-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NaRuc2XEvnLvmZpc0v3JLJI+doTqpAWaK6+rmx3wMHdLpHbM1r/ICxq00qA2EPxl jk5TBgJJmsxf+bfik1Ua8Q== 0000950134-98-003336.txt : 19980420 0000950134-98-003336.hdr.sgml : 19980420 ACCESSION NUMBER: 0000950134-98-003336 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980227 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980417 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEARCH FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000318672 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 411356819 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-09539 FILM NUMBER: 98596339 BUSINESS ADDRESS: STREET 1: 600 N PEARL ST STREET 2: STE 2500 CITY: DALLAS STATE: TX ZIP: 75201-2899 BUSINESS PHONE: 2149656000 MAIL ADDRESS: STREET 1: 600 N PEARL STREET STREET 2: SUITE 2500 CITY: DALLAS STATE: TX ZIP: 75201-2899 FORMER COMPANY: FORMER CONFORMED NAME: SEARCH CAPITAL GROUP INC DATE OF NAME CHANGE: 19930910 FORMER COMPANY: FORMER CONFORMED NAME: SEARCH NATURAL RESOURCES INC DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 27, 1998 -------------------------- SEARCH FINANCIAL SERVICES INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) DELAWARE 0-9539 41-1356819 - ---------------------------- ------------------------ ----------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 600 N. PEARL STREET SUITE 2500 DALLAS, TEXAS 75201-2899 - ---------------------------------------------- -------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 965-6000 ------------------------ NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 3. BANKRUPTCY OR RECEIVERSHIP. On March 6, 1998, Registrant and its automobile finance subsidiaries, MS Financial, Inc. ("MSF"), Search Funding Corp. and Search Financial Services Acceptance Corp., filed petitions under Chapter 11 of the United States Bankruptcy Code, as amended, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The petitions are currently pending as jointly administered Case No. 398-32129-RCM-11. In connection with the filing of the Chapter 11 petitions, Registrant announced that it is continuing discussions with Fleet Bank, N.A. and the other banks party to the MSF loan agreement to reach agreement on an order that would (1) provide for a transfer of the collateral securing the loan agreement to the bank group, or a sale of the underlying receivables portfolio pledged to the bank groups to a third party, in full satisfaction of the obligations owed to the bank group, and (2) allow Search and MSF to use a portion of the collections on the receivables portfolio pledged to the bank group to fund collection and related operating expenses until such transfer to the banks or sale to a third party takes place. On March 9, 1998, the Bankruptcy Court entered an order permitting such use of a portion of those collections on an interim basis. Registrant also announced that any transfer or sale (1) would require approval pursuant to Bankruptcy Court order in the Chapter 11 cases, (2) would be subject to receipt of higher and better offers and (3) is currently contemplated to provide for MSF to share in any proceeds from collections on the portfolio in excess of amounts equal to the obligations owed under the loan agreement and servicing costs. There can be no assurance that a transfer or sale will be approved by the Bankruptcy Court or that, if a transfer or sale does occur, collections on the portfolio will be sufficient to allow MSF to share therein. ITEM 5. OTHER EVENTS. Registrant also announced on March 9, 1998 that it has restructured the loan agreement between Hibernia National Bank ("Hibernia") and certain of its subsidiaries to permit additional borrowings under the agreement by Registrant's consumer finance subsidiaries. As part of the restructuring, non-prime auto receivables with an outstanding principal balance of approximately $19.7 million, pledged to secure borrowings under the loan agreement, were conveyed to Hibernia in exchange for satisfaction of outstanding indebtedness of approximately $15.9 million and the waiver by Hibernia of all existing events of default under the loan agreement. As a result of this restructuring, the maximum amount that can be borrowed under the loan agreement is $14,000,000 and all borrowings will bear interest at the prime rate +2%. As of March 6, 1998, the principal amount owing under the loan agreement was approximately $9.4 million. -2- 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 2.1 Agreed Order Regarding Limited Use of Cash Collateral (MS Financial, Inc.) and addenda thereto (a copy of the Exhibits to the Order and addenda will be furnished to the Commission supplementally upon request) 10.1 Agreement to Transfer Collateral and Restructure Loan effective February 27, 1998 by and among Hibernia National Bank ("Hibernia"), Search Funding II, Inc., Registrant, Search Financial Services Holding Company, Search Financial Services of Florida, Inc., Search Financial Services of Georgia, Inc., Search Financial Services of Louisiana, Inc., Search Financial Services of Oklahoma, Inc., Search Financial Services of Puerto Rico, Inc., Search Financial Services of Tennessee, Inc. and Search Financial Services of Texas, Inc. (the "Search Parties") (a copy of the Exhibits to the Agreement to Transfer Collateral and Restructure Loan will be furnished to the Commission supplementally upon request) 10.2 First Amendment to Loan Agreement and Related Documents dated as of February 27, 1998 among the Search Parties and Hibernia 10.3 Promissory Note dated February 27, 1998 payable to the order of Hibernia in the principal amount of $14,000,000 -3- 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SEARCH FINANCIAL SERVICES INC. By: /s/ Ellis A. Regenbogen ----------------------------------- Ellis A. Regenbogen Executive Vice President Dated: March 11, 1998 -4- 5 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 2.1 Agreed Order Regarding Limited Use of Cash Collateral (MS Financial, Inc.) and addenda thereto (a copy of the Exhibits to the Order and addenda will be furnished to the Commission supplementally upon request) 10.1 Agreement to Transfer Collateral and Restructure Loan effective February 27, 1998 by and among Hibernia National Bank ("Hibernia"), Search Funding II, Inc., Registrant, Search Financial Services Holding Company, Search Financial Services of Florida, Inc., Search Financial Services of Georgia, Inc., Search Financial Services of Louisiana, Inc., Search Financial Services of Oklahoma, Inc., Search Financial Services of Puerto Rico, Inc., Search Financial Services of Tennessee, Inc. and Search Financial Services of Texas, Inc. (the "Search Parties") (a copy of the Exhibits to the Agreement to Transfer Collateral and Restructure Loan will be furnished to the Commission supplementally upon request) 10.2 First Amendment to Loan Agreement and Related Documents dated as of February 27, 1998 among the Search Parties and Hibernia 10.3 Promissory Note dated February 27, 1998 payable to the order of Hibernia in the principal amount of $14,000,000
-5- EX-2.1 2 AGREED ORDER RE: LIMITED USE OF CASH COLLATERAL 1 EXHIBIT 2.1 UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION - ------------------------- In re: ) CHAPTER 11 SEARCH FINANCIAL SERVICES ) CASE NO. 398-32129-RCM-11 ACCEPTANCE CORP. ) CASE NO. 398-32128-SAF-11 MS FINANCIAL, INC., ) CASE NO. 398-32130-SAF-11 SEARCH FUNDING CORP. ) CASE NO. 398-32131-SAF-11 SEARCH FINANCIAL ) (Requesting to be Jointly SERVICES, INC. ) Administered Under Case No. ) 398-32129-RCM-11) DEBTORS ) - ------------------------- AGREED ORDER REGARDING LIMITED USE OF CASH COLLATERAL (MS FINANCIAL, INC.) FILING AND JURISDICTION A. These cases were commenced by the filing of voluntary petitions for relief Under Chapter 11 of Title 11, United States Code (the "Bankruptcy Code") on March 6, 1998 (the Petition Date") in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Court"); B. Since the Petition Date, MS Financial, Inc. (the "Debtor" or "MSFI") has operated its business and managed its affairs as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. Neither a trustee nor a creditors' committee has been appointed in this case as of the filing of this Order; C. The Court has jurisdiction of this matter pursuant to 28 U.S.C. Section 1334; -1- 2 D. This matter is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2); LOAN DOCUMENTS AND SECURITY INTERESTS E. Fleet Bank, N.A., acting as agent for itself and for certain other banks ("Fleet") and the Debtor, and the Debtor's parent corporation, Search Financial Services, Inc. ("Search"), are parties to a certain Loan Agreement dated as of July 31, 1997 (the "Loan Agreement" and more generally with the other loan documents described below or otherwise executed in conjunction with the Loan Agreement, the "Fleet Facility"); F. Incident thereto the Debtor executed promissory notes to Fleet and to other banks in the lending group for which Fleet acts as agent under the Loan Agreement, which notes reflected an original aggregate commitment of $70,000,000 and under which, from time to time, indebtedness would exist reflecting the obligations of the Debtor for borrowings and other fees, expenses and costs under the Fleet Facility (the "Notes"); G. The Debtor's indebtedness and obligations to Fleet pursuant to the Fleet Facility are secured upon the terms of (a) a certain Security Agreement dated as of July 31, 1997 (the "Security Agreement") and (b) a certain Pledge Agreement dated as of July 31, 1997 (the "Pledge"); H. The Security Agreement granted to Fleet a first priority security interest in substantially all of the Debtor's existing and after-acquired assets, as more fully described in Exhibit "A" attached hereto (the "Assets"); Nothing in this Order shall be deemed to limit the right of any party in interest in the Debtors' case to object to Fleet's debt or the validity of its liens. -2- 3 I. The Pledge granted to Fleet a first priority security interest in the Debtor's equity (the "Stock") in its wholly owned subsidiary, MS Auto Receivables Company, a Delaware corporation ("MS Auto"); J. Together the Assets and the Stock constitute collateral to secure repayment of the Notes and other indebtedness under the Fleet Facility (the "Collateral"); K. Generally, the Debtor is a financial services company specializing in the purchase and management of non-prime motor vehicle receivables, essentially obligations of consumer obligors secured by depreciating motor vehicles (the "Receivables"); L. Generally, MS Auto is in the same business as the Debtor, except that (a) its ownership of similar non- prime motor vehicle receivables (the "MS Auto Receivables") arose as a result of a certain securitization transaction closed in 1995 and (b) since the securitization it has not purchased new receivables; M. The Debtor used loan proceeds from the Fleet Facility to finance its non-prime motor vehicle financing business. In the ordinary course of its business, the Debtor was permitted to draw down funds advanced by Fleet based upon a formula (the "Borrowing Base Formula"). The Loan Agreement contemplated that the Debtor was to pay Fleet all of the collections that the Debtor received from its customers, whether (i) directly, where the Debtor initially had access to the funds, or (ii) indirectly, through lockbox arrangements where the Debtor lacked access to the funds, which funds were forwarded by the deposit bank directly to Fleet. The Borrowing Base Formula permitted the Debtor, so long as it was not in default, to draw down funds against a percentage of its then existing qualified collateral, consisting in the main of Receivables on eligible automobile loans; -3- 4 N. The Debtor has historically collected the Receivables directly or indirectly through a subsidiary of Search, Search Financial Services Acceptance Corp. ("Search Acceptance"), and employees thereof; O. The lockbox arrangement referenced above is embodied in, among other documents, a certain Lockbox and Controlled Account Agreement dated as of July 31, 1997 by and among Fleet, the Debtor and Hibernia National Bank, the depository bank located in New Orleans, Louisiana (the "Lockbox Agreement"); P. All of the Debtor's obligations under the Fleet Facility are guaranteed by Search; FLEET'S CLAIM Q. As of the Petition Date, the unpaid balance of principal on the Notes, exclusive of accrued but unpaid interest, fees and payments other than interest due Fleet under the Fleet Facility, attorneys' fees, costs and expenses, was $60,749,582.08. The Loan Agreement entitles Fleet to recover all of its reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees, in enforcing its remedies pursuant to the Fleet Facility; R. The proceeds from the collection of any Receivables, the proceeds from the disposition of any repossessed or returned collateral securing the Receivables, the proceeds from the sale of all or any portion of the Assets or the Stock, and any and all dividends or other distributions from the Stock, constitute and will constitute Fleet's "cash collateral" as that term is defined in Section 363(a) of the Bankruptcy Code. -4- 5 S. In conjunction with the Lockbox Agreement, payments of Receivables are required to be deposited into a blocked account at Hibernia National Bank in New Orleans, Louisiana to be disbursed to Fleet in accordance with the Lockbox Agreement; T. Certain other payments of Receivables or dispositions of other Assets prior to the Petition Date were being paid directly to, or collected directly by, the Debtor or by Search or Search Acceptance for application to the Fleet Facility as required by a Temporary Injunction Order (the "TIO") issued by consent of the parties on February 24, 1998, by the District Court of Dallas County, Texas, 193rd Judicial District in Fleet Bank, N.A. v. MS Financial, Inc. and Search Financial Services Inc. (Case No. DV98-1006) (the "Texas Action"); U. The Debtor wishes to use Fleet's cash collateral, and Fleet has consented to the limited use of its cash collateral, in accordance with the terms and conditions hereof. SEGREGATION, ACCOUNTING AND USE OF CASH COLLATERAL 1. Subject to the terms and conditions hereof, the Debtor may use Fleet's cash collateral as follows: for a period (the "Specified Period") of two weeks commencing March 9 and ending March 21, 1998 the Debtor may use Twenty Thousand ($20,000.00) Dollars per business day (including Saturdays and excluding Sundays) to pay the costs associated with the management, sale, collection and/or liquidation of the Collateral, which costs shall materially comply with those expenditures identified in the budget attached hereto in the form of Exhibit "B". The Specified Period may be extended for successive daily or weekly periods by the filing in this proceeding of a joint written notice executed by Fleet and the Debtor without need of further action by this Court, provided, however, that authorization to use cash collateral pursuant to such a notice shall be limited, absent further Court order, to no more than the daily amount and for the budgetary purposes set forth or referenced in this paragraph. -5- 6 2. As adequate protection to Fleet and to safeguard Fleet against any diminution in the value of its Collateral arising from the Debtor's use of cash collateral, pursuant to Sections 361 and 363(e) of the Bankruptcy Code, Fleet is hereby granted a continuing post-petition replacement lien and security interest in all property, assets and interests in property of the Debtor, of every name, nature and description, and the proceeds thereof, not subject to the application, if at all, of Section 551 of the Bankruptcy Code, whether existing on the Petition Date or acquired or arising thereafter which liens shall be junior to all valid, enforceable and perfected liens in existence as of the Petition Date, all of which shall be equivalent to a lien granted under Section 364(c)(2) and (3) of the Bankruptcy Code. The validity, enforceability, and perfection of Fleet's post-petition lien shall not be subject to the "equities of the case" exception to 552(b) of the Bankruptcy Code and shall not depend upon filing, recordation, or any other act required under applicable state or federal law, rule or regulation. If Fleet hereafter requests the Debtor to execute and deliver to Fleet financing statements, mortgages, deeds of trust, applications for lien notations, or other instruments or documents considered by Fleet to be reasonably necessary or desirable to further evidence the perfection of liens and security interests herein granted, the Debtor is authorized and directed to execute and deliver such instruments and documents to Fleet, and Fleet is granted relief from the automatic stay of Section 362 of the Bankruptcy Code in order to perfect such liens and security interests. 3. As further adequate protection to Fleet for the Debtor's use of cash collateral, Fleet is hereby granted an administrative priority claim pursuant to Section 507(b) of the Bankruptcy Code, superior to any and all other costs and expenses of the kind specified in, and pursuant to, Sections 507(a)(1), 506(c), 507(b) and 726(b) of the Bankruptcy Code, to the extent the liens granted pursuant to this Order prove inadequate to protect Fleet from any post-petition diminution in the -6- 7 value of its interest in the pre-petition Collateral, and the proceeds thereof arising from the Debtor's use of cash collateral. 4. The terms and provisions of this Order with respect to the liens and security interests granted hereby, and the super-priority administrative expense claim, shall continue for the duration of this Chapter 11 case and for the duration of this case under any other chapter of the Bankruptcy Code to which it may be converted, and such liens and security interests shall maintain the priorities established hereby until satisfied and discharged, notwithstanding the appointment of a trustee or examiner in this or any converted case or the dismissal of this or any converted case, and notwithstanding the expiration or termination of this Order, as it may be amended or extended from time to time. 5. In the event any or all of the provisions of this Order are hereafter modified, amended, or vacated by a subsequent order of this Court or any other court, such modification, amendment, or vacation shall not affect the validity of any right or obligation arising under an order approving the Order prior to the effective date of such modification, amendment or vacation, which shall be governed in all respects by the provisions of this Order. 6. Nothing contained herein shall be deemed a finding by the Court, or an acknowledgment by Fleet, that the liens and priority claims granted Fleet by this Order adequately protect Fleet for the Debtor's use of cash collateral. 7. As long as this Order is in effect, the Debtor, and where necessary to comply herewith, Search and Search Acceptance shall: a. insure the Assets in amounts and for the risks established as the practice of the parties under the Fleet Facility; -7- 8 b. apply Fleet's cash collateral and other sources of cash available to them to the expenses of operation of their businesses substantially consistent with any budgets incorporated in this or any successive order and in particular, as a first priority, to the payment as and when due of payroll and payroll taxes concerning all employees who service the Receivables; c. Except as expressly permitted in Paragraph 1 hereof and other than in respect to remittances made by obligors directly to the Hibernia lockbox maintained at Hibernia National Bank for Fleet's benefit, remit and cause any of their subsidiaries to remit as and when received on a daily basis to the Hibernia lockbox all collections and other proceeds from Receivables, or other Assets that are received by or for the benefit of MSFI, to Fleet, in the identical form received, whether cash, original checks, money order, Western Union, ACE Cash Express or otherwise; d. provide Fleet a daily report concerning any and all collections of the Receivables, proceeds received arising from the foreclosure sale of repossessed or returned motor vehicles, and proceeds received from the disposition of any Assets; e. In respect to MS Auto, and MSFI's control thereof as sole stockholder, to the extent that Search, Search Acceptance or subsidiaries of Search perform the role of servicing the MS Auto Receivables, take whatever actions are required: (i) to provide Fleet with a current list, in detail reasonably requested by Fleet, of MS Auto's assets and liabilities; (ii) to provide Fleet with such financial information concerning MS Auto as is of the type, and with the same timeliness, as is required to be provided hereunder by MSFI to Fleet; -8- 9 (iii) to prohibit the purchase by MS Auto of any motor vehicle or consumer loans with the proceeds of collections of the MS Auto Receivables; and (iv) to prohibit MS Auto from using any of the proceeds of collections of the MS Auto Receivables, proceeds received arising from the foreclosure sale of repossessed or returned motor vehicles and proceeds received from the disposition of any other assets owned by MS Auto, for any purpose other than the payment in the ordinary course of its own debts to lenders or to those rendering goods and services to it; and f. In respect to the collection of Receivables, the Debtor and, where necessary to comply herewith, Search and Search Acceptance shall: (i) promptly deliver to Fleet or its servicer, currently CSC Logic/MSA d/b/a Loan Servicing Enterprise (the "Servicer") true and correct copies of (a) the electronic file for MSFI's loan portfolio, (b) thorough and complete monthly reports of serving records for the loan portfolio for the past six months, and (c) such information regarding the system vendors, at risk account, bank reconciliations, system codes and specifications and all other information regarding the loan portfolio files and collection and reconciliation systems as the Servicer shall reasonably require to perform servicing of the loan portfolio; (ii) without limiting the generality of subparagraph (i) above, provide to the Servicer, as soon as possible after the 15th day and the last day of each calendar month (each such day a "Reference Date") copies of the items described in clauses (a) and (c) of subparagraph (i), as well as thorough and complete -9- 10 servicing records for the loan portfolio, in each case updated through the applicable Reference Date; and (iii) at any time requested by the Servicer, assist the Servicer in all reasonable ways requested by the Servicer to perform reconciliation of collections, efficiently and accurately complete a data mapping of data from the collection systems of the Debtor and Search and any of its subsidiaries handling the Receivables to the Servicer's collection systems, efficiently and accurately complete a conversion program to effect a conversion of the collection systems of the Debtor and Search and any of its subsidiaries handling the Receivables to the Servicer's collection systems and to validate and perfect the accuracy and completeness of the data mapping and the conversion program. 8. During the Specified Period the Debtor shall permit Fleet, its agents and professionals, upon a reasonable basis: a. to review the pre-petition, as well as the post-petition, books and records of the Debtor, or the books and records of Search, Search Acceptance or any of their subsidiaries maintained in connection with the servicing of the Collateral; b. to review the books and records of MS Auto, or the books and records of Search, Search Acceptance or any of their subsidiaries maintained in connection with the servicing of the MS Auto Receivables; c. to have access to any of the Assets for the purpose of appraising its or their value; d. to use the services of Zolfo-Cooper, LLC, or other financial consultants of Fleet's selection, to have access to the business premises of the Debtor, MS Auto, Search, -10- 11 and Search Acceptance, the books and records of the Debtor and MS Auto, and, where relevant to the servicing of the assets of the Debtor or MS Auto, Search, Search Acceptance and any of their subsidiaries and personnel of the Debtor, MS Auto, Search and Search Acceptance and any of their subsidiaries who are knowledgeable concerning the same; and e. to use the services of a servicing company, including without limitation, the Servicer to have access to the business premises of the Debtor, Search and Search Acceptance (or any of their subsidiaries), the Debtor's, Search's and Search Acceptance's (or any of their subsidiary's) facilities for the management and liquidation of the Receivables and the MS Auto Receivables and any repossessed or returned motor vehicles or the like, and the personnel of the Debtor, Search and Search Acceptance (or any of their subsidiaries), including MIS specialists on site, who are knowledgeable concerning the same. 9. Except as shall have been modified or provided for herein, Fleet shall be entitled during the Specified Period to receive and apply to the Fleet Facility, including the Notes, all payments or proceeds made or delivered and to be made or delivered to it pursuant to the Lockbox Agreement and/or by or on behalf of the Debtor from and after the Petition Date, which payments or proceeds may be applied to interest, principal, late charges, other fees and payments due Fleet under the Fleet Facility, or the obligation of the Debtor to reimburse attorneys' fees, costs and/or expenses at Fleet's discretion, subject to Fleet's obligation to account for all such applications at the written request of the Debtor and further subject to the right of the Debtor or any party in interest to contest the application of such payments or proceeds at a later point in the -11- 12 proceeding. No attorneys' fees may be paid pursuant to this paragraph absent approval by the Court. 10. To the extent that any cash collateral existed as of, or may accumulate after the Petition Date prior to the entry of this Order, subject to the provisions of this Order the same shall immediately be turned over to Fleet, provided, however, that it is the intention of the parties that the Debtor shall have had and has the right to use such cash collateral as may have existed as of the close of business on March 6, 1998 but not otherwise, as authorized by the TIO entered in the Texas Action. Such turnover of payments or proceeds shall be made as provided, where relevant, in paragraph 7(c) above. 11. Except as expressly provided for herein or by application of the Bankruptcy Code, nothing contained in this Order shall: a. constitute a waiver by Fleet of any rights which it may have under the Bankruptcy Code, or under and with respect to the Fleet Facility, including all loan documents referenced above, and the Collateral, including, without limitation, (i) the right to exercise with respect thereto all of the rights of a secured party under the Security Agreement and Pledge, the Uniform Commercial Code and other applicable law, or (ii) the right to seek relief from the automatic stay, additional adequate protection or to challenge any impairment of its respective claim or the Collateral, and incident thereto to introduce such evidence of its claim and Collateral value as may be appropriate in the circumstances; b. constitute a waiver by the Debtor of any rights it may have (i) to oppose a request by Fleet for relief from stay, or (ii) to seek to use, sell or lease pursuant to the -12- 13 provisions of Section 363 of the Bankruptcy Code, the Collateral, or proceeds thereof, and any other property in which Fleet is granted a security interest hereunder; c. affect in any way any rights and obligations among the constituent banks for which Fleet acts as agent and for itself, provided, however, that such banks shall be entitled to all of the benefits of this Order; d. constitute consent by Fleet to these Chapter 11 cases or to the continuation thereof or constitute a waiver by Fleet of any rights in respect thereto which it may have; e. constitute consent by Fleet to the use of its cash collateral other than as provided herein; and f. obligate Fleet to permit the use of its cash collateral other than as provided herein or to advance funds to the Debtor for any reason, including, without limitation, for the payment of expenses of administration under the Bankruptcy Code. 12. In consideration of the authorization granted by this order for the use by the Debtor of cash collateral, and in view of the effect of such use, no expense of administration of the Debtor's cases shall be charged against any of Fleet's Collateral, or charged to Fleet, pursuant to Section 506(c) of the Bankruptcy Code with respect to the Specified Period (as it may be extended by the parties), all of which rights, if any, are hereby waived forever by the Debtor on behalf of its bankruptcy estate and its creditors and shareholder. Notwithstanding the foregoing, the lien and the priority granted to Fleet herein, the liens possessed by Fleet as of the Petition Date, and the cash collateral generated therefrom, up to an aggregate amount equal to $4,166.67 per day for each day of the Specified Period (as it may be extended by the parties) shall be reserved for payment of the reasonable fees, costs and expenses incurred during the Specified Period (as it may be extended by the parties) of any professionals retained by the Debtor, and -13- 14 upon entry of an order approving payment of any of the Debtor's professionals' fees, costs and expenses, Fleet is authorized to pay the same from Fleet's cash collateral directly to such professionals; provided, however, that no cash collateral shall be used to pay any fees, costs and expenses incurred with investigating or asserting any claims or causes of action against Fleet or any other bank for which Fleet acts as agent under the Fleet Facility, or Fleet's liens or claims, or in connection with any motion filed by the Debtor seeking entry of an order authorizing the Debtor to utilize cash collateral without Fleet's consent. The entry of this Order is without prejudice to Fleet's rights to examine or object to an application seeking an award of fees to any professional retained by the Debtor. 13. Subject to the provisions of the Bankruptcy Code where not otherwise expressly provided for herein, (i) the entry of this Order shall not terminate, modify, waive, or provide a defense to Search on its guaranty, (ii) the indebtedness under the Fleet Facility, including Search's guaranty, remains fully enforceable against Search to the extent enforceable against the Debtor, and (iii) Search and Search Acceptance shall be bound to all of the provisions hereof as if either were a signatory thereto, to the extent that it has access to, control over or performs services in respect to the Collateral, as more particularly set forth in this Order. Nothing herein is intended to, or shall, constitute relief to Fleet from the automatic stay in Search's proceeding or have the effect of increasing Fleet's claim in Search's proceeding above that which existed as of the filing date of that proceeding, except as may otherwise be permissible under the Bankruptcy Code. 14. This Order and the cash collateral use arrangement approved herein shall become effective immediately upon execution by both the Court and by the parties as provided for below. The aforesaid arrangement and this Order shall terminate as provided herein. -14- 15 15. All banks for which Fleet acts as agent under the Fleet Facility shall be entitled to the benefits granted to Fleet under this Order. 16. Any notice or report required hereunder sent via personal delivery, overnight delivery, or facsimile transmission shall be deemed given when received, but if sent via postage prepaid first class United States mail, it shall be deemed given three (3) business days after mailing. Items shall be addressed to the parties as set forth below: If to Fleet: Fleet Bank, N.A. Mail Stop: CT MO H21B 777 Main Street Hartford, CT 06115 (Attention: Mr. Edward J. Walsh) Telephone: (860) 986-3784 Telecopier: (860) 986-2435 with a copy to: Edwin E. Smith, Esq. (which is not Bingham Dana LLP notice) 150 Federal Street Boston, Massachusetts 02110 Telephone: (617) 951-8615 Telecopier: (617) 951-8736 and Neil W. Townsend, Esq. Bingham Dana LLP 150 Federal Street Boston, Massachusetts 02110 Telephone: (617) 951-8866 Telecopier: (617) 951-8736 If to Debtor: MS Financial, Inc. Search Financial Services Inc. Attn: George C. Evans, Chief Executive Officer 600 North Pearl Street Suite 2500, L.B. 123 Dallas, TX 75201 Telephone: (214) 965-6000 Telecopier: (214) 965-6098 -15- 16 with a copy to: Deborah Lynn Schrier-Rape, Esq. (which is not Andrews & Kurth, L.L.P. notice) 1717 Main Street, Suite 3700 Dallas, TX 75201 Telephone: (214) 659-4520 Telecopier: (214) 659-4401 and Ellis Regenbogen, Esq. Search Financial Services Inc. 600 North Pearl Street Suite 2500, L.B. 128 Dallas, TX 75201 Telephone: (214) 965-6000 Telecopier: (214) 965-6098 and James Donnell, Esq. Andrews & Kurth, L.L.P. 600 Travis, Suite 4200 Houston, TX 77002 Telephone: (713) 220-4200 Telecopier: (713) 220-4285 H. DeWayne Hale Hale, Aston, Seckel, Taubenfeld, P.C. 600 North Pearl Street Dallas, TX 75201 Telephone: (214) 720-2600 Telecopier: (214) 720-2665 SIGNED this 9 day of March, 1998. /s/ Robert McGuire ---------------------------------------- U.S. BANKRUPTCY JUDGE -16- 17 AGREED TO AND ACCEPTED: /s/ James Donnell /s/ Sabin Willett - ------------------------------------------- --------------------------------------------------- Deborah Lynn Schrier-Rape, Esq. Guy B. Moss State Bar No. 00785635 Sabin Willett James Donnell, Esq. Bingham Dana LLP State Bar No. 05981300 150 Federal Street Andrews & Kurth, L.L.P. Boston, Massachusetts 02110 1717 Main Street, Suite 3700 (617) 951-8000 Dallas, Texas 75201 (214) 659-4100 (pro hac vice application pending) ATTORNEYS FOR MS FINANCIAL, INC. and SEARCH Mark A. Goodman FINANCIAL SERVICES ACCEPTANCE CORP. State Bar No. 08156920 David, Goodman & Madole Two Lincoln Centre 5420 LBJ Freeway, Suite 1200 /s/ H. DeWayne Hale Dallas, Texas 75240 - ------------------------------------------- H. DeWayne Hale (972) 991-0889 State Bar No. 08725800 J. Mark Chevallier ATTORNEYS FOR FLEET BANK, N.A. State Bar No. 04189170 Hale, Aston, Seckel & Taubenfeld, P.C. 600 North Pearl Street Dallas, TX 75201 (214) 720-2600 ATTORNEYS FOR SEARCH FINANCIAL SERVICES INC. AND SEARCH FUNDING CORP.
-17- 18 ADDENDUM TO CASH COLLATERAL ORDER New Paragraph 17 17. Nothing herein shall be construed as having the effect of making the MS Auto Receivables "property of the estate" or "cash collateral" or of granting to Fleet any lien, security interest, or other interest in the MS Auto Receivables (for anything other than the payment of fees permitted pursuant to existing, prepetition servicing agreements) or from altering in any way the existing, prepetition procedures with regard to the collection, remittance and reporting requirements regarding the MS Auto Receivables. AGREED: /s/ Stacy Jernigan Haynes and Boone, LLP, Counsel for - ---------------------------------------- LaSalle National Bank and Financial Security Assurance, Inc. /s/ James Donnell Andrews & Kurth, LLP, Counsel for - ---------------------------------------- MS Financial, Inc. and Search Financial Services Acceptance Corp. /s/ Mark Goodman David, Goodman & Madole, Counsel for - ---------------------------------------- Fleet Bank, N.A. /s/ H. DeWayne Hale H. DeWayne Hale, Hale, Aston, Seckel - ---------------------------------------- & Taubenfeld, Counsel for Search Financial Services Inc. and Search Funding Corp. 19 ADDENDUM TO AGREED ORDER REGARDING LIMITED USE OF CASH COLLATERAL On July 31, 1997, Hibernia National Bank ("Hibernia"), MS Financial, Inc. ("MS Financial"), and Fleet Bank, N.A., as agent (the "Agent") entered into that certain Lockbox and Controlled Account Agreement, a copy of which is attached hereto (the "Lockbox Agreement"). AGREEMENT: 1. MS Financial and the Agent have agreed to the terms and provision of that certain Agreed Order Regarding Limited Use of Cash Collateral to which this Addendum is attached (the "Agreed Order"). Hibernia is not a party to the Agreed Order except as regards continuation of the Lockbox Agreement provided herein, and Hibernia reserves all rights and remedies in these proceedings. 2. MS Financial, the Agent and Hibernia wish to continue the Lockbox Agreement as amended hereby. Defined terms, unless otherwise defined herein, shall have the same meaning ascribed to them in the Lockbox Agreement. 3. Except to the extent otherwise provided herein, all terms and provisions of the Lockbox Agreement including, but not limited to, payment of all fees and charges to Hibernia under the Lockbox Agreement, are incorporated herein for all purposes, shall continue in full force and effect as a post-petition contract for the term of the Agreed Order. 4. In the event that the authority to use cash collateral of the Agent under the Agreed Order shall terminate, the Agent shall immediately notify Hibernia in writing of such termination. Such notice shall be delivered as follows: Hibernia National Bank 313 Carondelet Street New Orleans, LA 70112 (Attention: Mr. Barry McMahan) Via Telecopy: (504) 533-5817 Hibernia National Bank 313 Carondelet Street New Orleans, LA 70112 (Attention: Pat Gaffney, Esq.) Via Telecopy: (504) 533-5636 Mr. William L. Wallander Winstead Sechrest & Minick P.C. 5400 Renaissance Tower 1201 Elm Street Dallas, TX 75270 Via Telecopy (214) 745-5390 -1- 20 On the date of receipt of such notice, Hibernia will cease to wire funds to the Agent's Depositary Account and will hold funds deposited into the Depository Account pending further Order of the Bankruptcy Court or an agreement in writing by and among MS Financial, the Agent and Hibernia. All fees and charges under the Lockbox Agreement shall continue notwithstanding the holding of funds by Hibernia hereunder. AGREED TO AND ACCEPTED: /s/ James Donnell for DSR - --------------------------------------------- Deborah L. Schrier-Rape State Bar No. 00785636 Andrews & Kurth L.L.P. ATTORNEYS FOR SEARCH FINANCIAL SERVICES ACCEPTANCE CORP. AND MS FINANCIAL, INC. /s/ H. DeWayne Hale - --------------------------------------------- H. DeWayne Hale State Bar No. 08725800 Hale, Aston, Seckel & Taubenfeld, P.C. ATTORNEYS FOR SEARCH FUNDING CORP. AND SEARCH FINANCIAL SERVICES INC. /s/ Mark Goodman - --------------------------------------------- Mark A. Goodman State Bar No. 08156920 David Goodman & Madole, P.C. ATTORNEYS FOR FLEET BANK, N.A. /s/ William Wallander - --------------------------------------------- William L. Wallander State Bar No. 20780750 Winstead Sechrest & Minick P.C. ATTORNEYS FOR HIBERNIA NATIONAL BANK /s/ Stacy Jernigan - --------------------------------------------- Stacy Jernigan State Bar No. 1065220 Haynes and Boone, LLP ATTORNEYS FOR LASALLE NATIONAL BANK AND FINANCIAL SECURITY ASSURANCE, INC. -2- EX-10.1 3 AGREEMENT TO TRANSFER COLLATERAL-RESTRUCTURE LOAN 1 EXHIBIT 10.1 AGREEMENT TO TRANSFER COLLATERAL AND RESTRUCTURE LOAN This AGREEMENT TO TRANSFER COLLATERAL AND RESTRUCTURE LOAN ("Agreement") is made effective as of the 27th day of February, 1998, by and among Hibernia National Bank, a national banking association ("Lender"), Search Funding II, Inc., a Texas corporation ("Original Borrower"), Search Financial Services Inc., a Delaware corporation ("Guarantor"), and each of the following corporations (collectively, the "Additional Borrowers"): Search Financial Services Holding Company, a Texas corporation; Search Financial Services of Florida, Inc., a Texas corporation; Search Financial Services of Georgia, Inc., a Texas corporation; Search Financial Services of Louisiana, Inc., a Louisiana corporation; Search Financial Services of Oklahoma, Inc., a Texas corporation; Search Financial Services of Puerto Rico, Inc., a Puerto Rico corporation; Search Financial Services of Tennessee, Inc., a Texas corporation; and Search Financial Services of Texas, Inc., a Texas corporation. Lender, Original Borrower, Guarantor and Additional Borrowers are hereinafter sometimes referred to collectively as the "Parties" and individually as a "Party". R E C I T A L S: A. Pursuant to that certain Loan Agreement dated September 11, 1996 between Lender and Original Borrower (the "Original Loan Agreement"), Lender established a $25,000,000 line of credit for Original Borrower secured by chattel paper and certain other assets owned by Original Borrower. Original Borrower's obligations under the Original Loan Agreement were guaranteed by Guarantor. B. Pursuant to the request of Original Borrower, Guarantor and the Additional Borrowers, the Original Loan Agreement was replaced by a Loan Agreement dated October 6, 1997 among Lender, Original Borrower and Additional Borrowers (the "Loan Agreement") which provided for a $25,000,000 line of credit in favor of Original Borrower and Additional Borrowers (collectively, the "Borrowers"). All capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Loan Agreement. C. Borrowers' obligations under the Line of Credit are evidenced by that certain Promissory Note dated October 6, 1997 executed by Borrowers and payable to the order of Lender in the principal amount of $25,000,000 (the "Note"). Payment and performance of Borrowers' obligations under the Line of Credit have been unconditionally guaranteed by Guarantor pursuant to that certain Commercial Guaranty dated October 6, 1997 executed by Guarantor (the "Guaranty"). D. Borrowers' obligations under the Line of Credit are secured by (i) the Non-Prime Auto Paper and other collateral in which Original Borrower granted Lender a perfected first priority 2 security interest pursuant to that certain Commercial Security Agreement dated October 6, 1997 (the "Original Borrower's Security Agreement") and (ii) the Consumer Paper and other collateral in which Additional Borrowers granted Lender a perfected first priority security interest pursuant to those certain Commercial Security Agreements dated October 6, 1997 (collectively the "Additional Borrowers' Security Agreements"). The Loan Agreement, the Note, the Guaranty, the Original Borrower's Security Agreement, the Additional Borrowers' Security Agreements and the other documents executed by any of the Borrowers or Guarantor pertaining to, evidencing or securing the Line of Credit are herein collectively referred to as the "Loan Documents". E. The Line of Credit is in default as a result of Borrowers' failure to comply with covenants and agreements contained in the Loan Agreement. In order to avoid Lender's pursuit of remedies for collection of the Line of Credit and realization on the collateral securing the Line of Credit, Borrowers and Guarantor have requested that Lender accept, in full satisfaction of the obligations of Original Borrower under the Loan Documents, the transfer of substantially all of the Non-Prime Auto Paper and other collateral covered by the Original Borrower's Security Agreement (the "Transfer"), which Lender is willing to do, subject to the terms and conditions hereof, provided that Additional Borrowers and Guarantor reaffirm their continuing obligations under the Loan Documents after application of the credit granted by Lender resulting from the Transfer. F. Additional Borrowers and Guarantor have further requested Lender to waive the existing defaults under the Loan Documents and restructure the Line of Credit so that Additional Borrowers may continue to obtain advances thereunder. Lender is willing to grant such request pursuant to the terms and conditions hereinafter provided. NOW, THEREFORE, for and in consideration of the premises, the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. The Line of Credit. The Parties agree, acknowledge and stipulate that: (a) Borrowers have defaulted under the terms and conditions of the Loan Documents in certain respects; (b) Lender has complied with all notice requirements and provisions, if any, with respect to the defaults under the Loan Documents, and all notice, grace and cure periods have either expired or have been waived by Borrowers and Guarantor; (c) Lender is entitled to accelerate all of the Indebtedness, whether principal, accrued interest and/or other charges allowed under the Loan Documents and applicable law, and to exercise its other rights and remedies under the Loan Documents as a result of such defaults; and (d) The outstanding principal balance of the Line of Credit as of the date hereof is $24,661,083.92, for which Borrowers and Guarantor are jointly and severally liable and on a solidary basis under the Loan Documents, and all of such Indebtedness is secured by -2- 3 the perfected first priority security interest granted to Lender in the collateral covered by Original Borrower's Security Agreement and Additional Borrowers' Security Agreements. 2. Transfer of Collateral. (a) Contemporaneously with the execution and delivery of this Agreement, Original Borrower shall execute, acknowledge and deliver to Lender a Bill of Sale and Assignment in substantially the form attached hereto as Exhibit "A" (the "Bill of Sale"), pursuant to which Original Borrower sells, transfers, assigns, and conveys to Lender, subject to the representations, warranties, terms, conditions and covenants contained herein, the chattel paper covered by Original Borrower's Security Agreement and constituting the portfolio of Non-Prime Auto Paper which is listed on Exhibit "B" attached hereto (the "Auto Paper Portfolio"), and all instruments, documents, accounts, general intangibles and other collateral (including all proceeds thereof) relating thereto or arising thereunder (collectively, the "Purchased Collateral"), but expressly excluding (i) inventory, (ii) the charged off loans and other assets listed on Exhibit "C" attached hereto and (iii) all instruments, documents, accounts, general intangibles and other collateral (including all proceeds thereof) relating to or arising under such excluded assets (collectively, the "Excluded Collateral"). To the extent there is on deposit in the Dominion Account as of the close of business on the date hereof, any collections with respect to the Auto Paper Portfolio, such collections will be applied to the payment of accrued interest and expenses owing to Lender and any excess thereof shall be retained by Lender as part of the Purchased Collateral. (b) Subject to the conditions subsequent specified in Section 4 hereof, and without in any manner releasing Original Borrower from any liability arising out of or in connection with this Agreement and the Bill of Sale, Lender hereby conditionally releases and discharges Original Borrower from all liability under the Note, the Loan Agreement, Original Borrower's Security Agreement and any other Loan Documents executed by Original Borrower. Lender further releases the Excluded Collateral from any security interest in favor of Lender. So long as none of the conditions subsequent specified in Section 4 occurs, this Section 2(b) shall serve to release and discharge Original Borrower from all liability which Original Borrower may have in connection with the payment of any or all of the debt evidenced by the Note and performance of the obligations evidenced by the Loan Documents. If any of the conditions subsequent specified in Section 4 occurs, the release provisions of this Section 2(b) shall, at Lender's sole option, be void and of no further force and effect. (c) Subject to the conditions subsequent specified in Section 4 hereof, Lender hereby conditionally releases and discharges Additional Borrowers and Guarantor from a portion of their respective liability under the Note and the Guaranty in an amount equal to $15,882,333.40 reflecting the total outstanding principal advances with respect to the Auto Paper Portfolio, as a result of which partial release the remaining principal balance of the Line of Credit as of the date hereof is $8,778,750.52 for which Additional Borrowers and Guarantor remain jointly and severally liable and on a solidary basis. -3- 4 (d) Borrowers and Guarantor acknowledge, agree and stipulate that the Transfer is an absolute sale of the Purchased Collateral to Lender and is not intended as a deed of trust, mortgage, conditional title retention arrangement, trust conveyance or any other security agreement of any nature whatsoever nor as a foreclosure under any provision of the Uniform Commercial Code, and that none of Borrowers nor Guarantor has any further interest or claim, including specifically, but without implied limitation, any right or equity of redemption, in and to the Purchased Collateral of any kind whatsoever. Borrowers and Guarantor further acknowledge, agree and stipulate that Lender is a good faith purchaser of the Purchased Collateral and that this Agreement and the consummation of the Transfer are in the best interests of all Borrowers and Guarantor in their present financial situation. The business reasons for Original Borrower's sale of the Purchased Collateral include, but are not limited to, the following reasons: (i) the Purchased Collateral has been declining in value on a going concern basis and eroding with the passage of time; (ii) Original Borrower believes that liquidation of the Purchased Collateral in a forced sale proceeding would result in a lower value; (iii) Original Borrower has engaged in reasonable efforts to sell the Purchased Collateral, and Lender's offer to purchase the Purchased Collateral as reflected in this Agreement exceeds the best offer (both as to price and terms) which Original Borrower has received from any third party; and (iv) the consideration under this Agreement to be given to Original Borrower for the Purchased Collateral is fair to and in the best interest of Original Borrower under the circumstances. (e) Contemporaneously with the execution and delivery of this Agreement, Original Borrower shall deliver to Lender satisfactory evidence that all necessary action on the part of Original Borrower, including without limitation approval of the sole shareholder of Original Borrower, has been taken with respect to the execution and delivery of this Agreement, the Bill of Sale and all other documents and instruments executed by Original Borrower in connection herewith and the consummation of the transactions contemplated hereby, so that all of such documents are validly executed and delivered by Original Borrower and will be binding upon and enforceable against Original Borrower. 3. Restructure of Loan. (a) Contemporaneously with the execution and delivery of this Agreement, Additional Borrowers and Guarantor shall execute and deliver to Lender a First Amendment to Loan Agreement and Related Documents in substantially the form attached hereto as Exhibit "D" (the "First Amendment"). (b) In order to evidence the renewal, modification and restructuring, but not extinguishment, of the indebtedness evidenced by the Note, Additional Borrowers will execute and deliver to Lender an amended and restated promissory note in substantially the form attached hereto as Exhibit "E" (the "Amended Note"). Lender will retain the original of the Note but cause it to be marked "Replaced by Amended and Restated Promissory Note dated February 27, 1998." (c) Additional Borrowers and Guarantor agree, acknowledge and stipulate that (i) the Parties have negotiated in good faith and have agreed in good faith to the terms and -4- 5 conditions of the First Amendment; (ii) the additional credit provided under the First Amendment is necessary to prevent immediate and irreparable harm to Additional Borrowers' business and to facilitate the reorganization of Additional Borrowers' and Guarantor's businesses; (iii) without the additional availability to obtain Loans as provided in the First Amendment, Additional Borrowers will be unable to retain or pay employees, to maintain their assets, to provide financial information to attempt to reorganize their affairs, or to perform tasks which Additional Borrowers believe are necessary to maximize the value of their remaining assets; and (iv) as a result of the partial release granted by Lender pursuant to Section 2(c) above, Additional Borrowers and Guarantor are jointly and severally liable and on a solidary basis to Lender in the current principal amount of $8,778,750.52 plus all accrued interest and any other charges allowed under the Loan Documents and applicable law, and Additional Borrowers and Guarantor have no claims or offsets against, or defenses or counterclaims to, the full and complete payment of any and all such Indebtedness. (d) Contemporaneously with the execution and delivery of this Agreement, Additional Borrowers and Guarantor shall deliver to Lender satisfactory evidence that all necessary action on the part of such Parties has been taken with respect to the execution and delivery of this Agreement, the First Amendment and such other documents executed in connection herewith and the consummation of the transactions contemplated hereby so that all of such documents are validly executed and delivered and will be binding upon and enforceable against such Parties. 4. Conditions Subsequent. Anything herein to the contrary notwithstanding, in the event that any statement, warranty or representation made by any of the Borrowers or Guarantor herein (other than with respect to title to the Purchased Collateral and the absence of liens) is false, misleading or erroneous in any material respect or, with respect to title to the Purchased Collateral and the absence of liens is false, misleading or erroneous in any respect, in the event any of the Borrowers or Guarantor prevents, impedes, delays, stays, restrains, enjoins or sets aside, or seeks to prevent, impede, delay, stay, restrain, enjoin or set aside, the Transfer or the subsequent sale of the Purchased Collateral (provided that such subsequent sale is challenged based on the validity of the Transfer), or any part thereof, to any person or entity, without regard to whether any such attempt may be successful, or in the event any person or entity, other than any of the Borrowers or Guarantor, is successful in preventing, impeding, delaying, staying, restraining, enjoining or setting aside the Transfer or the subsequent sale of the Purchased Collateral (provided that such subsequent sale is challenged based on the validity of the Transfer), or any part thereof, to any person or entity for a period of more than thirty (30) days (which period of thirty (30) days shall not apply to the setting aside of the Transfer or any subsequent sale), Lender may, at its sole option, declare its agreements in Section 2(b) and 2(c) of this Agreement to be null and void, ab initio, and of no force or effect. In addition, in any such event, and subject to the liability thereafter of Borrowers and Guarantor: (a) The liens, rights, titles and interests evidenced by Original Borrower's Security Agreement and the other Loan Documents executed by the Original Borrower will be automatically revived and reinstated with respect to the Purchased Collateral, or any part -5- 6 thereof affected, if the same shall have been previously released, in whole or in part, by Lender; (b) The Line of Credit shall be deemed in default; (c) Lender shall have the right, at its option, to foreclose the lien and security interest, and enforce the rights, titles and interest of the Lender under, the Loan Documents, including Original Borrower's Security Agreement, and the right to take such other action permitted hereby or at law or in equity; and (d) All costs of Lender incurred in connection with this Agreement and any other costs of such foreclosure, enforcement or other action shall be deemed a part of the indebtedness of the Line of Credit and the full indebtedness of the Line of Credit shall be payable by Original Borrower as well as by Additional Borrowers and Guarantor; provided, however, that in calculating the amount of the full indebtedness then owing to Lender, Lender shall give credit for any cash proceeds it has received from its disposition or collection of the Purchased Collateral less any amount Lender has been required to disgorge or otherwise refund on account of such cash proceeds; and PROVIDED FURTHER, THAT THE LIMITATION PERIOD FOR ANY SUCH FORECLOSURE, ENFORCEMENT OR OTHER ACTION FOR PURPOSES OF THE STATUTE OF LIMITATIONS SHALL NOT COMMENCE TO RUN UNTIL THE DATE UPON WHICH THE LENDER DECLARES IN WRITING ITS AGREEMENTS IN SECTION 2(b) AND 2(c) OF THIS AGREEMENT TO BE NULL AND VOID AND OF NO FORCE AND EFFECT. 5. Representations and Warranties of Borrowers and Guarantor. Borrowers and Guarantor jointly and severally represent and warrant to Lender as follows: (a) Each of the Borrowers and Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the corporate power and authority to execute and deliver, and to perform its obligations under, this Agreement and all instruments and other documents executed and delivered in connection herewith (collectively, the "Transfer Documents"). The execution and delivery by Borrowers and Guarantor of this Agreement and the other Transfer Documents, and consummation by such Parties of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of such Parties. This Agreement and the other Transfer Documents to which any of the Borrowers or Guarantor is a party constitute the legal, valid and binding obligations of such Parties, enforceable against them in accordance with their respective terms. (b) The execution and delivery by Borrowers and Guarantor of this Agreement and the other Transfer Documents, and the consummation of the transactions contemplated hereby and thereby, will not conflict with or result in a breach of or default under any of the terms, conditions or provisions of the articles of incorporation or bylaws of such Parties or any agreement or other instrument to which any of such Parties is a party or by which any of such Parties or the Purchased Collateral may be bound. -6- 7 (c) The execution and delivery by Borrowers and the Guarantor of this Agreement and the other Transfer Documents, compliance by such Parties with the terms hereof and thereof, and the consummation by such Parties of the transactions contemplated hereby and thereby, do not require any of such Parties to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or other entity or any governmental or judicial authority. (d) None of the transactions contemplated by this Agreement are restrained or prohibited by any injunction, stay, order or judgment rendered by any court or other governmental agency, no proceeding has been instituted or is pending in which any creditor of any of the Borrowers, Guarantor or any other person or entity seeks to restrain such transactions, or any part thereof, or otherwise to attach, sequester or enforce any other remedies against the Purchased Collateral or any part thereof, nor is there any person or entity, other than Lender, that has the right to seek any such attachment, sequestration or other remedies. (e) None of the Borrowers nor Guarantor have commenced a voluntary proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law nor has any involuntary proceeding been commenced against any of the Borrowers or Guarantor seeking relief under the federal bankruptcy code. (f) All of the Purchased Collateral, including without limitation the Auto Paper Portfolio, is owned by Original Borrower free and clear of any lien, security interest, charge or other encumbrance, except for Lender's perfected security interest. All of the Purchased Collateral that comprises Eligible Non-Prime Auto Paper is enforceable in accordance with its terms, is genuine, and complies with applicable federal, state and local laws, ordinances, rules and regulations concerning form, content and manner of preparation and execution and, to the best of Original Borrower's knowledge, all persons appearing to be obligated on the Eligible Non-Prime Auto Paper have authority and capacity to contract and are in fact obligated as they appear to be on the Eligible Non-Prime Auto Paper, free of any offset, compensation, deduction or counterclaim. To the extent the Purchased Collateral consists of accounts, chattel paper, instruments or general intangibles that are not Eligible Non-Prime Auto Paper, such ineligible collateral is enforceable in accordance with its terms, is genuine, and complies in all material respects with applicable federal, state and local laws, ordinances, rules and regulations concerning form, content and manner of preparation and execution and, to the best of Original Borrower's knowledge, all persons appearing to be obligated on such collateral have authority and capacity to contract and are in fact obligated as they appear to be on such collateral, free of any offset, compensation, deduction or counterclaim. Except as disclosed on Exhibit "F" attached hereto, all original instruments representing the Auto Paper Portfolio and all certificates of title relating thereto have been delivered to Lender. None of the security for the Auto Paper Portfolio has been foreclosed upon or repossessed. None of the chattel paper listed on Exhibit "B" is subject to a known claim or legal action asserted or filed by any obligor thereunder. -7- 8 (g) Neither Original Borrower nor Search Financial Services Acceptance Corp. has any forced placed insurance or vendor single insurance coverage in effect with respect to the motor vehicles securing the Purchased Collateral. All representations and warranties contained in this Section 5 or elsewhere in this Agreement shall survive the execution and delivery of this Agreement and the other Transfer Documents and shall inure to the benefit of Lender and its successors and assigns. 6. Representations and Warranties of Lender. Lender represents and warrants to Borrowers and Guarantor that Lender is the present legal and equitable owner and holder of the Loan Documents and is authorized to execute and deliver this Agreement and the other Transfer Documents to which it is a party and to perform its obligations thereunder. 7. Covenants of Borrowers and Guarantor. (a) Except as otherwise provided in subsection (d) below, Original Borrower shall deliver to Lender, on or within three (3) Business Days after the date hereof, a loan history for each item of chattel paper included as part of the Auto Paper Portfolio and all documents, items and information, including without limitation books and records, in Original Borrower's possession relating to the Purchased Collateral. In the event any of the Borrowers or Guarantor locates any of the missing instruments listed on Exhibit "F", such instruments will be promptly delivered to Lender. (b) Borrowers and Guarantor shall promptly forward to Lender all written notices received by any of them after the date hereof with respect to the Purchased Collateral. All funds and documents received after the date hereof by Original Borrower in connection with the Purchased Collateral shall immediately be turned over to Lender without recourse or warranty and, pending such payment or delivery, Original Borrower shall hold the same in trust for Lender. Lender may endorse any checks payable to the order of Original Borrower with respect to the Purchased Collateral. All funds on deposit in the blocked branch accounts representing collections with respect to the Purchased Collateral shall be promptly wire transferred to the Dominion Account. Original Borrower acknowledges and agrees that from and after the date hereof Original Borrower has no interest in any funds in the Dominion Account or any blocked branch accounts, all of which blocked branch accounts shall either be transferred into the name of Lender or terminated. (c) Upon request by Lender, Original Borrower shall execute letters prepared by Lender and addressed to account debtors giving them written notice of the transfer of the Auto Paper Portfolio to Lender. (d) To the extent requested by Lender and for such period of time as may be designated by Lender (but in any event not to exceed ninety (90) days), Original Borrower shall assist Lender in the servicing of the Auto Paper Portfolio pursuant to the terms of a servicing agreement executed contemporaneously herewith. -8- 9 8. Power of Attorney. Original Borrower hereby irrevocably constitutes and appoints Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full revocable power and authority in the name of Original Borrower or in its own name, to take any and all action and to execute any and all documents or instruments which Lender at any time and from time to time deems necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, Original Borrower hereby gives Lender the power and right on behalf of Original Borrower and in its own name to do any of the following, without notice to or the consent of Original Borrower: (a) To demand, sue for, collect or receive in the name of Original Borrower or in its own name, any money or property at any time payable or receivable on account of or in exchange for any of the Purchased Collateral and, in connection therewith, endorse checks, notes, drafts, acceptances, money orders, documents of title, or any other instruments for the payment of money under the Purchased Collateral or any policy of insurance; (b) To notify post office authorities to change the address for delivery of mail of Original Borrower to an address designated by Lender and to receive, open and dispose of mail addressed to Original Borrower; provided that Lender shall refrain from so notifying postal authorities for a period not to exceed ninety (90) days after the date hereof if during such period Original Borrower opens all of its mail in the presence and with the participation of a designated representative of Lender and turns over to Lender all such mail relating to the Purchased Collateral. (c) To direct account debtors and any other parties liable for payment under any of the Purchased Collateral to make payment of any and all monies due and to become due thereunder directly to Lender or as Lender shall direct; (d) To receive payment of and receipt for any and all monies, claims and other amounts due and to become due at any time in respect of or arising out of any Purchased Collateral; (e) To sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, certificates of title and applications for certificates of title, assignments, proxies, stock powers, verifications, and notices in connection with chattel paper and other documents relating to the Purchased Collateral; (f) To commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction with respect to the Purchased Collateral; (g) To collect the Purchased Collateral or any part thereof and to enforce any other right in respect of any Purchased Collateral; (h) To defend any suit, action or proceeding brought against Original Borrower with respect to any Purchased Collateral; -9- 10 (i) To settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; and (j) To insure, and to make, settle, compromise or adjust claims under any insurance policy covering, any of the Purchased Collateral. This power of attorney is a power coupled with an interest and shall be irrevocable. Lender shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to Lender in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. Lender shall not be liable for any act or omission for any error of judgment or any mistake of fact or law in its individual capacity or in its capacity as attorney-in-fact, except acts or omissions resulting from its willful misconduct. 9. Brokerage Commissions. Each Party represents to the other Parties that no broker has been involved in this transaction. It is agreed that if any claim for a brokerage commission, fee or other compensation is ever made against any Party to this Agreement in connection with this transaction, such claim shall be handled and paid by the Party whose actions or alleged commitments form the basis of such claim, and the Party whose actions or alleged commitments formed the basis of such claim shall indemnify and hold harmless the other Party against whom the claim is made from and against any and all such claim or demand with respect to any such brokerage commission, fee or other compensation asserted by any person, firm or corporation in connection with this Agreement or the transactions contemplated hereby. 10. Limited Assumption of Seller's Liabilities. Lender is not and shall not to be construed or deemed to be a successor of Original Borrower, it being understood and agreed that Lender is acquiring the Purchased Collateral subject and subordinate only to the terms of this Agreement and the Loan Documents, and it is further understood and agreed that Lender has not and does not hereby assume or agree to assume any liability whatsoever of Original Borrower nor does Lender assume or agree to assume any obligation of Original Borrower under any contract, lease, agreement, indenture or any other document to which Original Borrower is a party, by which Original Borrower is or may be bound or which in any manner affects the Purchased Collateral, or any part thereof, except as otherwise expressly agreed to by Lender in this Agreement or the Transfer Documents. 11. No Partnership or Joint Venture. None of the Lender, the Borrowers nor the Guarantor intends hereby to create a partnership, either general or limited, or a joint venture, and neither this Agreement nor the manner in which title to the Purchased Collateral, or any part thereof, is held or conveyed shall cause Lender, to be partners, either general or limited, or joint venturers with any of the Borrowers or Guarantor. 12. Survival of Terms. The terms and provisions hereof shall survive the execution and delivery of this Agreement and the Transfer Documents and shall remain in full force and effect thereafter unless otherwise specified herein. -10- 11 13. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns. 14. Entire Agreement. This Agreement and the Transfer Documents embody the entire agreement between the Parties relative to the subject matter hereof, and there are no oral or parol agreements existing between Borrowers, Guarantor or Lender, or any combination thereof, relative to the subject matter hereof which are not expressly set forth herein and in the Transfer Documents and covered hereby and thereby. 15. Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation hereof. 16. Interpretation. Whenever the context hereof shall so require, the singular shall include the plural, the male gender shall include the female gender and the neuter, and vice versa. 17. Notices. All notices or other communications required or permitted to be given pursuant to the Loan Documents or hereto shall be in writing and shall be deemed served and given at the time of (i) deposit in a depository receptacle under the care and custody of the United States Postal Service, properly addressed to the designated address of the addressee as set forth below, postage prepaid, registered or certified mail with return receipt requested, (ii) delivery to the designated address of the addressee set forth below by a third party commercial delivery service or (iii) receipt at the facsimile receiving facility of the addressee if transmitted by facsimile. Notice given in any other manner shall be effective only if and when received by the addressee. For purposes of notices, the addresses and facsimile numbers of the Parties shall be as follows: If to Lender: Hibernia National Bank 313 Carondelet, 1th Floor New Orleans, LA 70130 Attention: Mike Lacy Facsimile: 504/533-5817 If to Original Borrower: Search Funding II, Inc. 600 North Pearl Street Suite 2500, L.B. 123 Dallas, Texas 75201-2899 Attention: Robert D. Idzi Facsimile: 214/965-6098 If to any of the c/o Search Financial Services Holding Additional Borrowers: Company 600 North Pearl Street Suite 2500, L.B. 123 Dallas, Texas 75201-2899 Attention: Robert D. Idzi Facsimile: 214/965-6098 -11- 12 If to Guarantor: Search Financial Services, Inc. 600 North Pearl Street Suite 2500, L.B. 123 Dallas, Texas 75201-2899 Attention: Robert D. Idzi Facsimile: 214/965-6098 Any Party shall have the right to change its address and facsimile numbers for notice hereunder and under the other Loan Documents to any other location within the continental United States by notice to the other Parties of such new address at least thirty (30) days prior to the effective date of such new address. 18. Expenses. Except as otherwise specifically provided herein, each Party shall pay its own expenses in connection with this Agreement and the transactions contemplated hereby. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts together shall constitute one and the same agreement. Any signature page to any such counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto, except having attached to it such additional signature pages. It shall not be necessary that the signature of, or on behalf of, each Party, or that the signature of all Parties required to bind any Party, appear on each counterpart. It also shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the Parties hereto. 20. Additional Acts. Except as otherwise provided herein, in addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by Original Borrower, Additional Borrowers, Guarantor or Lender, Original Borrower, Additional Borrowers and Guarantor hereby agree to perform, execute and/or deliver, or cause to be performed, executed and/or delivered, as of the date hereof, any and all such further acts, deeds and assurances as Lender or other third party may reasonably require to (a) evidence and vest in Lender the ownership of and indefeasible title to the Purchased Collateral, and (b) consummate the transactions contemplated hereunder. 21. Applicable Law. THIS AGREEMENT AND ALL THE EXHIBITS HERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. 22. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 23. Time of Essence. Time is of the essence of this Agreement. -12- 13 24. Attorneys' Fees. Should any Party employ an attorney or attorneys to enforce any of the provisions hereof, or to protect its interest in any manner arising under this Agreement, or to recover damages for the breach of this Agreement, the non-prevailing Party in any action pursued in courts of competent jurisdiction (the finality of which is not legally contested) agrees to pay to the prevailing Party all reasonable costs, damages and expenses, including specifically, but without implied limitation, attorneys' fees, expended or incurred by the prevailing Party in connection therewith. 25. Advice of Counsel. As a part of the consideration for this Agreement and prior to the execution and delivery hereof, each Party hereto has fully informed itself of the terms, conditions and effects of this Agreement and the Transfer, and, to the extent the Parties hereto desire to do so, each Party has had this Agreement and the documents to be executed and delivered pursuant to this Agreement reviewed by an attorney or attorneys of its choice and fully understands the effect hereof, including specifically, but without implied limitation, all federal income tax consequences of the consummation of the transactions contemplated hereby. No promise or representation of any kind has been made by Lender to any of the Borrowers or Guarantor, or anyone acting on any of their behalf, except as expressly stated in this Agreement, and the Borrowers and Guarantor jointly and severally agree and represent that they are executing this Agreement of their own free will in reliance on their own judgment and the advice of their counsel and without threat or duress. 26. RELEASE. THE BORROWERS AND THE GUARANTOR HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OF NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF THEIR RESPECTIVE LIABILITY TO REPAY THE "INDEBTEDNESS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM THE LENDER. THE BORROWERS AND THE GUARANTOR HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE THE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH THE BORROWERS OR THE GUARANTOR MAY NOW OR HEREAFTER HAVE AGAINST THE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING WITHOUT LIMITATION ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OF RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR RELATED DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT. -13- 14 27. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWERS, THE GUARANTOR AND THE LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN AGREEMENT OR RELATED DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. [Remainder of page intentionally left blank] -14- 15 EXECUTED as of the date first above written. LENDER: HIBERNIA NATIONAL BANK, a national banking association By: /s/ Gerald F. Pavlas ----------------------------------- Gerald F. Pavlas Executive Vice President ORIGINAL BORROWER: SEARCH FUNDING II, INC., a Texas corporation By: /s/ Robert D. Idzi ----------------------------------- Robert D. Idzi President -15- 16 ADDITIONAL BORROWERS : SEARCH FINANCIAL SERVICES HOLDING COMPANY, a Texas corporation SEARCH FINANCIAL SERVICES OF FLORIDA, INC., a Texas corporation SEARCH FINANCIAL SERVICES OF GEORGIA, INC., a Texas corporation SEARCH FINANCIAL SERVICES OF LOUISIANA, INC., a Louisiana corporation SEARCH FINANCIAL SERVICES OF OKLAHOMA, INC., a Texas corporation SEARCH FINANCIAL SERVICES OF PUERTO RICO, INC., a Puerto Rico corporation SEARCH FINANCIAL SERVICES OF TENNESSEE, INC., a Texas corporation SEARCH FINANCIAL SERVICES OF TEXAS, INC., a Texas corporation By: /s/ Robert D. Idzi ---------------------------------------- Robert D. Idzi President GUARANTOR: SEARCH FINANCIAL SERVICES INC., a Delaware corporation By: /s/ Robert D. Idzi ---------------------------------------- Robert D. Idzi Senior Executive Vice President and Chief Financial Officer -16- 17 SCHEDULE OF EXHIBITS: Exhibit "A" Bill of Sale Exhibit "B" Auto Paper Portfolio Exhibit "C" Excluded Collateral Exhibit "D" First Amendment Exhibit "E" Amended Note Exhibit "F" Undelivered Instruments
-17- EX-10.2 4 1ST AMENDMENT TO LOAN AGREEMENT & RELATED DOCUMENT 1 EXHIBIT 10.2 FIRST AMENDMENT TO LOAN AGREEMENT AND RELATED DOCUMENTS THIS FIRST AMENDMENT TO LOAN AGREEMENT AND RELATED DOCUMENTS (the "Amendment"), dated as of February 27, 1998, is among Search Funding II, Inc., a Texas corporation, Search Financial Services Holding Company, a Texas corporation, Search Financial Services of Florida, Inc., a Texas corporation, Search Financial Services of Georgia, Inc., a Texas corporation, Search Financial Services of Louisiana, Inc., a Louisiana corporation, Search Financial Services of Oklahoma, Inc., a Texas corporation, Search Financial Services of Puerto Rico, Inc., a Puerto Rico corporation, Search Financial Services of Tennessee, Inc., a Texas corporation, and Search Financial Services of Texas, Inc., a Texas corporation (collectively, the "Existing Borrowers"), Search Financial Services Inc., a Delaware corporation (the "Guarantor"), and HIBERNIA NATIONAL BANK (the "Lender"). RECITALS: A. The Existing Borrowers and the Lender have entered into that certain Loan Agreement (the "Loan Agreement") dated October 6, 1997. B. Pursuant to the Loan Agreement, the Guarantor executed that certain Commercial Guaranty (the "Guaranty") dated October 6, 1997 which guaranteed to Lender the payment and performance of the Indebtedness (as defined in the Loan Agreement). C. Pursuant to the Loan Agreement, the Existing Borrowers each executed a certain Commercial Security Agreement dated October 6, 1997 (collectively, the "Security Agreement"). D. The Existing Borrowers are in default under the Loan Agreement. In order to avoid the Lender's pursuit of remedies for collection of the Line of Credit (as defined in the Loan Agreement) and realization on the collateral securing the Line of Credit, the Existing Borrowers and the Guarantor have requested that the Lender accept, in full satisfaction of the obligations of Search Funding II, Inc. ("Search Funding") under the Loan Agreement and the Related Documents (as defined in the Loan Agreement), the transfer of substantially all of the Non-Prime Auto Paper and related collateral covered by that certain Commercial Security Agreement dated October 6, 1997 executed by Search Funding (the "Transfer Transaction"). E. The Lender has agreed to the Transfer Transaction, provided that, among other things, the Existing Borrowers and the Guarantor execute and deliver that certain Agreement to Transfer Collateral and Restructure Loan of even date herewith (the "Transfer Agreement") and the other documents contemplated thereby. F. The Existing Borrowers and the Guarantor have further requested that the Lender waive the Existing Defaults under the Loan Agreement and restructure the Line of Credit so that the Existing Borrowers (other than Search Funding) may continue to obtain advances thereunder, which the Lender is willing to do, subject to the terms and conditions hereof. 2 NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I Definitions 1.1 Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Loan Agreement, as amended hereby. ARTICLE II Amendments 2.1 Amendment to References in the Loan Agreement and Related Documents. Effective as of the date hereof, all references in the Loan Agreement and in the Related Documents to (i) "Borrower" and "Borrowers" shall be deemed to mean individually, collectively and interchangeably Search Financial Services Holding Company, Search Financial Services of Florida, Inc., Search Financial Services of Georgia, Inc., Search Financial Services of Louisiana, Inc., Search Financial Services of Oklahoma, Inc., Search Financial Services of Puerto Rico, Inc., Search Financial Services of Tennessee, Inc., and Search Financial Services of Texas, Inc. and (ii) "$25,000,000.00" shall be deemed to be references to "$14,000,000.00." 2.2 Amendment to the Definition of "Borrowing Base" in the Loan Agreement. Effective as of the date hereof, the definition of "Borrowing Base" on page 1 of the Loan Agreement is hereby amended in its entirety to read as follows: BORROWING BASE. The words "BORROWING BASE" means the lesser of $14,000,000.00 or the sum of (a) 65% of the aggregate amount of the outstanding principal and interest owed under Eligible Consumer Paper, and (b) the agreed borrowing base value of other Collateral granted to Lender which is deemed eligible by Lender in its sole and absolute discretion. 2.3 Deletion of Definition of "Eligible Non-Prime Auto Paper" in the Loan Agreement. Effective as of the date hereof, the definition of "Eligible Non-Prime Auto Paper" on pages 2 and 3 of the Loan Agreement and all other references to "Eligible Non-Prime Auto Paper" in the Loan Agreement are hereby deleted in their entirety. 2.4 Amendment to Monitoring Fee. Effective as of the date hereof, the subsection entitled "Monitoring Fee" on page 5 of the Loan Agreement is hereby amended in its entirety to read as follows: -2- 3 Monitoring Fee. A monitoring fee of $1,500 per month for each month or portion of a month during the term of this Agreement. The monitoring fee for a month is due and payable on the first day of the following month. 2.5 Amendment to Annual Renewal Fee. Effective as of the date hereof, the subsection entitled "Annual Renewal Fee" on page 5 of the Loan Agreement is hereby amended in its entirety to read as follows: Annual Renewal Fee. An annual renewal fee of 0.25% of the maximum dollar amount of the Note payable, in full, on each annual anniversary of this Agreement prior to the Expiration Date. 2.6 Amendment to Unused Facility Fee. Effective as of the date hereof, the section entitled "Unused Facility Fee" on page 5 of the Loan Agreement is hereby amended so that the reference to "0.070% per annum" is changed to "0.250% per annum". 2.7 Amendment to Loan Proceeds. Effective as of the date hereof, the section entitled "Loan Proceeds" on page 10 of the Loan Agreement is hereby amended in its entirety to read as follows: Loan Proceeds. Use all Loan proceeds solely for working capital needs of Borrowers incurred in the ordinary course of business of Borrowers. Notwithstanding the foregoing, Borrowers shall be permitted to apply proceeds of the Loans in the maximum aggregate amount of $500,000 (or such greater amount that may, in its sole discretion, be approved by Lender in writing) to the repayment of their valid and existing debts, including valid and existing intercompany debts owing to Guarantor or any affiliate of Guarantor other than Borrowers. 2.8 Amendment to Voluntary Readjustment of Indebtedness. Effective as of the date hereof, the section entitled "Voluntary Readjustment of Indebtedness" on page 13 of the Loan Agreement is hereby amended in its entirety to read as follows: Voluntary Readjustment of Indebtedness. Should proceedings for readjustment of indebtedness, reorganization, bankruptcy, composition or extension under any insolvency law be brought by any Borrower or any Guarantor; provided however, that the filing of a voluntary chapter 11 petition by Search Financial Services Inc. under the Federal Bankruptcy Code ("Guarantor's Chapter 11 Case") shall not constitute an Event of Default so long as none of the following shall have occurred: (i) Guarantor's Chapter 11 Case is converted to a case under chapter 7 of the Federal Bankruptcy Code; (ii) a trustee or examiner is appointed in Guarantor's Chapter 11 Case; (iii) any adversary proceeding or contested matter is commenced in Guarantor's Chapter 11 Case requesting that the liens granted under any of the Loan Documents be avoided or set aside or that the claims arising under any of the Loan Documents be avoided or disallowed; (iv) any adversary proceeding or contested matter is commenced in Guarantor's Chapter 11 Case seeking to avoid or set aside any of the transactions consummated under that certain Agreement to -3- 4 Transfer Collateral and Restructure Loan dated February 27, 1998 among the Borrowers, the Lender and certain other parties; or (v) a chapter 11 plan of reorganization is confirmed in Guarantor's Chapter 11 Case under which the Lender's claim is impaired and such plan has not been accepted by Lender. 2.9 Addition to Events of Default. Effective as of the date hereof, the section entitled "Events of Default" commencing on page 13 of the Loan Agreement is hereby amended by adding the following thereto as an additional Event of Default: Servicing Agreement. A Servicer Event of Default shall have occurred under and as defined in that certain Servicing Agreement dated February 27, 1998, between Search Funding II, Inc. and Lender. ARTICLE III Conditions Precedent 3.1 Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent: (a) The Lender shall have received all of the following, each dated (unless otherwise indicated) the date of this Amendment, in form and substance satisfactory to the Lender: (1) Resolutions. Resolutions of the Board of Directors of each Existing Borrower and the executive committee of Guarantor certified by its respective Secretary or an Assistant Secretary which authorize the execution, delivery, and performance by such Existing Borrower or Guarantor of this Amendment and the other Related Documents to which such Existing Borrower or Guarantor is or is to be a party hereunder; (2) Incumbency Certificate. A certificate of incumbency certified by the Secretary or an Assistant Secretary of each Existing Borrower and Guarantor certifying the names of the officers of such Existing Borrower or Guarantor authorized to sign this Amendment and each of the other Related Documents to which such Existing Borrower or Guarantor is or is to be a party hereunder (including the certificates contemplated herein) together with specimen signatures of such officers; (3) Governmental Certificates. Certificates of the appropriate government officials of the state of incorporation of each Existing Borrower and Guarantor as to the existence and good standing of such Existing Borrower or Guarantor, each dated within ten (10) days prior to the date of this Amendment; -4- 5 (4) Opinion of Counsel. A favorable opinion of Andrews & Kurth, L.L.P., legal counsel to Existing Borrowers and Guarantor, as to such matters as the Lender may reasonably request; (5) Transaction Documents. The Existing Borrowers and the Guarantor shall have executed and delivered the Transfer Agreement and such additional documents and instruments as are contemplated thereby; (6) Note. The Existing Borrowers (except for Search Funding) shall have executed and delivered an Amended and Restated Promissory Note in the form attached hereto as Exhibit A; and (7) Additional Information. Lender shall have received such additional documents, instruments and information as Lender may request. (b) The representations and warranties contained herein and in all Related Documents, as amended hereby and after giving effect to the waivers herein, shall be true and correct as of the date hereof as if made on the date hereof, except as they are affected by Search Funding's exiting from the Non-Prime Auto Paper origination business and by the litigation filed by Hall/Phoenix Inwood, Ltd. and Fleet Bank, N.A. against Guarantor and others; (c) Except for the Existing Defaults (as defined below) and the Potential Defaults (as defined below), no Event of Default shall have occurred and be continuing and no event or condition shall have occurred that with the giving of notice or lapse of time or both would be an Event of Default. (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments, and other legal matters incident thereto shall be satisfactory to Lender and its legal counsel, Winstead Sechrest & Minick P.C. ARTICLE IV Limited Waiver 4.1 Existing Defaults. The Existing Borrowers hereby acknowledge that Lender has notified them that the following actions or inactions have occurred which constitute Events of Defaults (the "Existing Defaults"): (a) Default under Dominion Account Obligations. The Existing Borrowers have failed to deposit into a Dominion Account prior to the date hereof collections in the amount of approximately $300,000.00, which were made with respect to amounts due under Non-Prime Auto Paper or Consumer Paper or received from the sale of any inventory of any Existing Borrower, within one (1) Business Day after receipt; -5- 6 (b) False Statements. The representations and warranties of the Existing Borrowers made in that certain Borrowing Base Certificate dated as of January 28, 1998, delivered to the Lender were incorrect in a material respect due to the miscalculation of the Borrowing Base; and (c) Receivership. Proceedings for the appointment of a receiver of all or any part of the property of the Guarantor have been commenced by Hall/Phoenix Inwood, Ltd., and such proceedings have not been dismissed within sixty (60) days after commencement. 4.2 Potential Defaults. The Existing Borrowers hereby acknowledge that Lender has notified them that the following breaches or violations of the Loan Agreement have occurred which, if not cured within the applicable grace period provided in the Loan Agreement, will constitute additional Events of Default (the "Potential Defaults"): (a) Failure to Deliver Instruments. The Existing Borrowers have failed to deliver prior to February 16, 1998 all original instruments representing all eligible Non-Prime Auto Paper or Consumer Paper to the Lender or a custodian approved by the Lender, and such failure has resulted in an overadvance; (b) Default in Favor of Third Parties. The Guarantor is in default under a loan, extension of credit, security agreement or other agreement in favor of Fleet Bank, N.A. and in favor of Hall/Phoenix Inwood, Ltd., in each case involving in excess of $1,000,000; and (c) Failure to Provide Borrowing Base Certificate. Search Funding has violated or failed to comply fully with the affirmative covenant to provide a Borrowing Base Certificate to the Lender by noon on Wednesday, February 11, 1998. (d) Default Under the Loan Agreement. The Guarantor has failed to maintain a minimum Adjusted Net Worth of no less than $20,000,000.00. 4.3 Limited Waiver. By execution of this Amendment, the Lender hereby waives the Existing Defaults and the Potential Defaults which would arise under the Loan Agreement as described in Sections 4.1 and 4.2 of this Amendment. Lender is not presently aware of any other Event of Default or any other occurrence which, if not cured within the applicable grace period, would constitute an Event of Default. Except as otherwise specifically provided for in this Section 4.3 of this Amendment, nothing contained herein shall be construed as a waiver by the Lender of any covenant or provision of the Loan Agreement, the Related Documents, or of any other contract or instrument between the Existing Borrowers and the Lender, and the failure of the Lender at any time or times hereafter to require strict performance by the Existing Borrowers of any provision thereof shall not waive, affect or diminish any right of the Lender to thereafter demand strict compliance therewith. -6- 7 ARTICLE V Ratification by the Guarantor 5.1 Ratifications. The Guarantor hereby ratifies and reaffirms all of its obligations under the Guaranty and acknowledges that the Guaranty is not subject to any claims, defenses or offsets. The Guarantor also hereby agrees that nothing contained in the Loan Agreement and the Related Documents, as hereby amended, shall adversely affect any right or remedy of the Lender under the Guaranty and that the execution and delivery of this Amendment and the Related Documents shall in no way change or modify its obligations under the Guaranty and shall not constitute a waiver by the Lender of any of its rights against the Guarantor. ARTICLE VI Ratifications, Representations and Warranties 6.1 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the Related Documents, including without limitation the Security Agreement, and except as expressly modified and superseded by this Amendment or the Transfer Agreement, the terms and provisions of the Loan Agreement and the Related Documents are ratified and confirmed and shall continue in full force and effect. The Existing Borrowers and the Lender agree that the Loan Agreement and the Related Documents as amended hereby shall continue to be legal, valid, binding and enforceable in accordance with its terms, except for the release of Search Funding from any obligations thereunder. The Existing Borrowers hereby agree that the security interests and the liens in the Collateral granted to the Lender by the Existing Borrowers (other than Search Funding) are not extinguished hereby and the making, perfection and priority of such security interests shall continue in full force and effect. 6.2 Representations and Warranties. The Existing Borrowers hereby represent and warrant to the Lender that (i) the execution, delivery and performance of this Amendment, the Transfer Agreement and any and all documents executed and/or delivered in connection herewith or therewith have been authorized by all requisite corporate action on the part of each Existing Borrower and will not violate the certificate or articles of incorporation or bylaws of such Existing Borrower, (ii) the representations and warranties contained in the Loan Agreement, as amended hereby and after giving effect to the waivers herein, and any Related Document are true and correct on and as of the date hereof as though made on and as of the date hereof, except as they are affected by Search Funding's exiting from the Non-Prime Auto Paper origination business and by the litigation filed by Hall/Phoenix Inwood, Ltd. and Fleet Bank, N.A. against Guarantor and others, (iii) except for the Existing Defaults and the Potential Defaults, no Event of Default has occurred and is continuing and no event or condition has occurred that with the giving of notice or lapse of time or both would be an Event of Default, and (iv) the Existing Borrowers have valid and existing intercompany debts owing to the Guarantor or an affiliate of the Guarantor (other than Existing Borrowers) in the aggregate amount of $1,499,718 as of January 31, 1998. -7- 8 ARTICLE VII Miscellaneous 7.1 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any Related Document including any Related Document furnished in connection with this Amendment shall survive the execution and delivery of this Amendment and the other Related Documents, and no investigation by the Lender or any closing shall affect the representations and warranties or the right of the Lender to rely upon them. 7.2 Reference to Loan Agreement. Each of the Related Documents, including the Loan Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement as amended hereby, are hereby amended so that any reference in such Related Documents to the Loan Agreement shall mean a reference to the Loan Agreement as amended hereby. 7.3 Expenses of Lender. As provided in the Loan Agreement, the Existing Borrowers (other than Search Funding) agree to pay on demand all costs and expenses incurred by the Lender in connection with the preparation, negotiation, and execution of this Amendment and the other Related Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including without limitation the costs and fees of the Lender's legal counsel, and all costs and expenses incurred by the Lender in connection with the enforcement or preservation of any rights under the Loan Agreement, as amended hereby, or any other Related Document, including without limitation the costs and fees of the Lender's legal counsel. 7.4 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 7.5 Applicable Law. This Amendment and all other Loan Documents executed pursuant hereto shall be deemed to have been made and to be performable in the State of Louisiana, and shall be governed by and construed in accordance with the laws of the State of Louisiana. 7.6 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Lender and the Existing Borrowers and their respective successors and assigns, except no Existing Borrower may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lender. 7.7 Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 7.8 Effect of Waiver. No consent or waiver, express or implied, by the Lender to or for any breach of or deviation from any covenant, condition or duty by any Existing Borrower or -8- 9 Guarantor shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty. 7.9 Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 7.10 RELEASE. THE EXISTING BORROWERS AND THE GUARANTOR HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OF NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF THEIR RESPECTIVE LIABILITY TO REPAY THE "INDEBTEDNESS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM THE LENDER. THE EXISTING BORROWERS AND THE GUARANTOR HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE THE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE EXISTING BORROWERS OR THE GUARANTOR MAY NOW OR HEREAFTER HAVE AGAINST THE LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING WITHOUT LIMITATION ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OF RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR RELATED DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. 7.11 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE EXISTING BORROWERS, THE GUARANTOR AND THE LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN AGREEMENT OR RELATED DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. 7.12 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, -9- 10 WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. [Remainder of Page Intentionally Left Blank] -10- 11 Executed as of the date first written above. EXISTING BORROWERS: SEARCH FUNDING II, INC. SEARCH FINANCIAL SERVICES HOLDING COMPANY SEARCH FINANCIAL SERVICES OF FLORIDA, INC. SEARCH FINANCIAL SERVICES OF GEORGIA, INC. SEARCH FINANCIAL SERVICES OF LOUISIANA, INC. SEARCH FINANCIAL SERVICES OF OKLAHOMA, INC. SEARCH FINANCIAL SERVICES OF PUERTO RICO, INC. SEARCH FINANCIAL SERVICES OF TENNESSEE, INC. SEARCH FINANCIAL SERVICES OF TEXAS, INC. By: /s/ Robert D. Idzi ------------------------------------- Robert D. Idzi President of each entity LENDER: HIBERNIA NATIONAL BANK By: /s/ Gerald F. Pavlas ------------------------------------- Gerald F. Pavlas Executive Vice President -11- 12 GUARANTOR: SEARCH FINANCIAL SERVICES INC. By: /s/ Robert D. Idzi ------------------------------------ Robert D. Idzi Senior Executive Vice President and Chief Financial Officer -12- EX-10.3 5 PROMISSORY NOTE DATED FEBRUARY 27, 1998 1 EXHIBIT 10.3 AMENDED AND RESTATED PROMISSORY NOTE
- ------------------------------------------------------------------------------------------------------------------ Principal Date Maturity Loan Call Collateral Account Officer Initials No. - ------------------------------------------------------------------------------------------------------------------ $14,000,000.00 02-27-1998 09-30-2000 - ------------------------------------------------------------------------------------------------------------------
Borrowers: Search Financial Services Holding Company Search Financial Services of Florida, Inc. Search Financial Services of Georgia, Inc. Search Financial Services of Louisiana, Inc. Search Financial Services of Oklahoma, Inc. Search Financial Services of Puerto Rico, Inc. Search Financial Services of Tennessee, Inc. Search Financial Services of Texas, Inc. Lender: Hibernia National Bank (TIN: 72-0210640) 313 Carondelet Street Post Office Box 61540 New Orleans, Louisiana 70161 Principal Amount: $14,000,000.00 Date of Note: February 27, 1998 PROMISE TO PAY. Search Financial Services Holding Company, Search Financial Services of Florida, Inc., Search Financial Services of Georgia, Inc., Search Financial Services of Louisiana, Inc., Search Financial Services of Oklahoma, Inc., Search Financial Services of Puerto Rico, Inc., Search Financial Services of Tennessee, Inc., and Search Financial Services of Texas, Inc. (collectively, "Borrowers" and individually "Borrower") promise to pay to the order of HIBERNIA NATIONAL BANK ("Lender"), in lawful money of the United States of America the sum of Fourteen Million and No/100 Dollars ($14,000,000.00) or such other or lesser amounts as may be reflected from time to time on the books and records of Lender as evidencing the aggregate unpaid principal balance of loan advances made to Borrowers on a revolving line of credit basis as provided below, together with simple interest assessed on a variable rate basis at the rate per annum equal to 2.000 percentage points over the Index provided below, as the Index under this Note may be adjusted from time to time, one or more times, with interest being assessed on the unpaid principal balance of this Note as outstanding from time to time, commencing on February 27, 1998, and continuing until this Note is paid in full. 2 LINE OF CREDIT. This Note evidences a revolving line of credit "master note." Advances under this Note may be requested orally by Borrowers or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credit until Lender receives from Borrowers at Lender's address shown above written notice of revocation of their authority: GEORGE C. EVANS, ROBERT D. IDZI, ELLIS A. REGENBOGEN, and CAROLYN J. MALONE. Requests for advances will be made in accordance with the provisions contained in the Loan Agreement among Borrowers, Search Funding II, Inc., and Lender dated October 6, 1997, as amended by a certain First Amendment to Loan Agreement and Related Documents of even date herewith and as it may hereafter be amended or modified from time to time (the "Loan Agreement"). Borrowers agree to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any deposit account maintained by any Borrower with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (i) any Borrower or any guarantor is in default under the terms of this Note or any agreement that any Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note, (ii) any Borrower or any guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt, (iii) there occurs a material adverse change in the financial condition of any Borrower or any guarantor, or in the total value of the collateral securing repayment of this Note, or (iv) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guaranty of this Note or any other loan with Lender. PAYMENT. Borrowers will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on September 30, 2000. In addition, Borrowers will pay regular monthly payments of accrued unpaid interest beginning March 1, 1998, and all subsequent interest payments are due on the first day of each month after that until this Note is paid in full. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrowers will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent Index which is THE CHASE MANHATTAN BANK PRIME COMMERCIAL LENDING RATE (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute Index after notice to Borrowers. Lender will tell Borrowers the current Index rate upon Borrowers' request. Borrowers understand that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The Index currently is 8.500% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 2.000 percentage points over the Index, resulting in an initial rate of 10.500% per annum. - 2 - 3 OTHER FEES AND CHARGES. In addition to the principal, interest and other fees and charges provided for in this Note, Borrowers agree to also pay all other amounts, fees and charges provided for in the Loan Agreement, including, without limitation, all overlines, overadvances, interest on overlines and overadvances, unused facility fees, facility charges and expenses, and commitment cancellation charges provided for in the Loan Agreement. PREPAYMENT. Borrowers may prepay this Note in full at any time by paying the then unpaid principal balance of this Note, plus accrued simple interest and any unpaid late charges through date of prepayment. Prepayment of the amounts due under this Note shall not constitute termination of any agreement between Borrowers and Lender, including, without limitation, the Loan Agreement. Specifically, Borrowers acknowledge and agree that Lender may be entitled to a commitment cancellation charge provided for in the Loan Agreement. If Borrowers prepay this Note in full, or if Lender accelerates payment, Borrowers understand that, unless otherwise required by law, any prepaid fees or charges will not be subject to rebate and will be earned by Lender at the time this Note is signed. DEFAULT. The following actions and/or inactions shall constitute default events under this Note: Default Under This Note. Should Borrowers default in the payment of any amounts due and payable under this Note. Default Under Loan Agreement. Should any Event of Default occur under the Loan Agreement (as the term "Event of Default" is defined in the Loan Agreement). LENDER'S RIGHT UPON DEFAULT. Should any one or more default events occur or exist under this Note as provided above, Lender shall have the right, at its sole option, to declare formally this Note to be in default and to accelerate the maturity and insist upon immediate payment in full of the unpaid principal balance then outstanding under this Note, plus accrued interest, together with reasonable attorneys' fees, costs, expenses and other fees and charges as provided herein. Lender shall have the further right, again at its sole option, to declare formal default and to accelerate the maturity and to insist upon immediate payment in full of each and every other loan, extension of credit, debt, liability and/or obligation of every nature and kind that any Borrower may then owe to Lender, whether direct or indirect or by way of assignment, and whether absolute or contingent, liquidated or unliquidated, voluntary or involuntary, determined or undetermined, secured or unsecured, whether any Borrower is obligated alone or with others on a "solidary" or "joint and several" basis, as a principal obligor or otherwise, all without further notice or demand, unless Lender shall otherwise elect. ATTORNEYS' FEES. If Lender refers this Note to an attorney for collection, or files suit against Borrowers to collect this Note, or if any Borrower files for bankruptcy or other relief from creditors, Borrowers agree to pay Lender's reasonable attorneys' fees. DEPOSIT ACCOUNTS. As collateral security for repayment of this Note and all renewals and extensions, as well as to secure any and all other loans, notes, indebtedness and obligations that any - 3 - 4 Borrower may now and in the future owe to Lender or incur in Lender's favor, whether direct or indirect, absolute or contingent, due or to become due, of any nature and kind whatsoever, each Borrower hereby grants Lender a continuing security interest in any and all funds that each Borrower may now and in the future have on deposit with Lender or in certificates of deposit on other deposit accounts as to which each Borrower is an account holder (with the exception of IRA, pension, and other tax-deferred deposits). Borrowers further agree that Lender may, at any time after a default event occurs, apply any funds that any Borrower may have on deposit with Lender or in certificates of deposit or other deposit accounts as to which any Borrower is an account holder (with the exception of IRA, pension and other tax-deferred deposits) against the unpaid balance of this Note and any and all other present and future indebtedness and obligation that any Borrower may then owe to Lender, in principal, interest fees, costs, expenses, and attorneys' fees. GOVERNING LAW. Borrowers agree that this Note and the loan evidenced hereby shall be governed under the laws of the State of Louisiana. Specifically, this business or commercial Note is subject to La.-R.S. 9:3509, et seq. INTEREST AFTER DEFAULT. If Lender declares this Note to be in default, Lender has the right prospectively to adjust and fix the simple interest rate under this Note, until this Note is paid in full, to 3.000 percentage points in excess of the interest rate under this Note at the time of default. MAXIMUM INTEREST RATE. Anything to the contrary contained herein notwithstanding, no provision of this Note shall require the payment or permit the collection of interest in excess of the maximum permitted by applicable law (the "Maximum Rate"). If interest in excess of the Maximum Rate is provided for in this Note or otherwise in connection with the loan transaction represented by this Note, or is adjudicated to be so provided, the provisions of this paragraph shall govern and prevail, and no Borrower or any guarantor shall be obligated to pay the excess amount of such interest or any other excess sum paid for the use, forbearance, or detention of Advances made under this Agreement. In the event Lender ever receives, collects or applies, as interest due and payable under this Note, any sum in excess of the Maximum Rate, the amount of the excess shall be applied as a payment and reduction of the principal of the Indebtedness represented by this Note; and if the principal of the Indebtedness represented by this Note has been fully paid, any remaining excess shall forthwith be paid to Borrowers. In determining whether or not interest paid or payable exceeds the Maximum Rate, Borrowers and Lender shall, to the extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread, in equal or unequal parts, the total amount of interest throughout the entire contemplated term of the Indebtedness represented by this Note so that interest for the entire term does not exceed the Maximum Rate. WAIVERS. Each Borrower and each guarantor of this Note hereby waives demand, presentment for payment, protest, notice of protest, notice of nonpayment, notice of acceleration and notice of intent to accelerate, and all pleas of division and discussion, and agrees that its obligation and liabilities to Lender hereunder shall be on a "solidary" or "joint and several" basis. Each Borrower and each guarantor further severally agrees that discharge or release of any party who is or may be liable to Lender for the Indebtedness represented hereby, or the release of any collateral directly or - 4 - 5 indirectly securing repayment hereof, shall not have the effect of release any other party or parties, who shall remain liable to Lender or of releasing any other collateral that is not expressly released by Lender. Each Borrower and each guarantor additionally agrees that Lender's acceptance of payment other than in accordance with the terms of this Note, or Lender's subsequent agreement to extend or modify such repayment terms, or Lender's failure or delay in exercising any rights or remedies granted to Lender, shall likewise not have the effect of releasing any Borrower or any other party or parties from their respective obligations to Lender, or of releasing any collateral that directly or indirectly secures repayment hereof. In addition, any failure or delay on the part of Lender to exercise any of the rights and remedies granted to Lender shall not have the effect of waiving any of Lender's rights and remedies. Any partial exercise of any rights and/or remedies granted to Lender shall furthermore not be construed as a waiver of any other rights and remedies; it being each Borrower's intent and agreement that Lender's rights and remedies shall be cumulative in nature. Each Borrower and each guarantor further agrees that, should any default event occur or exist under this Note, any waiver or forbearance on the part of Lender to pursue the rights and remedies available to Lender, shall be binding upon Lender only to the extent that Lender specifically agrees to any such waiver or forbearance in writing. A waiver or forbearance on the part of Lender as to one default event shall not be construed as a waiver or forbearance as to any other default. SUCCESSORS AND ASSIGNS LIABLE. Each Borrower's and each guarantor's obligations and agreements under this Note shall be binding upon each Borrower's and each guarantor's respective successors, heirs, legatees, devisees, administrators, executors and assigns. The rights and remedies granted to Lender under this Note shall inure to the benefit of Lender's successors and assigns, as well as to any subsequent holder or holders of this Note. CAPTION HEADINGS. Caption headings of the sections of this Note are for convenience purposes only and are not to be used to interpret or to define their provisions. In this Note, whenever the context so requires, the singular includes the plural and the plural also includes the singular. SEVERABILITY. If any provision of this Note is held to be invalid, illegal or unenforceable by any court, that provision shall be deleted from this Note and the balance of this Note shall be interpreted as if the deleted provision never existed. PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. LENDER AND BORROWERS HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR ANY BORROWER AGAINST THE OTHER. - 5 - 6 AMENDMENT. This Note is given in amendment, restatement, and modification, but not in extinguishment or novation of, that certain Promissory Note dated October 6, 1997 in the original principal amount of $25,000,000.00 executed by the Borrowers and Search Funding II, Inc. and payable to the order of the Lender. BORROWERS: SEARCH FINANCIAL SERVICES HOLDING COMPANY SEARCH FINANCIAL SERVICES OF FLORIDA, INC. SEARCH FINANCIAL SERVICES OF GEORGIA, INC. SEARCH FINANCIAL SERVICES OF LOUISIANA, INC. SEARCH FINANCIAL SERVICES OF OKLAHOMA, INC. SEARCH FINANCIAL SERVICES OF PUERTO RICO, INC. SEARCH FINANCIAL SERVICES OF TENNESSEE, INC. SEARCH FINANCIAL SERVICES OF TEXAS, INC. By: /s/ Robert D. Idzi ---------------------------------- Robert D. Idzi President of each entity - 6 - -----END PRIVACY-ENHANCED MESSAGE-----