EXHIBIT 10.43
SETTLEMENT AGREEMENT
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This Settlement Agreement (this "Agreement") is made and entered into as
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of the ___ day of April, 1997, by and among Jayhawk Acceptance Corporation (the
"Debtor"), Fleet Capital Corporation ("Fleet"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------ -----
("▇▇▇▇▇▇▇▇").
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RECITALS
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A. The Debtor and Fleet entered into that certain Loan and Security
Agreement, dated April 4, 1995, as amended by various amendments numbered First
through Seventh (as amended, the "Pre-Petition Loan Agreement"), pursuant to
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which Fleet made available to the Debtor a credit facility in an amount up to
$65,000,000, subject to certain terms and conditions.
B. On February 7, 1997 (such date, and the specific time of filing on
such date, being referred to as the "Petition Date"), the Debtor filed its
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Chapter 11 voluntary petition pursuant to 11 U.S.C. (S) 101 et seq. (the
"Bankruptcy Code") as Case No. 397-31261-SAF-11 (the "Bankruptcy Case") in the
--------------- ---------------
United States Bankruptcy Court for the Northern District of Texas, Dallas
Division (the "Bankruptcy Court"). The Debtor has continued to operate and
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manage its business from such date.
C. Since the Petition Date, the Debtor and Fleet have had disputes
concerning the Debtor's use of Fleet's cash collateral.
D. On or about February 11, 1997, the Bankruptcy Court entered the
Interim Order Authorizing The Use Of Cash Collateral And Providing For Adequate
Protection (the "First Interim Cash Collateral Order"), which governed the
-----------------------------------
Debtor's use of Fleet's cash collateral for the period from February 7, 1997
through February 28, 1997.
E. On or about March 14, 1997, the Bankruptcy Court entered the Second
Interim Order Authorizing The Use Of Cash Collateral And Providing For Adequate
Protection (the "Second Interim Cash Collateral Order"), which governs the
------------------------------------
Debtor's use of Fleet's cash collateral for the period from March 1, 1997
through March 31, 1997.
F. On or about March 25, 1997, the Bankruptcy Court entered the Third
Interim Order Authorizing The Use Of Cash Collateral And Providing For Adequate
Protection (the "Third Interim Cash Collateral Order"), which governs the
-----------------------------------
Debtor's use of Fleet's cash collateral for the period from April 1, 1997
through April 30, 1997 .
G. To settle all disputes of the parties hereto, including, but not
limited to, those arising from the Debtor's cash collateral motion and Fleet's
objections thereto, and to resolve issues addressed in this Agreement regarding
the Debtor's plan of reorganization, Fleet, the Debtor, and ▇▇▇▇▇▇▇▇ have
entered into this Agreement.
SETTLEMENT AGREEMENT - PAGE 1
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AGREEMENT OF PARTIES
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NOW, THEREFORE, for and in consideration of the mutual covenants set forth
in this Agreement and for other good and valuable consideration, Fleet, the
Debtor, and ▇▇▇▇▇▇▇▇ intending to be fully bound, agree to the above Recitals
and as follows:
1. Definitions. For purposes of this Agreement, the following terms will
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have the definitions set forth below:
"Bankruptcy Case" shall have the meaning given it in Recital B.
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"Bankruptcy Court" shall have the meaning given it in Recital B.
---------------- ---------
"Cash Collateral Orders" shall mean the First Interim Cash Collateral
----------------------
Order, the Second Interim Cash Collateral Order, the Third Interim Cash
Collateral Order (each as defined in the Recitals), and the Final Cash
Collateral Order.
"Debtor" shall have the meaning given it in the introductory paragraph
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to this Agreement, and, to the extent that this Agreement refers to the Debtor
from and after the Effective Date, the term "Debtor" as used herein shall also
-----
refer to the "Reorganized Debtor."
------------------
"Effective Date" shall have the meaning ascribed to it in the Plan.
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"Final Cash Collateral Order" shall mean the Joint Stipulation And
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Agreed Final Order Authorizing The Use Of Cash Collateral And Providing For
Adequate Protection, which shall be in the form attached hereto as Exhibit A, or
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as may be modified by the mutual agreement of Fleet and the Debtor.
"Final Order" shall mean an order of the Bankruptcy Court, as entered
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by the clerk of the Bankruptcy Court on a docket in, or related to, the
Bankruptcy Case, or an order of another court of competent jurisdiction that the
Bankruptcy Court has specifically permitted to proceed to enter such order, as
entered by the clerk of such court on the appropriate docket (i) as to which the
time to appeal or to seek certiorari has expired, and as to which no appeal or
petition for certiorari has been timely taken, or (ii) as to which any appeal
that has been or may be filed, such appeal or petition has been resolved by the
highest court to which the order was appealed or from which certiorari was
sought, and the time to appeal or any extension thereof or to seek certiorari of
such appellate order has expired.
"JayMed" shall mean Jayhawk Medical Acceptance Corporation, a Texas
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corporation.
"Loan Agreement" shall mean a Loan and Security Agreement in the form
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annexed hereto as B, or as may be modified by the mutual agreement of Fleet and
--
the Debtor.
SETTLEMENT AGREEMENT - PAGE 2
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"Loan Documents" shall mean the Note, the Loan Agreement, the Pledge
--------------
Agreement, the New Guaranty and all other documents executed in connection with
or as security for the Note.
"New Guaranty" shall mean the Limited Guaranty in the form annexed
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hereto as Exhibit C, or as may be modified by the mutual agreement of Fleet and
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the Debtor.
"Note" shall mean the Term Note in the form annexed hereto as Exhibit
---- -------
D, or as may be modified by the mutual agreement of Fleet and the Debtor.
-
"Obligations" shall mean the Debtor's obligations to Fleet under the
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Pre-Petition Loan Agreement (including the "Obligations", as defined therein),
together with the Debtor's and Reorganized Debtor's obligations herein.
"Participant" shall mean Texas Commerce Bank National Association.
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"Petition Date" shall have the meaning given it in Recital B.
------------- ---------
"Plan" shall mean a plan of reorganization in the form annexed hereto
----
as Exhibit F, or as may be modified by the mutual agreement of Fleet and the
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Debtor, which is to be filed by the Debtor in the Bankruptcy Case.
"Plan Confirmation" shall mean confirmation of the Plan by the
-----------------
Bankruptcy Court in the Bankruptcy Case.
"Pledge Agreement" shall mean the Pledge Agreement in the form annexed
----------------
hereto as Exhibit E, or as may be modified by the mutual agreement of Fleet and
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the Debtor.
"Pre-Petition Loan Agreement" shall have the meaning given it in
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Recital A.
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"Settlement Motion" shall mean a joint motion in the form of Exhibit G
----------------- ---------
annexed hereto, or as may be modified by the mutual agreement of Fleet and the
Debtor, to be filed in the Bankruptcy Court in support of and seeking
authorization for the Debtor to enter into and perform its obligations under
this Agreement.
"Settlement Order" shall mean an order approving the Settlement
----------------
Motion, which shall be in the form of Exhibit H annexed hereto, or as may be
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modified by the mutual agreement of Fleet and the Debtor.
"Trust" shall mean the Jayhawk Funding Trust I, a Delaware business
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trust, which is an entity wholly-owned by the Debtor.
"▇▇▇▇▇▇▇▇ Release" shall mean a release executed by ▇▇▇▇▇▇▇▇ in favor
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of Fleet and Participant, which shall be in the form of Exhibit I annexed
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hereto, or as may be modified by the mutual agreement of Fleet and the Debtor.
SETTLEMENT AGREEMENT - PAGE 3
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2. Plan Confirmation. The Debtor will seek to obtain Plan Confirmation
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as expeditiously as possible, and, in any event, not later than July 31, 1997.
Subject to satisfaction of the conditions precedent set forth in Sections 8 and
-------- -
9 below, Fleet will support the Plan and vote to accept it. The Debtor shall
-
cause JayMed to support and vote for the Plan.
3. Final Cash Collateral Order. The Debtor and Fleet agree to support
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and diligently seek approval of the Final Cash Collateral Order.
4. Payments. Prior to the Effective Date, the Debtor shall make to
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Fleet the payments as are provided for in the Third Interim Cash Collateral
Order, and, subject to Bankruptcy Court approval, the Final Cash Collateral
Order. After the Effective Date, the Debtor shall make to Fleet the payments
required by the Note, the other Loan Documents, and the Plan.
5. Collateral. Prior to the Effective Date, the Collateral securing the
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Obligations shall consist of the property of Debtor described in the Pre-
Petition Loan Agreement that was in existence on the Petition Date and such
other property of Debtor in which Fleet is accorded a lien pursuant to any of
the Cash Collateral Orders. After the Effective Date, the Collateral securing
the Obligations shall consist of all of the property described in any of the
Loan Documents.
6. Reporting. Prior to the Effective Date, the Debtor shall provide to
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Fleet reports in accordance with Cash Collateral Orders entered in the
Bankruptcy Case. After the Effective Date, the Debtor shall provide to Fleet the
reports as and when called for by the Loan Documents.
7. Loan Documents. On or before, but effective only on the Effective
--------------
Date, the Debtor shall execute or cause to be executed and deliver or cause to
be delivered to Fleet the Loan Documents and such other instruments, documents,
certificates, opinions and assurances as Fleet might reasonably request in
connection with the use of Fleet's cash collateral on the basis outlined in the
Loan Documents and in connection with the Debtor's authority and capacity to
accept the use of Fleet's cash collateral and execute the Loan Documents. Upon
the execution, delivery and effectiveness of the Loan Documents, the Loan
Documents will constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, and will supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties with respect thereto, including specifically, but without limitation,
this Agreement.
8. Specific Agreements of ▇▇▇▇▇▇▇▇. Prior to, but effective on, the
-------------------------------
Effective Date, ▇▇▇▇▇▇▇▇ shall execute and deliver to Fleet the New Guaranty and
the ▇▇▇▇▇▇▇▇ Release. ▇▇▇▇▇▇▇▇ shall support and vote for the Plan. ▇▇▇▇▇▇▇▇
shall execute or cause to be executed and deliver or cause to be delivered to
Fleet such instruments, documents, certificates, opinions and assurances as
Fleet might reasonably request in connection with the foregoing undertakings.
▇▇▇▇▇▇▇▇ consents to the terms of this Agreement and to the terms of the Plan
and the Loan Documents, which are annexed to this Agreement as Exhibits.
SETTLEMENT AGREEMENT - PAGE 4
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9. Conditions Precedent. Fleet's agreement to support and vote for the
--------------------
Plan is subject to satisfaction of each of the following conditions precedent:
(a) The Bankruptcy Court shall have entered the Final Cash Collateral
Order on or before April 30, 1997, and it shall have become a Final Order.
(b) The Debtor shall have filed the Plan on or before April 18, 1997,
with all of the Loan Documents appended to a Supplement to the Plan, which
will be filed with the Bankruptcy Court simultaneously with the Plan.
(c) The Plan is not modified or amended without Fleet's prior written
consent (which Fleet may give or withhold in its sole discretion).
(d) The Disclosure Statement shall have been filed on or before April
18, 1997.
(e) The Debtor shall have filed the Settlement Motion concurrently
with its filing of the Plan and shall have diligently and in good faith
sought to obtain entry of the Settlement Order.
(f) Fleet shall have reviewed and approved, in its reasonable
discretion, the Final Order Authorizing Debtor's Limited Use Of Cash
Collateral Of Prudential Securities Credit Corporation, which will be filed
in the Bankruptcy Case.
(g) No liens or other encumbrances shall have been created on the
Collateral securing the Obligations, other than liens and encumbrances in
favor of Fleet, the encumbrance in favor of Prudential Securities Credit
Corporation ("PSCC") covering the Debtor's interest in the Trust, which
----
shall secure only the indebtedness of the Debtor owing to PSCC as of the
Petition Date.
(h) JayMed, and any assignee, in whole or in part, of any claim of
JayMed in the Bankruptcy Case (including ▇▇▇▇▇▇▇▇), shall have voted for
and supported the Plan.
(i) The Disclosure Statement accompanying the Plan shall have been
approved by the Bankruptcy Court.
10. Certain Representations and Warranties. As further consideration for
--------------------------------------
the execution of this Agreement, each party hereby expressly warrants and
represents to the other party hereto that before executing this Agreement, each
such party has fully informed himself or itself of its terms, contents,
conditions and effects; that in executing this Agreement each such party has had
the opportunity to seek the benefits and advice of attorneys of its own choosing
and has voluntarily executed this Agreement; that no promise or representation,
oral or otherwise, has been made to him or it by any other party or anyone
acting for any other party, except as is expressly stated in this Agreement and
in the instruments referred to herein; and each party fully understands that the
considerations mentioned herein, and the receipt of the considerations which
SETTLEMENT AGREEMENT - PAGE 5
--------------------
are herein acknowledged and confessed, are all the considerations that are ever
to be given for the release of claims against the other party or parties. Each
party further warrants and represents that he or it has made no transfer or
assignment of any rights being released hereunder. Each of the parties further
warrants and represents that all necessary corporate and board approval has been
obtained approving this Agreement. Fleet, ▇▇▇▇▇▇▇▇ and the Debtor represent and
warrant that each one of them has the legal capacity to enter into this
Agreement, and this Agreement is binding and enforceable on each one of them in
accordance with its terms; provided, however, that this Agreement shall not be
binding upon the Debtor, the Debtor's estate or its creditors and other parties
until the Settlement Order is entered.
11. Time of Essence. Time is of the essence of this Agreement.
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12. Governing Law. This Agreement shall be governed by the laws of the
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State of Texas and by the laws of the United States of America, which are
effective this date.
13. Counterparts. This Agreement may be executed in counterparts, and
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when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument. However, no
party shall be required to exhibit or prove all counterparts of the original
agreement to make proof of same, rather each counterpart shall constitute an
enforceable agreement against the party who has executed the same.
14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective heirs,
successors, personal representatives and assigns hereto.
15. Final Agreement. THIS AGREEMENT, TOGETHER WITH ALL DOCUMENTS OR
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PLEADINGS REFERENCED HEREIN OR TO BE EXECUTED IN CONNECTION THEREWITH,
CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS,
UNDERSTANDINGS, NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE
PARTIES WITH RESPECT THERETO. NO AMENDMENT, MODIFICATION OR RESCISSION OF THIS
AGREEMENT SHALL BE EFFECTIVE UNLESS SET FORTH IN WRITING SIGNED BY EACH PARTY
HERETO.
16. JURY TRIAL WAIVER. EACH OF THE DEBTOR AND ▇▇▇▇▇▇▇▇ WAIVES THE RIGHT
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TO TRIAL BY JURY (WHICH FLEET HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL. EACH OF THE DEBTOR AND
▇▇▇▇▇▇▇▇ ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO
FLEET'S ENTERING INTO THIS AGREEMENT AND THAT FLEET IS RELYING UPON THE
FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH THE DEBTOR AND ▇▇▇▇▇▇▇▇. EACH OF
THE DEBTOR AND ▇▇▇▇▇▇▇▇
SETTLEMENT AGREEMENT - PAGE 6
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WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL
COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[This space intentionally left blank.]
SETTLEMENT AGREEMENT - PAGE 7
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IN WITNESS WHEREOF, the parties, acting individually or by and through
their duly authorized representatives, have executed this Agreement as of the
day and year first above written.
JAYHAWK ACCEPTANCE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: President
---------------------------------
Dated: April 17, 1997
FLEET CAPITAL CORPORATION
By: /s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: Vice President
---------------------------------
Dated: April 17, 1997
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ joins in this Agreement for
the purpose of evidencing his agreement with
the terms and conditions set forth in
Sections 8, 10, 15 and 16 of this Agreement
---------- -- -- --
and acknowledging accuracy of Recitals.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Dated: April 17, 1997
EXHIBITS:
--------
A - Final Cash Collateral Order
B - Loan Agreement
C - New Guaranty
D - Note
E - Pledge Agreement
F - Plan
G - Settlement Motion
H - Settlement Order
I - ▇▇▇▇▇▇▇▇ Release
SETTLEMENT AGREEMENT - PAGE 8
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STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
BEFORE ME, the undersigned authority, on this day personally appeared H.
▇▇▇▇▇▇▇ ▇▇▇▇▇, known to me to be the person whose name is subscribed to this
Settlement Agreement and acknowledged that he is the Vice President of Fleet
Capital Corporation and that he is fully authorized to execute this Settlement
Agreement for the purposes and consideration expressed herein.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17 day of April, 1997.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
NOTARY PUBLIC
in and for the State of Texas
My Commission Expires:
9/22/97
------------------------
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
BEFORE ME, the undersigned authority, on this day personally appeared ▇▇▇▇
▇. ▇▇▇▇▇, known to me to be the person whose name is subscribed to this
Settlement Agreement and acknowledged that he is the President of Jayhawk
Acceptance Corporation and that he is fully authorized to execute this
Settlement Agreement for the purposes and consideration expressed herein.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17 day of April, 1997.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
NOTARY PUBLIC
in and for the State of Texas
My Commission Expires:
9/22/97
----------------------
SETTLEMENT AGREEMENT - PAGE 9
--------------------
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
BEFORE ME, the undersigned authority, on this day personally appeared ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, known to me to be the person whose name is subscribed to this
Settlement Agreement and acknowledged that he is ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and that he is
executing this Settlement Agreement for the purposes and consideration expressed
herein.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17 day of April, 1997.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
NOTARY PUBLIC
in and for the State of Texas
My Commission Expires:
12/16/2000
---------------------
SETTLEMENT AGREEMENT - PAGE 10
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EXHIBIT A
---------
to
Settlement Agreement
Final Cash Collateral Order
---------------------------
[Attached.]
EXHIBIT A - PAGE 1
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: (S)
(S)
JAYHAWK ACCEPTANCE (S) NO. 397-31261-SAF-11
CORPORATION, (S)
(S) CHAPTER 11
DEBTOR. (S)
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL
AND PROVIDING FOR ADEQUATE PROTECTION
-------------------------------------
On the ____ day of April, 1997, there came on for consideration the
final hearing on the Debtor's Joint Motion To Approve Entry Of Joint Stipulation
And Agreed Final Order Authorizing The Use Of Cash Collateral And Providing For
Adequate Protection, with respect to the Debtor's request to use cash collateral
for the period from and after May 1, 1997 pursuant to the terms hereof (the
"Motion"). Fleet Capital Corporation ("Fleet") appeared by and through its
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counsel, ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. of the law firm of ▇▇▇▇▇▇ & ▇▇▇▇, L.L.P. and C.
▇▇▇▇▇▇ ▇▇▇▇▇, Esq. of the law firm of Parker, Hudson, Rainer & ▇▇▇▇▇, L.L.P.;
the Debtor, Jayhawk Acceptance Corporation (the "Debtor"), appeared by and
------
through its counsel, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. of the law firm of Weil, Gotshal &
▇▇▇▇▇▇, L.L.P. Counsel for the Debtor and Fleet announced to the Court that
parties had reached agreement with respect to issues relating to the Debtor's
use of cash collateral of Fleet and Fleet's request for adequate protection
thereof, which agreement is set forth hereafter. The Court finds that notice is
sufficient and appropriate under the particular circumstances of this case. The
Court is advised that Fleet has demanded adequate protection of its interests in
its collateral to be used by the Debtor under 11 U.S.C. (S)(S) 361 and 363. The
Debtor represented to the Court that it will comply with the terms of this Joint
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 1
-------------------------------------------
Stipulation And Agreed Final Order Authorizing Use Of Cash Collateral And
Providing For Adequate Protection (this "Final Cash Collateral Order"). The
---------------------------
parties hereto stipulate and agree to the terms set forth herein, and the Court
finds that there is cause to adopt said stipulation and approve the agreement of
such parties. The Court hereby makes the following findings of fact and
conclusions of law as set forth below:
I. FINDINGS OF FACT
1. Appropriate notice and opportunity for hearing have been
given for the Motion in accordance with the provisions of (S)(S) 361 and 363 of
the Bankruptcy Code. This Court has jurisdiction of this contested matter
pursuant to 28 U.S.C. (S) 1334. This is a core proceeding as defined in 28
U.S.C. (S) 157(b)(2)(A), (M), and (O) and is governed by 11 U.S.C. (S)(S) 361
and 363.
2. On or about February 7, 1997 (such date, and the specific time of
filing on such date, being referred to as the "Petition Date"), the Debtor filed
-------------
its voluntary petition under Chapter 11 of the Bankruptcy Code. Since that date,
the Debtor has remained in possession of its property and operated its affairs
as a debtor-in-possession pursuant to 11 U.S.C. (S)(S) 1107 and 1108.
3. The Debtor, which is a Texas corporation, is a specialized
financial services company, principally engaged in the business of serving
automobile dealers in the sub-prime credit market, providing an indirect
financing source to buyers of used vehicles with limited access to traditional
sources of consumer credit. The Debtor also owns 100% of the shares of Jayhawk
Medical Acceptance Corporation ("Jaymed") and Jayhawk Services, Inc.
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("Jayserv"), neither of which have filed for bankruptcy protection. Jaymed is a
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start-up subsidiary in a large new market of purchasing, what the Debtor
maintains are, creditworthy receivables from plastic surgeons, other doctors and
dentists. The Debtor maintains that Jayserv is the employer of all of the
employees of Jaymed and Debtor.
4. No party disputes that during 1996, Jayhawk completed two
securitization transactions, whereby it created Jayhawk Funding Trust I, a
Delaware business trust (the "Trust"), selling contracts (the "Trust
----- -----
Contracts") to the Trust having an aggregate principal balance of approximately
---------
$177 million. The Debtor maintains that the Trust sold approximately $42
million in aggregate principal face amount of notes (the "Series A Notes") to
--------------
investors in March 1996, and the Trust sold approximately $47.9 million in
aggregate principal face amount of notes (the "Series B Notes") to a single
--------------
investor in August 1996.
5. The Debtor maintains that neither the Trust Contracts nor any
collections from such Trust Contracts are property of the estate. The legal and
beneficial ownership interest (shares) in the Trust holding the Trust Contracts
is owned by the Debtor. The Debtor also services the Trust Contracts owned by
the Trust, receiving income in the form of servicing fees.
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 2
-------------------------------------------
6. The Debtor maintains that Prudential Securities Credit
Corporation ("Prudential") holds a valid and properly perfected security
----------
interest in the Debtor's legal and beneficial ownership interest (shares) in the
Trust and the Trust shares, securing the principal sum of approximately $5
million as of the Petition Date.
7. The Debtor's operation of its business requires that it use Cash
Collateral (as defined below) of Fleet immediately under the terms hereof to
preserve the assets of its estate and to enable its operations to continue from
and after May 1, 1997. Without the use of its Cash Collateral, the Debtor will
suffer irreparable harm.
8. The Debtor acknowledges the debts owed to Fleet defined as the
"Pre-Petition Indebtedness" in Fleet's first objection filed with the Court on
February 11, 1997 (hereafter "Fleet Objection 1"), and acknowledges that Fleet
-----------------
is oversecured. Fleet maintains that it has a first, valid, prior, and perfected
security interest in and lien on the Fleet Collateral (as defined in Fleet
Objection 1), and all proceeds thereof, including cash collateral derived
therefrom that constitute "cash collateral" within the meaning of 11 U.S.C. (S)
363(a) (subject to the provisions of paragraph 3(f) below, the "Cash
----
Collateral"), to secure repayment of the Pre-Petition Indebtedness.
----------
9. The Debtor admits, acknowledges, and stipulates that the
principal amount of the Pre-Petition Indebtedness, as of the Petition Date, owed
by the Debtor to Fleet (under the Loan Documents, as defined in Fleet Objection
1) is $63,079,797.34 in unpaid principal, exclusive of accrued but unpaid
interest, attorneys' fees, costs and expenses.
10. Fleet maintains that the Pre-Petition Indebtedness is secured by
first, valid, prior, and continuing perfected security interests in and liens on
all of the Fleet Collateral and the proceeds and products thereof, all as more
fully described in the Loan Documents, and any and all rents, income, or
proceeds derived therefrom, and accessions, substitutions, renewals,
improvements, replacements, and additions thereto, then owned or thereafter
acquired by the Debtor, and all rights and property of any kind forming the
subject matter of any of the foregoing existing as of the Petition Date,
including the Cash Collateral and all post-petition proceeds and products
thereof under 11 U.S.C. (S) 552(b) (collectively, the "Pre- Petition
-------------
Collateral"). Fleet and the Debtor maintain that the Pre-Petition Indebtedness
----------
is fully secured by the Pre-Petition Collateral. The Pre-Petition Collateral
continues to secure the repayment of the Pre-Petition Indebtedness as evidenced
by the Loan Documents.
11. Based upon descriptions of the Pre-Petition Collateral in the
parties' pleadings and statements by counsel for the Debtor and for Fleet, the
Pre-Petition Collateral includes a large amount of consumer chattel paper, much
of which is located in a secure storage facility at Inwood Security Vaults, Inc.
Fleet has consented to Debtor's access to the Fleet Collateral and the Post-
Petition New Contracts (as defined hereafter) located at the storage facility,
subject to the conditions set forth below. Those contracts funded by the Debtor
from and after the Petition Date which are funded with any Cash Collateral are
hereafter referred to as the "Post-Petition New Contracts." Auto contracts which
---------------------------
the Debtor reported in Fleet's Borrowing Base as Fleet's
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 3
-------------------------------------------
collateral as of the Petition Date, but which the Debtor had not purchased as of
the Petition Date, and that are estimated by the Debtor as of the Petition Date
to be in the amount of $10 million, less $3.4 million of such auto contracts
later unwound by the Debtor, together with auto contracts purchased by the
Debtor from the Petition Date through and including February 28, 1997, shall
hereafter be referred to, as the "Additional Fleet Contracts." As of this date,
--------------------------
all of the Additional Fleet Contracts have been funded by the Debtor. Hereafter,
the term "Existing Fleet Collateral" shall mean the Pre-Petition Collateral,
-------------------------
the Post-Petition New Contracts, and the Additional Fleet Contracts, and any
"cash collateral" derived therefrom within the meaning of 11 U.S.C. (S) 363(a).
12. On February 11, 1997, this Court entered a certain Order
Authorizing The Use of Cash Collateral And Providing For Adequate Protection
(the "First Interim Cash Collateral Order"), which governed the Debtor's use of
-----------------------------------
Cash Collateral for the period from February 1, 1997 to February 28, 1997.
13. On or about March 14, 1997, this Court entered a certain Second
Interim Order Authorizing The Use of Cash Collateral And Providing For Adequate
Protection (the "Second Interim Cash Collateral Order"), which governed the
------------------------------------
Debtor's use of Cash Collateral for the period from March 1, 1997 to March 31,
1997.
14. On or about March 25, 1997, this Court entered a certain Third
Interim Order Authorizing The Use of Cash Collateral And Providing For Adequate
Protection (together with the Supplement thereto, collectively, the "Third
------
Interim Cash Collateral Order"), governing the Debtor's use of Cash Collateral
-----------------------------
for the period from April 1, 1997 to April 30, 1997.
15. The Debtor and Fleet have reached agreement with respect to the
Debtor's use of Cash Collateral for the period from and after May 1, 1997
pursuant to the terms set forth herein and in that certain Settlement Agreement,
by and among Fleet, the Debtor, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, dated April ___, 1997 (the
"Settlement Agreement"); and the Debtor has sought approval from this Court. The
--------------------
terms and provisions of the Settlement Agreement and the Exhibits thereto are
incorporated herein, but the Settlement Agreement is not binding upon the
parties thereto unless authorized pursuant to a separate order of this Court.
16. This Final Cash Collateral Order shall be effective on the date
that this Court signs this Final Cash Collateral Order.
WHEREUPON, the Court makes the following conclusions of law:
II. CONCLUSIONS OF LAW
A. Fleet, as the holder of a secured claim against the Debtor, is
entitled to adequate protection of its interests in the Fleet Collateral under
11 U.S.C. (S)(S) 361 and 363, as provided below.
B. Fleet agrees that it is adequately protected for the period from
and after May 1, 1997 by the provisions of this Final Cash Collateral Order.
Fleet should be granted a
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 4
-------------------------------------------
replacement lien in any Post-Petition New Contracts which are funded by the use
of its Cash Collateral and should receive the same reports from the Debtor as
the Debtor had furnished pre-petition, together with such reports as provided
below.
C. The entry of this Final Cash Collateral Order is in the best
interests of the Debtor, its creditors, and its estate, and it is necessary to
the continued operations of the Debtor's business.
BASED UPON THE FOREGOING, it is therefore ORDERED, ADJUDGED, AND
DECREED:
1. Fleet shall be entitled to all of the benefits, rights,
protections, and liens of the First Interim Cash Collateral Order, the Second
Interim Cash Collateral Order, and the Third Interim Cash Collateral Order, each
of which shall continue in effect in accordance with the terms thereof.
2. Subject to the limitations and conditions hereof, the Debtor is
hereby authorized to use the Cash Collateral in accordance with the provisions
set forth in the Budget, with no single line item expenditure to exceed 10% of
the Budget amount as of the end of each month. As used herein, the following
terms have the following meanings:
(a) The term "Budget" means initially, for the first Budget
------
Period, the budget which is attached to this Final Cash Collateral
Order as Exhibit "A" and made a part hereof, and, thereafter, either
-----------
(i) any future budget that is mutually agreed to by Fleet
and the Debtor in writing, or
(ii) if no mutual agreement has been reached in writing as
of the end of any applicable expiring Budget Period, then such
budget that is for substantially the same purposes and in
substantially the same amounts for such line items as are set
forth in Exhibit "A" attached to this Final Cash Collateral
-----------
Order.
(b) The term "Budget Period" means initially the period from and
-------------
after May 1, 1997 through the end of the period provided for in the
initial Budget, and, thereafter, the period as may be provided for in
any future Budget.
The Debtor shall be entitled to use unspent funds, denominated in the budgets
attached to the Second Cash Collateral Order and the Third Interim Cash
Collateral Order as "Available for Post-Petition Fundings," for the respective
periods from March 1, 1997 to March 31, 1997 and April 1, 1997 to April 30, 1997
for the same purposes during the period from May 1, 1997 to July 31, 1997 in
accordance with this Final Cash Collateral Order, in addition to funds in such
amounts and for such purposes as provided in the attached Budget, in accordance
with the terms hereof. Notwithstanding the foregoing, so long as the Debtor
serves as servicing agent for the Trust, the Debtor is further authorized and
directed to continue to collect as servicing agent for
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 5
-------------------------------------------
the Trust and segregate and pay over to the Trust all collections attributable
to the Trust Contracts.
3. (a) Subject to subparagraphs 3(e) and 3(f) below, as adequate
protection to Fleet and to safeguard Fleet against any diminution in the
value of the Pre-Petition Collateral from the use of Cash Collateral, Fleet
shall have (in addition to its lien upon the Pre-Petition Collateral as
security for its claim against the Debtor) and is hereby granted valid and
perfected continuing and replacement security interests and liens in and
upon all of the Post-Petition New Contracts and proceeds thereof to the
extent of the Cash Collateral expended in purchasing such Post-Petition New
Contracts. The Debtor shall provide to Fleet a daily listing of the
following:
(i) all of the Post-Petition New Contracts funded with Cash
Collateral;
(ii) those contracts that are booked or processed by the Debtor
and have not been funded (the "Unfunded Contracts");
------------------
(iii) those contracts intended by the Debtor to become funded in
the future by the Debtor;
(iv) those contracts intended to become "Unwound Contracts" (as
defined below) in the future; and
(v) those contracts that were pledged as collateral to Fleet
as of February 7, 1997.
The Debtor shall separately identify the collections of the Post-Petition New
Contracts, and provide to Fleet the quality of information previously required
in the form of the Borrowing Base Reports. For the period from and after March
1, 1997, the Debtor shall provide daily to Fleet two (2) separate Borrowing Base
Reports:
(i) one calculating the Borrowing Base from and after February
28, 1997 with respect to Fleet collateral consisting of the Post-
Petition New Contracts (exclusive of the Additional Fleet Contracts);
and
(ii) the other calculating the Borrowing Base with respect to
Fleet collateral existing as of February 28, 1997 (inclusive of the
Additional Fleet Contracts), with each report not distinguishing
whether such contracts have been funded or not funded.
The replacement liens granted hereby are retroactive to the Petition Date. A
contract which is unwound by the Debtor (an "Unwound Contract") is a contract
----------------
which results in the Debtor returning to a dealer a previously tendered
installment contract, title, and accompanying documentation for such
transaction.
(b) As further adequate protection for the Debtor's use of Cash
Collateral, the Debtor shall pay to Fleet monthly interest as provided below, on
the first day of the month. In addition
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 6
-------------------------------------------
to the interest payments, the Debtor shall pay to Fleet, as adequate protection
to protect Fleet's interest in the Fleet Collateral, the principal amounts shown
below for the periods corresponding thereto. If the Debtor fails to pay for any
week the minimum of $500,000 due Fleet for such week as set forth in clause
(iii) below, then the Debtor may not use any Cash Collateral to purchase Post-
Petition New Contracts until Fleet is brought current. If the Debtor is more
than one weekly payment in arrears, the Debtor's right to use Cash Collateral
shall be limited to such amounts as Fleet, in its sole discretion, may authorize
the Debtor to use. No Cash Collateral may be used in any month unless during the
immediately preceding month Fleet has received all payments of principal and
interest required to be paid to Fleet for such preceding month. Fleet's Cash
Collateral may be used for pre-petition repossession claims pursuant to a
separate Order of this Court providing for same. The Debtor shall make the
following payments to Fleet:
(i) Interest. Accrued interest will continue to be paid to
--------
Fleet monthly, in arrears, on the first day of the month, commencing
June 1, 1997, at the non-default rate of interest provided in the Loan
Documents, without waiver of Fleet's right to assert the default rate
of interest as provided in the Loan Documents.
(ii) Monthly Principal Amortization. The outstanding
------------------------------
prinicpal balance of Fleet's claim (which is stipulated by the parties
hereto to be $63,079,797.34 in principal amount as of the Petition
Date) shall be due and payable to Fleet in monthly installments, the
aggregate amount of which during any particular month shall be not
less than the amount specified for such month as set forth below:
PER MONTH
MONTH: INSTALLMENT AMOUNT
------ ------------------
May through July, 1997 $4,000,000
August, 1997 $3,500,000
September, 1997 $3,250,000
October and November, 1997 $3,000,000
December, 1997 $2,750,000
January, 1998 $2,500,000
February, 1998 $2,000,000
March through August, 1998 $3,000,000
(iii) Weekly Principal Amortization. Weekly partial payments of
-----------------------------
the principal payment due for any month will be made to Fleet in the
amount of $500,000 per week, with the balance of such monthly payment
due not later than the end of the month. The foregoing amortization
will commence immediately.
(iv) Mandatory Prepayments. In addition to the principal
---------------------
payments provided for above, mandatory prepayments of principal will
be due and payable on a quarterly basis, on the 15th day of each
March, June, September and December, beginning June 15, 1997. The
amount of each mandatory prepayment shall be equal to fifty percent
(50%) of
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 7
-------------------------------------------
Excess Cash Flow as defined below, with the first such payment, if any, for
the payment due June 15, 1997 to be placed into a separate segregated,
blocked account subject to Fleet's liens, at Texas Commerce Bank, and
distributed to Fleet on the earliest to occur of the following:
(i) the effective date of the Plan (as defined below),
(ii) an Event of Default (as defined below), or
(iii) September 15, 1997.
All such mandatory prepayments for future periods shall be paid to Fleet
when due. "Excess Cash Flow" will be measured on a cumulative basis,
beginning March 1, 1997 and continuing thereafter, and will consist of all
of the "Net Collections" received by the Debtor since March 1, 1997 through
the end of the month immediately preceding any principal prepayment due
date. As a result of the cumulative aspect of measuring Net Collections,
the Debtor will be entitled to a credit to each mandatory prepayment due,
which credit will be equal to the amount of mandatory prepayments
previously made pursuant to the requirements of this paragraph. In no
event, however, will this credit calculation require Fleet to refund any
mandatory prepayments by the Debtor. All mandatory prepayments will be
applied to principal amounts due in the inverse order of maturity. As used
herein, the following terms have the following meanings:
"Collections" shall mean all interest collections, all principal
-----------
collections, all other collections, and all recoveries net of expenses
of the each case, from (i) the Debtor's auto contracts owned as of the
Petition Date, (ii) the auto contracts owned by the Trust as of the
Petition Date, and (iii) the Additional Fleet Contracts.
"Excess Cash Flow" shall mean the amount, if any, by which actual
---------------- ------
Net Collections exceed Projected Net Collections.
"Gross Collections" shall mean the Collections.
-----------------
"Net Collections" shall mean the remainder of (i) Gross
---------------
Collections, less (iii) Collections that are retained by the Trust and
not distributed to the Debtor.
"Projected Gross Collections" shall mean the Debtor's projected
---------------------------
estimate of Gross Collections. The Debtor's projected estimate of such
collections is attached to this Final Cash Collateral Order as Exhibit
-------
"C" and made a part hereof.
---
"Projected Net Collections" shall mean the Debtor's projected Net
-------------------------
Collections, which form the basis for the calculation of Excess Cash
Flow and
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 8
-------------------------------------------
which are attached to this Final Cash Collateral Order as Exhibit "B"
-----------
and made a part hereof.
(c) As further adequate protection to Fleet, and as a condition to
Debtor's ongoing right to use Cash Collateral, the Debtor agrees to achieve
Collections on the Debtor's auto contracts for the three (3)-month period
consisting of the calendar month then ended plus the immediately preceding two
calendar months (i.e., a rolling three (3)-month period), of not less than
eighty-five percent (85%) of Projected Gross Collections for the same rolling
three (3)-month period. If a default occurs by reason of a breach of this
covenant, then the Debtor will have the opportunity to cure this default for a
period of five (5) days from the earlier of the date of actual delivery, or, if
------
not delivered as required, the date of required delivery (which date will be not
--------
later than fifteen (15) days after the end of each month), to Fleet of a monthly
compliance certificate, executed by the President, Senior Vice President and
Chief Financial Officer, or Vice President and Comptroller of the Debtor for the
applicable month then ended, by making a prepayment (a "Cure Payment") on the
------------
outstanding principal amount of the Fleet indebtedness in an amount equal to the
difference between eighty-five percent (85%) of the Projected Gross Collections
and the actual amount of Gross Collections. All such prepayments will be
------
applied to principal amounts due in the inverse order of maturity. The first
measurement of this covenant will be conducted for the three (3) month period
that ends on May 31, 1997. This covenant is referred to as the "Gross
-----
Collections Covenant." If the Debtor makes a Cure Payment, as provided above,
--------------------
then, for purposes of subsequent calculations of the Gross Collections Covenant
that involve any of the calendar months that were included in the calculation of
the Gross Collections Covenant with respect to which a Cure Payment was made,
the Collections, as a percentage of Projected Gross Collections, for any of such
months, will be deemed to be 85%; it being the intention of the parties to avoid
creating a default for a breach of the Gross Collections Covenant that is
calculated for a calendar month subsequent to a calendar month for which the
Debtor cured a default under the Gross Collections Covenant by making a Cure
Payment.
(d) As of July 31, 1997, and as additional adequate protection to
Fleet, cash collateral issues in accordance with the Settlement Agreement, the
Debtor has agreed in the Settlement Agreement and by the terms hereof that it
will diligently and in good faith seek confirmation of the Debtor's Plan of
Reorganization attached to the Settlement Agreement as an exhibit thereto, or as
modified by the mutual agreement in writing of Fleet and the Debtor (the
"Plan"). Fleet has agreed to support the Plan so long as each of the conditions
----
precedent set forth in the Settlement Agreement are satisfied.
(e) If the effective date of the Plan does not occur on or before July
31, 1997, then Fleet shall have, and the Debtor shall be deemed to have granted
to Fleet, a replacement lien on and security interest in the Debtor's legal and
beneficial ownership interest in the Trust and the rights to distribution
therefrom (subject only to Prudential's existing lien thereon securing its
existing indebtedness), to the extent of an amount equal to all Cash Collateral
used by the Debtor during the pendency of the Chapter 11 Case and all Cash
Collateral on hand as of July 31, 1997, less all adequate protection payments of
----
principal and interest made to Fleet. Contemporaneously with the Debtor's grant
to Fleet of such replacement lien, as provided in the immediately preceding
sentence,
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 9
-------------------------------------------
(i) the Debtor and Fleet shall implement the cash management
procedures as contemplated by and provided in Section 5.2.4 of the Loan and
Security Agreement to be executed by the Reorganized Debtor and Fleet on or
before the effective date of the Plan and in the form attached as Exhibit B
to the Settlement Agreement (the "New Fleet Loan Agreement"); and
------------------------
(ii) on and after July 31, 1997, the Existing Fleet Collateral shall
be deemed, by the terms of this Final Cash Collateral Order, to be replaced
by all of the "Collateral" as defined in the New Fleet Loan Agreement
(hereinafter the "Reconstituted Fleet Collateral") to secure the Pre-
------------------------------
Petition Indebtedness, and Fleet shall be deemed to release, by the terms
of this Final Cash Collateral Order, its liens on any of the Existing Fleet
Collateral that does not constitute Reconstituted Fleet Collateral.
(f) After July 31, 1997, in the event the Plan does not become effective
on or before July 31, 1997, the term "Cash Collateral," as used in this Final
Cash Collateral Order, shall mean "cash collateral" within the meaning of 11
U.S.C. (S) 363(a) that is derived from the Reconstituted Fleet Collateral, other
than cash distributed to the Debtor's operating account in accordance with
subparagraph 3(e)(i) above and Section 5.2.4 of the New Fleet Loan Agreement. On
and prior to July 31, 1997, the term "Cash Collateral," as used in this Final
Cash Collateral Order, shall mean "cash collateral" within the meaning of 11
U.S.C. (S) 363(a) that is derived from the Existing Fleet Collateral, unless the
Plan becomes effective before such date.
(g) Fleet shall be entitled to all of its rights and protections with
respect to the unwinding of contracts as provided in the Second Interim Cash
Collateral Order. The Debtor agrees and stipulates that (i) the total amount of
unfunded contracts pledged to Fleet as collateral and included in the Borrowing
Base as of February 7, 1997 was approximately $10 million; and (ii) of that
approximately $10 million amount, approximately $6.6 million of such contracts
have now been funded by the Debtor, constitute Post-Petition New Contracts, and
are part of Fleet's collateral.
4. This Final Cash Collateral Order shall be sufficient and conclusive
evidence of the priority, perfection, and validity of all of the security
interests in and liens upon the property of the estate of the Debtor granted to
Fleet as set forth in this Final Cash Collateral Order, and the liens and
security interests granted and created herein shall, by virtue of this Final
Cash Collateral Order, constitute valid and perfected security interests without
the necessity of creating, filing, recording, or serving any financing
statements or other documents that might otherwise be required under federal or
state law in any jurisdiction or the taking of any other action to validate or
perfect the security interests and liens granted to Fleet in this Final Cash
Collateral Order and the Loan Documents. If Fleet shall, in its discretion,
elect for any reason to file any such financing statements or other documents
with respect to such security interests and liens, the Debtor is authorized and
directed to execute, or cause to be executed, all such financing statements or
other documents upon Fleet's reasonable request, and the filing, recording, or
service thereof (as the case may be) of such financing statements or similar
documents shall be deemed to have been made at the time of and on the Petition
Date, and the signature(s) of any
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 10
-------------------------------------------
person(s) designated by the Debtor, whether by letter to Fleet or by appearing
on any one or more of the agreements or other documents respecting the security
interest and lien of Fleet in and upon the Collateral, shall bind the Debtor and
its estate. Fleet may, in its discretion, file a certified copy of this Final
Cash Collateral Order in any filing or recording office in any county or other
jurisdiction in which the Debtor has real or personal property, and, in such
event, subject to applicable law, the subject filing or recording officer is
authorized and directed to file or record such certified copy of this Final Cash
Collateral Order.
5. Subject to subparagraphs 3(e) and 3(f) above, Inwood Security Vaults,
Inc., the Custodian under the Custodial Agreement between the Debtor and Fleet,
dated April 6, 1995, is authorized and directed to allow the Debtor to enjoy all
privileges it has under said Custodial Agreement to Fleet's collateral held by
said Custodian, subject to the following:
(1) any use or disposition of the Accounts and Auto Titles (as
defined in the Custodial Agreement) that are removed from the possession of
the Custodian (as defined in the Custodial Agreement) will be solely in
accordance with the terms and conditions of the Custodial Agreement;
(2) the proceeds of any sale or disposition of the Accounts and Auto
Titles that are subject to the terms of the Custodial Agreement are, and
shall remain Cash Collateral; and
(3) perfection and priority of Fleet's security interest in and to
the Accounts and Auto Titles shall continue and be preserved and
maintained, notwithstanding any interruption or lapse of Fleet's perfection
that otherwise would occur following any use or disposition of the Accounts
or Auto Titles other than as specifically provided in the Custodial
Agreement.
6. (a) The Debtor shall be bound to cooperate immediately with Fleet to
provide Fleet not less than two (2) business days after the end of each
preceding Friday during the term of this Final Cash Collateral Order with
all reports reasonably requested by Fleet, including, without limitation,
financial and collateral information, and such information described below.
Fleet shall have the right to visit the Debtor's business from time to time
during ordinary business hours and conduct audits after reasonable notice
and accompanied by an officer of the Debtor. The Debtor shall be bound to
provide to Fleet the following:
(i) on a weekly basis, the Debtor's actual performance and
results of operations as compared to its Budget, as to each and every
line item on the Budget;
(ii) management's report and explanation of the variance, if
any, from its Budget;
(iii) copies of all reports made to the United States Trustee,
and
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 11
-------------------------------------------
(iv) any financial records or statements regularly generated in
the normal course of its business.
The Debtor shall continue to be bound to furnish to Fleet reports as it had
furnished pre-petition including, without limitation, a daily report of
collections and a report in the form attached as Exhibit "B" to the Fleet
Objection 1. Each day the Debtor shall provide to Fleet Borrowing Base
Reports, including an aging of the auto contracts and accompanied by copies
of the underlying work papers which substantiate the numbers on each such
report, to the extent provided pre-petition. Not less than fifteen (15)
days after the end of each month, the Debtor shall provide to Fleet reports
pertaining to Net Collections, Gross Collections, Excess Cash Flow, the
Debtor's performance of the Gross Collections Covenant, the monthly static
pool analysis, and the payment status of each auto contract (including an
aging of each auto contract.) If the Debtor fails to provide timely to
Fleet the reports as provided in this paragraph 6(a), the Debtor shall have
five (5) business days after written notice from Fleet of such default to
cure same and provide such reports to Fleet, but during such period of
default, the Debtor shall have no right to use any Cash Collateral.
(b) The Debtor shall not fund the expenses of Jaymed directly or
indirectly through Jayserv.
(c) Unless authorized pursuant to a separate Order of this Court, the
Debtor has no authority to pay pre-petition debts owing to (i) auto
repossession contractors, (ii) collection system consultants, or (iii)
dealers on account of their Dealer Agreements with the Debtor.
(d) Unless authorized pursuant to a separate Order of this Court, the
Debtor shall not fund any sums for legal, accounting or investment banking
services.
7. In the event of the occurrence of any of the following:
(a) the Debtor's violation of any of the terms of this Final Cash
Collateral Order;
(b) conversion of the Chapter 11 case of the Debtor to a case under
Chapter 7 of the Bankruptcy Code;
(c) the appointment of a trustee pursuant to Section 1104(a)(1) or
(a)(2) of the Bankruptcy Code in this case;
(d) dismissal of the Debtor's Chapter 11 case,
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 12
-------------------------------------------
(e) failure to file the Plan on or before April 18, 1997, amendment
of the Plan in a manner that is unacceptable to Fleet and is inconsistent
with the terms of the Settlement Agreement, or withdrawal of the Plan; or
(f) failure to support and diligently and in good faith seek
confirmation of the Plan
(any of the foregoing being referred to in this Final Cash Collateral Order,
individually, as an "Event of Default" and, collectively, as "Events of
---------------- ---------
Default"); then (unless such Event of Default is specifically waived in writing
-------
by Fleet, which waiver shall not be inferred from any other action, inaction, or
acquiescence by Fleet) upon or after the occurrence of any of the foregoing,
(x) with respect to a failure by the Debtor to make timely payments
of principal and interest as provided for in paragraphs 3(b) or 3(c) above
or timely provide such reports to Fleet as provided in paragraph 6(a)
immediately above, the Debtor's breach of its covenants in any of such
paragraphs shall result in the immediate cessation of any Cash Collateral
use by the Debtor, or
(y) with respect to any breach of the above Events of Default
exclusive of those referred to in the subparagraph (x) above, after Fleet's
giving three (3) business days' notice, served by overnight delivery
service or telefax upon the Debtor, the Debtor's counsel, counsel to the
Unsecured Creditors' Committee, and the United States Trustee, the Debtor
shall not use any of the Cash Collateral without further order of the
Court, which shall not issue until after notice and a hearing.
Any further order of this Court governing the use of Cash Collateral shall
afford adequate protection to Fleet on terms no less favorable than those set
forth in this Final Cash Collateral Order.
8. The provisions of this Final Cash Collateral Order shall inure to the
benefit of the Debtor and Fleet and shall be binding upon the Debtor and its
successors and assigns, and shall also be binding upon all creditors of the
Debtor and other parties in interest from and after the date of the signing of
this Final Cash Collateral Order.
9. Nothing contained herein shall preclude Fleet from making appropriate
application or request to the Court for such other relief as shall be necessary
to protect adequately its interests, including, without limitation, including,
but not limited to, objecting to the Debtor's violation of the terms of this
Final Cash Collateral Order and any use of the Cash Collateral after the Budget
Period.
10. Notwithstanding anything to the contrary stated herein, the Debtor's
authority to use Cash Collateral shall expire on the earliest to occur of the
following:
(i) the effective date of the Plan;
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 13
-------------------------------------------
(ii) the occurrence of an Event of Default not relating to the
Debtor's breach of subparagraphs 3(b), 3(c) or 6(a) above, in consequence
of which Fleet gives notice pursuant to paragraph 7 of this Final Cash
Collateral Order ;
(iii) the Debtor's failure to pay timely to Fleet all principal and
interest as set forth in paragraph 3(b) above, until such default is cured,
at which time, if cured, the Debtor may use Cash Collateral without further
authorization from this Court;
(iv) the Debtor's failure to provide timely to Fleet such reports
as provided in paragraph 6(a) above in this Order, until such default is
cured, at which time, if cured, the Debtor may use Cash Collateral without
further authorization from this Court; or
(v) the Debtor's failure to pay to Fleet the amounts set forth in
paragraph 3(c) above and the cure period referred to therein shall have
expired, and thereafter until such default is cured, at which time, if
cured, the Debtor may use Cash Collateral without further authorization
from this Court.
11. This Court hereby expressly retains jurisdiction over all persons
and entities, co-extensive with the powers granted to the United States
Bankruptcy Court under the Bankruptcy Code to enforce the terms of this Final
Cash Collateral Order and to adjudicate any and all disputes in connection
therewith.
SIGNED this ____ day of April, 1997.
_____________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
UNITED STATES BANKRUPTCY JUDGE
EXHIBITS
--------
A - Budget (May, June, July, 1997)
B - Projected Net Collections
C - Projected Gross Collections
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 14
-------------------------------------------
AGREED AS TO FORM AND SUBSTANCE:
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
State Bar No. 21116200
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
State Bar No. 00785064
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
- and -
PARKER, HUDSON, RAINER & ▇▇▇▇▇, L.L.P.
▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
ATTORNEYS FOR
FLEET CAPITAL CORPORATION
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 15
-------------------------------------------
WEIL, GOTSHAL & ▇▇▇▇▇▇, L.L.P.
By: /s/ ▇. ▇. ▇▇▇▇▇
-----------------
▇. ▇. ▇▇▇▇▇, Esq.
State Bar No. 01566500
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
State Bar No. 15796800
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
- and -
▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
ATTORNEYS FOR
JAYHAWK ACCEPTANCE CORPORATION
JOINT STIPULATION AND AGREED FINAL ORDER
AUTHORIZING THE USE OF CASH COLLATERAL, ETC - PAGE 16
-------------------------------------------
EXHIBIT B
---------
to
Settlement Agreement
Loan Agreement
--------------
[Attached.]
EXHIBIT B - PAGE 1
---------
__________________________________________________
JAYHAWK ACCEPTANCE CORPORATION
__________________________________________________
__________________________________________________
__________________________________________________
LOAN AND SECURITY AGREEMENT
Dated: ________, 1997
$____________
__________________________________________________
__________________________________________________
__________________________________________________
FLEET CAPITAL CORPORATION
__________________________________________________
TABLE OF CONTENTS
Page
----
SECTION 1. TERM LOAN.......................................... 1
1.1 Term Loan................................................ 1
1.2 Use of Proceeds.......................................... 1
SECTION 2. INTEREST, FEES AND CHARGES......................... 1
2.1 Interest................................................. 1
2.2 Computation of Interest.................................. 3
2.3 Reimbursement of Expenses................................ 3
2.4 Bank Charges............................................. 3
SECTION 3. LOAN ADMINISTRATION................................ 3
3.1 Payments................................................. 3
3.2 Application of Payments and Collections.................. 5
3.3 Loan Account............................................. 5
3.4 Statements of Account.................................... 5
SECTION 4. SECURITY INTERESTS................................. 6
4.1 Security Interest in Collateral.......................... 6
4.2 Lien Perfection; Further Assurances...................... 6
SECTION 5. COLLATERAL ADMINISTRATION.......................... 7
5.1 General.................................................. 7
5.2 Administration of Contracts.............................. 8
5.3 Administration of Equipment.............................. 10
5.4 Payment of Charges....................................... 10
5.5 Permitted Liens on Servicing Equipment................... 11
SECTION 6. REPRESENTATIONS AND WARRANTIES..................... 11
6.1 General Representations and Warranties................... 11
6.2 Continuous Nature of Representations and Warranties...... 15
6.3 Survival of Representations and Warranties............... 15
SECTION 7. COVENANTS AND CONTINUING AGREEMENTS................ 15
7.1 Affirmative Covenants.................................... 15
7.2 Negative Covenants....................................... 19
7.3 Specific Financial Covenant.............................. 20
i
SECTION 8. CONDITIONS PRECEDENT............................... 21
8.1 Documentation............................................ 21
8.2 No Default............................................... 22
8.3 Other Loan Documents..................................... 22
8.4 Reorganization Plan...................................... 22
8.5 No Litigation............................................ 22
8.6 Costs and Expenses....................................... 22
SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.. 23
9.1 Events of Default........................................ 23
9.2 Acceleration of the Obligations.......................... 25
9.3 Other Remedies........................................... 25
9.4 Remedies Cumulative; No Waiver........................... 26
SECTION 10. MISCELLANEOUS..................................... 26
10.1 Power of Attorney....................................... 26
10.2 INDEMNITY............................................... 27
10.3 Modification of Agreement; Sale of Interest............. 28
10.4 Severability............................................ 28
10.5 Successors and Assigns.................................. 29
10.6 Cumulative Effect; Conflict of Terms.................... 29
10.7 Execution in Counterparts............................... 29
10.8 Notice.................................................. 29
10.9 Lender's Consent........................................ 30
10.10 Credit Inquiries....................................... 30
10.11 Time of Essence........................................ 30
10.12 Entire Agreement....................................... 30
10.13 Interpretation......................................... 30
10.14 Non-applicability of Article 5069-15.01 et seq......... 30
10.15 No Preservation or Marshaling.......................... 31
10.16 GOVERNING LAW; CONSENT TO FORUM........................ 31
10.17 WAIVERS BY BORROWER.................................... 32
10.18 WAIVER OF CONSUMER RIGHTS.............................. 32
10.19 ORAL AGREEMENTS INEFFECTIVE............................ 32
ii
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this ____ day of ______, 1997, by
and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at 2711 ▇▇▇▇▇▇▇ Avenue, Suite 2100, LB 21, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇;
and JAYHAWK ACCEPTANCE CORPORATION ("Borrower"), a Texas corporation with its
chief executive office and principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Capitalized terms used in this Agreement have
the meanings assigned to them in Appendix A, General Definitions.
SECTION 1. TERM LOAN
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make available upon Borrower's request therefor a
Term Loan, as follows:
1.1 Term Loan. Lender agrees, for so long as no Default or
---------
Event of Default exists, to make a Term Loan to Borrower, in the principal
amount of $____________. This amount represents the unpaid principal
amount of sums owing to Lender under the Prior Loan Agreement, which was
Sixty-Three Million Seventy-Nine Thousand Seven Hundred Ninety-Seven and
34/100 Dollars ($63,079,797.34), as stipulated in the Final Cash Collateral
Order, after giving credit to Borrower for payments in the amount of
_________________ Dollars ($________), made by Borrower to Lender under the
terms of the Final Cash Collateral Order and other predecessor cash
collateral orders entered in the Bankruptcy Proceedings.
1.2 Use of Proceeds. The Term Loan shall be used solely for the
---------------
satisfaction of existing Indebtedness of Borrower to Lender under the Prior Loan
Agreement, as of the Closing Date.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
--------
2.1.1 Rate of Interest. Interest shall accrue on the principal
----------------
amount of the Term Loan outstanding at the end of each day at a fluctuating rate
per annum (the "Applicable Annual Rate") equal to the Base Rate. The Applicable
----------------------
Annual Rate shall increase or decrease by an amount equal to any increase or
decrease in the Base Rate, effective as of the opening of business on the day
that any such change in the Base Rate occurs.
2.1.2 Default Rate of Interest. Upon and after the occurrence of
------------------------
an Event of Default, and during the continuation thereof, the principal amount
of the Term Loan shall bear interest at a rate per annum equal to 2.00% above
the Applicable Annual Rate or other applicable rate of interest (the "Default
-------
Rate").
----
LOAN AND SECURITY AGREEMENT - Page 1
---------------------------
2.1.3 Maximum Rate of Interest. Notwithstanding the foregoing,
------------------------
(i) if at any time the amount of interest computed as provided in the Loan
Documents would exceed the amount of such interest computed upon the basis of
the maximum rate of interest permitted by applicable state or federal law in
effect from time to time hereafter (the "Maximum Legal Rate"), the interest
------------------
payable under this Agreement shall be computed upon the basis of the Maximum
Legal Rate, but any subsequent reduction in the Applicable Annual Rate, Default
Rate or other rate, as applicable, shall not reduce such interest thereafter
payable hereunder below the amount computed on the basis of the Maximum Legal
Rate until the aggregate amount of such interest accrued and payable under this
Agreement equals the total amount of interest which would have accrued if such
interest had been at all times computed solely as provided in the Loan
Documents; and (ii) unless preempted by federal law, the Applicable Annual Rate,
Default Rate or other rate, as applicable, from time to time in effect hereunder
may not exceed the "indicated ceiling rate" from time to time in effect under
Tex. Rev. Civ. Stat. ▇▇▇. art 5069-1.04(c) (▇▇▇▇▇▇ 1987). If the applicable
state or federal law is amended in the future to allow a greater rate of
interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable upon demand.
2.1.4 Excess Interest. No agreements, conditions, provisions or
---------------
stipulations contained in this Agreement or any other instrument, document or
agreement between Borrower and Lender or default of Borrower, or the exercise by
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other Loan Document, or the arising of any contingency whatsoever, shall
entitle Lender to contract for, charge, or receive, in any event, interest
exceeding the Maximum Legal Rate. In no event shall Borrower be obligated to
pay interest exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received in
excess of the Maximum Legal Rate ("Excess"), Borrower acknowledges and
------
stipulates that any such contract, charge, or receipt shall be the result of an
accident and bona fide error, and that any Excess received by Lender shall be
---- ----
applied, first, to reduce the principal then unpaid hereunder; second, to reduce
the other Obligations; and third, returned to Borrower, it being the intention
of the parties hereto not to enter at any time into a usurious or otherwise
illegal relationship. Borrower recognizes that, with fluctuations in the Base
Rate and the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that the credit or return of any
Excess shall constitute the acceptance by Borrower of such Excess. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all interest at any time contracted for, charged
or received by Lender in connection with the Loan Documents shall be amortized,
prorated, allocated and spread in equal parts during the entire term of this
Agreement and the Term Loan.
LOAN AND SECURITY AGREEMENT - Page 2
---------------------------
2.2 Computation of Interest. Interest hereunder shall be calculated
-----------------------
daily and shall be computed on the actual number of days elapsed over a year of
360 days. For the purpose of computing interest hereunder, all items of payment
received by Lender shall be deemed applied by Lender on account of the
Obligations (subject to final payment of such items) 1 Business Day after
receipt by Lender of such items in Lender's account located in Chicago,
Illinois.
2.3 Reimbursement of Expenses. If, at any time or times regardless of
-------------------------
whether or not an Event of Default then exists, Lender incurs reasonable and
necessary legal or accounting expenses or any other costs or out-of-pocket
expenses (other than Lender's overhead expenses) in connection with the
negotiation and preparation of any amendment of or modification of this
Agreement or any of the other Loan Documents;, then all such legal and
accounting expenses, other costs and out of pocket expenses of Lender (other
than Lender's overhead expenses) shall be charged to Borrower). For purposes of
the immediately preceding sentence, overhead expenses shall mean labor and
material costs of Lender not directly related to the negotiation, preparation
and administration of this Agreement, the other Loan Documents and/or any
amendment thereto. If, upon the occurrence and during the continuance of an
Event of Default, Lender incurs reasonable and necessary legal or accounting or
any other costs or out-of-pocket expenses in connection with (i) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by Lender,
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's affairs; (ii) any
attempt to enforce any rights of Lender against Borrower or any other Person
which may be obligated to Lender by virtue of this Agreement or any of the other
Loan Documents, including, without limitation, the Account Debtors; or (iii) any
attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate
or otherwise dispose of or realize upon the Collateral;, then all such legal and
accounting expenses, other costs and out of pocket expenses of Lender shall be
charged to Borrower. To the extent not paid as required by Sections 7.1.11 or
---------------
8.6, all amounts chargeable to Borrower under this Section 2.3 shall be
--- -----------
Obligations secured by all of the Collateral and shall be payable to Lender
within 30 days of Borrower's receipt of an invoice with respect to such charges.
Borrower shall also reimburse Lender for expenses incurred by Lender in its
administration of the Collateral to the extent and in the manner provided in
Section 5 hereof.
---------
2.4 Bank Charges. Borrower shall pay to Lender any and all fees, costs or
------------
expenses which Lender pays to a bank or other similar institution arising out of
or in connection with the depositing for collection, by Lender, of any check or
item of payment received or delivered to Lender on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION
3.1 Payments. The Obligations shall be payable as follows:
--------
3.1.1 Principal. From and after the Effective Date, principal
---------
payable on account of Term Loan shall be payable by Borrower to Lender in
installments, on the last day of each calendar month, the amount of which is due
for any particular month being equal to the amount specified for such month as
set forth below (exclusive of the mandatory prepayments required by
LOAN AND SECURITY AGREEMENT - Page 3
---------------------------
Section 3.1.3, but without duplication of amounts paid in accordance with the
-------------
Final Cash Collateral Order);
AGGREGATE INSTALLMENTS
----------------------
MONTH: PER MONTH:
------ ----------
[June] through July, 1997 $4,000,000
August, 1997 $3,500,000
September, 1997 $3,250,000
October and November, 1997 $3,000,000
December, 1997 $2,750,000
January, 1998 $2,500,000
February, 1998 $2,000,000
March through August, 1998 $3,000,000
All outstanding principal shall be due and payable on September 1, 1998 (the
"Maturity Date"). In addition, principal payable on account of the Term Loan
shall be payable by Borrower to Lender immediately upon the occurrence of an
Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations.
3.1.2 Interest. Interest accrued on the Term Loan shall be due on
--------
(i) the first calendar day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, and (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations.
3.1.3 Mandatory Prepayments of Principal.
----------------------------------
(a) In addition to principal payments provided in Section
3.1.1 above, Borrower shall make mandatory prepayments of principal on a
quarterly basis, on the 15th day of each March, June, September and
December, beginning June 15, 1997. The amount of each mandatory prepayment
shall be equal to 50% of Excess Cash Flow. Excess Cash Flow will be
measured on a cumulative basis, beginning March 1, 1997 and continuing
thereafter, and will consist of all Net Collections received by Borrower
since March 1, 1997 through the end of the month immediately preceding any
principal prepayment due date. As a result of the cumulative aspect of
measuring Net Collections, Borrower will be entitled to a credit to each
mandatory prepayment due, which credit will be equal to the amount of
mandatory prepayments previously made by Borrower pursuant to the
requirements of this Section 3.1.3 or the Final Cash Collateral Order. In
no event, however, will this credit calculation require Lender to refund
any prepayments by Borrower. All mandatory prepayments will be applied to
principal payments due under the Term Loan in inverse order of maturity.
(b) In the event that the Effective Date has not occurred
on or before June 1, 1997, then the mandatory prepayment of 50% of Excess
Cash Flow that otherwise would be paid to Lender on June 15, 1997 shall be
paid into escrow in accordance with
LOAN AND SECURITY AGREEMENT - Page 4
---------------------------
the provisions of the Final Cash Collateral Order. Upon the occurrence of
the earlier of the Effective Date or September 15, 1997, the funds in the
escrow shall be released and paid to Lender.
3.1.4 Voluntary Prepayments of Principal. Borrower may make
----------------------------------
voluntary prepayments of principal, without penalty, at the option of Borrower.
All voluntary prepayments will be applied to principal payments due under the
Term Loan in inverse order of maturity.
3.1.5 Costs, Fees and Charges. Costs, fees and charges payable
-----------------------
pursuant to this Agreement (other than those specifically mentioned above in
this Section 3) shall be payable by Borrower, to Lender or to any other Person
---------
designated by Lender in writing, within 30 days after the date of Lender's
invoice or other written notice thereof to Borrower.
3.1.6 Other Obligations. The balance of the Obligations requiring
-----------------
the payment of money, if any (other than those specifically mentioned above in
this Section 3), shall be payable by Borrower to Lender, within 30 days of the
---------
date of Lender's invoice or other written notice thereof to Borrower.
3.2 Application of Payments and Collections. All items of payment
---------------------------------------
received by Lender by 1:00 p.m., Dallas, Texas time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
1:00 p.m., Dallas, Texas time, on any Business Day shall be deemed received on
the following Business Day. Borrower irrevocably waives the right to direct the
application of any and all payments and Collections at any time or times
received by Lender from or on behalf of Borrower after the occurrence and during
the continuance of an Event of Default, and, subject to the provisions of
Section 5.2.4 of this Agreement, Borrower does hereby irrevocably agree that
-------------
Lender shall have the continuing exclusive right to apply and reapply any and
all such payments and Collections received at any time or times hereafter by
Lender or its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records.
3.3 Loan Account. Lender shall enter the Term Loan as a debit to the Loan
------------
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.4 Statements of Account. Lender will account to Borrower monthly with a
---------------------
statement of the Term Loan, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final, binding
and conclusive upon Borrower absent manifest error unless Lender is notified by
Borrower in writing to the contrary within 30 days of the date each accounting
is received by Borrower. Such notice shall only be deemed an objection to those
items specifically objected to therein.
LOAN AND SECURITY AGREEMENT - Page 5
---------------------------
SECTION 4. SECURITY INTERESTS
4.1 Security Interest in Collateral. To secure the prompt payment and
-------------------------------
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of the following Property and interests in Property of
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) Pledged Contracts and rights to payment in connection
therewith;
(ii) Equipment;
(iii) General Intangibles, excluding, however, Borrower's tax
refunds and choses in action that do not relate to the Collateral;
(iv) the Contribution and Servicing Agreements, and rights to
payment in connection therewith;
(v) Investment Property (as defined in the Code) consisting of
Borrower's interest in the Trust;
(vi) All monies now or at any time or times hereafter in the
possession or under the control of Lender or a bailee or Affiliate of
Lender;
(vii) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (vi) above,
including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(viii) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (vii)
above.
4.2 Lien Perfection; Further Assurances. At Lender's request, Borrower
-----------------------------------
shall execute such UCC-1 financing statements as are required by Lender and such
other instruments, assignments or documents as Lender may deem necessary to
perfect or continue the perfection of Lender's Lien upon any of the Collateral.
Unless prohibited by applicable law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
LOAN AND SECURITY AGREEMENT - Page 6
---------------------------
SECTION 5. COLLATERAL ADMINISTRATION
5.1 General.
-------
5.1.1 Location of Collateral. All Collateral will at all times be
----------------------
kept by Borrower at one or more of the business locations set forth in Exhibit C
---------
hereto and shall not, without the prior written approval of Lender, be moved
therefrom except, prior to an Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for removals in connection
with dispositions of Equipment that are authorized by Section 5.3.2 hereof.
--------------------
5.1.2 Insurance of Collateral. Borrower shall maintain and pay
-----------------------
for insurance upon all Collateral (other than Pledged Contracts) wherever
located and with respect to Borrower's business, covering casualty, hazard,
public liability and such other risks in such amounts and with such insurance
companies as are reasonably satisfactory to Lender. The requirements for such
insurance shall be consistent with the insurance that Borrower previously
maintained under the terms of the Prior Loan Agreement. In addition, Borrower
shall, at its own expense, obtain a security bond covering all of its employees,
which are designated by Borrower to deliver to the Custodian and remove from the
possession of the Custodian any Pledged Contracts and Auto Titles, in such
amounts and with such insurance companies as are reasonably satisfactory to
Lender. As with Borrower's insurance, the requirements for a security bond shall
be consistent with the security bond that Borrower previously maintained under
the terms of the Prior Loan Agreement. Borrower shall deliver copies of the
originals of such policies to Lender with satisfactory lender's loss payable
endorsements, naming Lender as loss payee, assignee or additional insured, as
appropriate, and as Lender's interests may appear. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in the event of cancellation of the
policy for any reason whatsoever and a clause specifying that the interest of
Lender shall not be impaired or invalidated by any act or neglect of Borrower or
the owner of the Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy. If Borrower fails to provide and
pay for such insurance, Lender may, at its option, but shall not be required to,
procure the same at competitive market rates and charge Borrower therefor.
Borrower agrees to deliver to Lender, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies.
5.1.3 Protection of Collateral. All expenses of protecting,
------------------------
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the
sale thereof shall be borne and paid by Borrower. If Borrower fails to promptly
pay any portion thereof when due, Lender may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Lender shall not be
liable or responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Lender's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
LOAN AND SECURITY AGREEMENT - Page 7
---------------------------
5.2 Administration of Contracts.
---------------------------
5.2.1 Records and Schedules of Pledged Contracts. Borrower shall
------------------------------------------
keep accurate and complete records of its Pledged Contracts and all payments and
Collections thereon and shall submit to Lender the following:
(i) on a monthly basis on or before the 15th day of each month
from and after the date hereof, or, during the existence of a Default or
Event of Default, upon Lender's request, and for such shorter period of
time as Lender may request, as the case may be, a summary of Collections
and dilutions of Pledged Contracts for the preceding month, in form
satisfactory to Lender;
(ii) on or before the 15th day of each month from and after the
date hereof, or, during the existence of a Default or Event of Default,
upon Lender's request, and for such shorter period of time as Lender may
request, as the case may be, in form acceptable to Lender, a summary of
aged Pledged Contracts balances (net of unearned finance charges) of all
active Pledged Contracts (i.e., Pledged Contracts not purged, accelerated
or otherwise terminated) existing as of the last day of the preceding
month, as the case may be; provided that until such time as Lender provides
--------
notice to the contrary, Diminutive Pledged Contracts shall be deemed to be
current Pledged Contracts for purposes of preparing of such report; and
(iii) on or before the 15th day of each month from and after the
date hereof, or, during the existence of a Default or Event of Default,
upon Lender's request, and for such shorter period of time as Lender may
request, as the case may be, in form acceptable to Lender, a "static pool
analysis" report in the form attached hereto as Exhibit M; and
---------
(iv) during the existence of a Default or Event of Default, upon
Lender's request therefor, copies of computer records pertaining to
repayment histories, showing performance by month, delinquencies and
Collections, and present status reports relating to the Pledged Contracts
and such other matters and information relating to the status of then
existing Pledged Contracts as Lender shall reasonably request.
5.2.2 Taxes. If a Pledged Contract includes a charge for any tax
-----
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor; provided, however, that
-------- -------
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
5.2.3 Pledged Contract Verification. Upon the occurrence and
-----------------------------
during the continuance of a Default or an Event of Default, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
the validity, amount or any other matter relating to any Pledged Contracts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process.
LOAN AND SECURITY AGREEMENT - Page 8
---------------------------
5.2.4 Maintenance of Clearing Account. Until payment in full of
-------------------------------
all Obligations, Borrower shall establish and maintain a procedure for its
collections and cash management as follows:
(a) Clearing Account. Borrower shall maintain a clearing
account pursuant to a lockbox arrangement acceptable to Lender with the
Lockbox Bank. Borrower shall obtain the agreement by the Lockbox Bank in
favor of Lender to waive any offset rights against the funds deposited in
such account. Lender assumes no responsibility for such lockbox
arrangement, including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder. Borrower agrees that withdrawals from the Clearing Account are
restricted, depending on the Property that generated the funds deposited in
the Clearing Account, and that withdrawals may be made only by way of wire
transfer initiated by Borrower and payable only as follows:
(i) to Lender, with respect to payments, other
remittances and funds constituting Collateral;
(ii) to the Trust, with respect to payments, other
remittances and funds constituting Property owned by the Trust; and
(iii) to Borrower, with respect to payments, other
remittances and funds constituting Property other than Property
described in clauses (i) and (ii) above.
(b) Fleet Account. Borrower specifically agrees that proceeds
-------------
of the Collateral shall be deposited in the Clearing Account for wire
transfer to the Fleet Account, and that, by way of illustration but not in
limitation, the following are included within the meaning of proceeds of
Collateral: (i) Collections, (ii) distributions from the Trust; and (iii)
Servicing Fees. Borrower shall initiate by way of wire transfer to the
Fleet Account, as collateral for the Obligations, on the first business day
following Borrower's receipt thereof, all payments and other remittances
constituting the Collateral which are received in the lockbox; provided,
--------
however, that if Borrower receives any payment or other remittance as to
-------
which Borrower does not receive therewith, or otherwise have, sufficient
information to verify that such payment or other remittance relates to a
Pledged Contract, a distribution from the Trust, or a Servicing Fee, then
Borrower shall deposit such payment or other remittance in the Fleet
Account no later than the second business day after Borrower verifies that
such payment or other remittance relates to a Pledged Contract, a
distribution from the Trust, or a Servicing Fee.
(c) Operating Account. So long as no Event of Default has
-----------------
occurred and is continuing, then Lender will initiate by way of wire transfer,
at Borrower's expense, to Borrower's operating account, for Borrower's use, on
the next Business Day following Lender's receipt thereof, the payments and other
remittances constituting the Collateral that were received as collected funds in
the Fleet Account; and Borrower may use and enjoy such funds free and clear of
Liens in favor of Lender; Lender being then deemed to have
LOAN AND SECURITY AGREEMENT - Page 9
---------------------------
released its Lien thereon. If a Default has occurred and is
continuing, then Lender may, at Lender's option, reserve from funds that
otherwise would be wired from the Fleet Account to Borrower's operating
account, an amount determined by Lender, in its reasonable discretion, to
be sufficient to enable Borrower either to cure such Default at or prior to
the time such Default becomes an Event of Default or to pay any Obligations
that are due or shall become due during any applicable cure or grace
period. If an Event of Default has occurred and is continuing, then Lender
will have no obligation to transfer any funds from the Fleet Account to
Borrower's operating account and, instead, may exercise Lender's remedies
in Section 9 with respect to any funds in the Fleet Account.
---------
5.2.5 Collection of Pledged Contracts; Proceeds of Collateral. To
-------------------------------------------------------
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Pledged Contracts for Lender. All remittances received by
Borrower on account of Pledged Contracts, together with the proceeds of any
other Collateral, shall be held as Lender's property by Borrower as trustee of
an express trust for Lender's benefit and Borrower shall immediately deposit
same in kind in the Clearing Account. Lender retains the right at all times
after the occurrence of an Event of Default to notify Account Debtors that
Pledged Contracts have been assigned to Lender and to collect Pledged Contracts
directly in its own name and to charge the collection costs and expenses,
including attorneys' fees to Borrower.
5.3 Administration of Equipment.
----------------------------
5.3.1 Records and Schedules of Equipment. Borrower shall keep
----------------------------------
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with Section
-------
5.3.2 hereof, and shall furnish Lender with a current schedule containing the
-----
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
5.3.2 Dispositions of Equipment. Borrower will not sell, lease or
-------------------------
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
-------- -------
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, and so long as Borrower maintains adequate Servicing Equipment
to service and administer the Pledged Contracts in the ordinary course of
Borrower's business.
5.4 Payment of Charges. All amounts chargeable to Borrower under Section 5
------------------ ---------
hereof shall be Obligations secured by all of the Collateral, shall be payable
and shall bear interest from the date such advance was made until paid in full
at the rate applicable to the Term Loan from time to time.
5.5 Permitted Liens on Servicing Collateral. Lender agrees to consent to a
---------------------------------------
Lien on all Equipment, General Intangibles, books and records, and related
Intellectual Property (collectively, the "Servicing Collateral") in favor of a
--------------------
Person who hereafter extends credit to Borrower for the purpose of financing
purchase of Contracts, loans or receivables, and who is not an Affiliate of
Borrower, subject to the following terms and conditions:
LOAN AND SECURITY AGREEMENT - Page 10
---------------------------
(a) each of Lender and such other Person shall have equal access to
the Servicing Collateral for purposes of obtaining information regarding
the Contracts, loans or receivables, in which such Person has a Lien;
(b) until the Obligations to Lender and the Indebtedness to such other
Person have been paid in full, neither Fleet nor such Person may exercise
any foreclosure remedies against the Servicing Collateral to the extent
such exercise would interfere with the ability of the other to preserve its
interest in the Servicing Collateral;
(c) Lender and such other Person shall have entered into a mutually
acceptable intercreditor agreement pertaining to their respective security
interests in the Servicing Collateral, which shall generally provide for
equal rights with respect to the Servicing Collateral;
(d) the priority of the Lien of such Person may be junior to or equal
in priority to, but not superior to, the priority of the Lien in favor of
Lender;
(e) no Default or Event of Default has occurred and is continuing; and
(f) Lender shall receive all of the proceeds from any disposition of
the Servicing Collateral after an Event of Default for application to the
Obligations.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 General Representations and Warranties. To induce Lender to enter into
--------------------------------------
this Agreement Borrower warrants, represents and covenants to Lender that:
6.1.1 Organization and Qualification. As of the Closing Date,
------------------------------
Borrower is, and until the Obligations are repaid in full, Borrower will remain,
an entity duly organized, validly existing and in good standing under the laws
of Borrower's state of organization. Borrower is, and until the Obligations are
repaid in full, Borrower will remain, duly qualified and authorized to do
business and in good standing as a foreign corporation in each state or
jurisdiction in which the failure of Borrower to be so qualified would have a
material adverse effect on the financial condition, business or Properties of
Borrower.
6.1.2 Corporate Power and Authority. As of the Closing Date,
-----------------------------
Borrower is duly authorized and empowered to enter into, execute, deliver and
perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of
the other Loan Documents have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval of the
shareholders of Borrower; (ii) contravene Borrower's, articles of incorporation
or by-laws; (iii) violate, or cause Borrower to be in default under, any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to Borrower; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other
LOAN AND SECURITY AGREEMENT - Page 11
---------------------------
agreement, lease or instrument to which Borrower is a party or by which it or
its Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the Properties now owned or hereafter acquired by Borrower.
6.1.3 Legally Enforceable Agreement. As of the Closing Date, this
-----------------------------
Agreement is, and each of the other Loan Documents when delivered under this
Agreement will be, a legal, valid and binding obligation of Borrower enforceable
against it in accordance with its respective terms.
6.1.4 Corporate Names. As of the Closing Date, Borrower, has not
---------------
been known as or used any corporate, fictitious or trade names except those
listed on Exhibit D hereto. As of the Closing Date, Borrower has not been the
---------
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person.
6.1.5 Business Locations. As of the Closing Date Borrower's chief
------------------
executive office and other places of business are as listed on Exhibit C hereto.
---------
During the one-year period preceding the Closing Date, Borrower has not had an
office or place of business other than as listed on Exhibit C.
---------
6.1.6 Title to Properties; Priority of Liens. Borrower has and,
--------------------------------------
until the Obligations are repaid in full, Borrower will continue to have, good
title to all of the Collateral free and clear of all Liens except Permitted
Liens. Borrower has paid or discharged, and, until the Obligations are repaid in
full, Borrower will continue to pay and discharge, all lawful claims which, if
unpaid, might become a Lien against any of the Collateral that is not a
Permitted Lien. The Liens granted to Lender under Section 4 hereof are first
---------
priority Liens, subject only to Permitted Liens.
6.1.7 Servicing Equipment. The Servicing Equipment is in good
-------------------
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the value and operating efficiency of the
Servicing Equipment shall be maintained and preserved, reasonable wear and tear
excepted. Borrower will not permit any of the Servicing Equipment to become
affixed to any real Property leased to Borrower so that an interest arises
therein under the real estate laws of the applicable jurisdiction unless the
landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form acceptable to Lender, and Borrower will not
permit any of the Servicing Equipment to become an accession to any personal
Property other than Servicing Equipment that is subject to first priority
(except for Permitted Liens) Liens in favor of Lender.
6.1.8 Financial Statements; Fiscal Year. The balance sheets of
---------------------------------
Borrower as of ____________, 1997, and the related statements of income, changes
in stockholder's equity, and changes in financial position for the periods ended
on such dates, have been prepared in accordance with GAAP, and present fairly
the financial position of Borrower at such dates and the results of Borrower's
operations for such periods. The fiscal year of Borrower ends on December 31 of
each year.
LOAN AND SECURITY AGREEMENT - Page 12
---------------------------
6.1.9 Disclosure Statement. As of the Closing Date, the Disclosure
--------------------
Statement does not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading.
6.1.10 Taxes. Borrower's federal tax identification number is 75-
-----
2486444. As of the Closing Date Borrower has filed, and, until the Obligations
are repaid in full, Borrower will continue to file, all federal, state and local
tax returns and other reports it is required by law to file. As of the Closing
Date Borrower has paid, or made provision for the payment of and, until the
Obligations are repaid in full, Borrower will continue to pay and make provision
for the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes, assessments,
fees, levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor.
The provision for taxes on the books of Borrower are adequate for all years not
closed by applicable statutes, and for its current fiscal year.
6.1.11 Brokers. There are no claims for brokerage commissions,
-------
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
6.1.12 Intellectual Property. Borrower owns or possesses all the
---------------------
Intellectual Property necessary for the conduct of its business and all the
Intellectual Property related to or used in connection with Servicing Equipment,
in each case without any known conflict with the rights of others. All such
Intellectual Property is listed on Exhibit E hereto as of the date hereof.
---------
6.1.13 Governmental Consents. As of the Closing Date, Borrower has,
---------------------
and is in good standing with respect to, all governmental consents, approvals,
licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore conducted by it and
to own or lease and operate its Properties as now owned or leased by it.
6.1.14 Compliance with Laws. Borrower has duly complied with, and
--------------------
its Properties, business operations and leaseholds are in compliance in all
material respects with, the provisions of all federal, state and local laws,
rules and regulations applicable to Borrower, its Properties or the conduct of
its business. Until the Obligations are repaid in full, Borrower will continue
to comply with, and its Properties, business operations and leaseholds will
continue to be in compliance in all material respects with, the provisions of
all federal, state and local laws, rules and regulations applicable to Borrower,
its Properties or the conduct of its business. Borrower has established and
maintains an adequate monitoring system to insure that it remains in compliance
with all federal, state and local laws, rules and regulations applicable to it.
6.1.15 Restrictions. Borrower is not a party or subject to any
------------
contract, agreement, or charter or other corporate restriction, which
materially and adversely affects its business or the use or ownership of any of
its Collateral. As of the Closing Date, Borrower is not a party or subject to
any contract or agreement which restricts its right or ability to incur
Indebtedness, other than as
LOAN AND SECURITY AGREEMENT - Page 13
---------------------------
set forth on Exhibit F hereto, none of which prohibit the execution of or
---------
compliance with this Agreement or the other Loan Documents by Borrower.
6.1.16 Litigation. As of the Closing Date, and except as set forth
----------
on Exhibit G hereto, there are no actions, suits, proceedings or investigations
---------
pending, or to the knowledge of Borrower, threatened, against or affecting
Borrower, or the business, operations, Properties, prospects, profits or
condition of Borrower. As of the Closing Date, Borrower is not in default with
respect to any order, writ, injunction, judgment, decree or rule of any court,
governmental authority or arbitration board or tribunal.
6.1.17 No Defaults. As of the Closing Date, no event has occurred
-----------
and no condition exists which would, upon or after the execution and delivery of
this Agreement or Borrower's performance hereunder, constitute a Default or an
Event of Default. As of the Closing Date, Borrower is not in default, and no
event has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person for Money Borrowed.
6.1.18 Leases. Exhibit H hereto is a complete listing as of the
------ ---------
Closing Date of all capitalized leases of Borrower pertaining to Equipment; and
Exhibit I hereto is a complete listing as of the Closing Date of all operating
---------
leases of Borrower pertaining to Equipment. As of the Closing Date, Borrower is
in full compliance in all material respects with the terms of each of its
respective capitalized and operating leases.
6.1.19 Pension Plans. As of the Closing Date, and except for
-------------
Borrower's 401(k) Plan, Borrower has no Plan. Borrower is, and, until the
Obligations are repaid in full, will continue to be, in full compliance with the
requirements of ERISA with respect to each Plan. As of the Closing Date, no
fact or situation that could result in a material adverse change in the
financial condition of Borrower exists in connection with any Plan. As of the
Closing Date, Borrower has no withdrawal liability in connection with a
Multiemployer Plan; and until the Obligations are repaid in full, Borrower will
not incur any withdrawal liability in connection with a Multiemployer Plan.
6.1.20 Trade Relations. There exists no actual or threatened
---------------
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any Collection Agents or any
group of Collection Agents whose services individually or in the aggregate are
material to the business of Borrower; and there exists no present condition or
state of facts or circumstances which would materially affect adversely Borrower
or prevent Borrower from conducting such business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
6.1.21 Labor Relations. As of the Closing Date, and except as
---------------
described on Exhibit J hereto, Borrower is not a party to any collective
---------
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
LOAN AND SECURITY AGREEMENT - Page 14
---------------------------
6.2 Continuous Nature of Representations and Warranties. Except with
---------------------------------------------------
regard to representations and warranties that, by their stated terms, are
limited by or designated as being applicable to a specific time or period of
time, each representation and warranty contained in this Agreement and the other
Loan Documents shall be continuous in nature and shall remain accurate, complete
and not misleading at all times during the term of this Agreement, except for
changes in Borrower's business or operations that would render the information
in any Exhibit attached hereto either inaccurate, incomplete or misleading, so
long as such changes have been disclosed confidentially to Lender or disclosed
publicly by Borrower or such changes are expressly permitted by this Agreement.
6.3 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 7. COVENANTS AND CONTINUING AGREEMENTS
7.1 Affirmative Covenants. During the term of this Agreement, and
---------------------
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender, at its option, otherwise consents in writing,
Borrower shall:
7.1.1 Visits and Inspections. Permit representatives of Lender,
----------------------
from time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Properties of Borrower, inspect,
audit and make extracts from its books and records and discuss with its
officers, its employees and its independent accountants, Borrower's and each of
its Subsidiaries' business, assets, liabilities, financial condition, business
prospects and results of operations. Furthermore, and not in limitation of the
foregoing, Borrower shall permit Lender to visit Borrower's Properties and the
storage facility of the Custodian, from time to time, as often as may be
reasonably requested, but only during the normal business hours of Borrower and
Custodian, as the case may be, to conduct inspections and audits of Borrower's
Pledged Contracts and related Auto Titles, and the records relating thereto, in
order for Lender to test the segregation of the Collateral and the proper
allocation of cash Collections from Pledged Contracts.
7.1.2 Notices. Promptly notify Lender in writing of the occurrence of
-------
any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
7.1.3 Financial Statements. Keep adequate records and books of
--------------------
account with respect to its business activities in which proper entries are made
in accordance with GAAP reflecting all its financial transactions; and cause to
be prepared and furnished to Lender the following (all to be prepared in
accordance with GAAP applied on a consistent basis, unless Borrower's certified
public accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP):
LOAN AND SECURITY AGREEMENT - Page 15
---------------------------
(i) not later than 120 days after the close of each fiscal
year of Borrower, unqualified audited financial statements of Borrower and
its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by Ernst & Young, L.L.P. or by such other
firm of independent certified public accountants of recognized standing
selected by Borrower but acceptable to Lender (except for a qualification
for a change in accounting principles with which the accountant concurs);
(ii) not later than 45 days after the end of each month
hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of Borrower and its Subsidiaries as of the
end of such month and of the portion of Borrower's financial year then
elapsed, on a Consolidated and consolidating basis, certified by the
principal financial officer of Borrower as prepared in accordance with
GAAP and fairly presenting the Consolidated financial position and results
of operations of Borrower and its Subsidiaries for such month and period
subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan;
(v) promptly after the initiation thereof, copies of
materials relating to actions, suits, proceedings or investigations
against or affecting Borrower, or the business, operations, Properties,
prospects, profits or condition of Borrower in each case that exceed
$100,000 as the amount in controversy, or that could be reasonably
expected to have a material adverse effect on Borrower's financial
condition or results of operations;
(vi) promptly after the execution thereof, copies of
capitalized and operating leases to which Borrower is a party;
(vii) not later than 15 days after the end of each month
hereafter, a Compliance Certificate in the form of Exhibit K hereto,
---------
executed by the Executive Vice President and Treasurer of Borrower; and
(viii) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's financial condition or
results of operations.
LOAN AND SECURITY AGREEMENT - Page 17
---------------------------
Concurrently with the delivery of the financial statements described
in clause (i) of this Section 7.1.3, Borrower shall forward to Lender a copy of
-------------
the accountants' letter to Borrower's management, if any, that is prepared in
connection with such financial statements.
7.1.4 Landlord and Storage Agreements. Provide Lender with copies
-------------------------------
of all agreements between Borrower and any landlord or warehouseman which owns
any premises at which any Pledged Contracts or related Auto Titles may, from
time to time, be kept.
7.1.5 Possession of Pledged Contracts and Auto Titles by
--------------------------------------------------
Custodian. The Custodian shall maintain possession of Pledged Contracts and
---------
related Auto Titles according to the terms and conditions of the Custodial
Agreement.
7.1.6 Delivery of Pledged Contracts and Auto Titles. Upon the
---------------------------------------------
occurrence and during the continuance of an Event of Default, Borrower shall at
Borrower's own expense, (i) physically deliver to Lender or its agent original
Auto Titles in its possession for all vehicles securing any of the Pledged
Contracts and original copies of its Pledged Contracts in its possession and all
related documents and instruments, and all files, certificates of title,
correspondence, appraisals, computer programs, tapes, discs, cards, accounting
records and other information and data relating to the Collateral and (ii) duly
note or cause to be duly noted Lender's name on each Auto Title securing a
Pledged Contract pursuant to the proper certificate of title act in the proper
state, so that Lender will have a perfected security interest in the motor
vehicles purchased pursuant to any Pledged Contract. Failure to deliver any
Pledged Contract or related Auto Title, or failure to deliver physical
possession of any instruments, documents or writings in respect of any Pledged
Contract as provided herein shall not invalidate Lender's lien and security
interest therein, except to the extent that possession may be required by
applicable law for the perfection of said lien or security interest, in which
latter case, the Pledged Contract shall be deemed to be held by the Borrower as
the custodial agent of Lender, for the benefit of Lender. Failure of Lender to
demand or require Borrower to include any Pledged Contract or related Auto Title
securing a Pledged Contract in any schedule, to execute any schedule, to assign
and deliver any schedule or to deliver physical possession of any instruments,
documents, or writings related to any Pledged Contract shall not relieve
Borrower of its duty so to do.
7.1.7 Landlord's Consent Letter. Borrower shall use its best
-------------------------
efforts to obtain for Lender for each leased location of Borrower, landlord
consent letters from each of the landlords from whom Borrower leases Real
Property, in form and substance satisfactory to Lender.
7.1.8 Licensor's Consent Letter. Borrower shall use its best
-------------------------
efforts to obtain for Lender consent letters from each of the licensors from
whom Borrower licenses Intellectual Property relating to the servicing and
administering of Pledged Contracts, in form and substance satisfactory to
Lender.
7.1.9 Amendments to Securitization Documents. Provide Lender with
--------------------------------------
prior written notice of any amendment or modification to the Securitization
Documents. Prior to entering into any amendment or modification to the
Securitization Documents, Borrower shall
LOAN AND SECURITY AGREEMENT - Page 17
---------------------------
deliver to Lender true, correct and complete drafts of such amendment or
modification and copies of the executed amendment or modification promptly upon
execution.
7.1.10 Duties of Collection and Administration. Borrower shall
---------------------------------------
service, manage, administer, and make Collections on the Pledged Contracts and
shall do any and all things which it may deem necessary or desirable in
connection therewith which are consistent with this Agreement. Borrower shall
service and administer the Pledged Contracts by employing such procedures
(including collection procedures) and degree of care, in each cash consistent
with prudent industry standards, as are customarily employed by Borrower in
servicing and administering motor vehicle retain installment sales contracts and
notes owned or serviced by Borrower comparable to the Pledged Contracts. In
performing such duties, Borrower shall comply with Borrower's Credit and
Collection Policy. Payments by or on behalf of Account Debtors shall be
allocated by Borrower to scheduled payments, late fees, other charges, and
principal and interest in accordance with the terms of the Pledged Contracts and
Borrower's normal servicing practices and procedures (which shall be Borrower's
Credit and Collection Policy). Borrower's obligations to collect and administer
Pledged Contracts shall include, without limitation, collection and posting of
all payments, responding to inquiries of Account Debtors, investigating
delinquencies, sending payment coupons to Account Debtors, reporting any
required tax information to Account Debtors or to such other Persons as may be
required in connection with servicing the Pledged Contracts, monitoring the
collateral, and accounting for Collections. Borrower shall also (i) perform all
obligations of Borrower under the Pledged Contracts and (ii) administer and
enforce all rights of Borrower under the Dealer Agreements, including but not
limited to the right to require Dealers to repurchase Pledged Contracts for
breaches of representations and warranties made by the Dealers.
7.1.11 Costs and Expenses. Pay the balance of Lender's and TCB's
------------------
costs, fees (including attorneys' and other professionals' fees) and other
expenses incurred in connection with the Bankruptcy Proceedings and allowed by
the Bankruptcy Court that remains after satisfaction of the condition precedent
set forth in Section 8.6, without reduction, in 6 equal monthly installments,
-----------
the first installment commencing ________, 1997, so long as such costs, fees and
expenses represent actual out-of-pocket costs, fees and expenses incurred by
Lender and TCB and so long as attorneys' and other professionals' fees consist
of fees billed at the regular and normal hourly rates of such professionals,
without any allowance for premiums, surcharge or increase in such hourly rates
that might otherwise be applied given the complexity and demands of the
Bankruptcy Proceedings and that are not otherwise unreasonable.
7.2 Negative Covenants. During the term of this Agreement, and thereafter
------------------
for so long as there are any Obligations to Lender, Borrower covenants that,
unless Lender, at its option, otherwise consents thereto in writing, it will
not:
7.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate
-------------------------------------
with any Person; provided, that Borrower may merge with and into another Person
--------
so long as upon the consummation of any such merger, Borrower is the surviving
entity and no Default or Event of Default would exist after giving effect to the
consummation of the merger; nor acquire all or any substantial part of the
Properties of any Person, provided that Borrower may acquire Properties of
--------
LOAN AND SECURITY AGREEMENT - Page 18
---------------------------
another Person so long as upon the consummation of any such acquisition, no
Default or Event of Default would exist after giving effect to the consummation
of such acquisition.
7.2.2 Limitation on Liens. Create or suffer to exist, any Lien upon
-------------------
any of the Collateral whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the
manner described in Section 6.1.10 hereto, but only if in Lender's judgment
--------------
such Lien does not adversely affect Lender's rights or the priority of
Lender's Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in respect
of any such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property of Borrower or
materially impair the use thereof in the operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) such other Liens as appear on Exhibit L hereto;
---------
(vii) such other Liens as Lender may hereafter approve in
writing;
(viii) Liens in favor of Prudential Securities Credit
Corporation but only to the extent that they secure Indebtedness to
Prudential Securities Credit Corporation as of the Petition Date or
refinancings thereof pursuant to the Plan; and
(ix) Liens on Servicing Collateral, as contemplated and
permitted by Section 5.5.
-----------
7.2.3 Disposition of Assets. Sell, lease or otherwise dispose of
---------------------
any of the Collateral, including any disposition of Collateral as part of a sale
and leaseback transaction, to or in favor of any Person, except (i)
dispositions expressly authorized by this Agreement, and (ii) sales or other
dispositions of Equipment in the ordinary course of its business, subject,
however, to the terms of Section 5.3.2.
-------------
7.2.4 Change of Locations. Borrower will not change the location
-------------------
of its chief executive office or any other place of business from those listed
on Exhibit C hereto, without giving Lender at least 30 days prior written notice
---------
of the new location of its chief executive office or other
LOAN AND SECURITY AGREEMENT - Page 19
---------------------------
place of business, as the case may be, and delivering to Lender UCC-1 financing
statements or UCC-3 amendments, as appropriate, reflecting any new location
prior to such change in location.
7.2.5 Amendments to Securitization Documents. Amend or modify the
--------------------------------------
Securitization Documents in any manner that would have an adverse affect, as
determined by Lender in its discretion, on the Trust, the Collections that the
Trust would otherwise receive on the Series 1996A Notes or the Series 1996B
Notes (as such terms are defined in the Contribution and Servicing Agreements),
Lender's Lien on Borrower's interest in the Trust, or the timing or amount of
any distribution from the Trust to Borrower.
7.2.6 Amendments to Reorganization Plan. Amend or modify the
---------------------------------
Reorganization Plan in any manner that would have an adverse affect on Lender,
as determined by Lender in its discretion.
7.2.7 Amendments to Contribution and Servicing Agreement. Amend or
--------------------------------------------------
modify either of the Contribution and Servicing Agreements in any manner that
would have an adverse affect, as determined by Lender in its discretion, on the
timing or amount of any fees or distributions therefrom to Borrower.
7.3 Specific Financial Covenant. During the term of this Agreement, and
---------------------------
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
7.3.1 Minimum Gross Collections.
-------------------------
(a) Gross Collections Covenant. For each calendar month during the
--------------------------
term of this Agreement, achieve Collections on Pledged Contracts, for the
3-month period consisting of the calendar month then ended plus the
immediately preceding two calendar months (i.e., a rolling 3-month period),
of not less than 85% of Projected Gross Collections for the same rolling 3-
month period. If a Default occurs by reason of a breach of this covenant,
then the Borrower will have the opportunity to cure this Default for a
period of 5 days from the earlier of the date of actual delivery, or, if
------
not delivered as required, the date of required delivery, pursuant to
--------
Section 7.1.3(vii) of this Agreement, to Fleet of the monthly Compliance
------------------
Certificate for the applicable month then ended, by making a prepayment (a
"Cure Payment") on the outstanding principal amount of the Term Loan in an
------------
amount equal to the difference between 85% of the Projected Gross
Collections and the actual amount of Gross Collections. All such
------
prepayments will be applied to principal amounts due in the inverse order
of maturity. The first measurement of this covenant will be conducted for
the 3- month period that ends on ________, 1997. This covenant is referred
to as the "Gross Collections Covenant."
--------------------------
(b) Cure Payments. If Borrower makes a Cure Payment, as provided
-------------
above, then, for purposes of subsequent calculations of the Gross
Collections Covenant that involve any of the calendar months that were
included in the calculation of the Gross Collections Covenant with respect
to which a Cure Payment was made, the Collections
LOAN AND SECURITY AGREEMENT - Page 20
---------------------------
on Pledged Contracts, as a percentage of Projected Gross Collections, for
any of such months will be deemed to be 85%; it being the intention of the
parties to avoid creating a Default for a breach of the Gross Collections
Covenant that is calculated for a calendar month subsequent to a calendar
month for which Borrower cured a Default under the Gross Collections
Covenant by making a Cure Payment.
SECTION 8. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make the
Term Loan under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
8.1 Documentation. Lender shall have received, in form and substance
-------------
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel, including, but not limited to the following
documents:
(a) copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral;
(b) good standing certificates for Borrower, issued within 15 days
before the Closing Date by the Secretary of State or other appropriate official
of Borrower's jurisdiction of incorporation;
(c) the written opinions of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and ▇▇▇▇, Gotshal &
▇▇▇▇▇▇, L.L.P., counsel to Borrower, regarding Borrower and the execution of
this Agreement and the Other Agreements executed in connection with this
Agreement, and the transactions contemplated hereby, to be in form and substance
satisfactory to Lender;
(d) the Trademark Security Agreement, the Trust Pledge Agreement, the
Guaranty, and the Releases shall have been executed, and shall be in form and
substance satisfactory to Lender, in its sole discretion, and true and correct
copies of such executed documents shall have been delivered to Lender; and
(e) evidence satisfactory to Lender that the conditions precedent to
Lender's agreement to support and vote for the Reorganization Plan, as such
conditions precedent are as set forth in the Settlement Agreement, have been
satisfied.
8.2 No Default. No Default or Event of Default shall exist.
----------
8.3 Other Loan Documents. Each of the conditions precedent set forth in
--------------------
the other Loan Documents shall have been satisfied.
LOAN AND SECURITY AGREEMENT - Page 21
---------------------------
8.4 Reorganization Plan. The Effective Date shall have occurred under
-------------------
the Reorganization Plan without any of the conditions precedent thereto in the
Reorganization Plan having been waived, unless consented to in writing by
Lender.
8.5 No Litigation. No action, proceeding, investigation, regulation or
-------------
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
8.6 Costs and Expenses. Borrower shall have paid Lender's and TCB's
------------------
costs, fees (including attorneys' and other professionals' fees) and other
expenses incurred in connection with the Bankruptcy Proceedings, in an amount of
at least $300,000, without reduction, but subject to allowance by the Bankruptcy
Court. Borrower acknowledges that the fees and expenses heretofore incurred by
Lender and TCB through March, 1997 in the approximate amount of $287,000 are not
unreasonable. Borrower shall not have opposed the application for payment
thereof if it is submitted to the Bankruptcy Court for approval in the
Bankruptcy Proceedings prior to the Closing Date.
8.7 Prudential Security Credit Corporation. Lender shall have approved
--------------------------------------
the New Prudential Security Documents; and Lender will be deemed to have
approved the New Prudential Security Documents if such documents do not increase
the scope or nature of or the amount of indebtedness (inclusive of indebtedness
consisting of PSCC's costs, fees and expenses incurred in connection with the
Bankruptcy Proceedings and allowed by the Bankruptcy Court) secured by or the
remedies available with respect to PSCC's liens and security interests, as
provided under PSCC's security documents existing as of the Petition Date.
SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
9.1 Events of Default. The occurrence of one or more of the following
-----------------
events shall constitute an "Event of Default":
9.1.1 Payment of Obligations. Borrower shall fail to pay any of
----------------------
the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
9.1.2 Misrepresentations. Any representation, warranty or other
------------------
statement made or furnished to Lender by or on behalf of Borrower in this
Agreement, any of the other Loan Documents or any instrument, certificate or
financial statement furnished in compliance with or in reference thereto proves
to have been false or misleading in any material respect when made or furnished.
9.1.3 Breach of Specific Covenants. Borrower shall fail or
----------------------------
neglect to perform, keep or observe any covenant contained in Sections 4.2,
------------
5.1.1, 5.2, 7.1.1, 7.1.3, 7.1.5, 7.1.6, 7.2 or 7.3 hereof on the date that
----- --- ----- ----- ----- ----- --- ---
Borrower is required to perform, keep or observe such covenant, and,
LOAN AND SECURITY AGREEMENT - Page 22
---------------------------
with respect to the covenant contained in Section 7.3, the cure period provided
-----------
for in Section 7.3 shall have expired.
-----------
9.1.4 Breach of Other Covenants. Borrower shall fail or neglect
-------------------------
to perform, keep or observe any covenant contained in this Agreement (other than
a covenant which is dealt with specifically elsewhere in Section 9.1 hereof) and
-----------
the breach of such other covenant is not cured to Lender's satisfaction within
30 days after the sooner to occur of Borrower's receipt of notice of such breach
from Lender or the date on which such failure or neglect first becomes known to
any officer of Borrower.
9.1.5 Default Under Security Documents/Other Agreements. Any
-------------------------------------------------
event of default shall occur under, or Borrower shall default in the performance
or observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
9.1.6 Other Defaults. There shall occur any default or event of
--------------
default on the part of Borrower under any agreement, document or instrument to
which Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) evidencing
an obligation to pay money in excess of $1,000,000 if the payment or maturity of
such Indebtedness is accelerated in consequence of such event of default or
demand for payment of such Indebtedness is made.
9.1.7 Insolvency and Related Proceedings. Borrower shall suffer
----------------------------------
the appointment of a receiver, trustee, custodian or similar fiduciary, or shall
make an assignment for the benefit of creditors, or any petition for an order
for relief shall be filed by or against Borrower under the Bankruptcy Code (if
against Borrower, the continuation of such proceeding for more than 30 days), or
Borrower shall make any offer of settlement, extension or composition to its
unsecured creditors generally.
9.1.8 ERISA. A Reportable Event shall occur which Lender, in
-----
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from Borrower's, such Subsidiary's complete or
partial withdrawal from such Plan.
9.1.9 Challenge to Agreement. Borrower, any Subsidiary of
----------------------
Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement, or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
9.1.10 Criminal Forfeiture. Borrower shall be criminally
-------------------
convicted under any law that could lead to a forfeiture of any Collateral of
Borrower.
LOAN AND SECURITY AGREEMENT - Page 23
---------------------------
9.1.11 Judgments. Any money judgment, writ of attachment or
---------
similar process, which is not otherwise bonded against and stayed on appeal, (i)
in excess of $250,000 (net of any amounts satisfied by insurance) or (ii) which
has a material adverse effect on the business or properties of Borrower, is
filed against Borrower or any of its Property.
9.1.12 Default by Custodian. Default by Custodian under the
--------------------
Custodial Agreement as may be amended from time to time which has not been cured
by Borrower or Custodian within 20 days after Lender has given Borrower written
notice of such Default.
9.1.13 Default Under Contribution and Servicing Agreement.
--------------------------------------------------
Borrower shall revoke, discontinue or terminate, or attempt to revoke,
discontinue or terminate its obligations as servicer under the Contribution and
Servicing Agreement or Borrower's obligations as servicer under the Contribution
and Servicing Agreement are otherwise terminated.
9.1.14 Default Under Bankruptcy Court Order. Borrower fails to
------------------------------------
perform its obligations under, or comply with the provisions of, either the
Reorganization Plan or the order of the Bankruptcy Court confirming Borrower's
Reorganization Plan in the Bankruptcy Proceedings (other than the obligations
and provisions relating to the Secured Fleet Claim), as determined by the
Bankruptcy Court, and the Bankruptcy Court further determines that such failure
has not been cured or waived; provided that such failure shall not be an Event
of Default under this Section 9.1.14 if the Bankruptcy Court determines that
--------------
such failure does not warrant the exercise of available remedies against
Borrower.
9.1.15 Failure to Consummate Reorganization Plan. The
-----------------------------------------
Reorganization Plan shall not be substantially consummated in accordance with
its terms.
9.2 Acceleration of the Obligations. Without in any way limiting the
-------------------------------
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
-----------
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand, protest notice of
intent to accelerate, notice of acceleration, or further notice by Lender except
to the extent notice is expressly provided for in this Agreement, become at once
due and payable and Borrower shall forthwith pay to Lender, the full amount of
such Obligations, provided, that upon the occurrence of an Event of Default
--------
specified in Section 9.1.7 hereof, all of the Obligations shall become
-------------
automatically due and payable without declaration, notice or demand by Lender.
9.3 Other Remedies. Upon and after the occurrence of an Event of
--------------
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
9.3.1 All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
LOAN AND SECURITY AGREEMENT - Page 24
---------------------------
9.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof), and (iii) to take control of
all Collections on Pledged Contracts and to apply all payments and remittances
constituting the Collateral to the Obligations on as frequent a basis as Lender
deems desirable.
9.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that 10 days written
notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right
to conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations. The
proceeds realized from the sale of any Collateral may be applied, after allowing
2 Business Days for collection, first to the costs, expenses and attorneys' fees
incurred by Lender in collecting the Obligations, in enforcing the rights of
Lender under the Loan Documents and in collecting, retaking, completing,
protecting, removing, storing, advertising for sale, selling and delivering any
Collateral, second to the interest due upon any of the Obligations; and third,
to the principal of the Obligations. If any deficiency shall arise, Borrower
shall remain liable to Lender therefor.
9.3.4 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral.
9.4 Remedies Cumulative; No Waiver. All covenants, conditions,
------------------------------
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained. The
failure or delay of Lender to require strict performance by Borrower of any
provision of this Agreement or to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until the Term Loan and all other
LOAN AND SECURITY AGREEMENT - Page 25
---------------------------
Obligations owing or to become owing from Borrower to Lender shall have been
fully satisfied. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement or any other
Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower.
SECTION 10. MISCELLANEOUS
10.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
-----------------
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
10.1.1 At such time or times upon or after the occurrence of a
Default or an Event of Default as Lender or said agent, in its sole discretion,
may determine, endorse Borrower's name on any checks, notes, acceptances,
drafts, money orders or any other evidence of payment or proceeds of the
Collateral which come into the possession of Lender or under Lender's control.
10.1.2 At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Pledged Contracts from the Account Debtors, enforce
payment of the Pledged Contracts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to the
collection of the Pledged Contracts; (ii) settle, adjust, compromise, discharge
or release any of the Pledged Contracts or other Collateral or any legal
proceedings brought to collect any of the Pledged Contracts or other Collateral;
(iii) sell or assign any of the Pledged Contracts and other Collateral upon such
terms, for such amounts and at such time or times as Lender deems advisable;
(iv) take control, in any manner, of any item of payment or proceeds relating to
any Collateral; (v) prepare, file and sign Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or
agreement relating to the Pledged Contracts and any other Collateral; (ix) use
Borrower's stationery and sign the name of Borrower to verifications of the
Pledged Contracts and notices thereof to Account Debtors; (x) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Pledged Contracts, Equipment and
any other Collateral; (xi) make and adjust claims under policies of insurance;
and (xii) do all other acts and things necessary, in Lender's determination, to
fulfill Borrower's obligations under this Agreement.
LOAN AND SECURITY AGREEMENT - Page 26
---------------------------
10.2 INDEMNITY. BORROWER HEREBY INDEMNIFIES, HOLDS LENDER HARMLESS AND
---------
SHALL DEFEND LENDER AND ITS DIRECTORS, OFFICERS, AGENTS, COUNSEL AND EMPLOYEES
("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES,
DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS CAUSED OR ASSERTED BY
THIRD PARTIES ("LOSSES") EVER SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON
(INCLUDING REASONABLE ATTORNEYS FEES AND LEGAL EXPENSES) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY,
INCLUDING, WITHOUT LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF SUCH
INDEMNIFIED PERSON, BUT NOT INCLUDING ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE
THE LENDER AND EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN
CONNECTION WITH THE INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL
OR THREATENED CLAIM, ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH
COSTS OF RESPONDING TO DISCOVERY REQUESTS OR SUBPOENAS). IN ADDITION, BORROWER
SHALL DEFEND LENDER AGAINST AND SAVE IT HARMLESS FROM ALL CLAIMS OF ANY PERSON
(OTHER THAN BORROWER) WITH RESPECT TO THE COLLATERAL. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THESE INDEMNITIES SHALL EXTEND TO ANY CLAIMS
ASSERTED AGAINST LENDER OR ANY OTHER INDEMNIFIED PERSON (OTHER THAN BORROWER) BY
ANY PERSON UNDER ANY ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S
OR ANY OTHER PERSON'S FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID OR
HAZARDOUS WASTE MATERIALS OR OTHER TOXIC SUBSTANCES. EACH INDEMNIFIED PERSON MAY
SELECT ITS OWN COUNSEL WITH RESPECT TO LOSSES, IN ADDITION TO ANY BORROWER'S
COUNSEL, AND SHALL BE INDEMNIFIED THEREFOR HEREUNDER. NOTWITHSTANDING ANY
CONTRARY PROVISION IN THIS AGREEMENT, THE OBLIGATION OF BORROWER UNDER THIS
SECTION 10.2 SHALL SURVIVE THE PAYMENT IN FULL OF THE OBLIGATIONS AND THE
------------
TERMINATION OF THIS AGREEMENT.
10.3 Modification of Agreement; Sale of Interest. This Agreement may not
-------------------------------------------
be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder and shall be accorded all of the rights
LOAN AND SECURITY AGREEMENT - Page 27
---------------------------
of the Lender with respect to exercise of the right of set off against any
deposits, credit balances, or other funds of the Borrower which are or may be in
its possession. Lender shall be relieved of all obligations hereunder upon any
such assignments. Borrower agrees that it will use its best efforts to assist
and cooperate with Lender in any manner reasonably requested by Lender to effect
the sale of participations in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents. Borrower further agrees
that Lender may disclose credit information regarding Borrower and its
Subsidiaries to any potential participant or assignee. Without the prior
consent of Borrower, which consent shall not be unreasonably withheld, Lender
shall not sell or assign its interest in this Agreement, the Loan Documents and
the Term Loan if after giving effect to such sale or assignment, Lender will
maintain less than a 51% beneficial interest in this Agreement, the Loan
Documents and the Term Loan; provided, however, that the consent of Borrower
-------- -------
shall not be required if such sale, assignment, transfer or disposition is part
of the transfer of Lender's entire loan portfolio.
10.4 Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.5 Successors and Assigns. This Agreement, the Other Agreements and
----------------------
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 10.3
------------
hereof.
10.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
------------------------------------
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
-----------
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
10.7 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 and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
10.8 Notice. Except as otherwise provided herein, all notices, requests
------
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
LOAN AND SECURITY AGREEMENT - Page 28
---------------------------
If to Lender: Fleet Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: Jayhawk Acceptance Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 10.8.
------------
10.9 Lender's Consent. Whenever Lender's consent is required to be
----------------
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
10.10 Credit Inquiries. Borrower hereby authorizes and permits Lender to
----------------
respond to usual and customary credit inquiries from third parties concerning
Borrower or any of its Subsidiaries.
10.11 Time of Essence. Time is of the essence of this Agreement, the
---------------
Other Agreements and the Security Documents.
10.12 Entire Agreement. This Agreement and the other Loan Documents,
----------------
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties
LOAN AND SECURITY AGREEMENT - Page 29
---------------------------
hereto and thereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and inducements, whether express
or implied, oral or written.
10.13 Interpretation. No provision of this Agreement or any of the other
--------------
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
10.14 Non-applicability of Article 5069-15.01 et seq. Borrower and Lender
--------------------------------- -------------
hereby agree that, except for Section 15.10(b) thereof, the provisions of Tex.
----------------
Rev. Civ. Stat. ▇▇▇. art. 5069-15.01 et seq. (▇▇▇▇▇▇ 1987) (regulating certain
-- ---
revolving credit loans and revolving tri-party accounts) shall not apply to this
Agreement or any of the other Loan Documents.
10.15 No Preservation or Marshaling. Borrower agrees that Lender has no
-----------------------------
obligation to preserve rights to the Collateral against prior parties or to
marshal any Collateral for the benefit of any Person.
10.16 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
-------------------------------
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE
-------- -------
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER, BORROWER
HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS, TEXAS, OR, AT
LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
TEXAS, DALLAS DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
----- --- ----------
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION
LOAN AND SECURITY AGREEMENT - Page 30
---------------------------
OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET
FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
10.17 WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY
-------------------
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL: (II) PRESENTMENT, DEMAND, NOTICE OF INTENTION
TO ACCELERATE, NOTICE OF ACCELERATION, AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT (EXCEPT TO THE EXTENT NOTICE IS EXPRESSLY PROVIDED FOR IN THIS
AGREEMENT), NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR
RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS,
INSTRUMENTS CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH
BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER
LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL
OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (IV) THE BENEFIT
OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (V) NOTICE OF ACCEPTANCE
HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.18 WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ALL PROVISIONS OF
-------------------------
THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT (TEX. BUS. & COM. CODE
▇▇▇. (S)17.01 ET SEQ. (▇▇▇▇▇▇
-- ---
LOAN AND SECURITY AGREEMENT - Page 31
---------------------------
SUPP. 1987)), A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, OTHER
THAN SECTION 17.555 THEREOF PERTAINING TO CONTRIBUTION AND INDEMNITY, AND
--------------
EXPRESSLY WARRANTS AND REPRESENTS THAT AFTER CONSULTATION WITH AN ATTORNEY OF
BORROWER'S OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER.
10.19 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER LOAN
---------------------------------------------------------------
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
-----------------------------------------------------------------------------
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
----------------------------------------------------------------------------
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
------------------- ------------------------------------------------------------
THE PARTIES.
------------
IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas, Texas,
on the day and year specified at the beginning of this Agreement.
JAYHAWK ACCEPTANCE CORPORATION
("Borrower")
By:___________________________
Name:_________________________
Title:________________________
ACCEPTED IN DALLAS, TEXAS:
FLEET CAPITAL CORPORATION
("Lender")
By:___________________________
Name:_________________________
Title:________________________
LOAN AND SECURITY AGREEMENT - Page 32
---------------------------
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of _________, 1997,
by and between Fleet Capital Corporation and Jayhawk Acceptance Corporation the
following terms shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person or Persons liable as an obligor or in
--------------
respect of any Pledged Contract.
Additional Fleet Contracts - Contracts that either (i) Borrower
--------------------------
purchased with Cash Collateral after the Petition Date and prior to March
1, 1997, or (ii) Borrower reported as being included in the Borrowing Base
as Lender's collateral as of the Petition Date, but which Borrower had not
purchased as of the Petition Date, and which Borrower estimated to be in
the amount of approximately $10,000,000 as of the Petition Date, less
those Contracts, in the approximate amount of $3,400,000, "unwound" by
Borrower subsequent to the Petition Date. As of the date hereof, Borrower
has funded all Additional Fleet Contracts.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
---------
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, a Person; (ii) which beneficially owns
or holds 5% or more of any class of the Voting Stock of a Person; or (iii)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the first
---------
sentence of this Appendix A, all Exhibits thereto and this Appendix A as
renewed, extended, modified and restated from time to time.
Auto Title - the certificate of title issued by the department of
----------
transportation or other corresponding instrumentality or agency of any
state which relates to an automobile sold pursuant to a Contract.
Bank - Fleet National Bank.
----
Bankruptcy Court - the United States Bankruptcy Court for the Northern
----------------
District of Texas, Dallas Division.
Bankruptcy Proceedings - the proceedings in Borrower's bankruptcy
----------------------
case, In re: Jayhawk Acceptance Corporation, Debtor, Case No. 397-31261-
SAF-11, in the Bankruptcy Court.
LOAN AND SECURITY AGREEMENT - Page 33
---------------------------
Base Rate - the rate of interest generally announced or quoted by Bank
---------
from time to time as its base rate for commercial loans, whether or not
such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such base rate for commercial loans is discontinued by
Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
Business Day - any day excluding Saturday, Sunday and any day which is
------------
a legal holiday under the laws of the State of Texas or the State of
Illinois or is a day on which banking institutions located in either of
such states are closed.
Capitalized Lease Obligation - any Indebtedness represented by
----------------------------
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Clearing Account - a deposit account of Borrower established by
----------------
Borrower pursuant to this Agreement at a bank selected by Borrower, but
acceptable to Lender in its reasonable discretion.
Closing Date - the date on which all of the conditions precedent in
------------
Section 8 of the Agreement are satisfied and the Term Loan is made under
---------
the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
----
State of Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property described
----------
in Section 4 of the Agreement and all other Property and interests in
---------
Property that now or hereafter secure the payment and performance of any of
the Obligations.
Collection Agent - means any Person engaged by Borrower in connection
----------------
with Borrower's efforts to collect payments on a Pledged Contract or to
repossess or liquidate the automobile that secures payment of a Pledged
Contract, including independent repossession agents, auctioneers,
remarketing firms, and independent collection agencies, and any Person
engaged in support of Borrower's systems for administering and servicing
the Pledged Contracts.
Collections - all interest collections, all principal collections, all
-----------
other collections, and all Recoveries, in each case, from (i) the
Borrower's Pledged Contracts owned as of the Petition Date, (ii) the
Additional Fleet Contracts, and (iii) the Trust's Contracts owned as of the
Petition Date.
Consolidated - the consolidation in accordance with GAAP of the
------------
accounts or other items as to which such term applies.
LOAN AND SECURITY AGREEMENT - Page 34
---------------------------
Contract- a written agreement pursuant to which a Person agrees to
--------
purchase from a Dealer a new or used automobile and to pay for same on an
installment basis, with interest, over a period of months.
Contribution and Servicing Agreements - those certain Contribution and
-------------------------------------
Servicing Agreements dated March 15, 1996, and August 7, 1996,
respectively, by and among Borrower, in its individual capacity and in its
capacity as servicer, the Trust, Trustee, in its capacity as trustee, and
Norwest Bank Minnesota, National Association, in its capacity as back-up
servicer, pursuant to which (i) Borrower contributed to the capital of the
Trust certain retail installment contracts of Borrower and (ii) Borrower,
on behalf of the Trust, will service such contributed contracts.
Credit and Collection Policy - the Borrower's Credit and Collection
----------------------------
Policy, as presently in effect on the Closing Date.
Custodian - the Custodian as defined under the Custodial Agreement.
---------
Custodial Agreement - the Custodial Agreement dated on or about the
-------------------
Closing Date by and among Lender, Borrower and Custodian.
Dealer - a Person engaged in the business of selling new or used
------
automobiles pursuant to Contracts.
Dealer Agreement - an agreement between Borrower and each Dealer from
----------------
which Borrower purchases Pledged Contracts.
Dealer Pool - the aggregate number of Pledged Contracts purchased from
-----------
any Dealer pursuant to a Dealer Agreement.
Default - an event or condition the occurrence of which would, with
-------
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in Section 2.1.2 of the Agreement.
------------ -------------
Disclosure Statement - means Debtor's Disclosure Statement Pursuant To
--------------------
Section 1125 Of The Bankruptcy Code, filed by the Borrower on April 18,
1997, in the Bankruptcy Court in connection with the Bankruptcy
Proceedings, as at any time amended with Lender's consent.
Distribution - in respect of any corporation means and includes: (i)
------------
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net
proceeds of the sale of Securities.
LOAN AND SECURITY AGREEMENT - Page 35
---------------------------
Effective Date - the first Business Day on which the conditions
--------------
specified in Section 10.1 of the Reorganization Plan have been satisfied or
waived.
Environmental Laws - all federal, state and local laws, rules,
------------------
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
---------
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or
owned by Borrower or in which Borrower has an interest, whether now owned
or hereafter acquired by Borrower and wherever located, and all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as
-----
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 9.1 of the Agreement.
---------------- -----------
Excess - as defined in Section 2.1.4 of this Agreement.
------ -------------
Excess Cash Flow - the amount, if any, by which actual Net Collections
---------------- ------
exceed Projected Net Collections.
Final Cash Collateral Order - the Joint Stipulation And Agreed Final
---------------------------
Order Authorizing The Use of Cash Collateral And Providing For Adequate
Protection, entered on April __, 1997 by the Bankruptcy Court in the
Bankruptcy Proceeding, as at any time amended with Lender's consent.
Fleet Account - a deposit account of Lender established by Lender in
-------------
the name of "Fleet Capital Corporation - Dallas, re: Jayhawk Acceptance
Corporation" at ▇▇▇▇▇▇ Trust and Savings Bank (Chicago, Illinois), ABA No.
▇▇▇▇-▇▇▇▇-▇, Account No. 183-8549, or such other bank designated by Lender
from time to time.
GAAP - generally accepted account principles in the United States of
----
America in effect from time to time.
General Intangibles - as defined in the Code.
-------------------
Gross Collections - Collections.
-----------------
Guaranty - that certain unconditional guaranty of the Obligations,
--------
dated as of the date hereof, executed by Guarantor in favor of Lender,
limited in amount to $10,000,000 of the Obligations, and including
collection costs and interest after demand for payment by Lender.
LOAN AND SECURITY AGREEMENT - Page 36
---------------------------
Guarantor - ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
---------
Indebtedness - as applied to a Person means, without duplication
------------
(i) other than contingent obligations owed by Borrower to
a Dealer under any Dealer Pool, all other items which in accordance
with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person as at the date
as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person
has guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the
account of such Person, and
(iv) in the case of Borrower (without duplication), the
Obligations.
Intellectual Property - patents, trademarks, service marks,
---------------------
tradenames, copyrights, licenses (including software licenses), computer
software, source codes, use codes, and other similar rights.
Inventory - all of Borrower's inventory, whether now owned or
---------
hereafter acquired including, but not limited to, all goods in operable or
repairable condition, new or used, of whatever kind or nature, wherever
located, and all returns, repossessions, exchanges, substitutions,
replacements, attachments, parts, accessories and accessions thereto and
thereof, and all other goods intended to be used in connection therewith,
held for sale or lease by Borrower, or for display or demonstration; all
materials and supplies of every nature and description used or which might
be used in connection with the printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed
in Borrower's business; and all documents evidencing and General
Intangibles relating to any of the foregoing, whether now owned or
hereafter acquired by Borrower.
Knowledge - means the actual knowledge of the existence or absence of
---------
certain facts after due inquiry by Borrower and such investigation by
Borrower as is prudent under current industry practices.
Lien - any interest in Property securing an obligation owed to, or a
----
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract.
LOAN AND SECURITY AGREEMENT - Page 37
---------------------------
Loan Account - the loan account established on the books of Lender
------------
pursuant to Section 3.3 of the Agreement.
-----------
Loan Documents - the Agreement, the Other Agreements and the Security
--------------
Documents.
Lockbox Bank shall mean Texas Commerce Bank National Association, or
------------
such other bank as may be selected by Borrower and be acceptable to Lender.
Losses - as defined in Section 10.2 of this Agreement.
------ ------------
Maturity Date - as defined in Section 3.1.1 of the Agreement.
------------- -------------
Maximum Legal Rate - as defined in Section 2.1.3 of this Agreement.
------------------ -------------
Money Borrowed - means (i) Indebtedness arising from the lending of
--------------
money by any Person to Borrower; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to Borrower, (A)
which is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit; and (v) Indebtedness of Borrower under any guaranty
of obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
------------------
of ERISA.
Net Collections - the remainder of (i) Gross Collections, less (ii)
--------------- ----
any of the Trust's Collections that are retained by the Trust and not
distributed to Borrower.
New Prudential Security Documents - the new loan and security
---------------------------------
documents evidencing PSCC's indebtedness, lien and security interest in the
Trust, as contemplated by the Reorganization Plan.
Obligations - the Term Loan and all other debts, liabilities,
-----------
obligations, covenants and duties, together with all interest, fees and
other charges thereon, owing, arising, due or payable from Borrower to
Lender of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, whether arising under the
Agreement or any of the other Loan Documents or otherwise whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter
arising and however acquired.
LOAN AND SECURITY AGREEMENT - Page 38
---------------------------
Other Accounts - all accounts, contract rights, chattel paper,
--------------
instruments and documents, other than Contracts, whether now owned or
hereafter created or acquired by Borrower or in which Borrower now has or
hereafter acquired any interest, including specifically, but without
limitation, Servicing Fees.
Other Agreements - any and all agreements, instruments and documents
----------------
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other
third party and delivered to Lender in respect of the transactions
contemplated by the Agreement.
Permitted Liens - any Lien of a kind specified in Section 7.2.5 of the
--------------- -------------
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
-------------------------------------
Borrower incurred after the date hereof which is secured by a Purchase
Money Lien and which, when aggregated with the principal amount of all
other such Indebtedness and Capitalized Lease Obligations of Borrower at
the time outstanding, does not exceed $1,000,000. For the purposes of this
definition, the principal amount of any Purchase Money Indebtedness
consisting of capitalized leases shall be computed as a Capitalized Lease
Obligation.
Person - an individual, partnership, corporation, limited liability
------
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Petition Date - the date of Borrower's filing of its petition in the
-------------
Bankruptcy Proceedings (i.e., February 7, 1997), and the specific time of
filing on such date.
Plan - an employee benefit plan now or hereafter maintained for
----
employees of Borrower that is covered by Title IV of ERISA.
Pledged Contract - any Contract that Borrower owned as of the Petition
----------------
Date and any Additional Fleet Contract.
Prior Loan Agreement - the Loan and Security Agreement dated as of
--------------------
April 4, 1995, by and between Borrower and Lender, including all amendments
thereto.
Projected Gross Collections - the Borrower's projected estimate of
---------------------------
Gross Collections. Borrower's projected estimate of Gross Collections is
set forth on Exhibit A to this Agreement.
---------
Projected Net Collections - the projected Net Collections, which form
-------------------------
the basis for the calculation of Excess Cash Flow, and which are attached
to this Agreement as Exhibit B and made a part hereof.
---------
LOAN AND SECURITY AGREEMENT - Page 39
---------------------------
Property - any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
PSCC - Prudential Securities Credit Corporation, a Delaware
----
corporation.
Purchase Money Indebtedness - means and includes (i) Indebtedness
---------------------------
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within 10 days prior to or after
the acquisition of any fixed assets for the purpose of financing all or any
part of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts
thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
-------------------
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
Recoveries - the remainder of (i) all cash received by Borrower in
----------
connection with the liquidation of Pledged Contracts, whether from the
Account Debtor, through sale of any financed automobile, or otherwise, less
(ii) all out-of-pocket expenses associated with the liquidation of Pledged
Contracts in accordance with Borrower's normal servicing procedures.
Releases - (a) a release from Guarantor of all claims, if any, against
--------
Lender, TCB, and their respective officers and agents, and (b) a release
from Borrower of all claims, if any, whether arising before or after the
Petition Date (including any claims arising under the Bankruptcy Code),
against Lender, TCB, and their respective officers and agents.
Reorganization Plan - the plan of reorganization filed by Borrower in
-------------------
the Bankruptcy Proceedings.
Reportable Event - any of the events set forth in Section 4043(b) of
----------------
ERISA.
Secured Fleet Claim - all claims (as such term is defined in the
-------------------
Federal Bankruptcy Code) and Liens arising under or related to the Prior
Loan Agreement or any instrument or agreement referred to therein or
executed by Borrower pursuant thereto.
Securitization Documents - the Contribution and Servicing Agreement
------------------------
and each of the other instruments, documents or agreements referred to
therein and executed in connection therewith.
Security - shall have the same meaning as in Section 2(1) of the
--------
Securities Act of 1933, as amended.
LOAN AND SECURITY AGREEMENT - Page 40
---------------------------
Security Documents - the Trademark Security Agreement, the Trust
------------------
Pledge Agreement, the Guaranty, and all other instruments and agreements
now or at any time hereafter securing the whole or any part of the
Obligations as the same may be renewed, extended, modified and restated
from time to time.
Servicing Collateral - as defined in Section 5.5 of the Agreement.
-------------------- -----------
Servicing Equipment - all Equipment used in the servicing and/or
-------------------
administering of Contracts, including specifically, but without limitation,
Equipment consisting of computers, computer hardware, and office furniture,
fixtures and equipment.
Servicing Fee - any fee payable to Borrower by any Person as
-------------
compensation to Borrower under the Contribution and Servicing Agreements
for the servicing and/or administering of Contracts and other installment
or similar obligations.
Subordinated Debt - Indebtedness of Borrower that is subordinated to
-----------------
the Obligations in a manner satisfactory to Lender.
Subsidiary - any corporation of which a Person owns, directly or
----------
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
TCB - Texas Commerce Bank National Association, a national banking
---
association.
Term Loan - the loan made by Lender as provided in Section 2.1 of the
--------- -----------
Agreement.
Total Liabilities - at any date means all amounts properly classified
-----------------
as liabilities on a balance sheet at such date in accordance with GAAP,
plus all reserves for contingencies and all other potential liabilities for
which no reserves have previously been established on such balance sheet,
to the extent such amounts are not already classified as liabilities in
accordance with GAAP.
Trademark Security Agreement - that certain Trademark Security
----------------------------
Agreement, dated as of the date hereof, executed by Borrower and Lender,
and as the same may be further amended, modified, renewed and restated from
time to time.
Trust - Jayhawk Funding Trust I, a special purpose Delaware business
-----
trust.
Trustee - Norwest Bank Texas, N.A., a national banking association, or
-------
such other financial institution which may serve in the capacity as a
trustee under the Contribution and Servicing Agreement.
Trust Pledge Agreement - that certain Pledge and Security Agreement
----------------------
(Beneficial Interests), dated as of the date hereof, executed by Borrower
in favor of Lender, covering
LOAN AND SECURITY AGREEMENT - Page 41
---------------------------
Borrower's interest in the Trust, as the same may be further amended,
modified, renewed and restated from time to time.
Voting Stock - Securities of any class or classes of a corporation the
------------
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have,
-----------
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
-------------------------------
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
Accounting terms not otherwise specifically defined herein shall be construed in
accordance with GAAP consistently applied. The words "include" and "including"
mean "include without limitation" and "including without limitation",
respectively.
LOAN AND SECURITY AGREEMENT - Page 42
---------------------------
LIST OF EXHIBITS
----------------
Exhibit A Projected Gross Collections
Exhibit B Projected Net Collections
Exhibit C Borrower's Business Locations
Exhibit D Corporate Names
Exhibit E Intellectual Property
Exhibit F Contracts Restricting Borrower's Right to Incur Debts
Exhibit G Litigation
Exhibit H Capitalized Leases
Exhibit I Operating Leases
Exhibit J Labor Contracts
Exhibit K Compliance Certificate
Exhibit L Permitted Liens
Exhibit M Form of Static Pool Analysis
LOAN AND SECURITY AGREEMENT - Page 43
---------------------------
EXHIBIT C
---------
Borrower's Business Location
----------------------------
Jayhawk Acceptance Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT D
---------
Corporate Names
---------------
Name of Subsidiaries:
Jayhawk Funding Trust I
Jayhawk Medical Acceptance Corporation
Jayhawk Services, Inc.
Name of Corporate Affiliates of Borrower:
First Computer Service Corporation
First Extended Service Corporation
FFG Insurance Company
Jayhawk, Inc.
Texas Professional Baseball, Inc.
Cougar Advertising, Inc.
EXHIBIT K
---------
Compliance Certificate
----------------------
[Letterhead of Borrower]
__________________, 19__
Jayhawk Acceptance Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
The undersigned, the Executive Vice President and Treasurer of Jayhawk
Acceptance Corporation, a Texas corporation ("Borrower"), gives this certificate
to Fleet Capital Corporation ("Lender") in accordance with the requirements of
Section 7.1.3 of that certain Loan and Security Agreement dated __________,
-------------
1997, between Borrower and Lender ("Loan Agreement"). Capitalized terms used in
this Certificate, unless otherwise defined herein, shall have the meanings
ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements of income of
Borrower for the monthly period ending __________________, 19__, copies of which
are attached hereto, I hereby certify as follows:
Collections on Pledged Contracts: $____________________
Projected Gross Collections: $____________________
The ratio, as a percentage, of Collections to Projected Gross: ________%
Requirement of Loan Agreement: not less than 85%
2. No Default exists on the date hereof, other than: ____________________
__________________________________________________[if none, so state]; and
3. No Event of Default exists on the date hereof, other than:__________
__________________________________________________[if none, so state].
Very truly yours,
_______________________________________
Name: ________________________________
Executive Vice President and Treasurer
EXHIBIT L
---------
Permitted Liens
---------------
1. Lien granted to Landlord under Office Lease for ▇▇▇▇▇ Tower.
2. Liens granted to Prudential Securities Credit Corporation covering
Borrower's interest in the Trust.
EXHIBIT M
---------
Form of Static Pool Analysis
----------------------------
[See Attached.]
EXHIBIT C
---------
to
Settlement Agreement
New Guaranty
------------
[Attached.]
EXHIBIT C - PAGE 1
---------
UNCONDITIONAL GUARANTY
----------------------
FOR VALUE RECEIVED, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Guarantor") guarantees
---------
unconditionally the full and prompt payment to FLEET CAPITAL CORPORATION
("Lender") at Lender's office in Dallas County, Texas, when due, whether by
-------
acceleration or otherwise, of the following obligations and indebtedness of
JAYHAWK ACCEPTANCE CORPORATION, a Texas corporation (the "Borrower"):
--------
any and all obligations for which Borrower, is now, or hereafter may
become, liable or indebted to Lender under that certain Loan and Security
Agreement, dated as of ______, 1997, by and between Borrower and Lender (as
may be renewed, extended, modified or replaced from time to time, the "Loan
Agreement"); all unpaid accrued interest on the Obligations; and all costs,
attorneys' fees, and other expenses incurred by Lender in enforcing this
Guaranty which are incurred by Lender by reason of any default by Borrower
under the Loan Agreement (all of the foregoing are hereinafter referred to
--------------
as the "Obligations").
-----------
All sums paid Lender by Guarantor may be applied by Lender at its
discretion upon any of the Obligations. To further secure payment of the
Obligations, Guarantor grants to Lender, in addition to all other contractual,
legal, and equitable rights of Lender, the right to offset against any account,
certificate of deposit, or other funds of Guarantor in the possession of or
under the control of Lender.
Guarantor hereby waives notice of acceptance of this Guaranty and all other
notices in connection herewith or in connection with the Obligations, including,
without limitation, notice of intent to accelerate and notice of acceleration,
and waives diligence, presentment, demand, protest, and suit on the part of
Lender in the collection of any of the Obligations, and agrees that Lender shall
not be required to first endeavor to collect any of the Obligations from
Borrower, or any other party liable for payment of the Obligations (hereinafter
referred to as an "Obligated Party"), before requiring Guarantor to pay the full
---------------
amount of the Obligations. Without impairing the rights of Lender against
Guarantor, Borrower or any other Obligated Party, suit may be brought and
maintained against Guarantor at the election of Lender with or without joinder
of Borrower or any other Obligated Party, any right to any such joinder being
hereby waived by Guarantor.
Guarantor represents to Lender he is receiving a direct and indirect
benefit as a result of this Guaranty and the Obligations; represents to Lender
that after giving effect to this Guaranty and the contingent obligations
evidenced hereby he is, and will be, solvent; acknowledges that his liability
hereunder shall be cumulative and in addition to any other liability or
obligation to Lender, whether the same is incurred through the execution of a
note, a similar guaranty, through endorsement, or otherwise; and acknowledges
that neither Lender nor any officer, employee, agent, attorney or other
representative of Lender has made any representation, warranty or statement to
Guarantor to induce him to execute this Guaranty.
UNCONDITIONAL GUARANTY - Page 1
----------------------
Guarantor hereby agrees that, except as hereinafter provided, his
obligations under this Guaranty shall be continuing, absolute and unconditional,
irrespective of (i) the validity or enforceability of the Obligations or of any
promissory note or other document evidencing all or any part of the Obligations,
(ii) the absence of any attempt to collect the Obligations from Borrower or any
other Obligated Party or other action to enforce the same, (iii) the waiver or
consent by Lender with respect to any provision of any instrument evidencing the
Obligations, or any part thereof, or any other agreement now or hereafter
executed by Borrower and delivered to Lender, (iv) failure by Lender to take any
steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for the Obligations, (v) the surrender,
release, exchange, or alteration by Lender of any security or collateral for the
Obligations, (vi) Lender's election, in any proceeding instituted under Chapter
11 of Title 11 of the United States Code (11 U.S.C. (S)101 et seq.) (the
"Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy
---------------
Code, (vii) any borrowing or grant of a security interest by Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code, (viii) the
disallowance of all or any portion of Lender's claim(s) for repayment of the
Obligations under Section 502 of the Bankruptcy Code, or (ix) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
No release, waiver, or discharge of Borrower or any Obligated Party from
liability for payment of any of the Obligations, nor any renewal,
supplementation, modification, rearrangement or acceleration of any of the
Obligations, nor any amendment of any document evidencing any of the
Obligations, either express or implied, shall relieve Guarantor from liability
for payment of the full amount of the Obligations then or thereafter
outstanding; and Guarantor will immediately pay all Obligations to Lender or
other person entitled thereto, regardless of any defense, right of set-off, or
counterclaim which Borrower or any other Obligated Party may have or assert, and
regardless of whether Lender or any other party shall have taken any steps to
enforce any rights against Borrower, any other Obligated Party, or any other
party to collect such sum, and regardless of any other condition or contingency,
including, without limitation, any neglect, delay, or omission of Lender. Lender
is hereby authorized, without notice or demand and without affecting the
liability of Guarantor, to, from time to time: (i) accept partial payments on
the Obligations; (ii) take and hold security or collateral for the payment of
this Guaranty or any other guarantees of the Obligations, and exchange, enforce,
waive and release any such security or collateral; (iii) apply such security or
collateral therefor in any manner, without affecting or impairing the
obligations of Guarantor hereunder.
Notwithstanding anything to the contrary contained herein, Guarantor shall
not have any right, claim or action, now or hereafter, against Borrower or any
other Obligated Party arising out of or in connection with this Guaranty or any
other document evidencing or securing the Obligations, including, without
limitation, any right or claim of subrogation, contribution, reimbursement,
exoneration, or indemnity, until all of the Obligations are paid in full.
Guarantor is familiar with, and has independently reviewed the financial
condition of, Borrower and hereby assumes responsibility for keeping itself
informed of the financial condition of Borrower, and any and all endorsers or
other guarantors of any instrument or document evidencing all or any part of the
Obligations and of all other circumstances bearing
UNCONDITIONAL GUARANTY - Page 2
----------------------
upon the risk of nonpayment of the Obligations or any part thereof that diligent
inquiry would reveal. Guarantor hereby agrees that Lender shall have no duty to
advise Guarantor of information known to Lender regarding such condition or any
such circumstances. Guarantor is not relying on the financial condition of
Borrower or the value of any collateral for the Obligations as an inducement to
enter into this Guaranty. If Lender, in its sole discretion, undertakes at any
time or from time to time to provide any such information to Guarantor, Lender
shall be under no obligation (i) to undertake any investigation not a part of
its regular business routine, (ii) to disclose any information which, pursuant
to accepted or reasonable commercial finance practices, Lender wishes to
maintain confidential, or (iii) to make any other or future disclosures of such
information or any other information to Guarantor.
Guarantor consents and agrees that Lender shall be under no obligation to
▇▇▇▇▇▇▇▇ any assets in favor of Guarantor or against or in payment of any or all
of the Obligations. Guarantor further agrees that, to the extent that Borrower
makes a payment or payments to Lender, or Lender receives any proceeds of
collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, any of its estate, trustee, receiver or any
other party, including, without limitation, Guarantor, under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligations or part thereof which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred and this Guaranty, if previously terminated, shall be reinstated for
the benefit of Lender.
Lender may, without notice to Guarantor or any other party, assign its
rights hereunder to any holder of the Obligations, in whole or in part, and upon
any such assignment all the terms and provisions of this Guaranty shall inure to
the benefit of such assignee, to the extent so assigned.
Lender is relying and is entitled to rely upon each and all of the
provisions of this Guaranty; and, accordingly, if any provision of this Guaranty
should be held to be invalid or ineffective, then all other provisions shall
continue in full force and effect notwithstanding.
Any and all notices, requests and demands to or upon Guarantor to be
effective shall be in writing and shall be deemed to have been validly served,
given or delivered as follows: (a) if sent by certified or registered mail
return receipt requested, three business days after deposit in the mail, postage
prepaid, or, if earlier, when delivered against receipt; or (b) in the case of
telegraphic notice, when delivered to the telegraph company; or (c) in the case
of telex notice, when sent, answer-back received; or (d) if sent by any other
method, upon actual delivery; in each case addressed to the address set forth
opposite Guarantor's signature below or at such other address as Guarantor shall
hereafter notify Lender.
It is the intention of Borrower, Guarantor and Lender to conform strictly
to applicable usury laws. Accordingly, no agreements, conditions, provisions or
stipulations contained in this Guaranty or any other instrument, document or
agreement between Guarantor or Borrower and Lender or default of Guarantor or
Borrower, or the exercise by Lender of the right to accelerate
UNCONDITIONAL GUARANTY - Page 3
----------------------
the payment of the maturity of principal and interest, or to exercise any option
whatsoever contained in this Guaranty or any other agreement between Guarantor
or Borrower and Lender, or the arising of any contingency whatsoever, shall
entitle Lender to collect, in any event, interest exceeding the maximum rate of
interest permitted by applicable state or federal law in effect from time to
time hereafter (the "Maximum Legal Rate") and in no event shall Guarantor be
------------------
obligated to pay interest exceeding such Maximum Legal Rate and all agreements,
conditions or stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel Guarantor to pay a rate of
interest exceeding the Maximum Legal Rate, shall be without binding force or
effect, at law or in equity, to the extent only of the excess of interest over
such Maximum Legal Rate. In the event any interest is charged in excess of the
Maximum Legal Rate ("Excess"), Guarantor acknowledges and stipulates that any
------
such charge shall be the result of an accident and bona fide error, and such
Excess shall be, first, applied to reduce the principal then unpaid hereunder;
second, applied to reduce the Obligations; and third, returned to Guarantor, it
being the intention of the parties hereto not to enter at any time into a
usurious or otherwise illegal relationship. Guarantor recognizes that, with
fluctuations in the applicable rate on the Obligations and the Maximum Legal
Rate, such an unintentional result could inadvertently occur. By the execution
of this Guaranty, Guarantor covenants that Guarantor shall not seek or pursue
any other remedy, legal or equitable, against Lender, based in whole or in part
upon the contracting, charging or receiving of any interest in excess of the
maximum authorized by applicable law.
If any sum due Lender by Guarantor hereunder is placed in the hands of an
attorney for collection, or is collected through probate, bankruptcy, or other
court proceeding, then Guarantor promises to pay Lender all reasonable costs,
attorneys' fees, and other expenses incurred by Lender pursuant to such
collection efforts.
It is expressly agreed and acknowledged that notwithstanding anything
contained in this Guaranty to the contrary, the liability of Guarantor under
this Guaranty shall be limited to an amount equal to the sum of the following:
(i) Ten Million and No/100 Dollars ($10,000,000.00) (the
"Guaranteed Obligations"); plus
---------------------- ----
(ii) all costs and expenses of any kind incurred by Lender in
enforcing this Guaranty which are incurred by Lender by reason of any
default by Borrower under the Loan Agreement, or any instrument or document
executed in connection with or as security for payment of the Obligations
or any renewal, extension or modification thereof (hereinafter referred to
as the "Collection Expenses"); plus
------------------- ----
(iii) interest that accrues on outstanding, unpaid amount of the
Guaranteed Obligations and Collection Expenses, at the same rate of
interest that accrues on the Obligations and the Collection Expenses under
the terms of the Loan Agreement, from and after the date Lender demands
performance and/or payment by Guarantor hereunder until payment in full
by Guarantor of all sums owing hereunder.
UNCONDITIONAL GUARANTY - Page 4
----------------------
Any and all existing and future indebtedness and/or obligations of Borrower
to Lender and all extensions, renewals and replacements thereof, whether now
existing or hereafter incurred, whether direct, primary, absolute, secondary,
contingent, secured, matured or unmatured, whether from time to time reduced and
thereafter increased, or entirely extinguished and thereafter reincurred,
whether originally contracted with Lender or with another or others, whether or
not evidenced by a negotiable or non-negotiable instrument or any other writing,
and whether contracted by Borrower along or jointly or severally with another or
others, other than the Guaranteed Obligations, are hereinafter referred to as
the "Unguaranteed Obligations". If at any time there exists any Unguaranteed
------------------------
Obligations (i) Lender may at its option, without impairing its rights
hereunder, exercise rights of offset by applying, first, to the Unguaranteed
Obligations any deposit balances to the credit of Borrower, and (ii) apply all
amounts realized by Lender from collateral or security held by Lender for
payment of the Obligations against the amount of the Collection Expenses,
Guaranteed Obligations and/or the Unguaranteed Obligations in such order or
manner as Lender shall determine in its sole discretion.
In the event that Lender makes demand on Guarantor under this Guaranty
prior to indefeasible payment of the Obligations, in full, to Lender, then this
Guaranty will terminate only upon payment, in full, to Lender by Guarantor of
the Guaranteed Obligations, the Collection Expenses, if any, and accrued
interest thereon, if any.
THIS GUARANTY HAS BEEN NEGOTIATED AND SHALL BE DEEMED TO HAVE BEEN MADE IN
THE STATE OF TEXAS. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS AND NOT THE LAWS OF
CONFLICTS OF THE STATE OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE AND
BENEFIT THIS DAY RECEIVED BY GUARANTOR, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN DALLAS COUNTY OF THE
STATE OF TEXAS AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED
MAIL DIRECTED TO GUARANTOR AT THE ADDRESS STATED HEREIN AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. GUARANTOR WAIVES
ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE.
EXCEPT AS OTHERWISE PROVIDED FOR IN THIS GUARANTY, GUARANTOR WAIVES THE
RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE OBLIGATIONS.
THIS WRITTEN GUARANTY, TOGETHER WITH ALL OTHER INSTRUMENTS, AGREEMENTS AND
--------------------------------------------------------------------------
CERTIFICATES EXECUTED BY THE
----------------------------
UNCONDITIONAL GUARANTY - Page 5
----------------------
PARTIES IN CONNECTION WITH THE OBLIGATIONS OR WITH REFERENCE HERETO OR THERETO,
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------
This Guaranty is given in modification, substitution and replacement of
that certain Unconditional Guaranty (the "Prior Guaranty"), dated January 9,
--------------
1997, executed by Guarantor in favor of Lender, covering certain obligations of
Borrower. Any and all liabilities of Guarantor to Lender under the Prior
Guaranty are modified, substituted and replaced by this Guaranty.
By acceptance of this Guaranty, Lender agrees and acknowledges in favor of
Guarantor as follows:
(a) Lender has rescinded Lender's demand to Guarantor, dated February
6, 1997, for payment and performance under the Prior Guaranty; and
(b) Lender knows of no other presently existing, matured, and
liquidated claims of Lender against guarantor.
Executed and delivered as of the ____ day of ________, 1997.
________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address:
-------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
UNCONDITIONAL GUARANTY - Page 6
----------------------
EXHIBIT D
---------
to
Settlement Agreement
Note
----
[Attached.]
EXHIBIT D - PAGE 1
---------
SECURED PROMISSORY NOTE
$____________ _____________, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
--------
promises to pay to the order of FLEET CAPITAL CORPORATION, a Rhode Island
corporation (hereinafter "Lender"), at its office located at 2711 North ▇▇▇▇▇▇▇,
------
Suite 2100, LB 21, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other location as Lender may
request, in such coin or currency of the United States which shall be legal
tender in payment of all debts and dues, public and private, at the time of
payment, the principal sum of _____ MILLION _______ THOUSAND AND NO/100 DOLLARS
($____________), together with interest from and after the date hereof at the
per annum rate set forth below.
Subject to Section 2.1.3 of the Loan Agreement (as defined below), the
--------------
unpaid principal balance outstanding hereunder shall accrue interest at the per
annum rate (hereinafter referred to as the "Applicable Annual Rate") specified
----------------------
in Section 2.1.1 of that certain Loan and Security Agreement, dated of even date
-------------
herewith, by and between Lender and Borrower (as amended, restated or renewed
from time to time, the "Loan Agreement"), except that upon and after the
--------------
occurrence and during the continuance of an Event of Default, the unpaid
principal balance outstanding hereunder, and, to the extent permitted by
applicable law, past due interest hereunder, shall accrue interest at the
Default Rate specified in Section 2.1.2 of the Loan Agreement.
-------------
This Secured Promissory Note (this "Note") is the Term Note referred
----
to in, and is issued pursuant to, the Loan Agreement, and is entitled to all of
the benefits and security of the Loan Agreement. All of the terms, covenants
and conditions of the Loan Agreement and all other instruments evidencing or
securing the indebtedness hereunder (including, without limitation, the
"Security Documents" as defined in the Loan Agreement) (hereinafter collectively
-------------------
referred to as the "Loan Documents") are hereby made a part of this Note and are
--------------
deemed incorporated herein in full. All capitalized terms used herein, unless
otherwise specifically defined in this Note, shall have the meanings ascribed to
them in the Loan Agreement.
The principal amount of and all accrued interest on this Note shall be
due and payable on the dates and in the manner hereinafter set forth:
(a) Interest. Interest shall be due and payable monthly, in arrears,
--------
on the first day of each month, commencing on _____1, 1997, and continuing
on the first day of each month thereafter until such time as the full
principal balance, together with all other amounts owing hereunder, shall
have been paid in full;
(b) Monthly Principal Amortization. The outstanding principal balance
------------------------------
of this Note shall be due and payable in monthly installments on the last
day of each calendar month, the amount of which for any particular month
being equal to the amount shown below for the month corresponding thereto,
except to extent Borrower previously
SECURED PROMISSORY NOTE - Page 1
-----------------------
made all or any portion of thereof pursuant to the Final Cash Collateral
Order (as such term is defined in the Loan Agreement):
AGGREGATE INSTALLMENTS
MONTH: ----------------------
------ PER MONTH:
----------
[June through July, 1997 $4,000,000
August, 1997 $3,500,000
September, 1997 $3,250,000
October and November, 1997 $3,000,000
December, 1997 $2,750,000
January, 1998 $2,500,000
February, 1998 $2,000,000
March through August, 1998 $3,000,000]
(c) Maturity Date. The entire remaining principal amount then
-------------
outstanding, together with any and all other amounts due hereunder, shall
be due and payable on the Maturity Date (i.e., September 1, 1998).
In addition to principal payments provided for above, mandatory prepayments
of principal shall be due and payable on a quarterly basis, on the 15th day of
each March, June, September and December, beginning on the first such date after
the Closing Date, in an amount equal to fifty percent (50%) of Excess Cash Flow,
as defined and more particularly provided for in Section 3.1.3 of the Loan
Agreement.
Borrower may prepay this Note in whole or in part at any time without
premium or penalty, unless otherwise specified in the Loan Agreement.
All partial prepayments, whether mandatory or voluntary, shall be applied
to installments of principal in the inverse order of their maturities.
Upon or after the occurrence of an Event of Default, Lender shall have all
of the rights and remedies set forth in Section 9 of the Loan Agreement,
---------
including the right to declare the then outstanding principal balance and
accrued interest hereof to be and the same shall thereupon become, immediately
due and payable without notice of intention to accelerate, notice of
acceleration, or any other notice to or demand upon Borrower, all of which
Borrower hereby expressly waives.
Notwithstanding anything to the contrary in this Note or otherwise, (i) if
at any time the amount of interest computed on the basis of the Applicable
Annual Rate or the Default Rate would exceed the amount of such interest
computed upon the basis of the maximum rate of interest permitted by applicable
state or federal law in effect from time to time hereafter (the "Maximum Legal
-------------
Rate"), the interest payable under this Note shall be computed upon the basis of
----
the Maximum Legal Rate, but any subsequent reduction in such Applicable Annual
Rate or Default Rate, as applicable, shall not reduce such interest thereafter
payable hereunder below the
SECURED PROMISSORY NOTE - Page 2
-----------------------
amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Note equals the total
amount of interest which would have accrued if such interest had been at all
times computed solely on the basis of the Applicable Annual Rate or Default
Rate, as applicable; and (ii) unless preempted by federal law, the Applicable
Annual Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the "indicated ceiling rate" from time to time in
effect under Tex. Rev. Civ. Stat. ▇▇▇. art. 5069-1.04(c) (▇▇▇▇▇▇ 1987). If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Note than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable at the same date and in the same manner as
accrued interest on this Note is generally payable pursuant to the provisions of
this Note.
No agreements, conditions, provisions or stipulation contained in this
Note, the Loan Agreement or any other instrument, document or agreement between
Borrower and Lender or default of Borrower, or the exercise by Lender of the
right to accelerate the payment of the maturity of principal and interest, or to
exercise any option whatsoever contained in this Note or any other Loan
Document, or the arising of any contingency whatsoever, shall entitle Lender to
contract for, charge, or receive, in any event, interest exceeding the Maximum
Legal Rate. In no event shall Borrower be obligated to pay interest exceeding
such Maximum Legal Rate and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate,
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such Maximum Legal Rate. In the event any
interest is contracted for, charged or received in excess of the Maximum Legal
Rate ("Excess Interest"), Borrower acknowledges and stipulate that any such
---------------
contract, charge, or receipt shall be the result of an accident and bona fide
error, and that any Excess Interest received by Lender shall be applied, first,
to reduce the principal then unpaid hereunder; second, to reduce the other
Obligations; and third, returned to Borrower, it being the intention of the
parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Borrower recognizes that, with fluctuations in the Applicable
Annual Rate and the Maximum Legal Rate, such a result could inadvertently occur.
By the execution of this Note, Borrower covenants that (i) the credit or return
of any Excess Interest shall constitute the acceptance by Borrower of such
Excess Interest, and (ii) Borrower shall not seek or pursue any other remedy,
legal or equitable, against Lender, based in whole or in part upon contracting
for, charging or receiving of any interest in excess of the maximum rate
authorized by applicable law. For the purpose of determining whether or not any
Excess Interest has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received by Lender in connection
with this Note shall be amortized, prorated, allocated and spread in equal parts
during the entire term of this Note.
Time is of the essence of this Note. Unless otherwise provided in the Loan
Agreement, Borrower, for itself and its legal representatives, successors and
assigns, expressly waives, to the fullest extent permitted by Applicable Law,
presentment, demand, protest, notice of dishonor, notice of non-payment, notice
of intent to accelerate, notice of acceleration, notice of maturity,
SECURED PROMISSORY NOTE - Page 3
-----------------------
notice of protest, presentment for the purpose of accelerating maturity,
diligence in collection, and the benefit of any exemption or insolvency laws.
If this Note is collected by or through an attorney at law, Borrower shall
be obligated to pay, in addition to the principal balance and accrued interest
hereof, reasonable attorney's fees and court costs, and any other charges for
which Borrower is responsible under the Loan Agreement and other Loan Documents.
Wherever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under Applicable Law, but if any provision
of this Note shall be prohibited or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. Borrower
agrees that, without releasing or impairing Borrower's liability hereunder,
Lender may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Texas.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered in Dallas, Texas, on the date first above written.
BORROWER:
JAYHAWK ACCEPTANCE CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
SECURED PROMISSORY NOTE - Page 4
-----------------------
EXHIBIT E
---------
to
Settlement Agreement
Pledge Agreement
----------------
[Attached.]
EXHIBIT E - PAGE 1
---------
EXHIBIT 10.43
PLEDGE AND SECURITY AGREEMENT
(BENEFICIAL INTERESTS)
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the ___ day of ______,
1997, by JAYHAWK ACCEPTANCE CORPORATION, a Texas corporation, having an office
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Pledgor"), to and in favor
-------
of FLEET CAPITAL CORPORATION, having an office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Pledgee").
-------
W I T N E S S E T H:
- - - - - - - - - -
PRELIMINARY STATEMENT. Pledgor is now the direct legal and beneficial
owner of one hundred percent (100%) of the issued and outstanding shares of
equity and beneficial interests, ownership rights and other ownership interests,
whether or not evidenced by any tangible indicia of ownership, issued by Jayhawk
Funding Trust I, a Delaware limited purpose business trust ("Issuer"), all as
------
more particularly described on Exhibit A hereto (the "Pledged Securities"). In
--------- ------------------
order to induce Pledgee to enter into the Loan Agreement (as defined below) with
Pledgee, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) and to accomplish same by (i) executing and
delivering to Pledgee this Pledge Agreement, (ii) subject to the PSCC Agreement,
delivering to Pledgee such of the Pledged Securities as Pledgee shall now or
hereafter have in its possession from time to time, together with appropriate
powers and/or endorsements duly executed in blank by Pledgor, and (iii)
delivering to Pledgee any and all other documents which Pledgee deems necessary
to protect Pledgee's interests hereunder or with respect to the Obligations.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, Pledgor
hereby agrees as follows:
1. Definitions
-----------
(a) "Loan Agreement" shall mean that certain Loan and Security
--------------
Agreement, dated ________, 1997, as the same may be amended, renewed, modified
or extended at any time and from time to time.
(b) "Obligations" shall have the meaning given such term in the Loan
-----------
Agreement.
(c) "Pledge Agreement" shall mean and include this Pledge and
----------------
Security Agreement, as amended, modified or supplemented from time to time.
(d) "Pledged Property" shall mean and include (i) the Pledged
----------------
Securities, together with all interest, profits, redemptions, subscription
rights, stock, warrants, certificates of interest, shares, participations,
receipts, securities, options, substitutions, exchanges, dividends
PLEDGE AGREEMENT - Page 1
----------------
and other distributions now or hereafter distributed by Issuer or which may
hereafter be acquired by or delivered to the possession of Pledgor or Pledgee
with respect to the Pledged Securities, (ii) Pledgor's records with respect to
the foregoing and (iii) the proceeds of all of the foregoing.
(e) "PSCC" shall mean Prudential Securities Credit Corporation, a
----
Delaware corporation.
(f) "PSCC Agreement" shall mean that certain Trust Shares Pledge
--------------
Agreement by and between PSCC and Pledgor, dated as of December 1, 1996.
(g) All other terms hereinbefore or hereinafter defined in this
Pledge Agreement shall have the meanings herein assigned to such terms.
(h) All capitalized terms not specifically defined herein shall have
the meanings assigned to them in the Loan Agreement, if therein defined;
otherwise, all capitalized terms not specifically defined herein or therein
which are defined in the Uniform Commercial Code (the "Code") as presently in
----
effect in the State of Texas shall be construed in accordance with the
definitions set forth in the Code.
2. Grant of Security Interest
--------------------------
As collateral security for the prompt and unconditional payment and
performance when due of each and every one of the Obligations, Pledgor hereby
assigns, mortgages, pledges, hypothecates, transfers and sets over to Pledgee
and grants to Pledgee a security interest in and lien upon all of the Pledged
Property, subject, however, to the PSCC Agreement.
3. Representations, Warranties, Covenants and Waivers
-------------------------------------------------
Pledgor hereby covenants, represents and warrants, with and to Pledgee
that (all of such covenants, representations and warranties being continuing in
nature so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly issued, fully
paid and non-assessable securities of the Issuer, constitute Pledgor's entire
interest in the Issuer and are not registered, nor has Pledgee authorized the
registration thereof, in the name of any person or entity other than PSCC,
pursuant to the PSCC Agreement, Pledgor or Pledgee.
(b) The Pledged Property is directly, legally and beneficially owned
by Pledgor free and clear of all claims, liens, pledges and encumbrances of any
kind, nature or description except for (i) the pledge and security interest with
respect thereto in favor of PSCC, as evidenced by the PSCC Agreement, and (ii)
the pledge and security interest with respect thereto in favor of Pledgee.
(c) The Pledged Property is not subject to any restrictions relative
to the transfer thereof, except as provided in the Declaration of Trust of the
Issuer and noted on the
PLEDGE AGREEMENT - Page 2
----------------
certificates evidencing the Pledged Securities, and Pledgor has the right to
transfer and hypothecate the Pledged Property free and clear of any liens,
encumbrances or restrictions, except as otherwise provided herein.
(d) The Pledged Property is duly and validly pledged to Pledgee and
no consent or approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any other third
party was or is necessary to the validity and enforceability of this Pledge
Agreement, except for the consent of PSCC, which Pledgee has obtained.
(e) Pledgee is authorized, but not required, to (i) store, deposit
and safeguard the Pledged Property, (ii) perform any and all other acts which
Pledgee in good ▇▇▇▇▇ ▇▇▇▇▇ reasonable and/or necessary for the protection and
preservation of the Pledged Property or its value or Pledgee's security interest
therein, including without limitation, transferring, registering or arranging
for the transfer or registration of the Pledged Property to or in Pledgee's own
name and receiving the income therefrom as additional collateral for the
Obligations and (iii) pay any charges or expenses which Pledgee deems necessary
for the foregoing purposes. Any obligation of Pledgee for reasonable care for
the Pledged Property in Pledgee's possession shall be limited to the same degree
of care which Pledgee uses for similar property owned by Pledgee.
(f) Pledgor will pay all charges and assessments of any nature
against the Pledged Property or with respect thereto prior to said charges
and/or assessments being delinquent.
(g) Pledgor shall promptly reimburse Pledgee on demand, together with
interest at the rate provided in the Loan Agreement, for any charges,
assessments or expenses paid or incurred by Pledgee in its discretion for the
protection and preservation and maintenance of the Pledged Property and the
enforcement of Pledgee's rights hereunder, including, without limitation,
reasonable attorneys' fees and legal expenses incurred by Pledgee in seeking to
protect, collect or enforce its rights in the Pledged Property or otherwise
hereunder.
(h) Pledgor shall furnish Pledgee with such information concerning
Issuer and the Pledged Property as Pledgee may from time to time request,
including, without limitation, current financial statements.
(i) During the term of this Pledge Agreement, if Pledgor shall
receive, have registered in its name or become entitled to receive or acquire or
have registered in its name any certificate, option, warrant or right with
respect to the equity or beneficial or other interests of Issuer (including
without limitation, any certificate representing a dividend on or a distribution
or exchange of or in connection with any reclassification of the Pledged
Securities) whether as an addition to, in substitution of, or in exchange for
any of the Pledged Property or otherwise, Pledgor agrees to accept same as
Pledgee's agent, to hold same in trust for Pledgee and to deliver same forthwith
to Pledgee or Pledgee's agent or bailee in the form received, with the
endorsement(s) of Pledgor where necessary and/or duly executed appropriate
powers and/or assignments, to be held by Pledgee or Pledgee's agent or bailee
subject to the terms hereof, or, if
PLEDGE AGREEMENT - Page 3
----------------
any of the foregoing is uncertificated, register same with the Pledgee's
security interest noted therein, as further security for the Obligations.
(j) During the term of this Pledge Agreement, Pledgor shall not
directly or indirectly sell, assign, transfer, or otherwise dispose of, or grant
any option with respect to the Pledged Property, nor shall Pledgor create, incur
or permit any further pledge, hypothecation, encumbrance, lien, mortgage or
security interest with respect to the Pledged Property, except pursuant to the
PSCC Agreement
(k) So long as no Event of Default (as hereinafter defined) has
occurred, Pledgor shall have the right to vote and exercise all ownership rights
with respect to the Pledged Securities, except as expressly prohibited herein.
(l) Pledgee may notify Issuer or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
(m) No action has been taken or is being taken by or is currently
planned by Pledgor, or any agent acting on its behalf which would cause this
Pledge Agreement or the Obligations to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System, the
Securities and Exchange Act of 1934 or any other applicable law or regulation,
in each case as now in effect or as the same may hereafter be amended or
supplemented. Pledgor is not in the business of extending credit for the
purpose of purchasing or carrying margin stocks or other securities.
(n) Pledgor waives (i) all rights to require Pledgee to proceed
against any other person, entity or collateral or to exercise any remedy, (ii)
the defense of the statute of limitations in any action upon any of the
Obligations, (iii) any right of subrogation in the Obligations or Pledged
Property, (iv) any rights as a guarantor or surety, including, without
limitation, the right to be informed of additional credit extended by Pledgor,
any financial information relating to Obligor, the value of the Pledged
Property, any deterioration thereof, or of any other matter, unless specifically
required by applicable law and non-waivable and (v) to the extent permissible,
its rights under Section 9.112 and 9.207 of the Code. Pledgee is entitled to all
of the benefits of a secured party set forth in Section 9.207 of the Code.
Pledgor agrees that the Pledged Property, other collateral, Company or any other
guarantor or endorser may be released, substituted or added with respect to the
Obligations, in whole or in part, without releasing or otherwise affecting the
liability of Pledgor, the pledge and security interests granted hereunder, or
this Pledge Agreement.
(o) The PSCC Agreement has not been amended or modified, and the
"Secured Obligations" (as such term is defined in the PSCC Agreement) consist
only of the loan, the outstanding principal balance of which is, as of this
date, $_________________. The principal balance of the Secured Obligations will
not be increased above such amount.
PLEDGE AGREEMENT - Page 4
----------------
4. Events of Default
-----------------
The occurrence of an "Event of Default" under (and as defined in) the
Loan Agreement or any representation or warranty made by Pledgor (or any of its
officers) under or in connection with this Pledge Agreement which shall prove to
have been incorrect in any material respect when made, or any failure by Pledgor
to perform or observe any term, covenant or agreement contained in this Pledge
Agreement on its part to be performed or observed, shall, at the sole option of
Pledgee, constitute and be deemed an Event of Default under this Pledge
Agreement.
5. Remedies After Default
----------------------
Upon or subsequent to the occurrence of an Event of Default:
(a) Pledgee, at its option, shall be empowered to exercise its
continuing right to instruct Issuer (or the appropriate transfer agent of the
Pledged Securities) to register any or all of the Pledged Securities and/or
other Pledged Property in the name of Pledgee or in the name of Pledgee's
nominee and Pledgee may complete, in any manner Pledgee may deem expedient, any
and all stock powers, assignments or other documents heretofore or hereafter
executed in blank by Pledgor and delivered to Pledgee. After said instruction,
and without further notice, Pledgee, in its discretion, shall have the exclusive
right to exercise all voting and business trust rights with respect to the
Pledged Securities and other Pledged Property and exercise any and all rights of
conversion, redemption, exchange, subscription or any other rights, privileges,
or options pertaining to any shares of the Pledged Securities or the other
Pledged Property as if Pledgee were the absolute owner thereof, including
without limitation, the right to exchange, in its discretion any and all of the
Pledged Securities and other Pledged Property upon any merger, consolidation,
reorganization, recapitalization or other readjustment with respect to Issuer.
Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee
shall have the right to deposit and deliver any and all of the Pledged
Securities and other Pledged Property to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as
Pledgee may determine, all without liability, except to account for property
actually received by Pledgee. However, Pledgee shall have no duty to exercise
any of the aforesaid rights, privileges or options (all of which are exercisable
in the sole discretion of Pledgee) and shall not be responsible for any failure
to do so or delay in doing so.
(b) In addition to all the rights and remedies of a secured party
under the Texas Business and Commerce Code, Pledgee shall have the right, at any
time and without demand of performance or other demand, advertisement or notice
of any kind (except the notice specified below of time and place of public or
private sale) to or upon Pledgor or any other person (all and each of which
demands, advertisements and/or notices are hereby expressly waived to the extent
permitted by law), to proceed forthwith to collect, redeem, receive,
appropriate, sell, or otherwise dispose of and deliver the Pledged Property or
any part thereof in one or more lots at public or private sale or sales at any
exchange, brokers board or at any of Pledgee's offices or elsewhere at such
prices and on such terms as Pledgee may deem best. The foregoing disposition(s)
may be for cash or on credit or for future delivery without assumption of
PLEDGE AGREEMENT - Page 5
----------------
any credit risk by Pledgee, with Pledgee having the right to purchase all or any
part of said Pledged Property so sold at any such sale or sales, public or
private, free of any right or equity of redemption in Pledgor, which right or
equity is hereby expressly waived or released by Pledgor. In connection with any
sale or other disposition of the Pledged Property, Pledgee is hereby authorized
by Pledgor to complete the appropriate instruments(s) of transfer executed and
delivered by Pledgor with respect to the Pledged Property in such manner as
Pledgee shall deem appropriate to effectuate such sale or other disposition. All
of Pledgee's rights and remedies, including, but not limited to, the foregoing,
shall be cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently, as Pledgee may deem expedient. The proceeds of any
such collection, redemption, recovery, receipt, appropriation, realization, sale
or other disposition, after deducting all costs and expenses of every kind
incurred relative thereto or incidental to the care, safekeeping or otherwise of
any and all Pledged Property or in any way relating to the rights of Pledgee
hereunder (including, without limitation, reasonable attorneys' fees and legal
expenses, including, without limitation, a reasonable estimate of the allocated
cost of Pledgee's in-house counsel and legal staff) shall be applied first to
the satisfaction of the Obligations (in such order as Pledgee may elect) and
then to the payment of any other amounts required by applicable law, including
Section 9.504(a)(3) of the Texas Business and Commerce Code, Pledgor to be and
remain liable to Pledgee for any deficiency. Pledgor agrees that ten (10) days
prior notice by Pledgee, sent by certified mail, postage prepaid, designating
the date after which a private sale may take place or a public auction may be
held, is reasonable notification of such matters.
(c) Pledgor recognizes that Pledgee may be unable to effect a public
sale of all or part of the Pledged Property by reason of certain prohibitions
contained in the Securities Act of l933, as amended, as now or hereafter in
effect or in applicable Blue Sky or other state securities law, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Pledged Property for their own account for investment
and not with a view to the distribution or resale thereof. If at the time of any
sale of the Pledged Property or any part thereof the same shall not, for any
reason whatsoever, be effectively registered (if required) under the Securities
Act of 1933 (or other applicable state securities law), as then in effect,
Pledgee in its sole and absolute discretion is authorized to sell such Pledged
Property or such part thereof by private sale in such manner and under such
circumstances as Pledgee or its counsel may deem necessary or advisable in order
that such sale may legally be effected without registration. Pledgor agrees that
private sales so made may be at prices and on terms less favorable to the seller
than if such Pledged Property were sold at public sale, and that Pledgee has no
obligation to delay the sale of any such Pledged Property for the period of time
necessary to permit Issuer, even if Issuer would agree, to register such Pledged
Property for public sale under such applicable securities laws. Pledgor agrees
that any private sales made under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner.
(d) All of the Pledgee's rights and remedies, including but not
limited to the foregoing and those otherwise arising under this Pledge
Agreement, the Loan Agreement, the instruments and securities comprising the
Pledged Property, applicable law or otherwise, shall be cumulative and not
exclusive and shall be enforceable alternatively, successively or concurrently
PLEDGE AGREEMENT - Page 6
----------------
as Pledgee may deem expedient. No failure or delay on the part of Pledgee in
exercising any of its options, powers or rights or partial or single exercise
thereof, shall constitute a waiver of such option, power or right.
6. Further Assurances
------------------
Pledgor agrees that at any time and from time to time upon the written
request of Pledgee, Pledgor will execute and deliver such further documents,
including but not limited to irrevocable proxies or stock powers, in form
satisfactory to counsel for Pledgee, and will take or cause to be taken such
further acts as Pledgee may reasonably request in order to effect the purposes
of this Pledge Agreement and perfect or continue the perfection of the security
interest in the Pledged Property granted to Pledgee hereunder.
7. Miscellaneous
-------------
(a) Beyond the exercise of reasonable care to assure the safe custody
of the Pledged Property while held by Pledgee hereunder, as provided in Section
-------
3(e) hereof, Pledgee or Pledgee's agent or bailee shall have no duty or
----
liability to protect or preserve any rights pertaining thereto and shall be
relieved of all responsibility for the Pledged Property upon surrendering it to
Pledgor or foreclosure with respect thereto. Pledgee shall have no obligation
or duty to return or release its security interest in the Pledged Property,
except upon the written request of Pledgor, at the sole expense of Pledgor and
only after all Obligations are indefeasibly paid in full.
(b) No course of dealing between Pledgor and Pledgee, nor any failure
or delay by Pledgee to exercise any right, power or privilege under this Pledge
Agreement, the Loan Agreement or under any other agreements, instruments and
documents executed and delivered in connection therewith, shall operate as a
waiver hereof or thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision of this Pledge Agreement shall be effective unless the
same shall be in writing and signed by Pledgee, and then such waiver shall be
effective only in the specific instance and for the purpose for which given.
(c) This Pledge Agreement may not be changed, modified or amended, in
whole or in part, except by a writing signed by Pledgor and Pledgee.
(d) The provisions of this Pledge Agreement and the Loan Agreement
are severable, and if any clause or provision hereof or thereof shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall attach only to such clause or provision in
any such jurisdiction or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
in this Pledge Agreement or the Loan Agreement in any jurisdiction.
PLEDGE AGREEMENT - Page 7
----------------
(E) THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING OF ANY KIND OR NATURE IN ANY COURT WHETHER ARISING OUT OF, UNDER OR
BY REASON OF THIS PLEDGE AGREEMENT, THE PLEDGED PROPERTY, THE LOAN AGREEMENT OR
ANY MATTER OR PROCEEDING RELATING THERETO.
(f) This Pledge Agreement shall inure to the benefit of Pledgee and
its successors and assigns, and shall be binding upon Pledgor and its successors
and assigns.
8. Counterparts
------------
This Pledge Agreement may be signed in any number of counterparts with
the same effect as if the signatures were upon the same instrument.
9. Governing Law
-------------
THIS PLEDGE AGREEMENT, THE LOAN AGREEMENT AND ANY OTHER AGREEMENT,
INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION HEREWITH, AND THE OBLIGATIONS OF
THE PARTIES HEREUNDER OR THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
10. Jurisdiction
------------
(a) Pledgor hereby irrevocably submits to the jurisdiction of any
Texas State or Federal court sitting in Dallas County in any action or
proceeding arising out of or relating to this Pledge Agreement to which Pledgor
is a party, and Pledgor hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such Texas State court
or in such Federal court. Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Pledgor irrevocably consents to the
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding by the mailing of copies of such
process to Pledgor at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Pledgor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Nothing in this paragraph 10 shall affect the right of Pledgee to
serve legal process in any other manner permitted by law or affect the right of
the Pledgee to bring any action or proceeding against the Pledgor or its
property in the courts of other jurisdictions.
PLEDGE AGREEMENT - Page 8
----------------
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed and delivered on the day and year first above written.
JAYHAWK ACCEPTANCE
CORPORATION,
a Texas corporation
By:______________________________
Name:____________________________
Title:___________________________
PLEDGE AGREEMENT - Page 9
----------------
EXHIBIT A
---------
PLEDGED SECURITIES
------------------
All of Pledgor's now owned or hereafter acquired right, title and interest in
and to all shares of equity and beneficial interests issued by Jayhawk Funding
Trust I, a Delaware limited purpose business trust, and all investment property,
stocks, bonds or other securities and personal property, cash, proceeds,
increases, and profits now existing or hereafter arising therefrom or relating
thereto, together with any passbook, receipts, participations, or certificates
which may from time to time evidence the same, and together with all moneys now
or hereafter on deposit therein, both principal and interest, all proceeds and
products thereof, and all of Pledgor's right, title and interest therein.
EXHIBIT A - Page 1
---------
EXHIBIT F
---------
to
Settlement Agreement
Plan
----
[Attached.]
EXHIBIT F - PAGE 1
---------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇, GOTSHAL 7 ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
ATTORNEYS FOR THE DEBTOR
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
______________________________________
(S)
In re: (S) Case No. 397-31261-SAF-11
(S)
JAYHAWK ACCEPTANCE CORPORATION, (S) Chapter 11
a Texas Corporation, (S)
(S)
Debtor. (S)
______________________________________
DEBTOR'S PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
Dated: April 18, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS.......................... 1
1.1. Administrative Expense Claim.......................................... 2
1.2. Allowed............................................................... 2
1.3. Amended ByLaws........................................................ 2
1.4. Amended Articles of Incorporation..................................... 2
1.5. Allowed Secured Fleet Claim........................................... 2
1.6. Ballot................................................................ 2
1.7. Bankruptcy Code....................................................... 2
1.8. Bankruptcy Court...................................................... 3
1.9. Bankruptcy Rules...................................................... 3
1.10. Business Day.......................................................... 3
1.11. Cash Collateral Orders................................................ 3
1.12. Cash.................................................................. 3
1.13. Causes of Action...................................................... 3
1.14. Chapter 11 Case....................................................... 3
1.15. Claim................................................................. 3
1.16. Class................................................................. 3
1.17. Class 6 Election Payment.............................................. 3
1.18. Collateral............................................................ 3
1.19. Commencement Date..................................................... 4
1.20. Confirmation Date..................................................... 4
1.21. Contract.............................................................. 4
1.22. Confirmation Hearing.................................................. 4
1.23. Confirmation Order.................................................... 4
1.24. Creditors' Committee.................................................. 4
1.25. Dealer................................................................ 4
1.26. Dealer Agreement...................................................... 4
1.27. Dealer Claims......................................................... 4
1.28. Debtor................................................................ 4
1.29. Debtor in Possession.................................................. 4
1.30. Disclosure Statement.................................................. 4
1.31. Disputed.............................................................. 4
1.32. Disputed Claim Amount................................................. 5
1.33. Effective Date........................................................ 5
1.34. Equity Interest....................................................... 5
1.35. Final Distribution Date............................................... 5
1.36. Final Order........................................................... 5
1.37. Fleet................................................................. 5
1.38. Initial Distribution Date............................................. 5
i
1.39. Insured Claim......................................................... 5
1.40. Jayhawk............................................................... 5
1.41. Jaymed................................................................ 5
1.42. Jaymed Claim.......................................................... 6
1.43. Jaymed Preferred Stock................................................ 6
1.44. Lien.................................................................. 6
1.45. New Fleet Documents................................................... 6
1.46. New Fleet Note........................................................ 6
1.47. Other Priority Claim.................................................. 6
1.48. Other Secured Claim................................................... 6
1.49. Plan.................................................................. 6
1.50. Plan Supplements...................................................... 6
1.51. Priority Tax Claim.................................................... 6
1.52. Prudential............................................................ 6
1.53. Released Director or Officer.......................................... 6
1.54. Reorganized Debtor.................................................... 7
1.55. Reorganized Jayhawk................................................... 7
1.56. Schedules............................................................. 7
1.57. Secured Claim......................................................... 7
1.58. Secured Fleet Claim................................................... 7
1.59. Secured Prudential Claim.............................................. 7
1.60. Tort Claim............................................................ 7
1.61. Unsecured Claim....................................................... 7
1.62. ▇▇▇▇▇▇▇▇.............................................................. 7
1.63. ▇▇▇▇▇▇▇▇ Guaranty..................................................... 7
1.64. ▇▇▇▇▇▇▇▇ Release...................................................... 7
1.65. Interpretation; Application of Definitions and Rules of Construction.. 7
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS......................... 8
2.1. Administrative Expense Claims......................................... 8
2.2. Professional Compensation and Reimbursement Claims.................... 8
2.3. Priority Tax Claims................................................... 9
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS..................... 9
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS........................ 10
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS...................................... 10
(a) Impairment and Voting.......................................... 10
(b) Distributions.................................................. 10
4.2. CLASS 2 -- SECURED FLEET CLAIM........................................ 10
ii
(a) Impairment and Voting.......................................... 10
(b) Distribution................................................... 10
4.3. CLASS 3 -- SECURED PRUDENTIAL CLAIM................................... 13
(a) Impairment and Voting.......................................... 13
(b) Distribution................................................... 13
4.4. CLASS 4 -- OTHER SECURED CLAIMS....................................... 14
(a) Impairment and Voting.......................................... 14
(b) Distributions/Reinstatement of Claims.......................... 14
4.5. CLASS 5 -- UNSECURED CLAIMS........................................... 15
(a) Impairment and Voting.......................................... 15
(b) Distributions.................................................. 15
4.6. CLASS 6 -- DEALER CLAIMS.............................................. 15
(a) Impairment and Voting.......................................... 15
(b) Distributions/Reinstatement.................................... 15
(c) Cure Payments/Contract Payments................................ 16
(d) Class 6 - Buyout Election...................................... 16
4.7. CLASS 7 -- JAYMED CLAIM............................................... 16
(a) Impairment and Voting.......................................... 16
(b) Distributions.................................................. 16
4.8. CLASS 8 -- EQUITY INTERESTS........................................... 16
(a) Impairment and Voting.......................................... 16
(b) Retention of Equity Interests.................................. 17
ARTICLE V.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS AND CLAIMS............................... 17
5.1. Voting of Claims...................................................... 17
5.2. Nonconsensual Confirmation............................................ 17
5.3. Subtraction and Addition of Classes and Subclasses.................... 17
(a) Deletion of Classes and Subclasses............................... 17
(b) Addition of Classes and Subclasses............................... 17
5.4. Method of Distributions Under the Plan................................ 17
(a) In General....................................................... 17
(b) Distributions of Cash............................................ 18
(c) Timing of Distributions.......................................... 18
(d) Minimum Distributions............................................ 18
(e) Unclaimed Distributions.......................................... 18
5.5. Disputed Claims....................................................... 18
(a) Distributions Upon Allowance of Disputed Claims Other Than
Disputed Unsecured Claims........................................ 18
(b) Distributions Upon Allowance of Disputed Unsecured Claims........ 18
(c) Tort Claims...................................................... 18
iii
5.6. Objections to and Resolution of Disputed Administrative Expense
Claims and Disputed Claims............................................ 19
5.7. Distributions Relating to Allowed Insured Claims...................... 19
5.8. Cancellation and Surrender of Existing Securities and Agreements...... 19
ARTICLE VI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES.............................. 20
6.1. Assumption or Rejection of Executory Contracts and Unexpired Leases... 20
(a) Executory Contracts and Unexpired Leases......................... 20
(b) Schedules of Rejected Executory Contracts and Unexpired Leases;
Inclusiveness.................................................... 20
(c) Insurance Policies............................................... 21
(d) Approval of Assumption or Rejection of Executory Contracts and
Unexpired Leases................................................. 21
(e) Cure of Defaults................................................. 21
(f) Bar Date for Filing Proofs of Claim Relating to Executory
Contracts and Unexpired Leases Rejected Pursuant to the Plan..... 21
6.2. Indemnification Obligations........................................... 22
6.3. Compensation and Benefit Programs..................................... 22
6.4. Retiree Benefits...................................................... 22
ARTICLE VII.
COMPROMISE OF DISPUTES................................. 22
7.1. Compromise and Settlement of Claims Against Fleet..................... 22
7.2. Compromise and Settlement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇..................... 23
ARTICLE VIII.
PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR.......................... 23
8.1. General............................................................... 23
8.2. Meetings of Reorganized Jayhawk Stockholders.......................... 23
8.3. Directors and Officers of Reorganized Debtor.......................... 24
(a) Board of Directors............................................... 24
(b) Officers......................................................... 24
8.4. Amended Bylaws and Amended Articles of Incorporation.................. 24
8.5. Issuance of New Promissory Note and Conversion of Jaymed Preferred
Stock................................................................. 24
ARTICLE IX.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN................... 24
9.1. Term of Bankruptcy Injunction or Stays................................ 24
iv
9.2. Revesting of Assets................................................... 24
9.3. Causes of Action...................................................... 25
9.4. Discharge of Debtor................................................... 25
9.5. Injunction............................................................ 25
ARTICLE X.
EFFECTIVENESS OF THE PLAN............................... 26
10.1. Conditions Precedent to Effectiveness................................. 26
10.2. Waiver of Conditions.................................................. 26
ARTICLE XI.
RETENTION OF JURISDICTION............................... 27
ARTICLE XII.
MISCELLANEOUS PROVISIONS................................ 28
12.1. Effectuating Documents and Further Transactions....................... 28
12.2. Corporate Action...................................................... 28
12.3. Exemption from Transfer Taxes......................................... 28
12.4. Debtor's Limited Release of Directors and Officers.................... 28
12.5. Claim Holders' Release of Directors and Officers from Claims and
Liabilities........................................................... 29
12.6. Exculpation........................................................... 29
12.7. Termination of Committee.............................................. 29
12.8. Post-Confirmation Date Fees and Expenses.............................. 29
12.9. Payment of Statutory Fees............................................. 30
12.10. Amendment or Modification of the Plan................................. 30
12.11. Severability.......................................................... 30
12.12. Revocation or Withdrawal of the Plan.................................. 30
12.13. Binding Effect........................................................ 30
12.14. Notices............................................................... 30
12.15. Governing Law......................................................... 31
12.16. Withholding and Reporting Requirements................................ 31
12.17. Plan Supplements...................................................... 31
12.18. Headings.............................................................. 32
12.19. Exhibits.............................................................. 32
12.20. Filing of Additional Documents........................................ 32
v
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
ATTORNEYS FOR THE DEBTOR
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
___________________________________
(S)
In re: (S) Case No. 397-31261-SAF-11
(S)
JAYHAWK ACCEPTANCE CORPORATION, (S) Chapter 11
a Texas Corporation, (S)
(S)
Debtor. (S)
(S)
___________________________________
DEBTOR'S PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
Jayhawk Acceptance Corporation, a Texas corporation, proposes the
following plan of reorganization under section 1121(a) of title 11 of the United
States Code.
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS
--------------------------------------
Definitions. As used herein, the following terms have the respective
-----------
meanings specified below, unless the context otherwise requires:
1.1. Administrative Expense Claim means any right to payment constituting
----------------------------
a cost or expense of administration of the Chapter 11 Case under sections 503(b)
and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual
and necessary costs and expenses of preserving the estate of the Debtor, any
actual and necessary costs and expenses of operating the business of the Debtor,
any indebtedness or obligations incurred or assumed by the Debtor in Possession
in connection with the conduct of its business, including, without limitation,
for the acquisition or lease of property or an interest in property or the
rendition of services, all compensation and reimbursement of expenses to the
extent Allowed by the Bankruptcy Court under section 330 or 503 of the
Bankruptcy Code, and any fees or charges assessed against the estate of the
Debtor under section 1930 of chapter 123 of title 28 of the United States Code.
1.2. Allowed means any Claim against the Debtor (a) which has been listed
-------
by the Debtor in its Schedules, as such Schedules may be amended by the Debtor
from time to time in accordance with Bankruptcy Rule 1009, as liquidated in
amount and not disputed or contingent and for which no contrary proof of claim
has been filed, (b) which is allowed hereunder, (c) which is not Disputed or (d)
if Disputed, (i) which has been allowed by Final Order or (ii) as to which,
pursuant to the Plan or a Final Order of the Bankruptcy Court, the liability of
the Debtor and the amount thereof are determined by final order of a court of
competent jurisdiction other than the Bankruptcy Court; provided, however, that
-------- -------
any Claims allowed solely for the purpose of voting to accept or reject the Plan
pursuant to an order of the Bankruptcy Court shall not be considered "Allowed
Claims" hereunder. Unless otherwise specified herein or by order of the
Bankruptcy Court, "Allowed Administrative Expense Claim," or "Allowed Claim"
shall not, for purposes of computation of distributions under the Plan, include
interest on such Administrative Expense Claim or Claim from and after the
Commencement Date.
1.3. Amended ByLaws means the amended and restated ByLaws of Reorganized
--------------
Jayhawk, which shall be in substantially the form contained in the Plan
Supplement (Volume II).
1.4. Amended Articles of Incorporation means the amended and restated
---------------------------------
Articles of Incorporation of Reorganized Jayhawk, which shall be in
substantially the form contained in the Plan Supplement (Volume II).
1.5. Allowed Secured Fleet Claim means the Claim described in Section 4.2
---------------------------
of this Plan.
1.6. Ballot means the form distributed to each holder of an impaired Claim
------
on which is to be indicated acceptance or rejection of the Plan.
1.7. Bankruptcy Code means title 11 of the United States Code, as amended
---------------
from time to time, as applicable to the Chapter 11 Case.
1.8. Bankruptcy Court means the United States District Court for the
----------------
Northern District of Texas, Dallas Division having jurisdiction over the Chapter
11 Case and, to the extent of any reference under section 157 of title 28 of the
United States Code, the unit of such District Court under section 151 of title
28 of the United States Code.
2
1.9. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as
----------------
promulgated by the United States Supreme Court under section 2075 of title 28 of
the United States Code, and any Local Rules of the Bankruptcy Court.
1.10. Business Day means any day other than a Saturday, Sunday or any
------------
other day on which commercial banks in Dallas, Texas are required or authorized
to close by law or executive order.
1.11. Cash Collateral Orders mean the Interim Order Authorizing the Use of
----------------------
Cash Collateral and Providing for Adequate Protection, the Second Interim Order
Authorizing the Use of Cash Collateral and Providing for Adequate Protection,
the Third Interim Order Authorizing the Use of Cash Collateral and Providing for
Adequate Protection (and the Supplement thereto), and the Joint Stipulation and
Agreed Final Order Authorizing the Use of Cash Collateral and Providing for
Adequate Protection.
1.12. Cash means legal tender of the United States of America and
----
equivalents thereof.
1.13. Causes of Action means, without limitation, any and all actions,
----------------
causes of action (including causes of action arising under any section of the
Bankruptcy Code), liabilities, obligations, rights, suits, debts, sums of money,
damages, judgments, claims and demands whatsoever, whether known or unknown, in
law, equity or otherwise.
1.14. Chapter 11 Case means the case under chapter 11 of the Bankruptcy
---------------
Code commenced by the Debtor, styled In re Jayhawk Acceptance Corporation,
Chapter 11 Case No. 397-31261-SAF-11, currently pending in the Bankruptcy Court.
1.15. Claim has the meaning set forth in section 101 of the Bankruptcy
-----
Code.
1.16. Class means a category of holders of Claims or Equity Interests as
-----
set forth in Article III of the Plan.
1.17. Class 6 Election Payment means the amount that is sixty percent
------------------------
(60%) of the estimated amount as of December 31, 1996 of all distributions that
are payable or will become payable to a Dealer arising out of or related to a
Dealer Agreement.
1.18. Collateral means any property or interest in property of the estate
----------
of the Debtor subject to a Lien to secure the payment or performance of a Claim,
which Lien is not subject to avoidance under the Bankruptcy Code or otherwise
invalid under the Bankruptcy Code or applicable state law.
1.19. Commencement Date means February 7, 1997, the date on which the
-----------------
Debtor commenced the Chapter 11 Case.
1.20. Confirmation Date means the date on which the Clerk of the
-----------------
Bankruptcy Court enters the Confirmation Order on the docket.
3
1.21. Contract means a written agreement pursuant to which a Person agrees
--------
to purchase from a Dealer a new or used automobile and to pay for same on an
installment basis, with interest, over a period of months.
1.22. Confirmation Hearing means the hearing held by the Bankruptcy Court
--------------------
to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy
Code, as such hearing may be adjourned or continued from time to time.
1.23. Confirmation Order means the order of the Bankruptcy Court
------------------
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
1.24. Creditors' Committee means the statutory committee of unsecured
--------------------
creditors appointed in the Chapter 11 Case pursuant to section 1102 of the
Bankruptcy Code.
1.25. Dealer means a Person engaged in the business of selling new or used
------
automobiles pursuant to Contracts.
1.26. Dealer Agreement means an agreement governing the relationship
----------------
between the Debtor and each Dealer from which the Debtor purchases Contracts.
1.27. Dealer Claims means those claims arising under the Dealer
-------------
Agreements.
1.28. Debtor means Jayhawk Acceptance Corporation, a Texas corporation.
------
1.29. Debtor in Possession means the Debtor in its capacity as debtor in
--------------------
possession in the Chapter 11 Case pursuant to sections 1101, 1107(a) and 1108 of
the Bankruptcy Code.
1.30. Disclosure Statement means the disclosure statement relating to the
--------------------
Plan, including, without limitation, all exhibits and schedules thereto, as
approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy
Code.
1.31. Disputed means any Claim proof of which was timely and properly
--------
filed and which has been or hereafter is listed on the Schedules as
unliquidated, disputed or contingent, and in either case or in the case of an
Administrative Expense Claim, any Administrative Expense Claim or Claim as to
which the Debtor or, if not prohibited by the Plan, any other party in interest
has interposed a timely objection and/or request for estimation in accordance
with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018, which
objection and/or request for estimation has not been withdrawn or determined by
a Final Order, and any Claim proof of which was required to be filed by order of
the Bankruptcy Court but as to which a proof of claim was not timely or properly
filed.
1.32. Disputed Claim Amount means the amount set forth in the proof of
---------------------
claim relating to a Disputed Claim or, if the amount of a Disputed Claim is not
specified in the proof of claim or is unliquidated, in whole or in part, an
amount estimated in accordance with section 502(c) of
4
the Bankruptcy Code and Bankruptcy Rule 3018 for purposes of, inter alia,
----- ----
Section 5.4 of the Plan pursuant to an order of the Bankruptcy Court.
1.33. Effective Date means the first Business Day on which the conditions
--------------
specified in Section 10.1 of the Plan have been satisfied or waived.
1.34. Equity Interest means any share of common stock or other instrument
---------------
evidencing an ownership interest in the Debtor, whether or not transferable, and
any option, warrant or right, contractual or otherwise, to acquire any such
interest.
1.35. Final Distribution Date means the one hundred eightieth day
-----------------------
subsequent to the Effective Date, or as soon thereafter as is practicable.
1.36. Final Order means an order of the Bankruptcy Court as to which the
-----------
time to appeal, petition for certiorari, or move for reargument or rehearing has
----------
expired and as to which no appeal, petition for certiorari, or other proceedings
----------
for reargument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargue, or rehear shall have been waived in
----------
writing in form and substance satisfactory to the Debtor or the Reorganized
Debtor or, in the event that an appeal, writ of certiorari, or reargument or
----------
rehearing thereof has been sought, such order of the Bankruptcy Court shall have
been determined by the highest court to which such order was appealed, or
certiorari, reargument or rehearing shall have been denied and the time to take
----------
any further appeal, petition for certiorari or move for reargument or rehearing
----------
shall have expired; provided, however, that the possibility that a motion under
-------- -------
Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous
rule under the Bankruptcy Rules, may be filed with respect to such order shall
not cause such order not to be a Final Order.
1.37. Fleet means Fleet Capital Corporation, a Rhode Island corporation.
-----
1.38. Initial Distribution Date means the date that is ninety days
-------------------------
subsequent to the Effective Date, or as soon thereafter as is practicable.
1.39. Insured Claim means any Claim arising from an incident or occurrence
-------------
that is covered under the Debtor's insurance policies.
1.40. Jayhawk means Jayhawk Acceptance Corporation, a Texas corporation.
-------
1.41. Jaymed means Jayhawk Medical Acceptance Corporation, a wholly-owned
------
subsidiary of Jayhawk.
1.42. Jaymed Claim means the Claim of Jaymed against the Debtor in the
------------
principal amount of $7,100,000, exclusive of interest, as of the Commencement
Date.
1.43. Jaymed Preferred Stock means the Series A Redeemable, Convertible
----------------------
Preferred Stock, par value $.01 per share of Jaymed.
5
1.44. Lien has the meaning set forth in section 101 of the Bankruptcy
----
Code.
1.45. New Fleet Documents means the New Fleet Note, the Loan and Security
-------------------
Agreement between Reorganized Jayhawk and Fleet which shall be in the form
contained in the Plan Supplement (Volume I), the Pledge and Security Agreement
(Beneficial Interests), which shall be in the form contained in the Plan
Supplement (Volume I), and all other instruments and agreements referred to in
any of the foregoing or to be executed by Reorganized Jayhawk pursuant thereto,
or as may be modified in writing by Fleet and the Debtor.
1.46. New Fleet Note means the Secured Promissory Note to be issued
--------------
pursuant to the Plan to Fleet, which shall be in the form contained in the Plan
Supplement (Volume I) or as may be modified in writing by Fleet and the Debtor,
and shall be in an amount equal to the sum of the Secured Fleet Claim as of the
Commencement Date less payments received and applied to principal during the
----
Chapter 11 Case, plus accrued but unpaid interest at the non-default rate, plus
---- ----
attorneys fees and costs to the extent allowed by the Bankruptcy Code.
1.47. Other Priority Claim means any Claim, other than an Administrative
--------------------
Expense Claim or a Priority Tax Claim, entitled to priority in right of payment
under section 507(a) of the Bankruptcy Code.
1.48. Other Secured Claim means any Secured Claim, other than the Secured
-------------------
Fleet Claim and the Secured Prudential Claim.
1.49. Plan means this chapter 11 plan of reorganization, including,
----
without limitation, the Plan Supplements (Volumes I and II) and all exhibits,
supplements, appendices and schedules hereto, either in its present form or as
same may be altered, amended or modified from time to time.
1.50. Plan Supplements means the forms of documents specified in Section
----------------
12.17 of the Plan.
1.51. Priority Tax Claim means any Claim of a governmental unit of the
------------------
kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.52. Prudential means Prudential Securities Capital Corporation.
----------
1.53. Released Director or Officer shall have the meaning set forth in
----------------------------
Section 12.5 of the Plan.
1.54. Reorganized Debtor means Reorganized Jayhawk.
------------------
1.55. Reorganized Jayhawk means Jayhawk Acceptance Corporation or any
-------------------
successor thereto by merger, consolidation or otherwise, on and after the
Effective Date.
6
1.56. Schedules means the schedules of assets and liabilities, the list of
---------
holders of Equity Interests, and the statements of financial affairs filed by
the Debtor under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007,
and all amendments and modifications thereto through the Confirmation Date.
1.57. Secured Claim means any Claim, to the extent reflected in the
-------------
Schedules or a proof of claim as a Secured Claim, which is secured by a Lien on
Collateral to the extent of the value of such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code, or, in the event that
such Claim is subject to setoff under section 553 of the Bankruptcy Code, to the
extent of such setoff.
1.58. Secured Fleet Claim means all Claims and Liens arising under or
-------------------
related to that certain Loan and Security Agreement dated as of April 4, 1995,
as amended, between Shawmut Capital Corporation, predecessor-in-interest to
Fleet, and the Debtor, or any instrument or agreement referred to therein or
executed by the Debtor pursuant thereto.
1.59. Secured Prudential Claim means all Claims and Liens arising under or
------------------------
related to that certain Trust Shares Pledge Agreement dated December 23, 1996
between Prudential and the Debtor, or any instrument or agreement referred to
therein or executed by the Debtor pursuant thereto.
1.60. Tort Claim means any Claim relating to personal injury, property
----------
damage or products liability or other similar Claim asserted against the Debtor
that has not previously been compromised or settled or otherwise resolved.
1.61. Unsecured Claim means any Claim that is not a Secured Claim,
---------------
Administrative Expense Claim, Priority Tax Claim, Other Priority Claim, Dealer
Claim or Jaymed Claim.
1.62. ▇▇▇▇▇▇▇▇ means ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
--------
1.63. ▇▇▇▇▇▇▇▇ Guaranty means the Guaranty of ▇▇▇▇▇▇▇▇ to Fleet pursuant
-----------------
to which ▇▇▇▇▇▇▇▇ will guarantee certain obligations of Reorganized Jayhawk to
Fleet which shall be in the form contained in the Plan Supplement (Volume I).
1.64. ▇▇▇▇▇▇▇▇ Release means the release to be executed and delivered by
----------------
▇▇▇▇▇▇▇▇ to Fleet dated as of the Effective Date, which shall be in the form
contained in the Plan Supplement (Volume I).
1.65. Interpretation; Application of Definitions and Rules of
-------------------------------------------------------
Construction. Wherever from the context it appears appropriate, each term stated
------------
in either the singular or the plural shall include both the singular and the
plural and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter. Unless otherwise specified, all
section, article, schedule or exhibit references in the Plan are to the
respective Section in, Article of, Schedule to, or Exhibit to, the Plan. The
words "herein," "hereof," "hereto," "hereunder" and other words of similar
import refer to the Plan as a whole and not to any particular section,
7
subsection or clause contained in the Plan. The rules of construction contained
in section 102 of the Bankruptcy Code shall apply to the construction of the
Plan. A term used herein that is not defined herein, but that is used in the
Bankruptcy Code, shall have the meaning ascribed to that term in the Bankruptcy
Code. The headings in the Plan are for convenience of reference only and shall
not limit or otherwise affect the provisions of the Plan.
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
--------------------------------------
2.1. Administrative Expense Claims. Except to the extent that any entity
-----------------------------
entitled to payment of any Allowed Administrative Expense Claim agrees to a
different treatment, each holder of an Allowed Administrative Expense Claim
shall receive Cash in an amount equal to such Allowed Administrative Expense
Claim on the later of the Effective Date and the date such Administrative
Expense Claim becomes an Allowed Administrative Expense Claim, or as soon
thereafter as is practicable; provided, however, that Allowed Administrative
-------- -------
Expense Claims representing liabilities incurred in the ordinary course of
business by the Debtor in Possession or liabilities arising under loans or
advances to or other obligations incurred by the Debtor in Possession, to the
extent authorized and approved by the Bankruptcy Court if such authorization and
approval was required under the Bankruptcy Code, shall be paid in full and
performed by the Reorganized Debtor in the ordinary course of business in
accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing or other documents relating to, such
transactions.
2.2. Professional Compensation and Reimbursement Claims. All entities
--------------------------------------------------
seeking an award by the Bankruptcy Court of compensation for services rendered
or reimbursement of expenses incurred through and including the Confirmation
Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the
Bankruptcy Code (a) shall file their respective final applications for
allowances of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is forty-five days after
the Effective Date or such other date as may be fixed by the Bankruptcy Court
and, if granted such an award by the Bankruptcy Court, (b) shall be paid in full
in such amounts as are Allowed by the Bankruptcy Court (i) on the date such
Administrative Expense Claim becomes an Allowed Administrative Expense Claim or
(ii) upon such other terms as may be mutually agreed upon between such holder of
an Administrative Expense Claim and the Debtor in Possession or, on and after
the Effective Date, the Reorganized Debtor.
2.3. Priority Tax Claims. Except to the extent that a holder of an
-------------------
Allowed Priority Tax Claim has been paid by the Debtor prior to the Effective
Date or agrees to a different treatment, each holder of an Allowed Priority Tax
Claim shall receive, at the sole option of Reorganized Debtor, (a) Cash in an
amount equal to such Allowed Priority Tax Claim on the later of the Effective
Date and the date such Priority Tax Claim becomes an Allowed Priority Tax Claim,
or as soon thereafter as is practicable, or (b) equal annual Cash payments in an
aggregate amount equal to such Allowed Priority Tax Claim, together with
interest at a fixed annual rate equal to
8
eight and one-quarter percent (8 1/4%), over a period through the sixth
anniversary of the date of assessment of such Allowed Priority Tax Claim, or
upon such other terms determined by the Bankruptcy Court to provide the holder
of such Allowed Priority Tax Claim deferred Cash payments having a value, as of
the Effective Date, equal to such Allowed Priority Tax Claim.
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------
Claims, other than Administrative Expense Claims and Priority Tax Claims,
and Equity Interests are classified for all purposes, including voting,
confirmation and distribution pursuant to the Plan, as follows:
Class Status
----- ------
Class 1 -- Other Priority Claims..........................Unimpaired
Class 2 -- Secured Fleet Claim............................ Impaired
Class 3 -- Secured Prudential Claim....................... Impaired
Class 4 -- Other Secured Claims...........................Unimpaired
Class 5 -- Unsecured Claims............................... Impaired
Class 6 -- Dealer Claims..................................Unimpaired
Class 7 -- Jaymed Claim................................... Impaired
Class 8 -- Equity Interests...............................Unimpaired
9
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
----------------------------------------
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS.
--------------------------------
(a) Impairment and Voting. Class 1 is unimpaired by the Plan.
---------------------
Each holder of an Allowed Other Priority Claim is conclusively presumed to have
accepted the Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Other Priority
-------------
Claim shall receive Cash in an amount equal to such Allowed Other Priority Claim
on the later of the Effective Date and the date such Allowed Other Priority
Claim becomes an Allowed Other Priority Claim, or as soon thereafter as is
practicable.
4.2. CLASS 2 -- SECURED FLEET CLAIM.
------------------------------
(a) Impairment and Voting. Class 2 is impaired by the Plan. The
---------------------
holder of an Allowed Secured Fleet Claim is entitled to vote to accept or reject
the Plan.
(b) Distribution. Upon the Effective Date and pursuant to the
------------
terms of the New Fleet Documents, the holder of the Allowed Secured Fleet Claim
shall be treated as follows:
(1) Deemed Allowance. Upon the Effective Date, the Allowed
----------------
Secured Fleet Claim shall be treated as an allowed,
fully secured claim that is payable from and after the
Effective Date pursuant to the terms hereof and the New
Fleet Documents, without defense, offset or
counterclaim.
(2) Interest. Accrued interest will continue to be paid on
--------
the Allowed Secured Fleet Claim monthly, in arrears, on
the first day of the month, at the rate of interest
provided in the New Fleet Documents.
(3) Monthly Principal Amortization. The outstanding
------------------------------
principal balance of the Allowed Secured Fleet Claim
shall be due and payable from and after the Effective
Date to the holder of the Allowed Secured Fleet Claim
Fleet in monthly installments, the aggregate amount of
which during any particular month shall be not less
than the amount specified for such month as set forth
below:
10
Per Month
Month Installment Agreement
----- ---------------------
May through July, 1997 $4,000,000
August, 1997 $3,500,000
September, 1997 $3,250,000
October and November, 1997 $3,000,000
December, 1997 $2,750,000
January, 1998 $2,500,000
February, 1998 $2,000,000
March through August, 1998 $3,000,000
The remaining unpaid balance on the New Fleet Note
shall be due and payable on September 1, 1998.
(4) Mandatory Prepayments. In addition to the principal
---------------------
payments provided for above, mandatory prepayments of
principal will be due and payable from and after the
Effective Date on a quarterly basis, on the 15th day of
each March, June, September and December, beginning
June 15, 1997, based on fifty percent (50%) of Excess
Cash Flow as defined in the New Fleet Documents, and in
accordance with the New Fleet Documents.
(5) The Reorganized Debtor shall be bound from and after
the Effective Date, for each calendar month, to achieve
Collections (as defined in the New Fleet Documents) for
the three (3)-month period consisting of the calendar
month then ended plus the immediately preceding two
calendar months (i.e., a rolling three (3)-month
period), of not less than eighty-five percent (85%) of
Projected Gross Collections for the same rolling three
(3)-month period, all as more fully provided in the New
Fleet Documents.
(6) Upon the Effective Date, and as more fully provided
under the New Fleet Documents, the holder of the
Allowed Secured Fleet Claim will retain all of its
liens on all of its pre-petition collateral and post-
petition collateral to secure repayment and performance
of the Obligations (as defined in the New Fleet
Documents) and be entitled to all of its rights,
protections, benefits and priorities granted to Fleet
in the prior Cash Collateral Orders entered in the
Chapter 11 Case, except as specifically modified by the
terms of the New Fleet Documents.
11
(7) Upon the Effective Date, the holder of the Allowed
Secured Fleet Claim will be entitled indefeasibly to
all of the adequate protection payments received under
the prior Cash Collateral Orders entered by the
Bankruptcy Court, with such payments being credited to
the calculation of the Allowed Secured Fleet Claim.
(8) Upon the Effective Date, and as more fully provided
under the New Fleet Documents, the holder of the
Allowed Secured Fleet Claim will be granted a lien upon
the Debtor's legal and beneficial ownership interest in
the Trust to secure the payment of the Allowed Secured
Fleet Claim.
(9) Upon the Effective Date, and as more fully provided in
this Plan, all pre-petition, post-petition and
bankruptcy related claims (i.e., those claims arising
----
under any section of the Bankruptcy Code), if any, that
the Debtor (or any person by, through, or under the
Debtor) may have or assert against Fleet or its
participant, or any affiliate, or officer, director, or
agent, representative, attorney of any of the foregoing
parties, will be deemed released.
(10) Upon the Effective Date, and pursuant to the terms of
the New Fleet Documents, the holder of the Allowed
Secured Fleet Claim shall release its lien on all
accumulated cash balances and on all auto contracts
funded by the Debtor from and after March 1, 1997,
exclusive of the Additional Fleet Contracts (as defined
hereafter). "Additional Fleet Contracts" shall mean
--------------------------
auto contracts which the Debtor reported in Fleet's
Borrowing Base as Fleet's collateral as of February 7,
1997, but which the Debtor had not purchased as of
February 7, 1997, and that are estimated by the Debtor
as of February 7, 1997 to be in the amount of $10
million, less $3.4 million of such auto contracts later
unwound by the Debtor, together with auto contracts
purchased by the Debtor from the Commencement Date
through and including February 28, 1997.
(11) Notwithstanding anything else contained in this Plan,
or any amendments thereto, the holder of the Allowed
Secured Fleet Claim shall be paid and treated in
accordance with the terms of the New Fleet Documents.
To the extent that the terms providing for payment and
12
treatment of the Allowed Secured Fleet Claim in this
Plan, or any amendment thereto, conflicts with the
terms providing for payment and treatment of the
Allowed Secured Fleet Claim in the New Fleet Documents,
the terms of the New Fleet Documents shall control.
4.3. CLASS 3 -- SECURED PRUDENTIAL CLAIM.
-----------------------------------
(a) Impairment and Voting. Class 3 is impaired by the Plan. The
---------------------
holder of an Allowed Secured Prudential Claim is entitled to vote to accept or
reject the Plan.
(b) Distribution. The holder of an Allowed Secured Prudential
------------
Claim shall receive the treatment of the Allowed Secured Prudential Claim and
payment of such Claim as provided below.
(1) The Debtor shall direct the Managing Trustees of
Jayhawk Funding Trust I, a Delaware business trust (the
"Trust") to pay all distributions attributable to the
Debtor's existing beneficial interest in the Trust (the
"Trust Shares") to Prudential as such distributions or
proceeds become available to be applied against the
Allowed Secured Prudential Claim. Further, those funds
held by the Debtor, representing the "Remainder
Distribution" (as defined in that certain Final Order
Authorizing Debtor's Limited Use of Cash Collateral of
Prudential Securities Credit Corporation) previously
received by the Debtor from the Trust, shall also be
applied against the Allowed Secured Prudential Claim.
(2) The Debtor and Prudential agree and stipulate that
Prudential is owed not less than $4,995,029.08 as of
the Commencement Date, plus post-petition interest at
the non-default rate, attorneys' fees and other costs
accruing under the Trust Shares Pledge Agreement and
related loan documents (the "Prudential Loan
Documents");
(3) Prudential shall retain a first lien and security
interest on the Trust Shares as well as all proceeds or
other distributions attributable to Contracts secured
by the Series 1996 A Notes and the Series 1996 B Notes
held by the Trust as provided in the Prudential Loan
Documents; and
(4) The entire principal balance, as well as all accrued
interest thereon, of the Allowed Secured Prudential
Claim shall become due and payable on December 31,
1997.
13
(5) In the event that the Allowed Prudential Secured Claim
is not paid in full on or prior to the Effective Date,
the Debtor shall execute the New Prudential Note as
well as new loan and security documents (the "New
Prudential Security Documents") to evidence
Prudential's first lien and security interest in the
Trust Shares, as well as all proceeds and distributions
therefrom, in a form acceptable to counsel for
Prudential. Accrued interest will continue to be paid
on the Allowed Prudential Secured Claim at a rate of
interest provided in the New Prudential Security
Documents.
(6) Upon the Effective Date, the Allowed Prudential Secured
Claim shall be treated as an allowed, fully secured
Claim payable pursuant to the terms hereof without any
offset, defense or counterclaim.
(7) Upon the Effective Date, as more fully provided in the
Plan, any prepetition, postpetition or bankruptcy
related claims (or any claims arising under any
provision of the Bankruptcy Code), if any, that the
Debtor or any person asserting by, through or under the
Debtor may have or assert against Prudential or any
affiliate, officer, director, agent, representative,
attorney of any of the foregoing parties, shall be
deemed withdrawn or released.
4.4. CLASS 4 -- OTHER SECURED CLAIMS.
-------------------------------
(a) Impairment and Voting. Class 4 is unimpaired by the Plan.
---------------------
Each holder of an Allowed Other Secured Claim is conclusively presumed to have
accepted the Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions/Reinstatement of Claims. Except to the extent
-------------------------------------
that a holder of an Allowed Other Secured Claim agrees to a different treatment,
at the sole option of Reorganized Debtor, (i) each Allowed Other Secured Claim
shall be reinstated and rendered unimpaired in accordance with section 1124(2)
of the Bankruptcy Code, notwithstanding any contractual provision or applicable
nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to
demand or receive payment of such Claim prior to its stated maturity from and
after the occurrence of a default, (ii) each holder of an Allowed Other Secured
Claim shall receive Cash in an amount equal to such Claim, including any
interest on such Claim required to be paid pursuant to section 506(b) of the
Bankruptcy Code, on the later of the Effective Date and the date such Claim
becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable
or (iii) each holder of an Allowed Other Secured Claim shall receive the
Collateral securing its Claim in full and complete satisfaction of such Claim on
the later of the Effective Date and the date such Claim becomes an Allowed Other
Secured Claim, or as soon thereafter as is practicable.
14
4.5. CLASS 5 -- UNSECURED CLAIMS.
---------------------------
(a) Impairment and Voting. Class 5 is impaired by the Plan.
---------------------
Each holder of an Allowed Unsecured Claim is entitled to vote to accept or
reject the Plan.
(b) Distributions. Each holder of an Allowed Unsecured Claim
-------------
shall receive payment in full of such Allowed Unsecured Claim, together with
interest thereon at a rate of interest equal to the prime lending rate
prevailing from time to time as published in The Wall Street Journal in two
-----------------------
equal installments, the first such installment (the "Initial Class 5
Distribution") on the Initial Distribution Date and the last such installment
(the "Final Class 5 Distribution") on the Final Distribution Date.
4.6. CLASS 6 -- DEALER CLAIMS.
------------------------
(a) Impairment and Voting. Class 6 is unimpaired by the Plan.
---------------------
Each holder of an Allowed Class 6 Dealer Claim is
conclusively presumed to have accepted the Plan and is not
entitled to vote to accept or reject the Plan.
(b) Distributions/Reinstatement. Except to the extent that a
---------------------------
holder of an Allowed Class 6 Dealer Claim elects the
treatment provided in section 4.6(d) below, each Allowed
Class 6 Dealer Claim shall be reinstated and rendered
unimpaired in accordance with section 1124(2) of the
Bankruptcy Code, notwithstanding any contractual provision
or applicable nonbankruptcy law that entitles the holder of
an Allowed Class 6 Dealer Claim to demand or receive payment
of such Claim prior to its stated maturity from and after
the occurrence of a default.
(c) Cure Payments/Contract Payments. To the extent that the
-------------------------------
holder of an Allowed Class 6 Dealer Claim was entitled to a
payment under a Dealer Agreement as of the Commencement Date
and during any month following the Commencement Date through
the Effective Date, Reorganized Jayhawk shall distribute
such payments to any such Dealers within twenty (20) days
after the Effective Date. Following the Effective Date,
Reorganized Jayhawk shall make any payments required under
any Dealer Agreement to the Dealer in the ordinary course of
its business as required under the Dealer Agreements.
(d) Class 6 - Buyout Election. Each holder of a Class 6 Dealer
-------------------------
Claim may elect to receive the Class 6 Election Payment in
full payment, satisfaction and release of any Claims that
such electing Class 6 Dealer Claimant has or may have
arising out of or related to the Dealer Agreements, which
distribution shall be made on the later
15
of the Effective Date or the date such Class 6 Dealer Claim
becomes an Allowed Claim. The election shall be made on a
separate election form. If no election is made, the holder
of an Allowed Class 6 Dealer Claim shall receive the
treatment provided in paragraphs 4.6(b) and (c) above.
Notwithstanding the foregoing, the Class 6 Buyout Election
shall be withdrawn by the Debtor if as a result of the Class
6 Buyout Elections, the total of the Class 6 Election
Payments plus all cure payments due under paragraphs 4.6(b)
and (c) above exceeds $5,500,000.
4.7. CLASS 7 -- JAYMED CLAIM.
-----------------------
(a) Impairment and Voting. Class 7 is impaired by the Plan. The
---------------------
holder of an Allowed Jaymed Claim is entitled to vote to accept or reject the
Plan.
(b) Distributions. The Allowed Jaymed Claim shall be payable in
-------------
two (2) installments of principal, together with accrued and unpaid interest
through each principal payment date at a rate of interest equal to the prime
lending rate prevailing from time to time as published in The Wall Street
---------------
Journal, with the first installment occurring on the Initial Distribution Date
-------
and the final installment occurring on the Final Distribution Date.
4.8. CLASS 8 -- EQUITY INTERESTS.
---------------------------
(a) Impairment and Voting. Class 8 is unimpaired by the Plan.
---------------------
Each holder of an Equity Interest is conclusively presumed to have accepted the
Plan as a holder of an Equity Interest, and is not entitled to vote to accept or
reject the Plan.
(b) Retention of Equity Interests. Each holder of an Equity
-----------------------------
Interest shall continue to hold such Equity Interests on the Effective Date.
ARTICLE V.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS AND CLAIMS
-------------------------
5.1. Voting of Claims. Each holder of an Allowed Claim in an impaired
----------------
Class of Claims shall be entitled to vote separately to accept or reject the
Plan as provided in such order as is entered by the Bankruptcy Court
establishing certain procedures with respect to the solicitation and tabulation
of votes to accept or reject the Plan, or any other order or orders of the
Bankruptcy Court.
5.2. Nonconsensual Confirmation. If any impaired class of Claims entitled
--------------------------
to vote shall not accept the Plan by the requisite statutory majorities provided
in section 1126(c) of the
16
Bankruptcy Code, the Debtor reserves the right to amend the Plan in accordance
with Section 12.10 hereof or undertake to have the Bankruptcy Court confirm the
Plan under section 1129(b) of the Bankruptcy Code or both.
5.3. Subtraction and Addition of Classes and Subclasses.
--------------------------------------------------
(a) Deletion of Classes and Subclasses. Any class or subclass
----------------------------------
of Claims that does not contain as an element thereof an Allowed Claim or a
Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the
commencement of the Confirmation Hearing shall be deemed deleted from this Plan
for purposes of voting to accept or reject this Plan and for purposes of
determining acceptance or rejection of this Plan by such class or subclass under
section 1129(a)(8) of the Bankruptcy Code.
(b) Addition of Classes and Subclasses. In the event that any
----------------------------------
subclass of Class 4 (Other Secured Claims) would contain as elements thereof two
or more Secured Claims collateralized by different properties or interests in
property or collateralized by Liens against the same property or interest in
property having different priority, such Claims shall be divided into separate
subclasses of Class 4 (Other Secured Claims).
5.4. Method of Distributions Under the Plan.
--------------------------------------
(a) In General. Subject to Bankruptcy Rule 9010, all
----------
distributions under the Plan shall be made by Reorganized Debtor to the holder
as of the Confirmation Date of each Allowed Claim at the address of such holder
as listed on the Schedules unless the Debtor or Reorganized Debtor has been
notified in writing of a change of address, including, without limitation, by
the filing of a proof of Claim by such holder that provides an address for such
holder different from the address reflected on the Schedules for such holder.
The Debtor or the Reorganized Debtor shall have no obligation to recognize any
transfer of a Claim occurring after the Confirmation Date and shall be entitled
instead to recognize and deal for all purposes herein with only those holders
listed on the Schedules or on the register of proofs of claim maintained by the
Clerk of the Bankruptcy Court or the agent of the Clerk of the Bankruptcy Court
appointed for such purpose in the Chapter 11 Case as of the close of business on
the Confirmation Date.
(b) Distributions of Cash. Any payment of Cash made by
---------------------
Reorganized Debtor pursuant to the Plan shall be made by check drawn on a
domestic bank.
(c) Timing of Distributions. Any payment or distribution
-----------------------
required to be made under the Plan on a day other than a Business Day shall be
made on the next succeeding Business Day.
(d) Minimum Distributions. No payment of Cash less than $50
---------------------
shall be made by Reorganized Debtor to any holder of an Unsecured Claim unless a
request therefor is made in writing to Reorganized Debtor.
17
(e) Unclaimed Distributions. Any distributions pursuant to the
-----------------------
Plan, including cash, interest or other amounts earned thereon, that are
unclaimed for a period of one year after distribution thereof shall be revested
in Reorganized Debtor and any entitlement of any holder of any Claim to such
distributions shall be extinguished and forever barred.
5.5. Disputed Claims.
---------------
(a) Distributions Upon Allowance of Disputed Claims Other Than
----------------------------------------------------------
Disputed Unsecured Claims. The holder of a Disputed Claim other than a Disputed
-------------------------
Unsecured Claim that becomes an Allowed Claim subsequent to the Effective Date
shall receive payment of its Allowed Claim within ten (10) Business Days
following allowance of its Claim.
(b) Distributions Upon Allowance of Disputed Unsecured Claims.
---------------------------------------------------------
The holder of a Disputed Unsecured Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive both the Initial Class
5 Distribution and the Final Class 5 Distribution on the Final Distribution
Date. The holder of a Disputed Unsecured Claim that becomes an Allowed Claim
subsequent to the Final Distribution Date shall receive distributions of Cash in
an amount equal to the Allowed Claim within thirty days after the date such
Disputed Unsecured Claim becomes an Allowed Claim pursuant to a Final Order.
(c) Tort Claims. All Tort Claims are Disputed Claims. Any Tort
-----------
Claim as to which a proof of claim was timely filed in the Chapter 11 Case shall
be determined and liquidated (i) in the Bankruptcy Court or, in the case of
personal injury tort, in the District Court or, if the District Court so orders,
in the United States District Court for the judicial district in which the Claim
arose, or (ii) if the District Court or the Bankruptcy Court abstains from
exercising jurisdiction over the Claim, in the administrative or judicial
tribunal(s) in which it is pending on the Effective Date or, if no action was
pending on the Effective Date, in any administrative or judicial tribunal of
appropriate jurisdiction, or (iii) in accordance with any alternative dispute
resolution or similar proceeding as same may be approved by order of the
Bankruptcy Court. Any Tort Claim determined and liquidated (x) pursuant to a
judgment obtained in accordance with this Section 5.5(c) and applicable
nonbankruptcy law which is no longer appealable or subject to review, or (y) in
any alternative dispute resolution proceeding or similar proceeding as same may
be approved by order of the Bankruptcy Court, shall be deemed an Allowed
Unsecured Claim in such liquidated amount and satisfied in accordance with the
Plan. Nothing contained in this Section 5.5(c) shall constitute or be deemed a
waiver of any Cause of Action that the Debtor may hold against any entity,
including, without limitation, in connection with or arising out of any Tort
Claim.
5.6. Objections to and Resolution of Disputed Administrative Expense
---------------------------------------------------------------
Claims and Disputed Claims. Except as to applications for allowances of
--------------------------
compensation and reimbursement of expenses under sections 330 and 503 of the
Bankruptcy Code, the Debtor or Reorganized Debtor shall have the exclusive right
to make and file objections to Administrative Expense Claims and Claims
subsequent to the Confirmation Date. All objections shall be litigated to Final
Order; provided, however, that the Reorganized Debtor shall have the authority
-------- -------
to compromise, settle, otherwise resolve or withdraw any objections, without
approval of the
18
Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, the Debtor
or Reorganized Debtor shall file all objections to Administrative Expense Claims
(other than to applications for allowances of compensation and reimbursement of
expenses) and Claims and serve such objections upon the holder of the
Administrative Expense Claim or Claim as to which the objection is made as soon
as is practicable, but in no event later than ninety days after the Effective
Date or such later date as may be approved by the Bankruptcy Court.
5.7. Distributions Relating to Allowed Insured Claims. Distributions
------------------------------------------------
under the Plan to each holder of an Allowed Insured Claim shall be in accordance
with the treatment provided under the Plan for the Class in which such Allowed
Insured Claim is classified, but solely to the extent that such Allowed Insured
Claim is not satisfied from proceeds payable to the holder thereof under any
pertinent insurance policies and applicable law. Nothing contained in this
Section 5.7 shall constitute or be deemed a waiver of any Cause of Action that
the Debtor or any entity may hold against any other entity, including, without
limitation, insurers under any policies of insurance.
5.8. Cancellation and Surrender of Existing Securities and Agreements.
----------------------------------------------------------------
(a) On the Effective Date, the promissory notes and other
instruments evidencing any Claim shall be deemed canceled without further act or
action under any applicable agreement, law, regulation, order or rule and the
obligations of the Debtor under the agreements and indentures governing such
Claim shall be discharged.
(b) Each holder of a promissory note or other instrument
evidencing a Claim shall surrender such promissory note or instrument to the
Reorganized Debtor. No distribution of property hereunder shall be made to or on
behalf of any such holders unless and until such promissory note or instrument
is received by the Reorganized Debtor or the unavailability of such promissory
note or instrument is established to the reasonable satisfaction of the
Reorganized Debtor. The Reorganized Debtor may require any holder that is unable
to surrender or cause to be surrendered any such promissory notes or instruments
to deliver an affidavit of loss and indemnity and/or furnish a bond in form and
substance (including, without limitation, with respect to amount) reasonably
satisfactory to the Reorganized Debtor. Any holder that fails within the later
of one year after the Confirmation Date and the date its Claim is Allowed (i) to
surrender or cause to be surrendered such promissory note or instrument, (ii) if
requested, to execute and deliver an affidavit of loss and indemnity reasonably
satisfactory to the Reorganized Debtor, and (iii) if requested, to furnish a
bond reasonably satisfactory to the Reorganized Debtor, shall be deemed to have
forfeited all rights, claims and Causes of Action against the Debtor and the
Reorganized Debtor and shall not participate in any distribution hereunder.
19
ARTICLE VI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
----------------------------------------
6.1. Assumption or Rejection of Executory Contracts and Unexpired Leases.
-------------------------------------------------------------------
(a) Executory Contracts and Unexpired Leases. Pursuant to
----------------------------------------
sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts
and unexpired leases that exist between the Debtor and any person shall be
deemed assumed by the Reorganized Debtor as of the Effective Date except for any
executory contract or unexpired lease (i) which has been assumed pursuant to an
order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) which
has been rejected pursuant to an order of the Bankruptcy Court entered prior to
the Confirmation Date, (iii) as to which a motion for approval of the rejection
of such executory contract or unexpired lease has been filed and served prior to
the Confirmation Date or (iv) which is set forth in Schedule 6.1(a)(x)
(executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules
shall be included in the Plan Supplement. The listing of a document on Schedules
6.1(a)(x) and 6.1(a)(y) shall not constitute an admission by the Debtor or
Reorganized Debtor that such document is an executory contract or an unexpired
lease or that the Debtor or Reorganized Debtor has any liability thereunder.
(b) Schedules of Rejected Executory Contracts and Unexpired
-------------------------------------------------------
Leases; Inclusiveness. Each executory contract and unexpired lease listed or to
---------------------
be listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or
occupancy of real property shall be deemed to include (i) modifications,
amendments, supplements, restatements, or other agreements made directly or
indirectly by any agreement, instrument, or other document that in any manner
affects such executory contract or unexpired lease, without regard to whether
such agreement, instrument or other document is listed on Schedules 6.1(a)(x) or
6.1(a)(y), and (ii) executory contracts or unexpired leases appurtenant to the
premises listed on Schedules 6.1(a)(x) or 6.1(a)(y), including, without
limitation, all easements, licenses, permits, rights, privileges, immunities,
options, rights of first refusal, powers, uses, usufructs, reciprocal easement
agreements, vault, tunnel or bridge agreements or franchises, and any other
interests in real estate or rights in rem relating to such premises to the
-- ---
extent any of the foregoing are executory contracts or unexpired leases, unless
any of the foregoing agreements have been assumed previously.
(c) Insurance Policies. The Debtor's insurance policies and any
------------------
agreements, documents or instruments relating thereto, including, without
limitation, any retrospective premium rating plans relating to such policies,
are treated as executory contracts under the Plan. Notwithstanding the
foregoing, distributions under the Plan to any holder of a Claim covered by any
of such insurance policies and related agreements, documents or instruments that
are assumed hereunder, shall be in accordance with the treatment provided under
Article IV and Section 5.7 of the Plan. Nothing contained in this Section
6.1(c) shall constitute or be deemed a waiver of any Cause of Action that the
Debtor may hold against any entity, including, without limitation, the insurer
under any of the Debtor's policies of insurance.
20
(d) Approval of Assumption or Rejection of Executory Contracts and
--------------------------------------------------------------
Unexpired Leases. Entry of the Confirmation Order shall constitute (i) the
----------------
approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of
the assumption of the executory contracts and unexpired leases assumed pursuant
to Section 6.1(a) hereof, (ii) the extension of time, pursuant to section
365(d)(4) of the Bankruptcy Code, within which the Debtor may assume or reject
the unexpired leases specified in Section 6.1(a) hereof through the date of
entry of an order approving the assumption or rejection of such unexpired
leases, and (iii) the approval, pursuant to sections 365(a) and 1123(b)(2) of
the Bankruptcy Code, of the rejection of the executory contracts and unexpired
leases rejected pursuant to Section 6.1(a) hereof.
(e) Cure of Defaults. Except as may otherwise be agreed to by the
----------------
parties, within sixty days after the Effective Date or as soon thereafter as is
practicable, the Reorganized Debtor shall cure any and all undisputed defaults
under any executory contract or unexpired lease assumed pursuant to the Plan in
accordance with section 365(b)(1) of the Bankruptcy Code. All disputed defaults
that are required to be cured shall be cured either within thirty days of the
entry of a Final Order determining the amount, if any, of the Debtor's or
Reorganized Debtor's liability with respect thereto, or as may otherwise be
agreed to by the parties.
(f) Bar Date for Filing Proofs of Claim Relating to Executory
---------------------------------------------------------
Contracts and Unexpired Leases Rejected Pursuant to the Plan. Claims arising
------------------------------------------------------------
out of the rejection of an executory contract or unexpired lease pursuant to
this Section 6.1 of the Plan must be filed with the Bankruptcy Court no later
than thirty days after the later of (i) notice of entry of an order approving
the rejection of such executory contract or unexpired lease, and (ii) notice of
entry of the Confirmation Order. Any Claims not filed within such time will be
forever barred from assertion against the Debtor, its estate and its property.
Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as
Unsecured Claims under the Plan.
6.2. Indemnification Obligations. For purposes of the Plan, the
---------------------------
obligations of the Debtor to indemnify, reimburse or limit the liability of its
present and any former directors, officers or employees that were directors,
officers or employees, respectively, on or after the Commencement Date against
any obligations pursuant to the Debtor's certificates of incorporation or
bylaws, applicable state law or specific agreement, or any combination of the
foregoing, shall survive confirmation of the Plan, remain unaffected thereby,
and not be discharged irrespective of whether indemnification, reimbursement or
limitation is owed in connection with an event occurring before, on, or after
the Commencement Date.
6.3. Compensation and Benefit Programs. Except as provided in Section
---------------------------------
6.1(a) of the Plan, all employment and severance practices and policies, and all
compensation and benefit plans, policies, and programs of the Debtor, if any,
applicable to its directors, officers or employees, including, without
limitation, all savings plans, retirement plans, health care plans, severance
benefit plans, incentive plans, workers' compensation programs and life,
disability and other insurance plans are treated as executory contracts under
the Plan and are hereby assumed pursuant to sections 365(a) and 1123(b)(2) of
the Bankruptcy Code.
21
6.4. Retiree Benefits. Payments, if any, due to any person for the
----------------
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical, or hospital care benefits, or
benefits in the event of sickness, accident, disability, or death under any
plan, fund, or program (through the purchase of insurance or otherwise)
maintained or established in whole or in part by the Debtor prior to the
Commencement Date shall be continued for the duration of the period the Debtor
has obligated itself to provide such benefits.
ARTICLE VII.
COMPROMISE OF DISPUTES
----------------------
7.1. Compromise and Settlement of Claims Against Fleet. The Secured
-------------------------------------------------
Fleet Claim shall be deemed an Allowed Secured Fleet Claim in the amount stated
in the New Fleet Note. The Reorganized Debtor shall execute and deliver the New
Fleet Documents to Fleet, which documents, among other things, shall on the
Effective Date operate to compromise and settle any Causes of Action that the
Debtor and Debtor in Possession could have asserted against Fleet, Fleet's loan
participant, Texas Commerce Bank, National Association and any director, officer
or agent of either of them (the "Fleet Released Parties"), including Causes of
Action arising out of or relating to any transaction or occurrence, act,
activity or event, failure to act, or otherwise relating to any loans made by
the Fleet Released Parties to the Debtor occurring before the Effective Date.
In consideration of the release provided for in this section of the Plan, Fleet
has agreed to the treatment of the Secured Fleet Claim under section 4.2 of the
Plan which treatment shall be deemed a compromise and settlement as of the
Effective Date pursuant to section 1123 of the Bankruptcy Code and Bankruptcy
Rule 9019 of any Causes of Action that the Debtor has or may have had against
the Fleet Released Parties. As of the Effective Date, the Fleet Released Parties
shall be and hereby are released from any and all claims and Causes of Action
that the Debtor, Debtor-in-Possession or Reorganized Debtor may at any time have
or be able to assert against any of the Fleet Released Parties and that arise
out of or relate to any transaction or occurrence, act, activity or event,
failure to act, or otherwise relate to any loan made by any of the Fleet
Released Parties to the Debtor, before the Effective Date. Nothing in this
section 7.1 shall release the Fleet Released Parties from any of its obligations
under, or otherwise affect any party's rights pursuant to the Plan or the New
Fleet Documents.
7.2. Compromise and Settlement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. In January,
--------------------------------------------------
1996, the Debtor entered into an employment contract with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇"), which contract, among other things, provided that in the event
▇▇▇▇▇▇▇▇'▇ employment terminated for any reason other than cause (as defined in
the contract), ▇▇▇▇▇▇▇▇ would receive $250,000 (the "Severance Payment"). As of
the Commencement Date, the Debtor and ▇▇▇▇▇▇▇▇ agreed that ▇▇▇▇▇▇▇▇'▇ employment
would terminate and ▇▇▇▇▇▇▇▇ agreed to withdraw his demand for the Severance
Payment. In exchange therefor, the Debtor agreed to pay ▇▇▇▇▇▇▇▇ two months'
salary, extend medical benefits to ▇▇▇▇▇▇▇▇ through July 31, 1997 and make
voice-mail available to ▇▇▇▇▇▇▇▇ until the earlier of August 31, 1997 or the
date ▇▇▇▇▇▇▇▇ secures alternative employment. This Plan shall constitute a
motion to the Bankruptcy Court seeking approval of the Debtor's compromise with
▇▇▇▇▇▇▇▇, and the Confirmation Order shall
22
constitute an order of the Bankruptcy Court approving the compromise as fair and
equitable and within the bounds of reasonableness.
ARTICLE VIII.
PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR
------------------------------------
8.1. General. On the Effective Date, the management, control and
-------
operation of the Reorganized Debtor shall become the general responsibility of
the Board of Directors of the Reorganized Debtor, who shall, thereafter, have
the responsibility for the management, control and operation of the Reorganized
Debtor.
8.2. Meetings of Reorganized Jayhawk Stockholders. In accordance with the
--------------------------------------------
Amended Articles of Incorporation and the Amended Bylaws, as the same may be
amended from time to time, the first annual meeting of the stockholders of
Reorganized Jayhawk shall be held on a date in 1998 selected by the Board of
Directors of Reorganized Jayhawk, and subsequent meetings of the stockholders of
Reorganized Debtor shall be held at least once annually each year thereafter.
8.3. Directors and Officers of Reorganized Debtor.
--------------------------------------------
(a) Board of Directors. The initial Board of Directors of
------------------
Reorganized Jayhawk shall consist of eight individuals whose names shall be
disclosed prior to the Confirmation Hearing. Each of the members of such initial
Board of Directors shall serve until the first annual meeting of stockholders of
Reorganized Jayhawk or their earlier resignation or removal in accordance with
the Amended Articles of Incorporation or Amended Bylaws, as the same may be
amended from time to time.
(b) Officers. The officers of the Debtor immediately prior to
--------
the Effective Date shall serve as the initial officers of the Reorganized Debtor
on and after the Effective Date. Such officers shall serve in accordance with
any employment agreement with the Reorganized Debtor and applicable
nonbankruptcy law.
8.4. Amended Bylaws and Amended Articles of Incorporation. The Amended
----------------------------------------------------
Bylaws and Amended Articles of Incorporation shall be amended and restated as of
the Effective Date to the extent necessary (a) to prohibit the issuance of
nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy
Code, subject to further amendment of such articles of incorporation and bylaws
as permitted by applicable law, and (b) to effectuate the provisions of the
Plan, in each case without any further action by the stockholders or directors
of the Debtor, the Debtor in Possession or the Reorganized Debtor.
8.5. Issuance of New Promissory Note and Conversion of Jaymed Preferred
------------------------------------------------------------------
Stock. The issuance of the New Fleet Note by Reorganized Jayhawk is authorized
-----
without further act or action under applicable law, regulation, order or rule.
Reorganized Jayhawk shall exchange
23
shares of its common stock for shares of Jaymed Preferred Stock in accordance
with that certain Preferred Stock Purchase Agreement dated April 14, 1997
between ▇▇▇▇▇▇▇▇ and Jaymed.
ARTICLE IX.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN
-------------------------------------------------
9.1. Term of Bankruptcy Injunction or Stays. Unless otherwise provided
--------------------------------------
herein, all injunctions or stays provided for in the Chapter 11 Case under
sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on
the Confirmation Date, shall remain in full force and effect until the Effective
Date.
9.2. Revesting of Assets.
-------------------
(a) The property of the Debtor's estate shall revest in the
Reorganized Debtor on the Effective Date, subject to all liens and security
interests provided for in this Plan.
(b) From and after the Effective Date, the Reorganized Debtor
may operate its business, and may use, acquire and dispose of property free of
any restrictions imposed under the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtor and
Reorganized Debtor shall be free and clear of all liens, claims and interests of
holders of Claims and Equity Interests, except as provided in this Plan.
9.3. Causes of Action. Pursuant to section 1123(b)(3)(B) of the
----------------
Bankruptcy Code, as of the Effective Date any Causes of Action accruing to the
Debtor and Debtor in Possession, including, without limitation, avoidance or
recovery actions under sections 544, 545, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code, that are not compromised, settled or satisfied prior thereto or
in this Plan, shall become assets of the Reorganized Debtor, and the Reorganized
Debtor shall have the authority to prosecute such Causes of Action for the
benefit of the Debtor's estate. The Reorganized Debtor shall have the authority
to compromise and settle, otherwise resolve, discontinue, abandon or dismiss all
such Causes of Action without approval of the Bankruptcy Court.
9.4. Discharge of Debtor. The rights afforded herein and the treatment of
-------------------
all Claims and Equity Interests herein shall be in exchange for and in complete
satisfaction, discharge, and release of Claims of any nature whatsoever,
including any interest accrued on such Claims from and after the Commencement
Date, against the Debtor and the Debtor in Possession, or any of their assets or
properties. Except as otherwise provided herein, (a) on the Effective Date, all
such Claims against the Debtor shall be satisfied, discharged, and released in
full, and (b) all persons shall be precluded from asserting against the
Reorganized Debtor, its successors, or its assets or properties any other or
further Claims based upon any act or omission, transaction or other activity of
any kind or nature that occurred prior to the Confirmation Date.
24
9.5. Injunction. Except as otherwise expressly provided in the Plan or
----------
the Confirmation Order, all entities who have held, hold or may hold Claims
against the Debtor, are permanently enjoined, on and after the Effective Date,
from (a) commencing or continuing in any manner any action or other proceeding
of any kind with respect to any such Claim, (b) the enforcement, attachment,
collection or recovery by any manner or means of any judgment, award, decree or
order against the Debtor on account of any such Claim, (c) creating, perfecting
or enforcing any encumbrance of any kind against the Debtor or against the
property or interests in property of the Debtor on account of any such Claim or
Equity Interest, and (d) asserting any right of setoff, subrogation or
recoupment of any kind against any obligation due from the Debtor or against the
property or interests in property of the Debtor on account of any such Claim.
Such injunction shall extend to successors of the Debtor (including, without
limitation, the Reorganized Debtor) and their respective properties and
interests in property.
ARTICLE X.
EFFECTIVENESS OF THE PLAN
-------------------------
10.1. Conditions Precedent to Effectiveness. The Plan shall not become
-------------------------------------
effective unless and until the following conditions shall have been satisfied:
(a) the Confirmation Order, in form and substance satisfactory
to the Debtor, shall have become a Final Order;
(b) all actions, documents and agreements necessary to implement
the Plan shall have been effected or executed;
(c) the Debtor shall have received all authorizations, consents,
regulatory approvals, rulings, letters, no-action letters, opinions or documents
that are determined by the Debtor to be necessary to implement the Plan,
including, without limitation, no-action letters from the Securities and
Exchange Commission and letter or other rulings from the Internal Revenue
Service;
(d) the Debtor shall have executed and delivered to Fleet all of
the New Fleet Documents;
(e) ▇▇▇▇▇▇▇▇ shall have executed and delivered to Fleet the
▇▇▇▇▇▇▇▇ Guaranty and the ▇▇▇▇▇▇▇▇ Release; and
(f) Fleet shall have accepted, executed and delivered the New
Fleet Documents, and all conditions precedent thereunder have been satisfied or
waived by Fleet, in writing.
10.2. Waiver of Conditions. The Debtor may waive, by a writing signed by
--------------------
an authorized representative of the Debtor and subsequently filed with the
Bankruptcy Court, one or more of the conditions precedent to effectiveness of
the Plan set forth in Section 10.1 of the Plan,
25
except the Debtor may not waive the conditions in paragraphs (a), (d), (e) and
(f) of Section 10.1 without Fleet's prior written consent.
ARTICLE XI.
RETENTION OF JURISDICTION
-------------------------
The Bankruptcy Court shall have exclusive jurisdiction of all
matters arising out of, and related to, the Chapter 11 Case and the Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:
(a) To hear and determine pending applications for the
assumption or rejection of executory contracts or unexpired leases, if any are
pending, and the allowance of Claims resulting therefrom;
(b) To determine any and all adversary proceedings, applications
and contested matters;
(c) To hear and determine any objection to Administrative
Expense Claims or Claims;
(d) To enter and implement such orders as may be appropriate in
the event the Confirmation Order is for any reason stayed, revoked, modified or
vacated;
(e) To issue such orders in aid of execution and consummation of
the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
(f) To consider any amendments to or modifications of the Plan,
to cure any defect or omission, or reconcile any inconsistency in any order of
the Bankruptcy Court, including, without limitation, the Confirmation Order;
(g) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331 and 503(b) of
the Bankruptcy Code and the Plan;
(h) To hear and determine disputes arising in connection with
the interpretation, implementation or enforcement of the Plan;
(i) To recover all assets of the Debtor and property of the
Debtor's estate, wherever located;
(j) To hear and determine matters concerning state, local and
federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy
Code;
(k) To hear any other matter not inconsistent with the
Bankruptcy Code; and
26
(l) To enter a final decree closing the Chapter 11 Case.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
------------------------
12.1. Effectuating Documents and Further Transactions. The Debtor or the
-----------------------------------------------
Reorganized Debtor, through its Chief Executive Officer, President, or its Chief
Financial Officer, is authorized to execute, deliver, file or record such
contracts, instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of the Plan and any notes issued
pursuant to the Plan.
12.2. Corporate Action. On the Effective Date, all matters provided for
----------------
under the Plan that would otherwise require approval of the stockholders or
directors of the Debtor or Reorganized Debtor, including, without limitation,
the effectiveness of the Amended Articles of Incorporation, the Amended Bylaws,
the election or appointment, as the case may be, of directors and officers of
the Debtor or Reorganized Debtor pursuant to the Plan, and the authorization and
approval of employment agreements or amended employment agreements, shall be
deemed to have occurred and shall be in effect from and after the Effective Date
pursuant to the applicable general corporation laws of the State of Texas
without any requirement of further action by the stockholders or directors of
the Debtor or Reorganized Debtor. On the Effective Date or as soon thereafter
as is practicable, the Reorganized Debtor shall, if required, file the Amended
Articles of Incorporation with the Secretary of State of Texas, in accordance
with the applicable general corporation law of the State of Texas.
12.3. Exemption from Transfer Taxes. Pursuant to section 1146(c) of the
-----------------------------
Bankruptcy Code, the issuance, transfer or exchange of notes under the Plan, the
creation of any mortgage, deed of trust or other security interest, the making
or assignment of any lease or sublease, or the making or delivery of any deed or
other instrument of transfer under, in furtherance of, or in connection with the
Plan, including, without limitation, any merger agreements or agreements of
consolidation, deeds, bills of sale or assignments executed in connection with
any of the transactions contemplated under the Plan shall not be subject to any
stamp, real estate transfer, mortgage recording or other similar tax.
12.4. Debtor's Limited Release of Directors and Officers. As of the
---------------------------------------------------
Effective Date, the Debtor shall be deemed to have waived and released its
present and former directors and officers who were directors and officers,
respectively, during the Chapter 11 Case and on or before the Commencement Date
from any and all claims of the Debtor, including, without limitation, claims
which the Debtor otherwise has legal power to assert, compromise or settle in
connection with the Chapter 11 Case; provided, however, that this Section 12.4
-------- -------
shall not operate as a waiver or release of any claim (i) in respect of any
loan, advance or similar payment by the Debtor to any such person, and (ii) in
respect of any contractual obligation owed by such person to the Debtor.
27
12.5. Claim Holders' Release of Directors and Officers from Claims and
----------------------------------------------------------------
Liabilities. As of the Effective Date, each of the Debtor's present and former
-----------
directors and officers who were directors and officers, respectively, during the
Chapter 11 Case and on or before the Commencement Date (a "Released Director or
Officer") shall be released and discharged from any and all claims, obligations,
rights, Causes of Action and liabilities which any holder of a Claim against the
Debtor may be entitled to assert, whether or not derivative from or through the
Debtor, whether known or unknown, foreseen or unforeseen, existing or hereafter
arising, based in whole or in part upon any act or omission or other event
occurring on or at any time prior to the Effective Date in any way relating to
the Debtor, the Chapter 11 Case or this Plan; provided, however, that this
-------- -------
Section 12.5 shall not operate as a waiver or release of any claim (i) in
respect of any loan, advance or similar payment by any holder of a Claim to a
Released Director or Officer, (ii) in respect of any contractual obligation owed
by a Released Director or Officer to a holder of a Claim, or (iii) in respect of
the ▇▇▇▇▇▇▇▇ Guaranty; provided further, however, that nothing contained in this
-------- ------- -------
Section 12.5 shall affect the rights of a Released Director or Officer to assert
and prosecute (x) any direct claim, counterclaim, cross-claim, separate action
or similar claim against any entity which maintains that it has a Cause of
Action of the kind described in this Section 12.5 against a Released Director or
Officer that has not been released and discharged hereunder or (y) any claim for
indemnification, contribution or otherwise, however denominated, against any
entity relating to any Cause of Action against a Released Director or Officer
that has not been released and discharged hereunder. Each holder of a Claim
shall be deemed to have agreed to the provisions of this Section 12.5, and shall
be bound thereby, by reason of, among other things, its acceptance of this Plan
and its receipt of any distributions hereunder.
12.6. Exculpation. Subject to Sections 12.4 and 12.5 of the Plan, neither
-----------
the Reorganized Debtor nor any of its officers, directors, employees, advisors
or agents shall have or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising out of, the
filing of the Chapter 11 Case, the pursuit of confirmation of the Plan, the
consummation of the Plan or the administration of the Chapter 11 Case or the
Plan or the property to be distributed under the Plan, except for willful
misconduct or gross negligence, and, in all respects, the Reorganized Debtor,
and each of its officers, directors, employees, advisors and agents shall be
entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
12.7. Termination of Committee. The appointment of the Creditors'
------------------------
Committee shall terminate on the later of the Effective Date and the date of the
hearing to consider applications for final allowances of compensation and
reimbursement of expenses.
12.8. Post-Confirmation Date Fees and Expenses. From and after the
----------------------------------------
Confirmation Date, the Debtor and Reorganized Debtor shall, in the ordinary
course of business and without the necessity for any approval by the Bankruptcy
Court, pay the reasonable fees and expenses of professional persons thereafter
incurred by the Debtor and Reorganized Debtor, including, without limitation,
those fees and expenses incurred in connection with the implementation and
consummation of the Plan.
28
12.9. Payment of Statutory Fees. All fees payable pursuant to section
-------------------------
1930 of the title 28 of the United States Code, as determined by the Bankruptcy
Court at the Confirmation Hearing, shall be paid on the Effective Date.
12.10. Amendment or Modification of the Plan. Alterations, amendments or
-------------------------------------
modifications of the Plan may be proposed in writing by the Debtor at any time
prior to the Confirmation Date, provided that the Plan, as altered, amended or
modified, satisfies the conditions of sections 1122 and 1123 of the Bankruptcy
Code, and the Debtor shall have complied with section 1125 of the Bankruptcy
Code. The Plan may be altered, amended or modified at any time after the
Confirmation Date and before substantial consummation, provided that the Plan,
as altered, amended or modified, satisfies the requirements of sections 1122 and
1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a
hearing, confirms the Plan, as altered, amended or modified, under section 1129
of the Bankruptcy Code and the circumstances warrant such alterations,
amendments or modifications. A holder of a Claim that has accepted the Plan
shall be deemed to have accepted the Plan, as altered, amended or modified, if
the proposed alteration, amendment or modification does not materially and
adversely change the treatment of the Claim of such holder. Notwithstanding the
foregoing, the Debtor may alter, amend or modify the treatment of Claims and
Equity Interests provided for under the Plan provided that the holders of Claims
or Equity Interests affected thereby agree or consent to any such alteration,
amendment or modification.
12.11. Severability. In the event that the Bankruptcy Court determines,
------------
prior to the Confirmation Date, that any provision in the Plan is invalid, void
or unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
12.12. Revocation or Withdrawal of the Plan. The Debtor reserves the
------------------------------------
right to revoke or withdraw the Plan prior to the Confirmation Date. If the
Debtor revokes or withdraws the Plan prior to the Confirmation Date, then the
Plan shall be deemed null and void. In such event, nothing contained herein
shall constitute or be deemed a waiver or release of any claims by or against
the Debtor or any person or to prejudice in any manner the rights of the Debtor
or any person in any further proceedings involving the Debtor.
12.13. Binding Effect. The Plan shall be binding upon and inure to the
--------------
benefit of the Debtor, the holders of Claims and Equity Interests, and their
successors and assigns, including, without limitation, the Reorganized Debtor.
12.14. Notices. All notices, requests and demands to or upon the Debtor
-------
or the Reorganized Debtor to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when actually delivered or, in the
case of notice by facsimile transmission, when received and telephonically
confirmed, addressed as follows:
29
If to the Debtor:
Jayhawk Acceptance Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
12.15. Governing Law. Except to the extent the Bankruptcy Code,
-------------
Bankruptcy Rules or other federal law is applicable, or to the extent an Exhibit
to the Plan or Plan Supplement provides otherwise, the rights and obligations
arising under this Plan shall be governed by, and construed and enforced in
accordance with, the laws of the State of Texas, without giving effect to the
principles of conflicts of law of such jurisdiction.
12.16. Withholding and Reporting Requirements. In connection with the
--------------------------------------
consummation of the Plan, the Debtor or the Reorganized Debtor, as the case may
be, shall comply with all withholding and reporting requirements imposed by any
federal, state, local or foreign taxing authority and all distributions
hereunder shall be subject to any such withholding and reporting requirements.
12.17. Plan Supplements. Forms of the documents relating to the Amended
----------------
Articles of Incorporation, Amended By Laws, the New Fleet Documents, and
Schedules 6.1(a)(x) and 6.1(a)(y) referred to herein shall be contained in the
Plan Supplements (Volumes I and II) and filed with the Clerk of the Bankruptcy
Court as follows: the Plan Supplement (Volume I) containing the New Fleet
Documents, the ▇▇▇▇▇▇▇▇ Guaranty and the ▇▇▇▇▇▇▇▇ Release shall be filed
concurrently with the filing of this Plan, and the Plan Supplement (Volume II)
containing the Amended Articles of Incorporation, Amended ByLaws, and Schedules
6.1(a)(x) and 6.1(a)(y) shall be filed at least ten days prior to the last day
upon which holders of Claims may vote to accept or reject the Plan. Upon their
filing with the Bankruptcy Court, the Plan Supplements may be inspected in the
office of the Clerk of the Bankruptcy Court during normal court hours. Holders
of Claims or Equity Interests may obtain a copy of the Plan Supplements upon
written request to the Debtor in accordance with Section 12.14 of the Plan.
30
12.18. Headings. Headings are used in the Plan for convenience and
--------
reference only, and shall not constitute a part of the Plan for any other
purpose.
12.19. Exhibits. All Exhibits to the Plan, including the Plan Supplement,
--------
are incorporated into and are a part of the Plan as if set forth in full herein.
12.20. Filing of Additional Documents. On or before substantial
------------------------------
consummation of the Plan, the Debtor shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
Dated: April 18, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
JAYHAWK ACCEPTANCE CORPORATION,
a Texas corporation
By: ____________________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Operating Officer
31
EXHIBIT G
---------
to
Settlement Agreement
Settlement Motion
-----------------
[Attached.]
EXHIBIT G - PAGE 1
---------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
ATTORNEYS FOR THE DEBTOR
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
-----------------------------------
In re: (S) Case No. 397-31261-SAF-11
(S)
JAYHAWK ACCEPTANCE CORPORATION, (S) Chapter 11
a Texas Corporation, (S)
(S)
Debtor. (S)
-----------------------------------
MOTION OF THE DEBTOR FOR AN ORDER PURSUANT TO
SECTION 363 OF THE BANKRUPTCY CODE APPROVING
THE SETTLEMENT AGREEMENT BY AND AMONG THE DEBTOR,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ AND FLEET CAPITAL CORPORATION
-----------------------------------------------
TO THE ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
UNITED STATES BANKRUPTCY JUDGE:
Jayhawk Acceptance Corporation ("Jayhawk" or the "Debtor"), as debtor
and debtor-in-possession, respectfully represents:
JURISDICTION
------------
1. This Court has jurisdiction to consider this Motion pursuant to 28
U.S.C. (S)(S) 157 and 1334. This matter is a core proceeding pursuant to 28
U.S.C. (S) 157(b)(2)(A) and (O). Venue is proper before this Court pursuant to
28 U.S.C. (S)(S) 1408 and 1409.
BACKGROUND
----------
2. On February 7, 1997 (the "Petition Date"), the Debtor filed a
voluntary petition for relief under chapter 11 of title 11 of the United States
Code (the "Bankruptcy Code"). Jayhawk is operating its business and managing
its properties as a debtor-in-possession pursuant to sections 1107(a) and 1108
of the Bankruptcy Code.
3. The Debtor is a specialized financial services company, primarily
engaged in the business of serving automobile dealers in the subprime credit
market by providing an indirect financing source to buyers of used vehicles with
limited access to traditional sources of consumer credit. In August 1996, the
Debtor, through its wholly-owned subsidiary Jayhawk Medical Acceptance
Corporation ("Jaymed"), expanded its business into the elective health care
market by offering an indirect financing source for elective health care
procedures.
4. As of the Petition Date, the Debtor owed its revolving credit
lender, Fleet Capital Corporation ("Fleet"), approximately $60 million, which
was secured by substantially all of the Debtor's assets and was guaranteed up to
$10 million by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇").
5. Concurrently with the filing of this Motion, the Debtor filed a
plan of reorganization (the "Plan") pursuant to section 1121 of the Bankruptcy
Code, Plan Supplement (Volume I) that includes the proposed Fleet loan documents
attached thereto as exhibits, and a disclosure statement (the "Disclosure
Statement") accompanying the Plan. The terms of the Plan
2
contemplate, among other things, that the Debtor will restructure its
obligations with Fleet. In furtherance of such restructure, the Debtor intends
to execute various agreements documenting the terms of the restructured
obligations, to be effective as of the Effective Date of the Plan. In connection
therewith, the Debtor has entered into an agreement with ▇▇▇▇▇▇▇▇ and Fleet (the
"Settlement Agreement"), which is annexed hereto as Exhibit A and is
---------
incorporated herein for all purposes. Because the issue of the necessity of this
Court's approval is not free from doubt, and because the Debtor is required to
use its best efforts to obtain approval of the Settlement Agreement as provided
pursuant to the terms of the Settlement Agreement, the Debtor seeks this Court's
approval pursuant to section 363 of the Bankruptcy Code of the Debtor's entry
into the Settlement Agreement.
6. Pursuant to the terms of the Settlement Agreement, Fleet and
▇▇▇▇▇▇▇▇ agree to support and vote for the Plan, subject to compliance with
applicable laws. Essentially, the Settlement Agreement is a consent agreement.
The relevant terms of the Settlement Agreement include: (1) the Debtor will seek
to obtain confirmation of the Plan not later than July 31, 1997; (2) Fleet will
support and vote for the Plan, subject to the provisions of the Settlement
Agreement and compliance with applicable laws; (3) Jaymed will support and vote
for the Plan; (4) the Debtor and Fleet will support and seek approval of the
Final Cash Collateral Order/1/; (5) the Collateral securing the payment of the
Obligations as provided in the Plan will consist of all property described in
the Loan Documents; (6) the Debtor will continue to comply with its reporting
obligations as required by the Cash Collateral Orders and the Loan Documents;
________________
1. All capitalized terms not defined herein shall have the same meaning
ascribed to such terms in the Settlement Agreement.
3
(7) the Debtor will execute the Loan Documents prior to, but effective on, the
Effective Date; and (8) ▇▇▇▇▇▇▇▇ will execute the New Guaranty and the ▇▇▇▇▇▇▇▇
Release prior to, but effective on, the Effective Date.
7. Additionally, the Settlement Agreement contains several conditions
precedent to Fleet's agreement to support and vote for the Plan, including: (1)
the Court shall have entered the Final Cash Collateral Order on or before April
30, 1997; (2) the Debtor shall have filed the Plan on or before April 18, 1997;
(3) the Plan may not be amended or modified without Fleet's prior consent; (4)
the Disclosure Statement shall have been filed on or before April 18, 1997; (5)
the Debtor shall have filed this Motion concurrently with its filing of the Plan
and shall have diligently and in good faith sought to obtain entry of an order
approving the Settlement Agreement; (6) Fleet shall have approved the Final Cash
Collateral Order between the Debtor and Prudential Securities Credit Corporation
("PSCC"); (7) no liens or encumbrances, other than those favoring Fleet and
PSCC, shall have been created on the Collateral securing the Obligations; and
(8) ▇▇▇▇▇▇▇▇ or Jaymed, or any assignee of Jaymed's claim (including ▇▇▇▇▇▇▇▇),
shall have voted for and supported the Plan.
8. Fleet's claim is not deemed allowed under the Settlement Agreement.
---
Only after the Disclosure Statement has been approved and the Plan has been
confirmed will Fleet's claim be deemed allowed as of the Effective Date of the
Plan.
RELIEF REQUESTED
----------------
9. By this Motion, and pursuant to section 363 of the Bankruptcy
Code, the Debtor requests an order approving the terms of the Settlement
Agreement. The Debtor also
4
seeks authorization to take any additional actions that may be necessary or
appropriate to consummate the Settlement Agreement.
LEGAL AUTHORITY
---------------
10. Critical to the success of any reorganization plan is a consent
agreement between the Debtor and Fleet as a major secured creditor. Once such
an agreement is reached, the claims of other creditors can be resolved more
efficiently. Section 363(b)(1) of the Bankruptcy Code permits a debtor to enter
into transactions outside of the ordinary course of business after notice and a
hearing. The only court to address the issue whether a consent agreement
required compliance with section 363(b)(1) of the Bankruptcy Code was the
bankruptcy court for the Southern District of New York in Trans World Airlines,
---------------------
Inc. v. Texaco Inc. (In re Texaco Inc.), 81 B.R. 813 (Bankr. S.D.N.Y. 1988).
------------------- -----------------
According to the Texaco court, a consent agreement is not subject to section
------
363(b)(1) because it does not involve a debtor's right to use, sell, or lease
property of the estate, and such an agreement is conditioned upon [the] court's
approval of the plan." Id. at 816. Thus, "prior approval of negotiations
---
leading to a confirmation is not required because a debtor is encouraged to
negotiate with interested parties in accordance with the exclusivity conferred
under 11 U.S.C. (S) 1121(b)." Id.
---
11. Notwithstanding the foregoing, the Debtor is concerned that
certain covenants set forth in the Settlement Agreement may involve transactions
outside of the ordinary course of the Debtor's business and thus require this
Court's approval. The factors to be considered by the Court under section
363(b)(1) include (1) business justification and (2) relationship of the
agreement to the plan approval process. See, e.g. In re ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--- ---- ----------------------
Pattern, Inc., 114 B.R. 877 (Bankr. S.D.N.Y. 1990) (holding that an agreement
-------------
allowing a
5
chapter 11 debtor to merge with another entity if the plan of reorganization is
confirmed was amply supported by the debtor's reasonable business judgment and
was a step necessary to achieve the plan).
12. Courts have consistently recognized that free and open negotiation
is crucial for parties to prepare a consensual plan of reorganization. As long
as parties do not unequivocally solicit votes prior to the distribution of a
court-approved disclosure statement, parties may negotiate to reach an
agreement. For example, a party may distribute drafts of different plans for
comments from creditors. In re ▇▇▇▇▇▇, 51 B.R. 432, 436 (Bankr. D. Utah 1985).
------------
A party may also meet with other parties to discuss plan options. Id. (court
---
held that a meeting conducted pursuant to debtor's communication with various
creditors was not a solicitation under section 1125(b)). In addition, a debtor-
in-possession and a creditors' committee may enter into "a transaction to form
the basis of a plan" prior to confirmation of a plan of reorganization. In re
-----
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Pattern, Inc., 114 B.R. 877, 877 (Bankr. S.D.N.Y. 1990).
------------------------------
Finally, a party "may transmit additional materials to creditors and other
interested parties to induce their votes . . . so long as such extrajudicial
material and solicitation does not contradict the court-approved disclosure
statement, or contain mischaracterizations or misstatements of material fact
that might unfairly influence solicitees." In re ▇▇▇▇▇▇▇ Square Partnership, 160
--------------------------------
B.R. 336, 341 (Bankr. D. Minn. 1993).
13. In addition, policy reasons abound for courts to uphold consent
agreements. One of these reasons is that "the law should favor settlements."
In re ▇▇▇▇▇▇▇ Square Partnership, 160 B.R. at 339. Another reason is that
--------------------------------
courts should encourage consensual, negotiated plans early in a case. Id. at
---
340. Otherwise, the bankruptcy process could "create
6
unwarranted delays in the confirmation process at the expense of virtually
everyone concerned." In re ▇▇▇▇▇▇▇, 104 B.R. 206, 214 (Bankr. W.D. Mo. 1989). In
-------------
addition, since "there is no principled or predicable difference (between
permissible negotiations and prohibited solicitations), . . . any definition
would tend to chill creditors' negotiations." Id. (citing Century Glove, Inc. v.
--- ----------------------
First Am. Bank (In re Century Glove, Inc.), 860 F.2d 94, 101-02 (3d Cir. 1988)).
-------------- -------------------------
14. The Debtor has located only three decisions addressing challenges
to consent agreements, In re Texaco Inc., In re ▇▇▇▇▇▇▇ Square Partnership, and
----------------- --------------------------------
In re Circle K. Corp., et al., No. CIV. 93-1222 (D. Ariz. April 11, 1994). In
-----------------------------
each of these cases, the court upheld the agreement as a permissible negotiation
and not an impermissible solicitation because the purpose of the agreement was
not to solicit votes directly, rather the agreement contained various
affirmative and negative covenants relating to the parties' support for the
final reorganization plan.
15. In In re Texaco Inc., the bankruptcy court held that a $3 billion
-----------------
dollar settlement agreement executed prior to the court's approval of a
disclosure statement between the debtor Texaco Inc. and its creditor Pennzoil
was not a solicitation in violation of 11 U.S.C. (S) 1125(b). Texaco negotiated
a settlement with Pennzoil that formed the basis of Texaco's reorganization
plans. Paying particular attention to the necessity of the consent agreement,
the court noted that
the settlement had to be binding on Texaco and Pennzoil before Texaco
could submit its plan of reorganization. If Pennzoil were free to
support another plan while Texaco's plan was still capable of being
approved, the negotiations between Texaco and Pennzoil would be
meaningless. Pennzoil's support of Texaco's proposed plan is
fundamental to Texaco's efforts to effect a confirmable plan of
reorganization. Texaco's willingness to forego further litigation with
Pennzoil for
7
a payment of $3 billion is predicated on the fact that Pennzoil's
support will enable Texaco to propose a confirmable plan.
In re Texaco Inc., 81 B.R. at 815. Similarly, Fleet's support of the Debtor's
-----------------
Plan is fundamental to the Debtor's ability to effect a confirmable plan of
reorganization.
16. Further, the Texaco court noted that certain affirmative and
------
negative covenants in the agreement did not amount to vote solicitation in
violation of 11 U.S.C. (S) 1125(b). First, the consent agreement between the
two parties did not commit Pennzoil to a vote prior to the dissemination of a
court-approved disclosure statement. Id. The court stated that "[t]he proposal
---
in the Joint Plan for the settlement of Pennzoil's claim for $3 billion dollars
is not effective unless accepted by the requisite majority of shareholders and
approved by this court." Id. at 816. The Court further stated that "[u]nless
---
the requisite majority of shareholders first consent to the plan, followed by a
confirmation hearing which requires this Court's approval, there will be no
effective settlement pursuant to which Texaco would be obligated to pay, and
Pennzoil would be entitled to receive a $3 billion amount." Id. Similarly, the
---
Settlement Agreement by and among the Debtor, Fleet, and ▇▇▇▇▇▇▇▇ will not be
effective unless the Disclosure Statement is approved, the Plan is confirmed,
and there is compliance with all other applicable laws. Second, Pennzoil's
covenant not to "vote for, consent to, support or participate in the formulation
of any other plan" or modifications of the plan did not require Pennzoil to
accept the plan or cast a ballot. Id. In fact, as is the case with the Debtor's
---
Settlement Agreement with Fleet, the Texaco court noted that "[t]he solicitation
------
of Pennzoil's vote must await the approval of the disclosure statement. Indeed,
Pennzoil is not required to cast any ballot at all." Id. at 815. Additionally,
--
such a covenant did not violate section 1125(b) where there was "no
8
other plan on file which would require a disclosure statement." Id. Third, the
---
affirmative covenant, that the parties would use their "best efforts" to support
the plan, did not amount to a direct solicitation of votes in favor of the final
plan. Id. Each of these provisions is similar to the provisions contained in the
---
Settlement Agreement.
17. Next, the court in In re ▇▇▇▇▇▇▇ Square Partnership referred to In
-------------------------------- --
re Texaco Inc. in its decision to uphold a consent agreement as a permissible
--------------
negotiation under section 1125(b) of the Bankruptcy Code. The debtor, ▇▇▇▇▇▇▇
Square Partnership ("▇▇▇▇▇▇▇") entered into an agreement with a creditor,
District Energy St. ▇▇▇▇ ("District Energy") to switch from hot water to natural
gas to heat its building prior to the dissemination of a court-approved
disclosure statement. The agreement amounted to a savings of $269,000 for
▇▇▇▇▇▇▇, and reduced its previous contract term with District Energy by ten
years. A major creditor, Prudential Insurance Company of America ("Prudential")
objected to the agreement on the basis that it violated section 1125(b) of the
Bankruptcy Code. In addition, Prudential alleged that ▇▇▇▇▇▇▇, in violation of
section 1125(b), solicited District Energy's vote with preliminary drafts of its
amended disclosure statement./2/
18. The court upheld the consent agreement on the following grounds:
(1) the agreement was executory until final approval by the creditors of the
disclosure statement, (2) policy favored settlement, and (3) courts should
define solicitation narrowly. The agreement provided that District Energy's
acceptance of the final plan "remained executory until District Energy actually
filed its accepting ballot with the clerk of this Court." In re ▇▇▇▇▇▇▇ Square
--------------------
________________
2. On this separate issue, the court held that parties may convey additional
materials as long as the extrajudicial materials do not contradict the
disclosure statement or contain mischaracterizations or misstatements of
material fact that might unfairly influence solicitees. In re ▇▇▇▇▇▇▇ Square
--------------------
Partnership, 160 B.R. at 341.
-----------
9
Partnership, 160 B.R. at 340. Additionally, the "agreement did not purport to
-----------
exempt the debtor from its statutory obligation to present District Energy with
a court-approved disclosure statement." Id. Furthermore, the ▇▇▇▇▇▇▇ Square
--- --------------
court stated that courts should encourage "consensual arrangements" that further
reorganization plans. Id. at 339. The court also defined `solicitation'
---
narrowly, referring to Century Glove, Inc. as the leading case on the issue.
-------------------
Id. at 340. Finally, the court stated that, "[a]s a matter of these basic
---
principles, then, the Debtor's negotiations with District Energy did not
constitute `solicitation' within the contemplation of (S) 1125." Id. (emphasis
---
added).
19. In In re Circle K Corp., et al., one of four major creditor
-------------------- ------
groups, the Debenture Holders (the "Debenture Committee"), initially brought
suit in bankruptcy court by preliminary injunction claiming that the consent
agreements signed by various creditors after extensive negotiations violated 11
U.S.C. (S) 1125(b) of the Bankruptcy Code. Specifically, the Debenture Committee
stated that the agreements "illegally [made] a demand, prior to dissemination of
an approved disclosure statement, that the senior Creditors agree to vote in
favor of the Debtors' Plan and against any other competing plan." In re Circle
------------
K. Corp., et al., No. CIV 93-1222, slip op. at 7 (D. Ariz. April 11, 1994). The
-------- ------
Debenture Committee received a zero distribution under the debtors' plan, which
was approved and confirmed by the bankruptcy court over the Debenture
Committee's objection.
20. The Bankruptcy Court initially denied the Debenture Committee's
complaint. On appeal, the District Court for the District of Arizona, relying
upon In re Texaco, Inc., noted that, because the consent agreement contained
------------------
affirmative and negative covenants, the creditors were not unequivocally
required to vote in favor of the Circle K Plan. Two covenants
10
in the consent agreement formed the basis of the court's analogy to In re Texaco
------------
Inc.: (1) the ability of signatories to withdraw from the agreement if the
----
disclosure statement was not materially consistent with the agreement, and (2)
signatories to the agreement could withdraw if not doing so would constitute a
breach of fiduciary duty. In re Circle K Corp., et al., No. CIV 93-1222, slip
-------------------- ------
op. at 10 (D. Ariz. April 11, 1994). These "outs," the court determined, "put
the agreement in question within the protections of the Texaco case." The
Settlement Agreement among the Debtor, Fleet, and ▇▇▇▇▇▇▇▇ contains similar
features in the form of conditions precedent.
21. Moreover, the Circle K court noted that the signatories to the
--------
agreement, consistent with congressional intent, based their decision upon
adequate information, engaged in open negotiation, and were sufficiently
sophisticated to protect their interests. In re Circle K Corp., et al., No. CIV
-------------------- ------
93-1222, slip op. at 11 (D. Ariz. April 11, 1994) referring to In re ▇▇▇▇▇▇▇,
-------------
104 B.R. at 215; In re Allegheny Intern., Inc., 118 B.R. 282, 294 (Bankr. W.D.
-----------------------
Pa. 1990)). These factors were also present in negotiations between the Debtor,
Fleet, and ▇▇▇▇▇▇▇▇. Indeed, the Settlement Agreement is the product of
extensive negotiations, spanning many weeks, and multiple drafts and revisions.
CONCLUSION
----------
22. Courts have consistently held consent agreements enforceable as
permissible negotiations if they contain affirmative and negative covenants that
do not request a direct vote in favor of a final plan prior to when the parties
receive a court-approved disclosure statement. Examples of affirmative and
negative covenants held by courts to be enforceable in a consent agreement
include promises to "support" or use "best efforts" to support the final plan;
11
provisions that the agreement will remain executory until parties cast their
final ballot after court approval and dissemination of the disclosure statement;
and promises not to accept another plan or modify the current plan. Based on
the foregoing, to the extent such approval is required under section 363(b)(1)
of the Bankruptcy Code, the Court should approve the Settlement Agreement and
authorize the Debtor to take any actions necessary to consummate the
transactions contemplated therein.
NOTICE
------
23. No trustee or examiner has been appointed in this case. Notice of
this Motion has been given to the Office of the United States Trustee, counsel
to the statutory committee of unsecured creditors, counsel to Fleet, counsel to
Prudential Securities Capital Corporation, counsel to ▇▇▇▇▇▇▇▇, and those
persons and entities known to the Debtor who have requested notices in this
case. The Debtor submits that no other notice need be given.
WHEREFORE the Debtor respectfully requests entry of an order granting the
relief requested herein and such other and further relief as is just.
Dated: April 18, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
WEIL, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
-and-
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
12
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WEIL, GOTSHAL & ▇▇▇▇▇▇ LLP
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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ATTORNEYS FOR THE DEBTOR
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EXHIBIT H
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to
Settlement Agreement
Settlement Order
----------------
[Attached.]
EXHIBIT H - PAGE 1
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
------------------------------------
In re: (S) Case No. 397-31261-SAF-11
(S)
JAYHAWK ACCEPTANCE CORPORATION, (S) Chapter 11
a Texas Corporation, (S)
(S)
Debtor. (S)
------------------------------------
ORDER PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE
APPROVING THE SETTLEMENT AGREEMENT BY AND AMONG THE DEBTOR,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ AND FLEET CAPITAL CORPORATION
----------------------------------------------
Upon the Motion of Jayhawk Acceptance Corporation ("Jayhawk" or the
"Debtor"), as debtor-in-possession, for an order pursuant to section 363 of
title 11 of the United States Code (the "Bankruptcy Code") approving the
Settlement Agreement (the "Settlement Agreement") by and among the Debtor, Fleet
Capital Corporation ("Fleet"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), which is
attached to the Motion as Exhibit A; and good and sufficient notice of the
---------
Motion having been given to the Office of the United States Trustee, counsel for
the Creditors' Committee, counsel to Fleet, counsel to Prudential Securities
Capital Corporation, counsel to ▇▇▇▇▇▇▇▇, and each person known to the Debtor as
of the date of the Motion who had previously filed a notice of appearance in
this case, as evidenced by an affidavit of service previously filed
with the Court; and, to the extent necessary, the Court having held a hearing to
consider the Motion and any and all objections or responses to the Motion; and
it appearing that the relief requested in the Motion is in the best interests of
the Debtor, its creditors, and other parties in interest; and after due
deliberation and sufficient cause appearing therefor, it is
ORDERED that the Settlement Agreement is approved pursuant to Section
363 of the Bankruptcy Code; and it is further
ORDERED that Jayhawk is authorized to take all actions that may be
necessary or appropriate to consummate the Settlement Agreement.
SIGNED this _______ day of ___________________________, 1997.
____________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
UNITED STATES BANKRUPTCY JUDGE
2
EXHIBIT I
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to
Settlement Agreement
▇▇▇▇▇▇▇▇ Release
----------------
[Attached.]
EXHIBIT I - PAGE 1
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RELEASE
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This Release (this "Release") is entered into effective the ___ day of
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_____, 1997, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Guarantor") in favor of Fleet Capital
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Corporation ("Fleet") and Texas Commerce Bank National Association ("TCB").
----- ---
R E C I T A L S :
A. Jayhawk Acceptance Corporation (the "Debtor"), Guarantor and Fleet
------
have entered into that certain Settlement Agreement (the "Settlement
--------------------
Agreement"), dated the date hereof, to settle all disputes among the parties
thereto, including, but not limited to those arising from the Debtor's cash
collateral motion and Fleet's objections thereto, and to resolve issues
addressed in the Settlement Agreement regarding Debtor's plan of reorganization.
B. Pursuant to the terms of the Settlement Agreement, Guarantor has
entered into this Release.
A G R E E M E N T S :
NOW THEREFORE, in consideration of the premises stated above, and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged and confessed hereby, Guarantor agrees as follows:
1. Definitions. For purposes of this Settlement Agreement, the following
-----------
terms shall have the definitions set forth below:
"Bankruptcy Court" shall mean the United States Bankruptcy Court for
----------------
the Northern District of Texas, Dallas Division.
"Bankruptcy Case" shall mean the bankruptcy case commenced by the
---------------
Debtor filing its Chapter 11 voluntary petition pursuant to 11 U.S.C. (S) 101 et
seq. as Case No. 397-31261-SAF-11 in the Bankruptcy Court.
"Collateral" shall mean the property of Debtor described in the Pre-
----------
Petition Loan Documents that secures the obligations of Debtor to Fleet.
"Effective Date" shall mean the first business day on which the Plan
--------------
becomes effective, pursuant to the terms of the order of the Bankruptcy Court
confirming the Plan.
"Plan" shall mean a plan of reorganization of Debtor in the Bankruptcy
----
Case.
"Post-Petition Loan Documents" shall mean any and all of the documents
----------------------------
executed in connection with or as security for the Term Note in the form annexed
to the Settlement Agreement as Exhibit D, including, but not limited to, the
---------
Loan and Security
RELEASE - Page 1
-------
Agreement, Pledge Agreement and Limited Guaranty, forms of which are annexed to
the Settlement Agreement as Exhibits B, C and D, respectively.
---------- - -
"Pre-Petition Loan Agreement" shall mean that certain Loan and
---------------------------
Security Agreement, dated April 4, 1995, as amended by various amendments
numbered First through Seventh, by and between the Debtor and Fleet.
2. Release of Claims. Guarantor, on behalf of Guarantor and his heirs,
-----------------
legal and personal representatives, successors, and assigns, agrees to and
hereby does RELEASE, ACQUIT and FOREVER DISCHARGE Fleet, TCB (including, without
limitation, all affiliated entities, subsidiaries, direct and indirect parent
corporations and holding companies of each of Fleet and TCB) and their
respective officers, directors, employees, agents and attorneys, past and
present (the "Indemnified Parties"), from all Claims as defined in Paragraph 3
------------------- -----------
below; and Guarantor hereby agrees to indemnify the Indemnified Parties and hold
them harmless from any and all claims, losses, causes of action, costs and
expenses of every kind or character, including, without limitation, attorneys'
fees and expenses, arising out of, connected with, related to, or concerning in
any way the breach of this Release or any agreement of Guarantor contained
herein.
3. Claims. As used in Paragraph 2 above, the term "Claims" means any and
------ -----------
all possible claims, disputes, obligations, demands, actions, causes of action,
costs, expenses and liabilities whatsoever, known or unknown, at law or in
equity, originating in whole or in part, on or before the Effective Date, which
Guarantor may now or hereafter have against Fleet or any of the Indemnified
Parties, if any, and irrespective of whether any such Claims arise out of
contract, tort, violation of laws, or regulations, or otherwise, which arise out
of, are connected with, related to, or concern in any way any of the (i) Pre-
Petition Loan Agreement, (ii) the Collateral, (iii) any documents (the "Pre-
---
Petition Loan Documents") executed in connection with or as security for any
-----------------------
transaction or any series of transactions that was evidenced, renewed, extended
or modified by the Pre-Petition Loan Agreement, or (iv) the Bankruptcy Case, or
which arise out of, are connected with, related to, or concern in any way any
action, inaction, performance, non-performance, representation, transaction, or
occurrence involving or in any way related to the Pre-Petition Loan Agreement,
the Collateral, the Pre-Petition Loan Documents or the Bankruptcy Case.
4. Excluded Claims. As used in Paragraph 2 above, the term "Claims"
--------------- -----------
specifically excludes any and all claims, disputes, obligations, demands,
actions, causes of action, costs, expenses and liabilities whatsoever, known or
unknown, at law or in equity, originating after the Effective Date; and
5. No Admission by Fleet or TCB. This Release shall not be construed as
----------------------------
an admission of liability on the part of Fleet or TCB.
6. Owner of Claims. Guarantor hereby represents and warrants that
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Guarantor is the current legal and beneficial owner of any and all Claims
released hereby, if any, and has not assigned, pledged or contracted to assign
or pledge any of such Claims to any other person.
RELEASE - Page 2
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7. Covenant Not to ▇▇▇. Guarantor further hereby agrees that neither
-------------------
Guarantor nor any of its agents, employees, heirs, personal representatives,
successors or assigns, will bring, commence, institute, maintain, or prosecute
any action at law or proceeding in equity, or any legal proceeding whatsoever,
any claim for damages or relief whatsoever, against Fleet or any of the other
Indemnified Parties, which is based in whole or in part on any matter released
hereunder. Guarantor additionally hereby agrees that this Release may be
pleaded as a full and complete defense to, and may be used as a basis for an
injunction against, any action, suit or other proceeding that may be instituted,
prosecuted or attempted by Guarantor or any or all of its agents, employees,
independent contractors, heirs, personal representatives, successors or assigns
in breach of any of the provisions set forth in this Release.
8. VALUE RECEIVED. GUARANTOR ACKNOWLEDGES THAT FLEET IS RELYING THE
--------------
AGREEMENTS, REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS RELEASE IN ENTERING
INTO THE POST-PETITION LOAN DOCUMENTS WITH DEBTOR AND WOULD NOT ENTER INTO THE
POST-PETITION LOAN DOCUMENTS OR OTHER DOCUMENTS CONTEMPLATED BY THE POST-
PETITION LOAN DOCUMENTS BUT FOR SUCH AGREEMENTS, REPRESENTATIONS AND WARRANTIES.
EXECUTED EFFECTIVE the day and year first written above.
_____________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
RELEASE - Page 3
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CERTIFICATE OF ACKNOWLEDGMENT
THE STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
BEFORE ME on this day personally appeared ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, known to me to
be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that he executed the same for purposes and consideration
therein expressed.
Given under my hand and seal of office this ____ day of ___________, 1997.
____________________________________
Notary Public
My Commission Expires:
____________________
RELEASE - Page 4
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