECTION 6. FURTHER ASSURANCES. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action that may be reasonably required, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce the Banks' rights and remedies hereunder
with respect to any of the Pledged Collateral, and for the Secured Party to have
"control" of the Pledged Collateral as provided in Section 8.106 of the UCC and
to be a "protected purchaser" as provided in Section 8.303 of the UCC,
including, without limitation, to deliver the Pledged Collateral within the
meaning of Section 8.301 of the UCC.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Default or
Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights (including, without limitation,
the right to give consents, waivers and notifications in respect of
the Pledged Collateral) pertaining to the Pledged
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<PAGE>
Collateral or any part thereof; PROVIDED, HOWEVER, that no vote
shall be cast or consent, waiver or ratification given or action
taken which would be inconsistent with or violate any provision of
this Agreement or any other Loan Document; and PROVIDED FURTHER that
the Pledgor shall give the Secured Party at least ten (10) days'
written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any voting or other
consensual rights pertaining to the Pledged Collateral or any part
thereof, which might have a material adverse effect on the value of
the Pledged Collateral or any part thereof; and
(ii) The Pledgor shall be entitled to receive and retain any
and all dividends and interest paid in respect of the Pledged
Collateral to the extent permitted by the Credit Agreement;
PROVIDED, HOWEVER, that any and all
(A) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(B) dividends and other distributions hereafter paid or
payable in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution, and
(C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral,
shall be, and shall be forthwith delivered to the Secured Party to
hold as, Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Secured Party, be
segregated from the other property or funds of the Pledgor and be
forthwith delivered to the Secured Party as Pledged Collateral in
the same form as so received (with any necessary indorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) The Secured Party may, after acceleration of the Notes
pursuant to Section 8.01 of the Credit Agreement, and without notice
to the Pledgor, transfer or register in the name of the Secured
Party or any of its nominees, for the equal and ratable benefit of
the Banks, any or all shares of the Pledged Collateral held by the
Secured Party hereunder, and the Secured Party or its nominee may
thereafter, after delivery of notice to the Pledgor, exercise any
and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the
Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange at its
discretion any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any of such shares or upon
the exercise by any such issuer or the Secured Party of any right,
privilege or option pertaining to any shares of the
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Pledged Collateral, and in connection therewith, to deposit and
deliver any and all of the Pledged Collateral with any committee,
depository, transfer agent, registrar or other designated agency
upon such terms and conditions as it may determine, all without
liability except to account for property actually received by it,
but the Secured Party shall have no duty to exercise, and the Banks
shall not have any duty to request the exercise of, any of the
aforesaid rights, privileges or options, and neither the Secured
Party nor any Banks shall be responsible for any failure to do so or
delay in so doing.
(ii) All rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 7(a)(i) and to receive the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 7(a)(ii) shall cease, and all
such rights shall thereupon become vested in the Secured Party which
shall thereupon have the sole right to exercise such voting and
other consensual rights and to receive and hold as Pledged
Collateral such dividends and interest payments.
(iii) All dividends and interest payments which are received
by the Pledgor contrary to the provisions of Section 7(b)(ii) shall
be received in trust for the benefit of the Secured Party, shall be
segregated from other funds of the Pledgor, and shall be forthwith
paid over to the Secured Party as Pledged Collateral in the same
form as so received (with any necessary endorsement).
(iv) The Pledgor shall execute and deliver (or cause to be
executed and delivered to the Secured Party) all such proxies and
other instruments as the Secured Party may reasonably request for
the purpose of enabling the Secured Party to exercise the voting and
other rights which it is entitled to exercise pursuant to paragraph
(ii) above and to receive the dividends or interest payments which
it is entitled to receive and retain pursuant to paragraph (iii)
above.
SECTION 8. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
(a) The Pledgor shall not sell, exchange or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral or create
or permit to exist any Lien, other than Permitted Liens, upon or with
respect to any of the Pledged Collateral.
(b) The Pledgor agrees that it will (i) cause the issuer of the
Pledged Shares not to issue any stock or other securities in addition to
or in substitution for the Pledged Shares issued by such issuer, except to
the Pledgor, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of stock
or other securities of the issuer of the Pledged Shares.
SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints the Secured Party as the Pledgor's attorney-in-fact,
effective upon and during the continuance of an Event of Default, with full
authority in the place and stead of the Pledgor and in
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the name of the Pledgor, the Secured Party, the Banks or otherwise, from time to
time in the Secured Party's discretion, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with subsection (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Secured Party may deem necessary or desirable for
the collection of any of the Pledged Collateral or otherwise to enforce
the rights of the Banks and the Secured Party with respect to any of the
Pledged Collateral.
SECTION 10. SECURED PARTY MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Secured Party
incurred in connection therewith shall be payable by the Pledgor under Section
15(b).
SECTION 11. POSSESSION; REASONABLE CARE. The Secured Party shall hold in
its possession all Pledged Collateral pledged, assigned or transferred hereunder
and from time to time constituting a portion of the Pledged Collateral, except
as from time to time any documents or instruments may be required for
recordation or for the purpose of enforcing or realizing upon any right or value
thereby represented. The Secured Party may, from time to time, in its sole
discretion, appoint one or more agents (which in no case shall be the Pledgor or
an affiliate of the Pledgor) to hold physical custody, for the account of the
Secured Party, of any or all of the Pledged Collateral. The Secured Party shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Secured Party accords its own
property, it being understood that the Secured Party shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Secured Party has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
SECTION 12. REMEDIES. If any Event of Default shall have occurred and be
continuing and the Notes shall have been accelerated pursuant to Section 8.01 of
the Credit Agreement:
(a) The Secured Party may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party upon default under the UCC (whether or not the UCC applies to the
affected Pledged Collateral), or under the laws of any other applicable
jurisdiction, and the Secured Party may also, without notice except as
specified below, sell
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the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of the
Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days' notice to the
Pledgor 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.
The Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. The Secured
Party 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.
(b) Any cash held by the Secured Party as Pledged Collateral and all
cash proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Secured Party, be held by the
Secured Party as collateral for, and then or at any time thereafter
applied in whole or in part by the Secured Party against, the Obligations
in such order as the Secured Party shall select. Any surplus of such cash
or cash proceeds and interest accrued thereon, if any, held by the Secured
Party and remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus; PROVIDED THAT the Secured Party shall have no
obligation to invest or otherwise pay interest on any amounts held by it
in connection with or pursuant to this Agreement.
(c) All rights and remedies of the Secured Party and the Banks
expressed herein are in addition to all other rights and remedies
possessed by the Secured Party and the Banks in the Loan Documents and any
other agreement or instrument relating to the Obligations.
SECTION 13. REGISTRATION RIGHTS, PRIVATE SALES, ETC. (a) If the Secured
Party shall determine to exercise its right to sell all or any of the Pledged
Collateral pursuant to Section 12, the Pledgor agrees that, upon request of the
Secured Party, the Pledgor will use its best efforts to cause the officers and
directors of the issuer of the Pledged Shares at its expense to cooperate fully
with the Secured Party in conformity with requirements imposed by law for the
availability of an exemption from registration under the Securities Act of 1933,
as amended from time to time (the "Securities Act") and in the Secured Party's
determination that such exemption is not reasonably available for such sale, the
Pledgor shall use its best efforts to:
(i) execute and deliver, and cause the issuer of the Pledged
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents,
and to use its best efforts to do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the
Secured Party, advisable to register such Pledged Collateral under
the provisions of the Securities Act, or the securities laws of any
relevant jurisdiction outside the United States, and to use its best
efforts to cause the registration statement relating thereto to
become effective and to remain effective for such period as
prospectuses are required by law to be furnished to facilitate the
sale or other disposition of the
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Pledged Collateral, or that portion thereof to be sold, and to make
all amendments and supplements thereto and to the related
prospectuses which, in the opinion of the Secured Party, are
necessary or advisable, all in conformity with the requirements of
the Securities Act, and the rules and regulations of the Securities
Act, and the rules and regulations of the Securities and Exchange
Commission, applicable thereto or, where relevant, the laws, rules
and regulations of such other jurisdiction applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral
under the state securities or "Blue Sky" laws, if applicable
thereto, and to obtain all necessary governmental approvals for the
sale of the Pledged Collateral, as requested by the Secured Party;
(iii) cause the issuer of the Pledged Shares to make available
to its security holders, as soon as practicable, an earnings
statement which will satisfy the provisions of Section 11(a) of the
Securities Act; and
(iv) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Collateral or any
part thereof valid and binding and in compliance with applicable
law.
(b) The Pledgor recognizes that the Secured Party may be unable to
effect a public sale of any or all of the Pledged Collateral by reason of
certain prohibitions contained in the laws of any jurisdiction outside the
United States or in the Securities Act and applicable state securities
laws, but may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Pledged Collateral for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were
a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall, to the extent permitted by law, be deemed to have
been made in a commercially reasonable manner. Neither the Secured Party
nor the Banks shall be under any obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the issuer
of such securities to register such securities under the laws of any
jurisdiction outside the United States, under the Securities Act or under
any applicable state securities laws, even if the issuer would agree to do
so.
(c) The Pledgor further agrees to do or cause to be done, to the
extent that the Pledgor may legally do so, all such other acts and things
as may be necessary to make such sales or resales of any portion or all of
the Pledged Collateral valid and binding and in compliance with any and
all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sale or sales, all at the Pledgor's expense. The Pledgor further agrees
that a breach of any of the covenants contained in this Section 13 will
cause irreparable injury to the Secured Party and the Banks and that the
Secured Party and
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the Banks have no adequate remedy at law in respect of such breach and, as
a consequence, agrees that each and every covenant contained in this
Section 13 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees, to the fullest extent permitted by law,
not to assert as a defense against an action for specific performance of
such covenants that (i) the Pledgor's failure to perform such covenants
will not cause irreparable injury to the Secured Party or the Banks, or
(ii) the Secured Party or the Banks has an adequate remedy at law in
respect of such breach. The Pledgor further acknowledges the impossibility
of ascertaining the amount of damages which would be suffered by the
Secured Party and the Banks by reason of a breach of any of the covenants
contained in this Section 13 and, consequently, agrees that, if the
Pledgor shall breach any of such covenants and the Secured Party shall sue
for damages for such breach, the Pledgor shall pay to the Secured Party,
as liquidated damages and not as a penalty, an aggregate amount equal to
the value of the Pledged Collateral on the date the Secured Party or the
Banks shall demand compliance with this Section 13.
(d) To the fullest extent permitted by applicable law, the Pledgor
agrees to indemnify, protect and save harmless the Secured Party, the
Banks and any controlling persons thereof within the meaning of the
Securities Act from and against any and all liabilities, suits, claims,
costs and expenses (including counsel fees and disbursements) arising
under the Securities Act, the Securities and Exchange Act of 1934, as
amended, or at common law, or pursuant to any other applicable law in
connection with the aforesaid registration, insofar as such liabilities,
suits, claims, costs and expenses arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained
in the aforesaid registration statement, or the aforesaid registration
statement as amended or supplemented, or arises out of, or is based upon,
the 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 Pledgor shall not be liable in any
such case to the extent that any such liabilities, suits, claims, costs
and expenses arise out of, or are based upon, any untrue statement or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, FURTHER, that the Pledgor shall not be liable in any such case
to the extent that any such liabilities, suits, claims, costs and expenses
arise out of, or are based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in the aforesaid
registration statement, or the aforesaid registration statement as amended
or supplemented, in reliance upon and in conformity with written
information furnished to the Pledgor by the Secured Party or such Bank
specifically for inclusion therein. The foregoing indemnity agreement is
in addition to any liability that the Pledgor may otherwise have to the
Secured Party, any such Bank or any such controlling person.
SECTION 14. INDEMNITY, EXPENSES AND INTEREST.
(a) To the fullest extent permitted by law, the Pledgor agrees to
indemnify the Secured Party and the Banks, their employees, agents or
Affiliates from and against any and all claims, losses, costs, expenses,
damages and liabilities (including, without limitation, reasonable
attorneys' fees and costs) growing out of or resulting from this Agreement
-10-
<PAGE>
(including, without limitation, enforcement of this Agreement), and any
act or omission in connection therewith (including, without limitation,
any liabilities, claims, costs, expenses, losses or damages arising or
resulting, directly or indirectly from the negligence of the Secured Party
and the Banks, their employees, agents and Affiliates) (collectively, the
"Indemnified Liabilities"), to the extent that the Indemnified Liabilities
arise out of or by reason of claims made by Persons other than the Secured
Party or the Banks, except claims, losses, costs, expenses, damages or
liabilities resulting from the gross negligence or willful misconduct of
the Secured Party or any Bank. It is the intention of the parties that
this indemnification shall be unlimited, and that it shall include but not
be limited to, any and all direct, indirect, incidental, consequential and
punitive damages, including, without limitation, those arising or
resulting from the negligence of the Secured Party and the Banks, whether
such negligence be sole, joint or concurrent, active or passive.
(b) The Pledgor agrees upon demand to pay to the Secured Party the
amount of any and all expenses, including the fees and disbursements of
its counsel and of any experts and agents, which the Secured Party may
incur in connection with (i) the preparation, execution, delivery,
modification, amendment, filing, recording and direct administration of
this Agreement; (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the
Pledged Collateral; (iii) the exercise or enforcement of any of the rights
of the Secured Party hereunder; (iv) the failure by the Pledgor to perform
or observe any of the provisions hereof; and (v) costs and expenses
associated with due diligence, transportation, computer, duplication,
appraisals, audits, insurance and consultants incurred in connection with
or reasonably related to the transactions contemplated hereunder.
(c) The Pledgor agrees to pay interest on any expenses or other sums
due to the Secured Party hereunder that are not paid when due at a rate
per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) two
percent (2%) above the Base Rate.
SECTION 15. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party and the Majority Banks, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 16. NOTICES. All directions, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at, or, if a telecopy number is provided, telecopied (with
transmission confirmed by telephone) to, or mailed by first class or registered
mail, postage prepaid, to (i) in the case of the Pledgor, 675 Bering, Suite 710,
Houston, Texas 77057, Attention: Chief Financial Officer, Telephone: (713)
977-2600, Telecopy: (713) 260-0028; (ii) in the case of the Secured Party, 700
Louisiana Street, Houston, Texas 77002, Attention: Vice President, Corporate
Finance Group, Telephone: (713) 247-6679, Telecopy: (713) 247-6360; and (iii) to
any Bank, at the address set forth under the heading "Domestic Lending Office"
on the signature pages of the Credit Agreement. Any such address or telephone or
telecopy
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<PAGE>
number may be changed by the applicable Person by written notice to each other
Person referred to in clauses (i) through (iii).
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of the Secured Party
and the Banks, all obligations of the Pledgor hereunder and the security
interest hereunder shall, to the extent permitted by applicable law, be absolute
and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
the Notes or any of the other Loan Documents;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, the
Notes or any of the other Loan Documents;
(c) any exchange, release or nonperfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower, the Pledgor, FIRC,
FIARC, FIFSG or any other Person that is a party to any Loan Document in
respect of the Obligations.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement and the delivery of the Pledged Collateral to the Secured Party shall
create a continuing security interest in the Pledged Collateral and shall (a)
remain in full force and effect until termination of the obligations of the
Banks to make the Advances under the Credit Agreement and payment in full
thereafter of the Obligations; (b) be binding upon the Pledgor, its legal
representatives, successors and assigns; and (c) inure to the benefit of the
Secured Party, the Banks and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), the Banks
may assign or otherwise transfer the Notes to any other Person in accordance
with the terms and provisions set forth in Section 10.07 of the Credit
Agreement, and such Person shall thereupon become vested with all the rights and
benefits in respect thereof granted to the Banks, herein or otherwise. Upon the
termination of the obligations of the Banks to make Advances and the payment in
full thereafter of the Obligations, the Pledgor shall be entitled to the return,
upon its request and at its expense, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 19. WAIVER OF MARSHALLING. All rights of marshalling of assets of
the Pledgor, including any such right with respect to the Pledged Collateral,
are hereby waived by the Pledgor.
SECTION 20. LIMITATION BY LAW. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent
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<PAGE>
necessary so that they will not render this Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
SECTION 21. SEPARABILITY. 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. Should any clause, sentence, paragraph, subsection or
Section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom by the parties hereto, and the remainder will have
the same force and effectiveness as if such stricken part or parts had never
been included herein.
SECTION 22. CAPTIONS. The captions in this Agreement have been inserted
for convenience only and shall be given no substantive meaning or significance
whatever in construing the terms and provisions of this Agreement.
SECTION 23. NO WAIVER; REMEDIES. No failure on the part of the Secured
Party or any Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 25. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS).
(B) THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF,
TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE
OF TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
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<PAGE>
(II) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT
TO PLEAD OR CLAIM THE SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION
OR PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY
REGISTERED OR CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL POSTAGE PREPAID) TO THE PLEDGOR AT 675 BERING, SUITE 710,
HOUSTON, TEXAS 77057, OR AT SUCH OTHER ADDRESS OF WHICH THE SECURED
PARTY SHALL HAVE BEEN NOTIFIED IN WRITING PURSUANT TO SECTION 16.
(IV) NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL IN
ANY WAY AFFECT THE RIGHT OF THE SECURED PARTY OR ANY BANK OR THE
PLEDGOR TO BRING ANY ACTION ARISING OUT OF OR RELATING TO THE NOTES
OR THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COMPETENT COURT
ELSEWHERE HAVING JURISDICTION OVER THE PLEDGOR OR THE SECURED PARTY,
AS THE CASE MAY BE, OR ITS PROPERTY.
SECTION 26. WAIVER OF JURY TRIAL. EACH OF THE SECURED PARTY, THE PLEDGOR,
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 27. NO INSOLVENCY PETITION AGAINST THE BORROWER, FIRC OR FIARC.
The Pledgor hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of the obligations, it will not
institute against, or join any other person in instituting against, the
Borrower, FIRC or FIARC any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law. This Section 27 shall survive the termination of this
agreement.
SECTION 28. FINAL AGREEMENT. THIS WRITTEN PLEDGE AND SECURITY AGREEMENT
AND THE OTHER LOAN DOCUMENTS EXECUTED BY THE PLEDGOR REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered,
effective as of the date first above written.
FIRST INVESTORS (VERMONT) HOLDINGS,
INC., as Pledgor
By: TOMMY MOORE JR.
Name: TOMMY MOORE JR.
Title: PRESIDENT
[Signature Page - Pledge and Security Agreement (FIFS) - Page 1 of 1]
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PERCENTAGE OF
ISSUED AND
STOCK OUTSTANDING
CLASS OF CERTIFICATE NUMBER OF COMMON
STOCK ISSUER STOCK NO(S). PAR VALUE SHARES STOCK OF ISSUER
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Investors Financial Common 26 $.001 1,222,223 100%
Services, Inc.
</TABLE>
SI-1
EXHIBIT 10.44
PLEDGE AND SECURITY AGREEMENT
(FIRC AND FIARC)
THIS PLEDGE AND SECURITY AGREEMENT (FIRC AND FIARC), dated as of July 18,
1997 (as the same may be amended, modified, renewed or extended from time to
time, this "AGREEMENT"), is made by FIRST INVESTORS FINANCIAL SERVICES, INC., a
Texas corporation, as pledgor (the "PLEDGOR") to NATIONSBANK OF TEXAS, N.A., a
national banking association, as agent (the "AGENT") for the ratable benefit of
the financial institutions listed on the signature pages of, and any other
financial institution that may become a party to, the Credit Agreement referred
to below (collectively, the "BANKS"), as secured party (in such capacity, the
Agent is referred to as the "SECURED PARTY").
PRELIMINARY STATEMENTS:
(1) The Pledgor is the owner of the shares (the "PLEDGED SHARES") of stock
described in SCHEDULE I hereto and issued by the corporation named therein.
(2) The Pledgor has previously granted (i) a first priority lien and
security interest to NationsBank of Texas, N.A. (in its individual capacity,
"NATIONSBANK") in and to the outstanding capital stock of FIARC (which stock
constitutes a portion of the Pledged Shares) created by and existing under the
F.I.A.R.C. Pledge and Security Agreement, dated as of October 22, 1996, between
the Pledgor and NationsBank and (ii) a first priority lien and security interest
to NationsBank of Texas, N.A., as agent for the financial institutions that are
or may become parties to the FIRC Agreement (in such capacity, the "FIRC
AGENT"), in and to the outstanding capital stock of FIRC (which stock
constitutes a portion of the Pledged Shares) created by and existing under the
Pledge and Security Agreement, dated as of October 16, 1992, as amended, between
the Pledgor and the FIRC Agent.
(3) The second priority lien and security interest of the Secured Party in
and to the Pledged Shares, created by and existing under this Agreement, is
subordinate, junior and inferior to the first priority lien and security
interest of NationsBank and the FIRC Agent in and to the Pledged Shares.
(4) The Banks, the Agent and the Pledgor have entered into that certain
Credit Agreement, dated as of July 18, 1997 (as hereafter amended, restated,
modified, extended or renewed from time to time, the "CREDIT AGREEMENT"). It is
a condition precedent to the effectiveness of the Credit Agreement that the
Pledgor shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and for other good and valuable consideration, the
adequacy, receipt and sufficiency of which are hereby acknowledged, and in order
to induce the Banks to make Advances under the Credit Agreement, the Pledgor
hereby agrees as follows:
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<PAGE>
SECTION 1. DEFINED TERMS AND RELATED MATTERS.
(a) The capitalized terms used herein which are defined in the
Credit Agreement and not otherwise defined herein shall have the meanings
specified therein.
(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.
(c) Unless otherwise defined herein or in the Credit Agreement, the
terms defined in Articles 8 and 9 of the Uniform Commercial Code as
enacted in the State of Texas (the "UCC") are used herein as therein
defined.
SECTION 2. PLEDGE. The Pledgor hereby pledges and delivers to the Secured
Party, for the ratable benefit of the Banks, and hereby grants to the Secured
Party, for the ratable benefit of the Banks, a security interest in, the
property described in subsections (a) and (b) of this Section 2 (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all 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 Pledged Shares; and
(b) all additional shares of stock of any issuers of the Pledged
Shares from time to time acquired by the Pledgor in any manner, and the
certificates representing such additional shares, and all 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 such
shares.
The inclusion of proceeds in this Agreement does not authorize the Pledgor
to sell, dispose of or otherwise use the Pledged Collateral in any manner not
specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures the prompt and
complete (a) payment of all obligations of the Pledgor to the Agent and to any
or each Bank now or hereafter existing under the Credit Agreement, the Notes and
the other Loan Documents, as any of the same may be hereafter amended, restated,
modified, extended or renewed from time to time, with or without notice to the
Pledgor, (b) payment by Pledgor of all of its obligations under this Agreement,
(c) performance of all covenants and conditions by the Pledgor, FIRC, FIARC,
FIFSG or any other Person contained in any Loan Document to which it is a party
(including, without limitation, the covenants and conditions contained herein),
whether for principal, interest, fees, expenses or otherwise (all such
obligations, covenants and conditions described in the foregoing clauses (a),
(b) and (c) being hereinafter collectively referred to as the "OBLIGATIONS").
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<PAGE>
SECTION 4. BAILEE OF PLEDGED COLLATERAL; DELIVERY OF PLEDGED COLLATERAL.
(a) Pursuant to Section 9.305 of the UCC, the Pledgor will promptly
deliver to NationsBank and the FIRC Agent written notice, in the form
attached hereto as EXHIBIT A, of the Secured Party's interest in and to
the Pledged Shares and request that each of NationsBank and the FIRC Agent
act as bailee for the Secured Party with respect to the Pledged Shares,
and in such capacity, to hold the Pledged Shares to perfect the second
priority lien and security interest of the Secured Party in and to the
Pledged Shares.
(b) Except as provided in subsection (a) above, all certificates or
instruments representing or evidencing the Pledged Collateral have been
delivered to and held by or on behalf of the Secured Party pursuant hereto
in suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment, in blank, all in form and substance
satisfactory to the Secured Party. The Secured Party shall have the right
at any time to exchange certificates or instruments representing or
evidencing the Pledged Collateral in its possession for certificates or
instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is a corporation duly organized, legally existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and is duly qualified or licensed as a foreign corporation in
all jurisdictions where the Property owned or the business transacted by
it makes such qualification necessary and where the failure to be so
qualified would have a material adverse effect on (i) the financial
condition, business, properties or operations of the Pledgor or (ii) the
ability of the Pledgor to perform its obligations under this Agreement or
under any other Loan Document to which it is a party on a timely basis or
which would otherwise impair the ability of Pledgor to perform its
obligations under this Agreement.
(b) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in accordance
with and subject to the terms and conditions contained therein, except as
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (ii) subject to the general effect of
general principles of equity.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Pledgor of its obligations hereunder will conflict
with, result in or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon the property of the
Pledgor (other than pursuant to this Agreement), nor violate any law,
rule, regulation or any judgment, order, writ, injunction or decree of any
court, administrative agency or other governmental authority, or any
agreement or other instrument known to the Pledgor or to which the Pledgor
is a party or by which its property is bound. It is not
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<PAGE>
necessary for the Pledgor to obtain approval from any court to enter into
this Agreement or to execute, deliver and perform the obligations created
hereunder.
(d) The Pledgor has received, or will receive, direct or indirect
benefit from the making of this Agreement.
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Pledgor, threatened against or affecting the Pledgor
which, if adversely determined, would have a material adverse effect on
(i) the financial condition, business, properties or operations of Pledgor
or (ii) the ability of Pledgor to perform its obligations under this
Agreement or under the other Loan Documents to which it is a party on a
timely basis or which would otherwise impair the ability of Pledgor to
perform its obligations under this Agreement.
(f) The Pledgor is not in default in any manner in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement to which the Pledgor is a
party, the non-performance, non-observance or non-fulfillment of which
would have a material adverse effect on (i) the financial condition,
business, properties or operations of Pledgor or (ii) the ability of
Pledgor to perform its obligations under this Agreement or under the other
Loan Documents to which it is a party on a timely basis or which would
otherwise impair the ability of Pledgor to perform its obligations under
this Agreement.
(g) The Pledgor is not in violation of any Governmental Requirement
which violation (in the event such violation was asserted by any Person)
would have a material adverse effect on (i) the financial condition,
business, properties or operations of Pledgor or (ii) the ability of
Pledgor to perform its obligations under this Agreement or under the other
Loan Documents to which it is a party on a timely basis or which would
otherwise impair the ability of Pledgor to perform its obligations under
this Agreement.
(h) The Pledged Shares have been duly authorized and validly issued
and are fully paid and nonassessable under the laws of the jurisdiction of
incorporation of each issuer thereof.
(i) The Pledgor is the legal owner of the Pledged Collateral
referred to in subsection (a) of Section 2 hereof and holds such Pledged
Collateral free and clear of any Lien, other than Permitted Liens, and the
Pledgor has not sold, granted any option with respect to, assigned,
transferred or otherwise disposed of any of its respective rights or
interests in or to the Pledged Collateral.
(j) This Agreement and the delivery of the Pledged Collateral to the
Secured Party create a valid second priority Lien in the Pledged
Collateral securing the payment of the Obligations.
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<PAGE>
(k) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority which has not been received is
required for (i) the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement; (ii) the execution, delivery or performance of
this Agreement by the Pledgor; or (iii) the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally).
(l) The Pledged Shares constitute 100% of the issued and outstanding
shares of stock of each issuer thereof.
SECTION 6. FURTHER ASSURANCES. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action that may be reasonably required, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce the Banks' rights and remedies hereunder
with respect to any of the Pledged Collateral, and, subject to the first
priority security interests of NationsBank and the FIRC Agent in and to the
Pledged Shares, for the Secured Party to have "control" of the Pledged
Collateral as provided in Section 8.106 of the UCC and to be a "protected
purchaser" as provided in Section 8.303 of the UCC, including, without
limitation, to deliver the Pledged Collateral within the meaning of Section
8.301 of the UCC.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Default or
Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights (including, without limitation,
the right to give consents, waivers and notifications in respect of
the Pledged Collateral) pertaining to the Pledged Collateral or any
part thereof; PROVIDED, HOWEVER, that no vote shall be cast or
consent, waiver or ratification given or action taken which would be
inconsistent with or violate any provision of this Agreement or any
other Loan Document; and PROVIDED FURTHER that the Pledgor shall
give the Secured Party at least ten (10) days' written notice of the
manner in which it intends to exercise, or the reasons for
refraining from exercising, any voting or other consensual rights
pertaining to the Pledged Collateral or any part thereof, which
might have a material adverse effect on the value of the Pledged
Collateral or any part thereof; and
(ii) The Pledgor shall be entitled to receive and retain any
and all dividends and interest paid in respect of the Pledged
Collateral to the extent permitted by the Credit Agreement;
PROVIDED, HOWEVER, that any and all
(A) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
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<PAGE>
(B) dividends and other distributions hereafter paid or
payable in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution, and
(C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral,
shall be, and shall be forthwith delivered to the Secured Party to
hold as, Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Secured Party, be
segregated from the other property or funds of the Pledgor and be
forthwith delivered to the Secured Party as Pledged Collateral in
the same form as so received (with any necessary indorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) The Secured Party may, after acceleration of the Notes
pursuant to Section 8.01 of the Credit Agreement, and without notice
to the Pledgor, transfer or register in the name of the Secured
Party or any of its nominees, for the equal and ratable benefit of
the Banks, any or all shares of the Pledged Collateral held by the
Secured Party hereunder, and the Secured Party or its nominee may
thereafter, after delivery of notice to the Pledgor, exercise any
and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the
Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange at its
discretion any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any of such shares or upon
the exercise by any such issuer or the Secured Party of any right,
privilege or option pertaining to any shares of the Pledged
Collateral, and in connection therewith, to deposit and deliver any
and all of the Pledged Collateral with any committee, depository,
transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to
account for property actually received by it, but the Secured Party
shall have no duty to exercise, and the Banks shall not have any
duty to request the exercise of, any of the aforesaid rights,
privileges or options, and neither the Secured Party nor any Banks
shall be responsible for any failure to do so or delay in so doing.
(ii) All rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 7(a)(i) and to receive the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 7(a)(ii) shall cease, and all
such rights shall thereupon become vested in the Secured Party which
shall thereupon have the sole right to exercise such voting and
other consensual rights and to receive and hold as Pledged
Collateral such dividends and interest payments.
-6-
<PAGE>
(iii) All dividends and interest payments which are received
by the Pledgor contrary to the provisions of Section 7(b)(ii) shall
be received in trust for the benefit of the Secured Party, shall be
segregated from other funds of the Pledgor, and shall be forthwith
paid over to the Secured Party as Pledged Collateral in the same
form as so received (with any necessary endorsement).
(iv) The Pledgor shall execute and deliver (or cause to be
executed and delivered to the Secured Party) all such proxies and
other instruments as the Secured Party may reasonably request for
the purpose of enabling the Secured Party to exercise the voting and
other rights which it is entitled to exercise pursuant to paragraph
(ii) above and to receive the dividends or interest payments which
it is entitled to receive and retain pursuant to paragraph (iii)
above.
SECTION 8. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
(a) The Pledgor shall not sell, exchange or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral or create
or permit to exist any Lien, other than Permitted Liens, upon or with
respect to any of the Pledged Collateral.
(b) The Pledgor agrees that it will (i) cause each issuer of the
Pledged Shares not to issue any stock or other securities in addition to
or in substitution for the Pledged Shares issued by such issuer, except to
the Pledgor, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of stock
or other securities of each issuer of the Pledged Shares.
SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints the Secured Party as the Pledgor's attorney-in-fact,
effective upon and during the continuance of an Event of Default, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor,
the Secured Party, the Banks or otherwise, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with subsection (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Secured Party may deem necessary or desirable for
the collection of any of the Pledged Collateral or otherwise to enforce
the rights of the Banks and the Secured Party with respect to any of the
Pledged Collateral.
-7-
<PAGE>
SECTION 10. SECURED PARTY MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Secured Party
incurred in connection therewith shall be payable by the Pledgor under Section
15(b).
SECTION 11. POSSESSION; REASONABLE CARE. Subject to the first priority
security interests of NationsBank and the FIRC Agent in and to the Pledged
Shares, the Secured Party shall hold in its possession all Pledged Collateral
pledged, assigned or transferred hereunder and from time to time constituting a
portion of the Pledged Collateral, except as from time to time any documents or
instruments may be required for recordation or for the purpose of enforcing or
realizing upon any right or value thereby represented. Subject to the first
priority security interests of NationsBank and the FIRC Agent in and to the
Pledged Shares, the Secured Party may, from time to time, in its sole
discretion, appoint one or more agents (which in no case shall be the Pledgor or
an affiliate of the Pledgor) to hold physical custody, for the account of the
Secured Party, of any or all of the Pledged Collateral. The Secured Party shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Secured Party accords its own
property, it being understood that the Secured Party shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Secured Party has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
SECTION 12. REMEDIES. Subject to the first priority security interests of
NationsBank and the FIRC Agent in and to the Pledged Shares, if any Event of
Default shall have occurred and be continuing and the Notes shall have been
accelerated pursuant to Section 8.01 of the Credit Agreement:
(a) The Secured Party may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party upon default under the UCC (whether or not the UCC applies to the
affected Pledged Collateral), or under the laws of any other applicable
jurisdiction, and the Secured Party may also, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or
at any of the Secured Party's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as the Secured Party may
deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten (10) days' notice to
the Pledgor 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. The Secured Party shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Secured Party 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.
-8-
<PAGE>
(b) Any cash held by the Secured Party as Pledged Collateral and all
cash proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Secured Party, be held by the
Secured Party as collateral for, and then or at any time thereafter
applied in whole or in part by the Secured Party against, the Obligations
in such order as the Secured Party shall select. Any surplus of such cash
or cash proceeds and interest accrued thereon, if any, held by the Secured
Party and remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus; PROVIDED THAT the Secured Party shall have no
obligation to invest or otherwise pay interest on any amounts held by it
in connection with or pursuant to this Agreement.
(c) All rights and remedies of the Secured Party and the Banks
expressed herein are in addition to all other rights and remedies
possessed by the Secured Party and the Banks in the Loan Documents and any
other agreement or instrument relating to the Obligations.
SECTION 13. REGISTRATION RIGHTS, PRIVATE SALES, ETC. (a) If the Secured
Party shall determine to exercise its right to sell all or any of the Pledged
Collateral pursuant to Section 12, the Pledgor agrees that, upon request of the
Secured Party, the Pledgor will use its best efforts to cause the officers and
directors of each issuer of the Pledged Shares at its expense to cooperate fully
with the Secured Party in conformity with requirements imposed by law for the
availability of an exemption from registration under the Securities Act of 1933,
as amended from time to time (the "Securities Act") and in the Secured Party's
determination that such exemption is not reasonably available for such sale, the
Pledgor shall use its best efforts to:
(i) execute and deliver, and cause each issuer of the Pledged
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents,
and to use its best efforts to do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the
Secured Party, advisable to register such Pledged Collateral under
the provisions of the Securities Act, or the securities laws of any
relevant jurisdiction outside the United States, and to use its best
efforts to cause the registration statement relating thereto to
become effective and to remain effective for such period as
prospectuses are required by law to be furnished to facilitate the
sale or other disposition of the Pledged Collateral, or that portion
thereof to be sold, and to make all amendments and supplements
thereto and to the related prospectuses which, in the opinion of the
Secured Party, are necessary or advisable, all in conformity with
the requirements of the Securities Act, and the rules and
regulations of the Securities Act, and the rules and regulations of
the Securities and Exchange Commission, applicable thereto or, where
relevant, the laws, rules and regulations of such other jurisdiction
applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral
under the state securities or "Blue Sky" laws, if applicable
thereto, and to obtain all necessary governmental approvals for the
sale of the Pledged Collateral, as requested by the Secured Party;
-9-
<PAGE>
(iii) cause each issuer of the Pledged Shares to make
available to its security holders, as soon as practicable, an
earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Collateral or any
part thereof valid and binding and in compliance with applicable
law.
(b) The Pledgor recognizes that the Secured Party may be unable to
effect a public sale of any or all of the Pledged Collateral by reason of
certain prohibitions contained in the laws of any jurisdiction outside the
United States or in the Securities Act and applicable state securities
laws, but may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Pledged Collateral for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were
a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall, to the extent permitted by law, be deemed to have
been made in a commercially reasonable manner. Neither the Secured Party
nor the Banks shall be under any obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the issuer
of such securities to register such securities under the laws of any
jurisdiction outside the United States, under the Securities Act or under
any applicable state securities laws, even if the issuer would agree to do
so.
(c) The Pledgor further agrees to do or cause to be done, to the
extent that the Pledgor may legally do so, all such other acts and things
as may be necessary to make such sales or resales of any portion or all of
the Pledged Collateral valid and binding and in compliance with any and
all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sale or sales, all at the Pledgor's expense. The Pledgor further agrees
that a breach of any of the covenants contained in this Section 13 will
cause irreparable injury to the Secured Party and the Banks and that the
Secured Party and the Banks have no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and every covenant
contained in this Section 13 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees, to the fullest extent
permitted by law, not to assert as a defense against an action for
specific performance of such covenants that (i) the Pledgor's failure to
perform such covenants will not cause irreparable injury to the Secured
Party or the Banks, or (ii) the Secured Party or the Banks has an adequate
remedy at law in respect of such breach. The Pledgor further acknowledges
the impossibility of ascertaining the amount of damages which would be
suffered by the Secured Party and the Banks by reason of a breach of any
of the covenants contained in this Section 13 and, consequently, agrees
that, if the Pledgor shall breach any of such covenants and the Secured
Party shall sue for damages for such breach, the Pledgor shall pay to the
Secured Party, as liquidated damages and not as a penalty, an aggregate
amount equal to the
-10-
<PAGE>
value of the Pledged Collateral on the date the Secured Party or the Banks
shall demand compliance with this Section 13.
(d) To the fullest extent permitted by applicable law, the Pledgor
agrees to indemnify, protect and save harmless the Secured Party, the
Banks and any controlling persons thereof within the meaning of the
Securities Act from and against any and all liabilities, suits, claims,
costs and expenses (including counsel fees and disbursements) arising
under the Securities Act, the Securities and Exchange Act of 1934, as
amended, or at common law, or pursuant to any other applicable law in
connection with the aforesaid registration, insofar as such liabilities,
suits, claims, costs and expenses arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained
in the aforesaid registration statement, or the aforesaid registration
statement as amended or supplemented, or arises out of, or is based upon,
the 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 Pledgor shall not be liable in any
such case to the extent that any such liabilities, suits, claims, costs
and expenses arise out of, or are based upon, any untrue statement or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, FURTHER, that the Pledgor shall not be liable in any such case
to the extent that any such liabilities, suits, claims, costs and expenses
arise out of, or are based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in the aforesaid
registration statement, or the aforesaid registration statement as amended
or supplemented, in reliance upon and in conformity with written
information furnished to the Pledgor by the Secured Party or such Bank
specifically for inclusion therein. The foregoing indemnity agreement is
in addition to any liability that the Pledgor may otherwise have to the
Secured Party, any such Bank or any such controlling person.
SECTION 14. INDEMNITY, EXPENSES AND INTEREST.
(a) To the fullest extent permitted by law, the Pledgor agrees to
indemnify the Secured Party and the Banks, their employees, agents or
Affiliates from and against any and all claims, losses, costs, expenses,
damages and liabilities (including, without limitation, reasonable
attorneys' fees and costs) growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), and any
act or omission in connection therewith (including, without limitation,
any liabilities, claims, costs, expenses, losses or damages arising or
resulting, directly or indirectly from the negligence of the Secured Party
and the Banks, their employees, agents and Affiliates) (collectively, the
"Indemnified Liabilities"), to the extent that the Indemnified Liabilities
arise out of or by reason of claims made by Persons other than the Secured
Party or the Banks, except claims, losses, costs, expenses, damages or
liabilities resulting from the gross negligence or willful misconduct of
the Secured Party or any Bank. It is the intention of the parties that
this indemnification shall be unlimited, and that it shall include but not
be limited to, any and all direct, indirect, incidental, consequential and
punitive damages, including, without limitation, those arising or
resulting from the negligence of the Secured Party and the Banks, whether
such negligence be sole, joint or concurrent, active or passive.
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<PAGE>
(b) The Pledgor agrees upon demand to pay to the Secured Party the
amount of any and all expenses, including the fees and disbursements of
its counsel and of any experts and agents, which the Secured Party may
incur in connection with (i) the preparation, execution, delivery,
modification, amendment, filing, recording and direct administration of
this Agreement; (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the
Pledged Collateral; (iii) the exercise or enforcement of any of the rights
of the Secured Party hereunder; (iv) the failure by the Pledgor to perform
or observe any of the provisions hereof; and (v) costs and expenses
associated with due diligence, transportation, computer, duplication,
appraisals, audits, insurance and consultants incurred in connection with
or reasonably related to the transactions contemplated hereunder.
(c) The Pledgor agrees to pay interest on any expenses or other sums
due to the Secured Party hereunder that are not paid when due at a rate
per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) two
percent (2%) above the Base Rate.
SECTION 15. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party and the Majority Banks, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 16. NOTICES. All directions, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at, or, if a telecopy number is provided, telecopied (with
transmission confirmed by telephone) to, or mailed by first class or registered
mail, postage prepaid, to (i) in the case of the Pledgor, 675 Bering, Suite 710,
Houston, Texas 77057, Attention: Chief Financial Officer, Telephone: (713)
977-2600, Telecopy: (713) 260-0028; (ii) in the case of the Secured Party, 700
Louisiana Street, Houston, Texas 77002, Attention: Vice President, Corporate
Finance Group, Telephone: (713) 247-6679, Telecopy: (713) 247-6360; and (iii) to
any Bank, at the address set forth under the heading "Domestic Lending Office"
on the signature pages of the Credit Agreement. Any such address or telephone or
telecopy number may be changed by the applicable Person by written notice to
each other Person referred to in clauses (i) through (iii).
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of the Secured Party
and the Banks, all obligations of the Pledgor hereunder and the security
interest hereunder shall, to the extent permitted by applicable law, be absolute
and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
the Notes or any of the other Loan Documents;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, the
Notes or any of the other Loan Documents;
-12-
<PAGE>
(c) any exchange, release or nonperfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor, FIRC, FIARC, FIFSG
or any other Person that is a party to any Loan Document in respect of the
Obligations.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement and the delivery of the Pledged Collateral to the Secured Party shall
create a continuing security interest in the Pledged Collateral and shall (a)
remain in full force and effect until termination of the obligations of the
Banks to make the Advances under the Credit Agreement and payment in full
thereafter of the Obligations; (b) be binding upon the Pledgor, its legal
representatives, successors and assigns; and (c) inure to the benefit of the
Secured Party, the Banks and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), the Banks
may assign or otherwise transfer the Notes to any other Person in accordance
with the terms and provisions set forth in Section 10.07 of the Credit
Agreement, and such Person shall thereupon become vested with all the rights and
benefits in respect thereof granted to the Banks, herein or otherwise. Upon the
termination of the obligations of the Banks to make Advances and the payment in
full thereafter of the Obligations, the Pledgor shall be entitled to the return,
upon its request and at its expense, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 19. WAIVER OF MARSHALLING. All rights of marshalling of assets of
the Pledgor, including any such right with respect to the Pledged Collateral,
are hereby waived by the Pledgor.
SECTION 20. LIMITATION BY LAW. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 21. SEPARABILITY. 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. Should any clause, sentence, paragraph, subsection or
Section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom by the parties hereto, and the remainder will have
the same force and effectiveness as if such stricken part or parts had never
been included herein.
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<PAGE>
SECTION 22. CAPTIONS. The captions in this Agreement have been inserted
for convenience only and shall be given no substantive meaning or significance
whatever in construing the terms and provisions of this Agreement.
SECTION 23. NO WAIVER; REMEDIES. No failure on the part of the Secured
Party or any Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 25. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS).
(B) THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF,
TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE
OF TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(II) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT
TO
PLEAD OR CLAIM THE SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION
OR PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY
REGISTERED OR CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL POSTAGE PREPAID) TO THE PLEDGOR AT 675 BERING, SUITE 710,
HOUSTON, TEXAS 77057, OR AT SUCH OTHER ADDRESS OF WHICH THE SECURED
PARTY SHALL HAVE BEEN NOTIFIED IN WRITING PURSUANT TO SECTION 16.
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<PAGE>
(IV) NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL IN
ANY WAY AFFECT THE RIGHT OF THE SECURED PARTY OR ANY BANK OR THE
PLEDGOR TO BRING ANY ACTION ARISING OUT OF OR RELATING TO THE NOTES
OR THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COMPETENT COURT
ELSEWHERE HAVING JURISDICTION OVER THE PLEDGOR OR THE SECURED PARTY,
AS THE CASE MAY BE, OR ITS PROPERTY.
SECTION 26. WAIVER OF JURY TRIAL. EACH OF THE SECURED PARTY, THE PLEDGOR,
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 27. NO INSOLVENCY PETITION AGAINST FIRC OR FIARC. The Pledgor
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of the obligations, it will not institute against,
or join any other person in instituting against, FIRC or FIARC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law. This Section
27 shall survive the termination of this agreement.
SECTION 28. FINAL AGREEMENT. THIS WRITTEN PLEDGE AND SECURITY AGREEMENT
AND THE OTHER LOAN DOCUMENTS EXECUTED BY THE PLEDGOR REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered,
effective as of the date first above written.
FIRST INVESTORS FINANCIAL SERVICES, INC.,
as Pledgor
By: BENNIE H. DUCK
Name: Bennie H. Duck
Title: Vice President Treasure
[Signature Page - Pledge and Security Agreement (FIRC and FIARC) - Page 1 of 1]
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PERCENTAGE OF
ISSUED AND
STOCK OUTSTANDING
CLASS OF CERTIFICATE NUMBER OF COMMON
STOCK ISSUER STOCK NO(S). PAR VALUE SHARES STOCK OF ISSUER
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
F.I.R.C., Inc. Common 1 $1.00 1,000 100%
First Investors Financial Common 1 $1.00 1,000 100%
Services, Inc.
</TABLE>
SI-1
<PAGE>
EXHIBIT A
FORM OF NOTICE LETTER
[LETTERHEAD OF NATIONSBANK]
July 18, 1997
NOTICE LETTER
NationsBank of Texas, N.A. (in its
individual capacity and as FIRC
Agent), as Bailee for the Agent
700 Louisiana
Houston, Texas 77002
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of July 18,
1997, by and among First Investors Financial Services, Inc., a Texas corporation
(the "BORROWER"), the financial institutions listed on the signature pages
thereof (each individually a "BANK" and collectively, the "BANKS"), and
NationsBank of Texas, N.A., agent for the Banks (in such capacity, the "AGENT")
(as the same may be amended, restated, extended, modified or renewed from time
to time, the "CREDIT AGREEMENT").
The Borrower has previously granted (i) a first priority lien and security
interest to NationsBank of Texas, N.A. (in its individual capacity,
"NATIONSBANK") in and to the outstanding capital stock of First Investors Auto
Receivables Corporation, a Delaware corporation (the "FIARC STOCK"), created by
and existing under the F.I.A.R.C. Pledge and Security Agreement, dated as of
October 22, 1996, between the Borrower and NationsBank and (ii) a first priority
lien and security interest to NationsBank of Texas, N.A., as agent for the
financial institutions that are or may become parties to the FIRC Agreement (as
defined in the Credit Agreement) (in such capacity, the "FIRC AGENT"), in and to
the outstanding capital stock of F.I.R.C., Inc., a Delaware corporation (the
"FIRC STOCK" and together with the FIARC Stock, the "PLEDGED SHARES"), created
by and existing under the Pledge and Security Agreement, dated as of October 16,
1992, as amended, between the Borrower and the FIRC Agent.
Pursuant to Section 9.305 of the Uniform Commercial Code of the State of
Texas, notice is hereby given to each of NationsBank and the FIRC Agent that, in
connection with the transactions contemplated by the Credit Agreement, the
Borrower has entered into that certain Pledge and Security Agreement (FIRC and
FIARC), dated as of July 18, 1997, with the Agent, pursuant to which
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<PAGE>
NationsBank of Texas, N.A. (in its
individual capacity and as FIRC
Agent), as Bailee for the Agent
Page 2
July 18, 1997
the Borrower has granted to the Agent a second priority lien and security
interest in and to the Pledged Shares.
The Borrower hereby requests that each of NationsBank and the FIRC Agent,
and each of NationsBank and the FIRC Agent hereby agrees, to act as bailee for
the Agent with respect to the Pledged Shares, and in such capacity, to hold the
Pledged Shares to perfect the second priority lien and security interest of the
Agent in and to the Pledged Shares.
Please indicate your acceptance and agreement to the matters contained in
this Notice Letter by executing an enclosed copy of this Notice Letter in the
space provided below and returning an original counterpart to the Agent.
NATIONSBANK OF TEXAS, N.A., as Agent
By:
Name:
Title:
FIRST INVESTORS FINANCIAL SERVICES,
INC., a Texas corporation
By:
Tommy A. Moore, Jr.
President
A-2
<PAGE>
NationsBank of Texas, N.A. (in its
individual capacity and as FIRC
Agent), as Bailee for the Agent
Page 3
July 18, 1997
Acknowledged and accepted as of the date
first above written
NationsBank of Texas, N.A. (in its individual
capacity and as FIRC Agent), as Bailee for
the Agent
By:
Name:
Title:
A-3
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 6,633,366
<SECURITIES> 0
<RECEIVABLES> 124,027,798
<ALLOWANCES> 1,263,564
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 145,198,315
<CURRENT-LIABILITIES> 0
<BONDS> 118,181,739
0
0
<COMMON> 5,567
<OTHER-SE> 24,515,481
<TOTAL-LIABILITY-AND-EQUITY> 145,198,315
<SALES> 4,853,298
<TOTAL-REVENUES> 4,853,298
<CGS> 1,819,265
<TOTAL-COSTS> 1,819,265
<OTHER-EXPENSES> 1,581,482
<LOSS-PROVISION> 711,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 921,177
<INCOME-TAX> 336,230
<INCOME-CONTINUING> 584,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 584,947
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
