Contribution And Assumption Agreement - 8/18/2000

EXHIBIT 10.42


CONTRIBUTION AND ASSUMPTION AGREEMENT


BY AND BETWEEN


FIRSTCITY FUNDING L.P.


AND


DRIVE FINANCIAL SERVICES LP


AUGUST ___, 2000 2


CONTRIBUTON AND ASSUMPTION AGREEMENT


THIS CONTRIBUTION AND ASSUMPTION AGREEMENT (this "AGREEMENT") dated as of the 18th day of August 2000, by and between FIRSTCITY FUNDING L.P., a Texas limited partnership ("AUTO") and DRIVE FINANCIAL SERVICES LP, a Texas limited partnership ("DRIVE").


Auto and Drive may be referred to collectively herein as "PARTIES" and individually as a "PARTY."


RECITALS


WHEREAS, Auto is engaged in the business of purchasing or originating retail installment sale contracts relating to the sale or refinancing or new or used Automobiles, light trucks, vans or mini-vans, and from time to time has acquired or obtained title to residual interests and other assets related to the business of Auto and its Affiliates; and,


WHEREAS, as part of the recapitalization of Auto and its Affiliates, Auto seeks to acquire thirty-five and nine tenths' percent (35.9%) of the Membership Interests in Drive in exchange for which Drive agrees to accept certain Assets (as defined below or set forth in Schedule 1.1(a)) of Auto and to assume those liabilities and obligations of Auto set forth in Schedule 1.1(b), (the "ASSUMED LIABILITIES").


NOW THEREFORE, in consideration of the mutual covenants made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:


ARTICLE I


DEFINITIONS; INTERPRETATION


"Affiliate" means with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this Agreement, no Drive entity is considered an Affiliate of any Auto or IFA entity.


"Agreement" means this Contribution Agreement, as originally executed and as amended, modified or supplemented from time to time in accordance with its terms.


"Assets" has the meaning set forth in Schedule 1.1(a).


"Assumed Liabilities" has the meaning set forth in the Recitals, above.


"Auto Contribution" has the meaning set out in Section 2.2 herein.


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"Best Knowledge" means, with respect to Auto or Drive, the actual knowledge of each or any of the persons listed on Schedule 1.1(c), after reasonable investigation and verification.


"Business Day" means any day that is not a Saturday, Sunday or day on which banks in Texas or New York are authorized to close.


"Closing" has the meaning set forth in Section 2.1.


"Closing Date" has the meaning set forth in Section 2.1.


"Consent" has the meaning set forth in Section 4.5(a).


"Contracts" has the meaning set forth in Section 4.8(a).


"Cutoff Date" means August 1, 2000.


"Dealer" means, with respect to a Receivable, the executor of an assignment conveying such Receivable to Drive.


"Dealer Agreement" means an agreement between Auto and a Dealer relating to the sale of certain installment contracts to Auto or any of its Affiliates and all documents and instruments relating thereto.


"Dealer Assignment" means, with respect to a Receivable, the assignment executed by a Dealer conveying such Receivable to Drive.


"Encumbrance" means, with respect to any Property, any mortgage, lien, pledge, charge, easement, trust arrangement, right of way, encroachment, conditional sale or title retention arrangement, security interest or other claim or right of any kind in respect of such Property, or any preferential arrangement having the practical effect of constituting a security interest with respect to the payment of any obligation with, or from the proceeds of, such Property.


"Environmental Laws" means all amicable federal state and local laws including statutes, regulations, ordinances, rules of common law and Governmental Approvals, relating to the protection of public health and welfare and/or the environment, including, without limitation, laws governing Regulated Materials, laws relating to the storage, handling and use of chemicals, and laws relating to the protection of environmentally sensitive areas.


"Financed Vehicle" means any new or used automobile, light duty truck, van, minivan, or sport utility vehicle, together with all accessories, additions and parts constituting a part thereof and all accessions thereto securing or purporting to secure, an obligor's indebtedness under a Receivable.


"GAAP" means the United States generally accepted accounting principles as in effect from time to time, consistently applied.


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"Governmental Approval" means any authorization, consent, approval, license, ruling, permit, certification, exemption, filing, order, judgment, decree, publication, notice, declaration, registration or other similar action with, by, of or to any Governmental Authority.


"Governmental Authority" means any government, or any governmental department, commission, agency, authority, instrumentality or subdivision, or any judicial or administrative body, whether domestic, foreign, federal, state or local, having jurisdiction over the matter or matters in question.


"Law" shall mean (a) any administrative, judicial, legislative, or other action, code, consent, decree, constitution, decree, directive, enactment, finding, law, injunction, judgment, order, ordinance, proclamation, regulation, requirement, rule, statute, or writ of a Governmental Authority; or (b) the common law.


"Losses" has the meaning set forth in Section 7.1 herein.


"Material Adverse Effect" means any effect (other than as a result of changes in prevailing interest rates, or in GAAP) that is, or could reasonably be expected to be materially adverse to (i) the Assets, or the ability of Auto or Drive to perform its obligations under this Agreement, (ii) the ability of Drive, after the Closing Date, to conduct its business as contemplated by the Parties on such Closing Date, or (iii) the business, properties, operations or condition (final or otherwise) of Drive or any of its Affiliates, after the Closing Date.


"Member" means equity holder in a general or limited partnership or a limited liability company.


"Membership Interest" means equity interest in a general or limited partnership or a limited liability company.


"Parties" has the meaning set forth in the Introduction to this Agreement.


"Permitted Encumbrance" means (a) Encumbrances listed on Schedule 1.1(d); (b) liens for Taxes not yet due and payable to the extent listed on Schedule 1.1 (b); (c) easements, rights-of-way, building or use restrictions, exceptions, variances, reservations, or similar Encumbrances of record affecting but not materially interfering with the current or intended use or operation of any of the Assets; and, (d) materialmen's liens on Financed Vehicles constituting collateral for any Receivable.


"Person" means an individual, corporation, partnership, limited liability company, joint venture, trust, or unincorporated organization or a federal, state, city municipal or foreign government or an agency or political subdivision thereof


"Preferential Right" has the meaning set forth in Section 4.5(b).


"Property" means any property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, and any right or interest therein.


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"Receivables" has the meaning set forth in Schedule 1.1(a) hereto.


"Regulated Materials" means any substance regulated under Environmental Laws because of their effect or potential effect on public health and the environment, including, without limitation, "Hazardous Substances," any "Petroleum" and "Natural Gas Liquids," as those terms are defined or used in Section 10 1 of the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 U.S. C. Section 960 1, "Hazardous Wastes" as that term is defined pursuant to Section 3001 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6921, PCBs, chlorinated dioxins and furans, lead paint, asbestos, urea formaldehyde, radioactive materials, putrescibles, and infectious materials.


"Related Documents" has the meaning set forth in the Securities Purchase Agreement among FirstCity Financial Corporation, a Delaware corporation; FirstCity Consumer Lending Corporation, a Texas corporation; Auto; FirstCity Funding, L.P., a Texas limited partnership; FirstCity Funding GP Corp., a Texas corporation; IFA Drive GP Holdings LLC, a Delaware limited liability company; and, IFA Drive LP Holdings LLC, a Delaware limited liability company, of even date herewith.


"Retail Contracts" means retail installment loan contracts originated by Auto or an Affiliate of Auto.


"Returns" has the meaning set forth in Section 4.12.


"Taxes" means all taxes, assessments, charges, duties, fees, levies or other governmental charges, including, without limitation, all Federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any person or other entity.


"Interpretation" Each definition used in this Agreement includes the singular and the plural, and reference to the neuter gender includes the masculine and feminine where appropriate. The headings to the Articles and Sections of this Agreement are for convenience of reference and shall not affect the meaning or interpretation of this Agreement. Except as otherwise stated, reference to Articles, Sections, Exhibits and Schedules means the Articles, Sections, Exhibits and Schedules of this Agreement. The Exhibits and Schedules referred to throughout this Agreement are hereby incorporated by reference into, and shall be deemed a part of, this Agreement, provided that no Exhibit that consists of a form of agreement or instrument shall be deemed to become effective until executed and delivered by the applicable parties. Unless the context clearly indicates otherwise, the word "including" when used in this Agreement means "including but not limited to," and the words "hereof," "herein" and


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"hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.


Accounting Terms. All accounting terms not defined herein shall have the meanings determined by GAAP.


ARTICLE 2


CLOSING; CONTRIBUTIONS; ASSUMPTIONS


2.1. Closing. The closing of the transactions provided for in this Agreement and the Related Documents (the "CLOSING") shall be held at the offices of Sullivan & Worchester LLP 767 Third Avenue, New York, New York 10017 on August ___, 2000 or at such place or on such other date as may be agreed to in writing by the Parties (the "CLOSING DATE").


2.2. Auto Contribution. Auto hereby transfers, contributes, and delivers to Drive the Assets set forth in Schedule 1.1(a) (the "AUTO CONTRIBUTION").


2.3. Drive Contribution. (a) Simultaneous with the Auto Contribution and in consideration thereof, Auto shall receive a thirty-five and nine tenths' percent (35.9%) Membership Interest in Drive.


2.4 Assumption of Liabilities. As of the Cutoff Date, Drive shall assume the Assumed Liabilities, as set out in Schedule 1.1(b) hereto, and the Parties hereby confirm and agree that on and after the Cutoff Date, Drive shall assume all duties, obligations, and liabilities or claims against Auto related to the securitization transactions or the FCAR - Bank of America warehouse facility (excluding those duties, obligations and liabilities or claims arising under the Master Purchase Agreement dated March 30, 1999, as amended, among Auto, FirstCity Consumer Finance Corporation, and FCAR Receivables L.L.C.); provided however, that Drive shall not assume or otherwise be responsible for any obligations, known or unknown, contingent or direct, asserted or unasserted that arise before the Cutoff Date with respect to the securitization transactions or the FCAR - Bank of America warehouse facility, except as set forth in Schedule 1.1(b), nor any duties, obligations and liabilities of, or claims nor against, Auto or any of its Affiliates (or their respective employees, agents, officers, directors, trustees, representatives, subsidiaries, past or present shareholders, or Affiliates or any predecessor entities), including, without limitation, any obligations to cure existing defaults (known or unknown or asserted or unasserted) and any responsibility for any act, error or omission related to the business of Auto or any of its Affiliates, or the Assets pertaining to the period prior to the Cutoff Date. The assumption of liabilities by Drive under this Section 2.4 shall not constitute a release by Auto or its Affiliates of the duties, obligations, and responsibilities of Auto or its Affiliates under the basic documents of the securitization transactions and the FCAR - Bank of America warehouse facility.


2.5. Reasonable Efforts to Satisfy Conditions. Each of the Parties shall use its reasonable efforts to cause the deliveries and actions contemplated by this Article 2 to be made or taken, and the conditions to Closing set forth in Article 3 to be satisfied, by the Closing Date.


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2.6 Post Closing Conduct of Business. The Parties agree and acknowledge and Auto hereby covenants to Drive, that the sole business activities of Auto from and after the Closing Date, will be (i) to hold its limited partnership interest in Drive, (ii) carry out its duties, responsibilities and obligations under the Professional Services Agreement (the "Leasing Agreement") among FirstCity Consumer Lending Corporation, FirstCity Servicing of California Corporation, and Drive, (iii) originate (solely to the extent requested from time to time by Drive) Retail Contracts and sell such Retail Contracts pursuant to the terms and conditions of the Amended and Restated Master Purchase Agreement dated as of August 18, 2000, among Auto, FirstCity Consumer Finance, FCAR Receivables L.L.C., and Drive Financial Services LP, as directed by, on behalf of, and for the benefit of Drive, (iv) perform its duties, responsibilities and obligations under the subservicing agreements, basic documents, and Related Documents related to the securitization transactions, the FCAR- Bank of America warehouse facility, and the securitization documents assumed by Drive. Drive agrees and covenants to Auto that it will perform all of its duties, responsibilities and obligations under the Leasing Agreement and will cause FCAR Receivables L.L.C. to purchase from Auto all Retail Contracts originated by Auto at the direction of Drive, from and after the Closing Date.


ARTICLE 3


CONDITIONS PRECEDENT


3.1. Conditions Precedent. (a) The obligation of each Party to consummate the Closing is in each case subject to the satisfaction, or written waiver by Auto and Drive, of the following conditions precedent on or before the Closing Date:


(i) There shall have been no order or preliminary or permanent
injunction entered in any action or proceeding before any United States
federal or state court, or any foreign court, of competent jurisdiction
or Governmental Authority (which has jurisdiction over the enforcement
of any applicable Laws) making illegal or prohibiting the consummation
of the transactions contemplated hereby.


(ii) All Consents and Governmental Approvals, or
registrations, declarations or filings with, or expirations of waiting
periods imposed by or agreed with, any Governmental Authority necessary
for the consummation of the transactions contemplated hereby shall have
been obtained, filed or discharged or shall have occurred.


(iii) The certificate of limited partnership of Drive, in the
form attached hereto as Schedule 3.1(a)(iii) shall have been filed with
the Secretary of State of the State of Delaware.


(iv) Central National Bank shall have been instructed to
deliver the chattel paper evidencing the Receivables to Drive. However,
if such chattel paper is delivered to Auto, Auto will promptly deliver
the chattel paper to Drive.


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(b) The obligation of Drive to consummate the Closing is subject to the satisfaction or written waiver by it, of the following conditions precedent on or before the Closing Date:


(i) The representations and warranties of Auto made in this
Agreement shall be true and correct in all material respects as of the
Closing Date (or, to the extent such representation and warranty
expressly relates to an earlier date, as of such earlier date) and Auto
shall have delivered to Drive an officer's certificate, dated the
Closing Date, to such effect.


(ii) Auto shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement
to be performed or complied with by it as of the Closing Date, and Auto
shall have delivered to Drive an officer's certificate, dated the
Closing Date, to such effect.


(iii) Auto shall have furnished or caused to be furnished to
Drive a secretary's certificate of Auto attaching thereto board
resolutions or other authorizing documents in respect of the
transactions contemplated by this Agreement, a certification of the
incumbency of those Persons executing this Agreement on behalf of such
Person, and true and correct copies of all organizational documents of
such Person (including all amendments and supplements thereto).


(iv) Auto shall have received any and all required Consents to
the transactions contemplated by this Agreement, in form and substance
satisfactory to Drive.


(v) All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to
Drive and its special counsel, and Drive and its special counsel shall
have received all such information and counterpart originals or
certified or other copies of such documents and certificates as Drive
or such special counsel may reasonably request in connection with the
matters contemplated hereby.


(vi) Drive shall have received a certificate as to the good
standing of and payment of franchise taxes by Auto from the Secretary
of State of the State of Texas (to the extent such certificates are
generally issued by such Secretary of State), dated as of a date no
earlier than ten (10) days prior to the Closing Date.


(vii) Auto shall have taken all steps necessary to include
Drive as recipient for all notices and other documentation delivered or
deliverable to Auto relating to the Assets or Assumed Liabilities, and
Drive shall have received all notices and other documentation submitted
by or to any Person to give effect to such additional notice
requirement.


(c) The obligation of Auto to consummate the Closing is subject to the satisfaction, or written waiver by Auto of the following conditions precedent at or before the Closing:


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(i) The representations and warranties of Drive shall be true
and correct in all material respects (except if such representation or
warranty is subject to a materiality or Material Adverse Effect
threshold, in which case it shall be true and correct in all respects)
as of the Closing Date (or, to the extent such representation and
warranty expressly relates to an earlier date, as of such earlier
date), other than any representation and warranty the breach of which
would not result in a Material Adverse Effect, and Drive shall have
delivered to Auto an officer's certificate, dated the Closing Date, to
such effect.


(ii) Drive shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement
to be performed or complied with by it as of the Closing Date, and
shall have delivered to Auto an officer's certificate, dated the
Closing Date, to such effect.


(iii) Drive shall have furnished or caused to be furnished to
Auto a secretary's certificate of Drive, attaching thereto board
resolutions or other authorizing documents in respect of the
transaction contemplated by this Agreement, a certification of the
incumbency of those Persons executing this Agreement on behalf of such
Person, ...