SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 33-97130-A
THE THAXTON GROUP, INC.
(Name of small business issuer in its charter)
South Carolina 57-0669498
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1524 Pageland Highway, Lancaster South Carolina 29271
(Address of principal executive offices)
Issuers telephone number: 803-285-4336
Indicate by check mark whether the issuer (1) has filed all reports required to
by filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months(or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Outstanding at
Class October 31, 1996
Common Stock 3,778,563
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The Thaxton Group, Inc.
Form 10-QSB
September 30, 1996
Table of Contents
Page No.
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1996 3
Consolidated Statements of Income for the three months
ended September 30, 1996 and 1995 4
Consolidated Statements of Income for the nine months
ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 13
and Results of Operations
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 19
2
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Part I
Item 1. Financial Statements
THE THAXTON GROUP, INC.
Consolidated Balance Sheet
September 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash $ 254,286
Finance receivables 63,574,776
Less: Unearned income (15,374,891)
Allowance for credit losses (1,205,170)
-------------
Finance receivables, net (notes 2 and 3) 46,994,715
Premises and equipment, net 1,403,950
Other assets (note 4) 2,232,102
-------------
Total assets $ 50,885,053
=============
Liabilities and Stockholders' Equity
Notes payable (note 3) $ 41,604,196
Accrued interest payable 311,907
Other liabilities 510,108
-------------
Total liabilities 42,426,212
Common stock, $.01 par value; authorized
50,000,000 shares, issued 3,778,863
shares; outstanding,3,778,563 shares 37,789
Additional paid-in-capital 5,185,389
Retained earnings 3,980,863
Deferred stock award (742,500)
Less: Treasury stock (300 shares of
common stock at cost) (2,700)
-------------
Total stockholders' equity 8,458,841
-------------
Total liabilities and stockholders' equity $ 50,885,053
=============
</TABLE>
3
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THE THAXTON GROUP, INC.
Consolidated Statements of Income
Three Months Ended September 30
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest and fee income $3,547,909 $2,430,977
Interest expense 929,799 724,869
------------------ -------------------
Net interest income 2,618,111 1,706,107
Provision for credit losses 577,414 197,754
------------------ -------------------
THE THAXTON GROUP, INC.
Consolidated Statements of Income
Three Months Ended September 30
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net interest income after provision 2,040,696 1,508,353
for credit losses
Other income:
Insurance premiums and 297,916 189,573
commissions, net
Other income 700 6,205
------------------ -------------------
Total other income 298,616 195,778
Operating expenses:
Compensation 954,840 616,183
Telephone, postage, and supplies 172,545 132,839
Net occupancy 170,938 121,059
Insurance 53,358 26,767
Collection expense 48,072 32,542
Travel 32,414 27,735
Professional fees 55,054 17,505
Goodwill amortization 14,514 -0-
Other 178,754 133,980
------------------ -------------------
Total operating expenses 1,680,488 1,108,610
------------------ -------------------
Net income before taxes 658,824 595,522
Income tax expense (benefit)
Current 347,269 233,450
Deferred (99,354) 50,989
------------------ -------------------
Total income tax expense 247,915 284,439
------------------- ------------------
Net income $ 410,909 $ 311,083
=================== ==================
Earnings per share $.11 $.10
================== ===================
</TABLE>
4
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THE THAXTON GROUP, INC.
Consolidated Statements of Income
Nine Months Ended September 30
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest and fee income $10,096,204 $6,026,229
Interest expense 2,720,758 1,704,558
------------------ -------------------
Net interest income 7,375,446 4,321,670
Provision for credit losses 1,423,355 622,743
------------------ -------------------
Net interest income after provision 5,952,091 3,698,927
for credit losses
Other income:
Insurance premiums and 811,631 458,025
commissions, net
Other income 2,000 15,592
------------------ -------------------
Total other income 813,631 473,617
Operating expenses:
Compensation 2,646,622 1,703,237
Telephone, postage, and supplies 524,744 361,585
Net occupancy 459,824 319,633
Insurance 141,063 81,622
Collection expense 142,490 91,051
Travel 91,931 55,671
Professional fees 111,517 38,473
Goodwill amortization 47,895 -0-
Other 687,917 333,583
------------------ -------------------
Total operating expenses 4,854,001 2,984,855
------------------ -------------------
Net income before taxes 1,911,721 1,187,690
Income tax expense (benefit)
Current 840,423 534,460
Deferred (121,452) (69,421)
------------------ -------------------
Total income tax expense 718,971 465,039
------------------- ------------------
Net income $ 1,192,750 $ 722,651
=================== ==================
Earnings per share $.31 $.23
================== ===================
</TABLE>
5
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THE THAXTON GROUP, INC.
Consolidated Statements of Cash Flows
Nine months ended September 30
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities $ 1,838,100 $ 1,162,540
Cash flows from investing activities (12,519,039) (16,791,518)
Cash flows from financing activities 9,106,741 15,725,431
--------- ----------
Net (decrease) increase in cash (1,574,198) 96,453
Cash at beginning of period 1,828,484 248,842
---------- -------
Cash at end of period $ 254,286 $ 345,295
============ ==========
</TABLE>
6
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THE THAXTON GROUP, INC.
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(1) Summary of Significant Accounting Policies
The Thaxton Group, Inc. (the Company) is incorporated under the laws of
the state of South Carolina and operates branches in South Carolina,
North Carolina, Virginia, Georgia and Tennessee. The Company is a
diversified consumer finance company that is engaged primarily in
purchasing and servicing retail installment contracts purchased from
independent used car dealers and making and servicing personal loans to
borrowers with limited credit histories, low incomes or past credit
problems. The Company also offers insurance premium financing to such
borrowers. The Company provides reinsurance through a wholly-owned
subsidiary, TICO Reinsurance, Ltd. (TRL). All significant inter-company
accounts and transactions have been eliminated in consolidation.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
The following is a description of the more significant accounting and
reporting policies which the Company follows in preparing and presenting
its financial statements.
(a) Interest and Fee Income
Interest income from finance receivables is recognized using the
interest (actuarial) method on an accrual basis. Accrual of income
on finance receivables continues until the receivable is either
paid off in full, is charged off, or, in the case of Automobile
Sales Contracts, the collateral is repossessed. Fee income
consists primarily of late fees which are credited to income when
they become due from borrowers. For receivables which are renewed,
interest income is recognized using a method similar to the
interest (actuarial) method.
(b) Allowance for Credit Losses
Additions to the allowance for credit losses are based on
management's evaluation of the finance receivable portfolio based
on current economic conditions, overall portfolio quality,
charge-off experience, and such other
7
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factors which in management's judgment, deserve recognition
in estimating credit losses. Loans are charged-off when,
in the opinion of management, such loans are deemed to be
uncollectible or six months has elapsed since the date of the
last payment, whichever occurs first. While management uses
the best information available to make evaluations, future
adjustments to the allowance may be necessary if conditions
differ substantially from the assumptions used in making the
evaluations.
(c) Non-file Insurance
Non-file insurance is written in lieu of recording and perfecting
the Company's security interest in the assets pledged on certain
loans. Non-file insurance premiums are collected from the borrower
on certain loans at inception and renewal and are remitted
directly to an insurance company. Certain losses related to such
loans, which are not recoverable through life, accident and
health, or property insurance claims, are reimbursed through
non-file insurance claims subject to policy limitations. Any
remaining losses are charged to the allowance for credit losses.
(d) Premises and Equipment
Premises and equipment are reported at cost less accumulated
depreciation which is computed using the straight-line method for
financial reporting and accelerated methods for tax purposes.
Maintenance and repairs are charged to expense as incurred and
improvements are capitalized.
(e) Insurance
The Company remits a portion of credit life, accident and health,
property and auto insurance premiums written in connection with
certain loans to an unaffiliated insurance company at the time of
origination. Any portion of the premiums remitted to this
insurance company which are not required to cover their
administrative fees or to pay reinsurance claims expense are
returned to the Company through its reinsurance subsidiary, TRL,
and are included in insurance premiums and commissions in the
accompanying consolidated statements of income. Unearned insurance
commissions are accreted to income over the life of the related
insurance contracts using a method similar to that used for the
recognition of finance charges.
(f) Employee Savings Plan
The Company offers a payroll deduction savings plan to all its
employees. The Company pays interest monthly at an annual rate of
10% on the prior months ending balance. Employees may withdraw
savings on demand.
8
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(g) Income Taxes
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(Statement 109), requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset
and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(h) Earnings Per Share
Earnings per share is calculated using the weighted average shares
outstanding adjusted for the 10,025.48 for one stock split
declared by the board of directors on September 8, 1995. All share
and per share data have been retroactively adjusted for the stock
split.
(i) Intangible Assets
Intangible assets include the premium paid to acquire Eagle
Premium Finance which is amortized on a straight-line basis over
10 years.
(j) Interim Unaudited Financial Statements
Information with respect to September 30, 1996 and 1995, and the
three and nine month periods then ended, have not been audited by
the Company's independent auditors, but in the opinion of
management, reflect all adjustments (which include only normal
recurring adjustments) necessary for the fair presentation of the
operations of Company.
9
<PAGE>
(2) Finance Receivables
Finance receivables consisted of the following at September 30, 1996 and
1995:
1996 1995
---- -----
Consumer $58,921,933 38,481,789
Real estate secured 762,186 800,216
Insurance premium finance 3,622,198 4,928,913
Wholesale loans 268,458 240,807
------- -------
Total finance receivables 63,574,776 44,451,725
Unearned interest (14,740,601) (10,250,782)
Unearned insurance premiums, net (634,289) (706,643)
Allowance for credit losses (1,205,170) (765,172)
----------- ---------
Finance receivables, net $46,994,715 32,729,128
=========== ==========
Consumer loans include bulk purchases of receivables, auto dealer
receivables under holdback arrangements, and small consumer loan
receivables. With bulk purchase arrangements, the Company typically
purchases a group of receivables from an auto dealer or other retailer at
a discount to par based on management's review and assessment of the
portfolio to be purchased. This discount amount is then maintained in an
unearned income account to which losses on these loans are charged. To
the extent that losses from a bulk purchase exceed the purchase discount,
the allowance for credit losses will be charged. To the extent losses
experienced are less than the purchase discount, the remaining discount
is accreted into income. The amount of bulk purchased receivables, net of
unearned interest and insurance, and the related purchase discount
outstanding were approximately $7,271,088 and $1,267,968, respectively,
at September 30, 1996 and approximately $4,266,635 and $657,522,
respectively, at September 30, 1995.
With holdback arrangements, an auto dealer or other retailer will assign
receivables to the Company on a loan-by-loan basis, typically at par. The
Company will withhold a certain percentage of the proceeds, generally 5%
to 10%, as a dealer reserve to be used to cover any losses which occur on
these loans. The agreements are structured such that all or a portion of
these holdback amounts can be reclaimed by the dealer based on the
performance of the receivables. To the extent that losses from these
holdback receivables exceed the holdback amounts, the allowance for
credit losses will be charged. The amount of holdback receivables, net of
unearned interest and insurance, and the related holdback amount
outstanding were approximately $30,499,350 and $1,215,340, respectively,
at September 30, 1996 and approximately $17,938,835 and $1,093,117,
respectively, at September 30, 1995.
10
<PAGE>
At September 30, 1996, $1,913,558 of the purchase discounts and holdback
amounts were included in unearned interest, and $569,750 of purchase
discounts and holdback amounts were netted against repossessions and
included in other assets. At September 30, 1995, $1,535,639 of the
purchase discounts and holdback amounts were included in unearned
interest, and $215,000 of purchase discounts and holdback amounts were
netted against repossessions and included in other assets.
At September 30, 1996, there were no significant concentrations of
receivables in any type of property or from one borrower.
These receivables are pledged as collateral for a line of credit
agreement.
Changes in the allowance for credit losses for the nine months ended
September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Beginning balance $ 908,800 424,425
Valuation allowance for acquired loans 28,842 135,547
Provision for credit losses 1,423,355 622,743
Charge-offs (1,390,424) (490,638)
Recoveries 234,597 73,095
------------ ------------
Net charge-off (1,155,827) (417,543)
------------ ------------
Ending balance $ 1,205,170 765,172
============ ============
</TABLE>
The Company's loan portfolio primarily consists of short term loans, the
majority of which are originated or renewed during the current year.
Accordingly, the Company estimates that fair value of the finance
receivables is not materially different from carrying value.
(3) Indebtedness
At September 30, 1996, the Company maintained a line of credit agreement
with a commercial finance company for $80 million maturing on July 31,
1998. Of this amount, approximately $40.0 million remained at September
30, 1996. Borrowings under this arrangement bear interest at the lender's
prime rate plus a specified percentage, payable monthly. The carrying
amount of this financial instrument approximates market value.
The terms of the line of credit agreement provide that the finance
receivables are pledged as collateral for the amount outstanding. The
agreement requires the Company to maintain certain financial ratios at
established levels and comply with other non-financial requirements.
Also, the agreement prohibits the company from distributing more than 50%
of it's net income. As of September 30, 1996, it is management's opinion
that the Company met all such ratios and requirements.
11
<PAGE>
The Company also had borrowings from credit insurance companies which
totaled $750,000 at September 30, 1996 and $300,000 at September 30,
1995. Borrowings at September 30, 1996 consisted of a $500,000 note
maturing in May 1998 and bearing interest at prime plus 2% reset
quarterly, and a $250,000 note payable upon a sixty day demand bearing
interest at prime plus 2% reset monthly. The carrying amount of these
financial instruments approximates market value.
(4) Non-earning Assets
As of June 30, 1996, the Company began to classify repossessed
automobiles as non-earning assets and include them in other assets at
realizable value. Previously, repossessed units had been included in
finance receivables, adjusted to realizable value by dealer reserves and
holdback amounts included in unearned interest. Amounts receivable
related to repossessed automobiles and related dealer reserves and
holdback amounts included in other assets at September 30, 1996 and 1995
were as follows:
1996 1995
---- -----
Amounts receivable related to
repossessed automobiles $1,299,138 490,000
Dealer reserves and holdbacks (569,750) (215,000)
------------ ----------
Realizable value $ 729,388 275,000
=========== ========
All September 30, 1995 amounts have been restated to reflect this
treatment.
12
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Thaxton Group, Inc.(the "Company") is a diversified consumer finance
company that, operating in South Carolina, North Carolina, Virginia, Georgia and
Tennessee under the name "TICO Credit Company," is engaged primarily in
purchasing and servicing retail installment contracts ("Automobile Sales
Contracts") originated by independent used automobile dealers ("Dealers") and
making and servicing personal loans ("Direct Loans") to persons with limited
credit histories, low incomes or past credit problems ("Non-prime Borrowers").
Under the name "TICO Premium Finance Company" in North Carolina and South
Carolina the Company finances insurance premiums ("Premium Finance Contracts"),
primarily for personal lines of insurance purchased by Non-prime Borrowers
through independent agents ("Premium Finance"). A subsidiary of the Company is
engaged in Premium Finance in Virginia under the name "Eagle Premium Finance".
The Company, as agent, also sells various insurance products (primarily credit
life and credit accident and health) in conjunction with the purchase of
Automobile Sales Contracts or the making of Direct Loans.
The Company believes the best opportunities for continued growth in its
Automobile Sales Contract and Direct Loan portfolios lie in the opening of new
branch offices in small to medium-sized markets in the states where the Company
presently operates and contiguous states that management believes to be under
served by its competitors. The Company opened an office in Augusta, Georgia
during the second quarter of 1996, and plans to open one or more additional
branch offices in 1996 and three or more in 1997. The Company estimates that the
capital expenditure necessary for opening each new branch office is
approximately $21,000. While there are certain risks associated with such
expansion, the Company believes that its ability to identify and retain branch
management personnel having established relationships with Dealers, its
expertise in extending and servicing credit to Non-prime Borrowers and other
factors will enable it to manage anticipated growth in its branch office network
and in its Automobile Sales Contract and Direct Loan portfolios. The Company
will continue to expand its Premium Finance Contract portfolio by establishing
and broadening relationships with insurance agencies having a client base in
need of premium financing. The Company also periodically may make bulk purchases
of Automobile Sales Contracts and Premium Finance Contracts if such purchases
are deemed beneficial to the Company's competitive position and portfolio mix.
On October 31, 1996, the Company acquired Thaxton Insurance Group (TIG) by
exchanging common stock for all of the outstanding common stock and series A
preferred stock of TIG. TIG operates nineteen independent insurance agencies in
North and South Carolina. Based upon unaudited financial information prepared by
the management of TIG, at June 30, 1996 TIG had assets of $6.3 million with
revenues of $2.1 million for the six months then ended.
13
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Profitability
The following table sets forth certain data relating to the Company's
profitability.
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Net Finance Receivables(1) $45,875,230 $29,011,951 $42,598,449 $23,422,619
Average notes payable 39,019,732 25,666,639 36,272,503 20,543,444
Interest and fee income 3,547,909 2,430,977 10,096,204 6,026,229
Interest expense 929,799 724,869 2,720,758 1,704,558
----------- ---------- ---------- -----------
Net interest income 2,618,111 1,706,107 7,375,446 4,321,670
Average interest rate earned(1) 30.94% 33.52% 31.60% 34.30%
Average interest rate paid(1) 9.53 11.30 10.00 11.06
----- ------ ----- ------
Net interest spread 21.41 22.22 21.60 23.24
Net interest margin(2) 22.83% 23.52% 23.09% 24.60%
</TABLE>
- ------------
(1) Averages are computed using month-end balances during the periods
presented.
(2) Net interest margin represents net interest income divided by average Net
Finance Receivables.
Financial Condition at September 30, 1996 and 1995
Finance Receivables at September 30, 1996 were $63,574,776 versus
$44,415,725 at September 30, 1995, a 43% increase. The primary component of this
increase was Automobile Sales Contracts, which increased from $28,816,757 at
September 30, 1995 to $48,522,580 at September 30, 1996, or 68%. The Company
opened four branch offices in 1995 and one in 1996 dedicated to Automobile Sales
Contract Origination, which generated a significant volume of Automobile Sales
Contracts in 1996. The Company also completed a large bulk loan acquisition
during the third quarter of 1996. Premium Finance Contracts have decreased 27%
since the end of the third quarter of 1995, due to the the Company's decision to
reduce its exposure in Virginia.
Unearned income at September 30, 1996 was $15,374,891 versus $10,957,425
at September 30, 1995, a 40% increase which was directly related to the higher
volume of Automobile Sales Contract originations during 1996 and the dealer
reserves associated therewith.
The allowance for credit losses as a percentage of average Net Finance
Receivables decreased from 3.27% at September 30, 1995 to 2.83% at September 30,
1996, due to the increase in the relative portion of Automobile Sales Contracts
in the portfolio. Automobile Sales Contracts carry a lower allowance due to the
loss coverage provided by dealer reserves.
Stockholders' equity increased from $2,623,048 at September 30, 1995 to
$8,458,841 at September 30, 1996, a 222% increase, as a result of the proceeds
of the initial public offering, conversion of subordinated debt to equity, and
retained earnings from after tax profits during the period.
Results of Operations for the Three Months Ended September 30, 1996 and 1995
The growth in finance receivables during the three months ended September
30, 1996 versus the comparable period in 1995 resulted in higher levels of
interest and fee income. Interest and fee income
14
<PAGE>
for the three months ended September 30, 1996 was $3,547,909, versus
$2,430,977 for the three months ended September 30, 1995, a 46% increase.
Interest expense also was higher, increasing to $929,799 for the three months
ended September 30, 1996 versus $724,869 forthe three months ended September
30, 1995, a 28% increase. The increase in interest expense was due to the
higher levels of borrowings needed to fund finance receivable originations,
partially offset by reductions in the Company's cost of funds.
Net interest income for the three months ended September 30, 1996
increased to $2,618,111 from $1,706,107 for the comparable period of 1995, a 53%
increase. The increases in net interest income are attributable to the higher
levels of finance receivables. Interest spread for the third quarter of 1996
declined slightly compared to third quarter of 1995, due to the higher
proportion of Automobile Sales Contracts in the portfolio at September 1996.
The provision for credit losses established for the three months ended
September 30, 1996 was $577,414, versus $197,754 for 1995. The increase in the
provision was due to the increase in receivables outstanding as well as more
conservative reserving practices.
Insurance commissions net of insurance cost increased to $297,916 for the
three months ended September 30, 1996 from $189,573 for 1995, a 57% increase
primarily due to the higher levels of Automobile Sales Contract originations,
the triggering event for most sales of insurance products to borrowers.
Operating expenses increased from $1,108,610 for the three months ended
September 30, 1995 to $1,680,488 for 1996, a 52% increase. The increase in
expenses was due to opening new offices and expenses incurred related to being a
public company, including one additional executive officer, in addition to a
general increase in costs associated with administering a significantly larger
finance receivable portfolio.
Net income increased to $410,909 for the three months ended September 30,
1996 from $311,083 for 1995. The increase in net income was due to higher levels
of net interest and insurance income, partially offset by higher loss provisions
and expenses.
Results of Operations for the Nine Months Ended September 30, 1996 and 1995
The growth in finance receivables during the nine months ended September
30, 1996 versus the comparable period in 1995 resulted in higher levels of
interest and fee income. Interest and fee income for the nine months ended
September 30, 1996 was $10,096,204, versus $6,026,229 for the nine months ended
September 30, 1995, a 68% increase. Interest expense also was higher, increasing
to $2,270,758 for the nine months ended September 30, 1996 versus $1,704,558 for
the nine months ended September 30, 1995, a 33% increase. The increase in
interest expense was due to the higher levels of borrowings needed to fund
finance receivable originations, partially offset by reductions in the Company's
cost of funds.
Net interest income for the nine months ended September 30, 1996 increased
to $7,375,446 from $4,321,670 for the comparable period of 1995, a 71% increase.
The increases in net interest income are attributable to the higher levels of
finance receivables, the interest income and fees from which more than offset
the 6.1% decrease in net interest spread for the nine months ended September 30,
1996 versus 1995.
The provision for credit losses established for the nine months ended
September 30, 1996 was $1,423,355, versus $622,743 for 1995. The increase in the
provision was due to the increase in receivables outstanding as well as more
conservative reserving practices
15
<PAGE>
Insurance commissions net of insurance cost increased to $811,631 for the
nine months ended September 30, 1996 from $458,025 for 1995, a 77% increase
primarily due to the higher levels of Automobile Sales Contract originations,
the triggering event for most sales of insurance products to borrowers.
Operating expenses increased from $2,984,855 for the nine months ended
September 30, 1995 to $4,854,001 for 1996, a 63% increase. The increase in
expenses was due to opening new offices and expenses incurred related to being a
public company, including one additional executive officer, in addition to a
general increase in costs associated with administering a significantly larger
finance receivable portfolio.
Net income increased to $1,192,750 for the nine months ended September 30,
1996 from $722,651 for 1995, an increase of 65%. The increase in net income was
due to higher levels of net interest and insurance income, partially offset by
higher loss provisions and expenses.
Financial Condition at September 30, 1996 and December 31, 1995
Cash decreased from $1,828,484 at December 31, 1995 to $254,286 at
September 30, 1996, due to the use of the proceeds from the initial public
offering being used to pay down the Company's Revolving Credit Facility.
Finance receivables at September 30, 1996 were $63,574,776 compared to
$47,900,235 at December 31, 1995, an increase of 33%. The primary component of
this increase was Automobile Sales Contracts, which increased $16,066,926 or
50%. Premium Finance Contracts outstanding decreased 27%, due to the Company's
decision to reduce it's exposure in Virginia.
Unearned income increased from $11,020,232 at December 31, 1995 to
$15,574,776 at September 30, 1996, a 40% increase. The allowance for credit
losses increased from $908,800 at December 31, 1995 to $1,205,170 at September
30, 1996, an increase of 33%. The increase was due to the increase in
receivables outstanding as well as more conservative reserving practices.
Stockholders' equity increased from $7,177,890 at December 31, 1995 to
$8,458,841 at September 30, 1996, an 18% increase, as a result of retained
earnings from after tax profits during the period.
16
<PAGE>
Credit Loss Experience
Provisions for credit losses are charged to income in amounts sufficient
to maintain the allowance for credit losses at a level considered adequate to
cover the expected future losses of principal and interest in the existing
finance receivable portfolio. Credit loss experience, contractual delinquency of
finance receivables, the value of underlying collateral and management's
judgment are factors used in assessing the overall adequacy of the allowance and
resulting provision for credit losses. The Company's charge-off policy is based
on an account by account review of delinquent receivables. Losses on finance
receivables secured by automobiles are recognized at the time the collateral is
repossessed. Other finance receivables are charged off when they become
contractually past due 180 days, unless extenuating circumstances exist leading
management to believe such finance receivables will be collectible. Finance
receivables may be charged off prior to the normal charge-off period if
management deems them to be uncollectible.
The following table sets forth the Company's allowance for credit losses at
September 30, 1996, and 1995 and the credit loss experience over the periods
presented.
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Average net finance receivables(1) $45,875,230 $29,011,951 $42,598,449 $23,422,619
Allowance for credit losses 1,205,170 765,172 1,205,170 765,172
Allowance for credit losses as a percentage of 2.63% 2.64% 2.83% 3.27%
average net finance receivables (1)
Dealer reserves and discounts on bulk purchases (3) $2,483,308 $1,750,639 $2,483,308 $1,750,639
Dealer reserves and discounts on bulk purchases as 6.94% 7.76% 6.94% 7.76%
percentage of Automobile Sales Contracts at period
end(2)
Allowance for credit losses and dealer reserves and 8.04% 8.67% 8.66% 10.74%
discount on bulk purchases as a percentage of
average finance receivables (1)
Provision for credit losses $577,414 $197,754 $1,423,355 $622,743
Charge-offs (net of recoveries) 503,181 176,485 1,155,827 417,543
Charge-offs (net of recoveries) as a percentage of 4.39% 2.43% 3.62% 2.38%
average net finance receivables (1)
</TABLE>
---------------------
(1) Averages are computed using month-end balances of Net Finance
Receivables during the period presented.
(2) Percentages are computed using Automobile Sales Contracts, net
of unearned finance charges only.
(3) Amount remaining after allocation to repossessed automobiles.
17
<PAGE>
The following table presents an allocation of the Company's reserves and
allowances for credit losses, by type of receivable. The allowance for credit
losses has been allocated on an approximate basis between Direct Loans and
Premium Finance Contracts because losses on Automobile Sales Contracts are
charged against dealer reserves if the originating dealer's Specific Reserve
Account is adequate to cover the loss. The entire allowance is, however,
available to absorb losses occurring on any type of finance receivable. The
allocation is not indicative of future losses.
<TABLE>
<CAPTION>
At September 30,
1996 1995
<S> <C> <C>
Dealer reserves and discounts on bulk purchases on Automobile $2,483,308 $1,705,639
Sales Contracts, after allocation to repossessed automobiles
Allowance for credit losses:
Direct Loans 1,001,488 561,280
Premium Finance Contracts 203,682 140,726
------- -------
Subtotal 1,205,170 765,172
--------- -------
Total $3,614,244 $2,515,811
========== ==========
</TABLE>
The following table sets forth certain information concerning Automobile
Sales Contracts and Direct Loans at the end of the periods indicated:
<TABLE>
<CAPTION>
At September 30,
1996 1995
<S> <C> <C>
Automobile Sales Contracts and Direct Loans contractually $516,473 $288,358
past due 90 days or more(1)
Automobile Sales Contracts and Direct Loans (1) 44,129,221 29,566,260
Automobile Sales Contracts and Direct Loans contractually 1.17% .98%
past due 90 days or more as a percentage of Automobile
Sales Contracts and Direct Loans
</TABLE>
- -------------------------
(1) Finance receivable balances are presented net of unearned finance
charges, dealer reserves on Automobile Sales Contracts and discounts on bulk
purchases.
18
<PAGE>
The following table sets forth certain information concerning Premium
Finance Contracts at the end of the periods indicated:
At September 30,
1996 1995
Premium finance contracts contractually $89,543 $146,273
past due 60 days or more(1)
Premium finance contracts outstanding(1) 3,500,913 4,751,824
Premium finance contracts contractually 2.6% 3.1%
past due 60 days or more as a percentage
of premium finance contracts
- -------------------------------------------
(1) Finance receivable balances are presented net of unearned finance charges
and discounts on bulk purchases
Liquidity and Capital Resources
The Company generally finances its operations and new offices through cash
flow from operations and borrowings under the Revolving Credit Facility. On July
29, 1996 the Company and its primary lender agreed to amend the Revolving Credit
Facility to provide for borrowings of up to $80 million through July 31, 1998,
an increase of $30 million. As of September 30, 1996, approximately $40 million
was outstanding under the Revolving Credit Facility and there was $40 million
available for additional borrowing. Funds borrowed under the Revolving Credit
Facility bear interest at a rate equal to a designated prime rate plus a fixed
percentage. The amended Revolving Credit Facility provides for a lower fixed
percentage over prime than did the previous agreement. Amounts outstanding may
not exceed specified percentages of eligible finance receivables. The Revolving
Credit Facility imposes several financial and other covenants, including
leverage tests, dividend restrictions, and minimum net worth requirements. The
Company does not believe these covenants will materially limit its business or
its expansion strategy.
Management believes that the recent increase in the maximum borrowings
under the Revolving Credit Facility, in addition to cash expected to be
generated from operations, will provide the resources necessary to pursue the
Company's business and growth strategy through 1997. The company is currently
investigating several options for raising additional funds to support growth in
future years.
Part II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Information in response to this item is incorporated by
reference from the attached Index to Exhibits.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the quarter ended
September 30, 1996.
19
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Thaxton Group, Inc.
(Registrant)
Date: October 31, 1996 /s/James D. Thaxton
-------------------
James D. Thaxton
President and Chief Executive Officer
Date: October 31, 1996 /s/Kenneth H. James
-------------------
Kenneth H. James
Vice President, Secretary, and
Chief Financial Officer
20
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit No. Description Page No.
<S> <C> <C>
2 Stock Purchase Agreement, dated as of September 1, 1995 with Eagle Premium --
Finance Company, Inc.(1)
3.1 Amended and Restated Articles of Incorporation of The Thaxton Group, Inc.(1) --
3.2 Bylaws of the Thaxton Group,Inc.(1) --
10.1 Amended and Restated Loan and Security Agreement dated March 27, 1995 between --
Finova Capital Corporation and the Company(1)
10.2 Loan Agreement dated May 16, 1994 between the American Bankers Insurance --
Company of Florida and the Company(1)
10.3 Promissory note dated April 1, 1995 payable in the amount of $250,000 to --
Thaxton Insurance Group(1)
10.4 Promissory note dated April 1, 1995 payable in the amount of $165,000 to C. L. --
Thaxton, Sr. (1)
10.5 Promissory note dated April 1, 1995 payable in the amount of $250,000 to --
Katherine D. Thaxton(1)
10.6 Promissory note dated April 1, 1995 payable in the amount of $35,000 to --
Katherine D. Thaxton (1)
10.7 Promissory note dated May 1, 1995 payable in the amount of $350,000 to Thaxton --
Insurance Group(1)
10.8 Promissory note dated August 21, 1995 payable in the amount of $100,000 to --
Katherine D. Thaxton(1)
10.9 Security Agreement dated January 19, 1995 between the Company and Oakland Auto --
Sales, including Guaranty by Thaxton Insurance Group, Inc.(1)
10.10 Form of Restricted Stock Award between the Company and Robert L Wilson --
10.11 The Thaxton Group, Inc. 1995 Stock Incentive Plan(1) --
10.12 The Thaxton Group, Inc. Employee Stock Purchase Plan(1) --
10.13 Form of Note Conversion Agreement(1) --
10.14 Amended and Restated Schedule to Loan and Security Agreement dated February 23, --
1996 between Finova Capital Corporation and the Company(2)
10.15 Incentive Stock Option Agreement between Kenneth H. James and the Company (2) --
10.16 Incentive Stock Option Agreement between James A. Cantley and the Company(2) --
10.17 Loan Agreement dated March 18, 1996 between the American Bankers Insurance --
Company of Florida and the Company(2)
10.18 Amended and Restated Schedule to Loan and Security Agreement dated February 23, 22
1996 between Finova Capital Corporation and the Company(2)
10.19 Aircraft Sales Agreement between Corporate Aircraft Marketing and The Company 36
dated July 16, 1996
11 Statement re: computation of per share earnings 9
21 Subsidiaries of The Thaxton Group, Inc. (1) --
27 Financial Data Exhibit 43
</TABLE>
- -----------------------------------
(1) Incorporated by reference from Registration Statement on Form SB-2,
Commission File No. 33-97130-A
(2) Incorporated by reference from 1995 Annual Report on Form 10-KSB
21
<PAGE>
Exhibit 10.18
FINOVA Capital Corporation
Rediscount Finance
SECOND AMENDED AND RESTATED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
Borrower: THE THAXTON GROUP, INC.
Address: 1524 PAGELAND HIGHWAY
LANCASTER, SOUTH CAROLINA 29721
Date: JULY 29, 1996
This Second Amended and Restated Schedule to Loan and Security
Agreement ("Second Amended Schedule") is executed in conjunction with a certain
Amended and Restated Loan and Security Agreement ("Agreement"), dated March, 27,
1995, by and between FINOVA Capital Corporation, as Lender, and the above
Borrower, formerly known as C.L. Thaxton & Sons, Inc., as Borrower and as an
amendment and restatement of that certain Schedule to Loan and Security
Agreement, dated March 27, 1995 and that certain First Amended and Restated
Schedule, dated February 23, 1996 (collectively referred to herein as "Prior
Schedules"). The terms and provisions of this Second Amended Schedule shall
supersede all terms and provisions contained in the Prior Schedules. All
references to Section numbers herein refer to Sections in the Agreement.
1.9.A. MAXIMUM AMOUNT OF AN ELIGIBLE RECEIVABLE (SECTION 1.9).
The term "Maximum Amount of an Eligible Receivable"
shall mean for each Receivable Category as set forth
below:
Category One (Direct Loan Receivable) - the sum of
Seven Thousand Five Hundred Dollars ($7,500.00)
remaining due thereon at any date of determination.
Category Three (Vehicle Receivable) - the sum of
Twenty Thousand Dollars ($20,000.00) remaining due
thereon at any date of determination.
22
<PAGE>
1.9.B. MAXIMUM TERM OF AN ELIGIBLE RECEIVABLE (SECTION 1.9).
The "Maximum Term of an Eligible Receivable" shall be
for each Receivable Category as set forth below:
Category One (Direct Loan Receivable) - the period of
Forty-Eight (48) months remaining until the due date
of such Eligible Receivable at any date of
determination.
Category Two (Insurance Premium Receivable) - the
period of Twelve (12) months remaining until the due
date of such Eligible Receivable at any date of
determination.
Category Three (Vehicle Receivable) - the period of
Forty-Eight (48) months remaining until the due date
of such Eligible Receivable at any date of
determination.
1.9.C. RECEIVABLE LIMITATIONS - EXPANDED (SECTION 1.9).
Notwithstanding the provisions of Section 1.9, up to
Ten percent (10%) of the aggregate dollar amount of
Eligible Receivables may be composed of Category One
Receivables (Direct Loan Receivables) and/or Category
Three (Vehicle Receivables) which exceed the Maximum
Amount of an Eligible Receivable and the Maximum Term
of an Eligible Receivable applicable to Category One
Receivables (Direct Loan Receivables) and/or Category
Three (Vehicle Receivables), provided said
Receivables satisfy all other requirements of this
Section 1.9. and the balance remaining due on any
such Receivable does not exceed Thirty Thousand
Dollars and the term remaining until the due date of
such Receivable does not exceed Sixty (60) months, at
any date of determination.
1.9.D. AGING PROCEDURES AND ELIGIBILITY TEST (SECTION 1.9).
AGING PROCEDURES FOR A CONTRACTUAL AGING FOR THE FOLLOWING RECEIVABLE
CATEGORIES:
CATEGORY ONE (DIRECT LOAN RECEIVABLES)
1. No payment missed or due = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 to 90 days past due = "90 day Account".
5. 91 or more days past due = "90 + day Account"
CATEGORY TWO (INSURANCE PREMIUM RECEIVABLES)
1. No payment missed or due = Current.
2. 1 to 30 days past due = "30 day NC Account".
(financing contract not canceled)
23
<PAGE>
3. 31 or more days past due = "30+ day NC Account".
(financing contract not canceled)
4. 1 to 30 days past due = "30 day Canceled Account".
(financing contract canceled)
5. 31 to 60 days past due = "60 day Canceled Account".
(finance contract canceled)
6. 61 or more days past due = "60 + day Canceled Account".
(finance contract canceled)
For the purposes of the Loan Documents the cancellation of an insurance
receivable shall be immediately effective upon the effective cancellation date
of the associated insurance policy.
CATEGORY THREE (VEHICLE RECEIVABLES)
1. No payment missed or due = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 or more days past due = "60 + day Account".
ELIGIBILITY TEST:
The term "Eligibility Test" shall mean the test to determine the eligibility of
a Receivable for the purposes of Section 1.9 hereof, that test, being as follows
for each Receivable Category:
Category One (Direct Loan Receivables)
(1) No payment due on said Receivable remains unpaid
more than ninety (90) days from the specific date on
which such payment was due pursuant to the terms of
said Receivable;
(2) If the initial advance of said Receivable was
greater than One Thousand Dollars ($1,000.00), the
payment of said Receivable shall be secured by
collateral; and
(3) If said Receivable is purchased from a third party
wherein the Borrower is or will become obligated to
such third party in conjunction with the purchase of
such Receivable through a "reserve" or other
liability arrangement, all of such third party's
rights in and to the "reserve" or other liability
shall subordinated to Lender in all respects, except
as set forth below, in a form and substance
satisfactory to Lender. This provision shall not
restrict Borrower from making a payment or payments
to a third party for a reserve or other liability
arrangement, or a part thereof, provided such payment
is then contractually due to such third party,
pursuant to a written agreement executed at or prior
to the time the respective Receivable was purchased
by Borrower, and an Event of Default does not then
exist.
24
<PAGE>
Category Two (Insurance Premium Receivables)
(1) No payment due on said Receivable remains unpaid more
than (i) thirty (30) days for Category Two
Receivables that the contractual obligation
evidencing such Receivable has not been canceled
according to the terms of such Receivable and (ii)
sixty (60) days for Category Two Receivables that the
contractual obligation evidencing such Receivable has
been canceled according to the terms of such
Receivable, from the specific date on which such
payment was due pursuant to the terms of said
Receivable.
(2) The insurance company issuing the insurance policy of
which said Receivable evidences the financing of the
payment of the premiums with respect to such
insurance policy meets one of the following criteria:
(i) rated "C+" or better pursuant to the
current edition of "Best's Key Rating Guide -
Property and Casualty" as published by the A.M.
Best Company ("A.M. Best"); or
(ii) a member of a state reinsurance facility
or shared pool.
(3) No more than twenty percent (20%) of the aggregate
outstanding balance of all Category Two Receivables
can evidence the financing of the payment of premiums
for insurance policies for any one insurance company
is not one of the following:
(i) rated "A-" or better by A.M. Best; or
(ii) a member of a state reinsurance facility or
shared pool.
Category Three (Vehicle Receivables)
(1) No payment due on said Receivable remains unpaid more
than sixty (60) days from the specific date on which
such payment was due pursuant to the terms of said
Receivable.
(2) If said Receivable is purchased from a third party
wherein the Borrower is or will become obligated to
such third party in conjunction with the purchase of
such Receivable through a "reserve" or other
liability arrangement, all of such third party's
rights in and to the "reserve" or other liability
shall subordinated to Lender in all respects, except
as set forth below, in a form and substance
satisfactory to Lender. This provision shall not
restrict Borrower from making a payment or payments
to a third party for a reserve or other liability
arrangement, or a part thereof, provided such payment
is then contractually due to such third party,
pursuant to a written agreement executed at or prior
to the time the respective Receivable was purchased
by Borrower, and an Event of Default does not then
exist.
1.27 ADDITIONAL DEFINITIONS (SECTION 1.27, 1.28, 1.29, 1.30, 1.31, 1.32, 1.33,
1.34, 1.35, 1.36, 1.37, 1.38 AND 1.39)
The following definitions are hereby added in their entirety as Section
1.27, 1.28, 1.29, 1.30, 1.31, 1.32, 1.33, 1.34, 1.35, 1.36, 1.37, 1.38 and
1.39:
" 1.27 DIRECT LOAN RECEIVABLE . The term "Direct Loan
Receivable" shall mean any Receivable of Borrower, except any
Receivable that the proceeds of such Receivable were used to
purchase a motor vehicle and such Receivable is secured by
such motor vehicle, including but not limited to vehicles
purchased from any entity affiliated, directly or indirectly,
with Borrower, or a Receivable that evidences the financing of
the payment of insurance premiums. Direct Loan Receivables
shall be deemed "Category One Receivables" herein.
25
<PAGE>
" 1.28 INSURANCE PREMIUM RECEIVABLE. The term "Insurance
Premium Receivable" shall mean a Receivable that evidences the
financing of the payment of insurance premiums. Insurance
Premium Receivables shall be deemed "Category Two Receivables"
herein.
" 1.29 VEHICLE RECEIVABLE. The term "Vehicle Receivable" shall
mean a Receivable that the proceeds of such Receivable were
used to purchase a motor vehicle and such Receivable is
secured by such motor vehicle purchase by Borrower from
unaffiliated third parties. Vehicle Receivables shall be
deemed "Category Three Receivables" herein.
" 1.30 BULK PURCHASE RESERVES. The term "Bulk Purchase
Reserves" shall mean the unearned purchase discount of a group
(more than one) of Receivables that are purchased by Borrower
with respect to such Receivables.
" 1.31 DEALER RESERVE. The term "Dealer Reserve" shall mean
the amount due to a dealer with respect to a Receivable
wherein the Borrower is or will become obligated to such
dealer in conjunction with the purchase or transfer of such
Receivable, through an agreement in writing, containing a
"reserve" or other liability arrangement between the dealer
and Borrower.
" 1.32 CHARGE OFFS. The term "Charge Offs" shall mean the
amount due (including the principal balance plus all earned
fees and charges) pursuant to a Receivable on the date that
Borrower charges off such Receivable as uncollectible,
pursuant to Borrower's policies and/or procedures.
" 1.33 COLLATERAL RECOVERY RATE. The term "Collateral Recovery
Rate" shall mean, for twelve (12) calendar months immediately
preceding any date of determination, (i) the total cash
collected from all Receivables (including but not limited to
all cash proceeds from charge off recoveries), divided by (ii)
the sum of (a) the Included Rebates plus (b) the total cash
collected from all Receivables (excluding all cash proceeds
from charge off recoveries) plus (c) the aggregate of all
Charge Offs for that period.
" 1.34 INCLUDED REBATE PERCENTAGE. The term "Included Rebate
Percentage" shall mean, for any period of determination, the
percentage determined by (i) the aggregate of all Charge Offs
for that period, divided by (ii) the Nonpayment Net Receivable
Reductions for that period.
" 1.35 INCLUDED REBATES. The term "Included Rebates" shall
mean, for any period of determination, (i) the aggregate of
all rebates of interest for that period, multiplied by (ii)
the Included Rebate Percentage.
" 1.36 NONPAYMENT NET RECEIVABLE REDUCTIONS. The term
"Nonpayment Net Receivable Reductions" shall mean, for any
period of determination, the sum of (i) the aggregate of all
Charge Offs for that period, plus (ii) the aggregate of all
net refinanced balances of a Receivable for that period.
" 1.37 TRANCHE "A" CREDIT FACILITY. The term "Tranche "A"
Credit Facility" shall mean that certain portion of the
availability of the Loan as determined pursuant to the
provision of Section 2.16 hereof.
" 1.38 TRANCHE "B" CREDIT FACILITY. The term "Tranche "B"
Credit Facility" shall mean that certain portion of the
availability of the Loan as determined pursuant to the
provision of Section 2.17 hereof.
" 1.39 CRR ADVANCE RATE. The term "CRR Advance Rate" shall
mean, on any date of determination, the Collateral Recovery
Rate percentage less fifteen percentage points (.15).
26
<PAGE>
The definitions set forth below are hereby amended in their entirety as
follows:
" 1.16 LEVERAGE RATIO. The term "Leverage Ratio" shall mean,
at any date of determination, the remainder of the total
liabilities of Borrower, including the outstanding balance of
the Indebtedness, less the outstanding balance of all
Subordinated Debt divided by the sum of the amount of
Borrower's Tangible Net Worth plus the outstanding balance of
all Subordinated Debt plus the outstanding balance of that
portion of the Indebtedness outstanding pursuant to the
Tranche "B" Credit Facility.
2.1. AMOUNT OF LOAN (SECTION 2.1)
Section 2.1, AMOUNT OF LOAN, is hereby deleted and the following is
substituted in lieu thereof:
"2.1 AMOUNT OF LOAN. Subject to the terms, covenants and
conditions hereinafter set forth, Lender agrees upon the
Borrower's request from time to time, until the Maturity Date,
to make advances to Borrower (collectively, the "Loan"), in an
aggregate amount not to exceed at any time outstanding the
lesser of the following: (a) the Amount of Revolving Credit
Line (Schedule Section 2.1.A.), (b) the sum of the Amount of
the Tranche "A" Credit Facility plus the Amount of the Tranche
"B" Credit Facility (Schedule Section 2.1.A.) or (c) the
Availability on Eligible Receivables (Schedule Section
2.1.B.). Within the limits of this Section 2.1, Borrower may
borrow, repay and reborrow the advances. The Loan is a renewal
and extension, and not an extinguishment, of the indebtedness
due to Lender by Borrower as of the date hereof. The Loan
shall be evidenced by the Note.
2.1.A. AMOUNT OF REVOLVING CREDIT LINE, AMOUNT OF THE TRANCHE "A" CREDIT
FACILITY AND AMOUNT OF THE TRANCHE "B" CREDIT FACILITY (SECTION 2.1):
The "Amount of the Revolving Credit Line" is Eighty Million
Dollars ($80,000,000.00).
The "Amount of the Tranche "A" Credit Facility" is Seventy
Million Dollars ($70,000,000.00).
The "Amount of the Tranche "B" Credit Facility" is Ten Million
Dollars ($10,000,000.00).
2.1.B. AVAILABILITY ON ELIGIBLE RECEIVABLES (SECTION 2.1):
The "Availability on Eligible Receivables" shall be the sum of
the following:
(i) with respect to the Tranche "A" Credit Facility, an amount
equal to the lesser of:
(a) eighty-five percent (85%) of the
aggregate unmatured and unpaid amount due to
Borrower from the Account Debtor named
thereon, excluding all unearned finance
charges, Bulk Purchase Reserves and Dealer
Discounts pursuant to the Eligible
Receivables, or
(b) the Amount of the Tranche "A" Credit Facility;
27
<PAGE>
(ii) with respect to the Tranche "B" Credit Facility, an
amount equal to the lesser of:
(c) one hundred percent (100%) of the
aggregate unmatured and unpaid amount due to
Borrower from the Account Debtor named
thereon, excluding all unearned finance
charges, Bulk Purchase Reserves and Dealer
Discounts pursuant to the Eligible
Receivables less the amount of the
availability for the Tranche "A" pursuant to
Schedule Section 2.1.B.(i) hereinabove; or
(d) one hundred percent (100%) of the
aggregate unmatured and unpaid amount due to
Borrower from the Account Debtor named
thereon, including all unearned finance
charges, Bulk Purchase Reserves and Dealer
Discounts pursuant to the Eligible
Receivables multiplied by the CRR Advance
Rate, less the amount of the availability
for the Tranche "A" pursuant to Schedule
Section 2.1.B.(i) hereinabove, or
(e) the Amount of the Tranche "B" Credit Facility.
2.2. STATED INTEREST RATE (SECTION 2.2).
TRANCHE "A" CREDIT FACILITY STATED INTEREST RATE
The "Tranche "A" Credit Facility Stated Interest
Rate" shall be lesser of (i) the Governing Rate plus One
percent (1.00%) per annum; or (ii) the Maximum Rate.
TRANCHE "B" CREDIT FACILITY STATED INTEREST RATE
The "Tranche "B" Credit Facility Stated Interest
Rate" shall be lesser of (i) the Governing Rate plus Five
percent (5.00%) per annum; or (ii) the Maximum Rate.
2.2.A. INTEREST RATE (SECTION 2.2)
"2.2 INTEREST RATE. The outstanding principal balance of the
Indebtedness allocated hereunder to the Tranche "A" Credit Facility
shall bear interest at the Tranche "A" Credit Facility Stated Interest
Rate (Schedule Section 2.2). The portion of the outstanding principal
balance of the Indebtedness allocated hereunder to the Tranche "B"
Credit Facility shall bear interest at the Tranche "B" Credit Facility
Stated Interest Rate (Schedule Section 2.2). If the aggregate
outstanding balance of the Indebtedness allocated to the Tranche "A"
Credit Facility is or becomes more than the Tranche "A" Credit Facility
Availability, then in that event, the amount of the balance in excess
of the Tranche "A" Credit Facility Availability shall be allocated to
the Tranche "B" Credit Facility hereunder. Each request for advance
hereunder shall set forth the most current availability calculation for
the Tranche "A" and the Tranche "B" availability and the portion of
such requested advance that is to be allocated to increase the
outstanding balance of either the Tranche "A" Credit Facility and/or
the Tranche "B" Credit Facility.
28
<PAGE>
If Lender is ever prevented from charging or collecting
interest at the rates set forth in Tranche "A" Credit Facility Stated
Interest Rate Section (i) or the Tranche "B" Credit Facility Stated
Interest Rate Section (i) because interest at such rates when applied
to the outstanding balance of the Indebtedness would exceed interest at
the Maximum Rate, then such restricted rate or rates shall continue to
be the Maximum Rate until Lender has charged and collected the full
amount of interest chargeable and collectable had interest at the rate
set forth in such Stated Interest Rate Sections (i) always been
lawfully chargeable and collectible. As the Governing Rate changes, the
rate set forth in each Stated Interest Rate Section (i) shall be
increased or decreased (subject to the Maximum Rate) on the first day
of each calendar month to correspond with the change in the Governing
Rate then in effect and shall remain fixed at such rate until the first
day of the next succeeding calendar month, notwithstanding fluctuations
in the Governing Rate during the month. All changes in the Governing
Rate shall be made without notice to Borrower. The monthly interest due
on the principal balance of the Indebtedness allocated to Tranche "A"
Credit Facility and Tranche "B" Credit Facility outstanding shall be
computed for the actual number of days elapsed during the month in
question on the basis of a year consisting of three hundred sixty (360)
days and shall be calculated by determining the average daily principal
balance outstanding allocated to the Tranche "A" Facility and the
Tranche "B" Credit Facility for each day of the month in question. The
daily rate shall be equal to 1/360th times the Stated Interest Rate
(but shall not exceed the Maximum Rate).
2.3. MATURITY DATE (SECTION 2.3.C).
The primary term of this Agreement shall expire on July 31,
1998. If Borrower desires to extend the primary term or any
term thereafter of this Agreement, Borrower shall give Lender
notice of its intent to extend the term no earlier than one
hundred and eighty (180) days and no later than one hundred
and fifty (150) days prior to any expiration date of this
Agreement. Upon the receipt by Lender of Borrower's notice to
extend the term of this Agreement, if Lender desires to renew
and extend the term of this Agreement, Lender shall give
Borrower notice of Lender's intent to extend the term of this
Agreement, within sixty (60) days of Lender's receipt of
Borrower's notice to extend. If Lender does not give Borrower
notice of Lender's intent to extend the term of this Agreement
within the sixty (60) days period, then it shall be deemed
that Lender does not intend to renew and extend the term of
this Agreement. Notwithstanding the foregoing, this Agreement
shall remain in full force and effect until the Indebtedness
due and owing to Lender has been paid in full.
2.6 VOLUNTARY PREPAYMENTS (SECTION 2.6)
Section 2.6 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:
"2.6 VOLUNTARY PREPAYMENTS. Borrower may, at its option,
voluntarily prepay the Indebtedness in full and terminate
Lender's security interest in the Collateral hereunder at any
time, provided, however, that Borrower has given Lender ninety
(90) days written notice of any such intention to prepay the
Indebtedness in full and Borrower pays to Lender the
"Liquidated Damages" (Schedule Section 2.6) as liquidated
damages and not as a penalty for such prepayment. Borrower may
not make such prepayment prior to the expiration of such
ninety (90) day period. Upon written notice of prepayment of
the Indebtedness in full, the commitment by Lender to advance
funds to Borrower and all the obligations of Lender shall
terminate on the expiration of said ninety (90) day notice
period, and the entire amount of the Indebtedness, including
the amount of the Liquidated Damages, shall be due and payable
on such date.
The amount of "Liquidated Damages" shall be, if Borrower
notifies the Lender of Borrower's intention to pay the
Indebtedness in full and requests a termination of Borrower
security interest in the Collateral hereunder (i) on or before
July 31, 1997, the amount of "Liquidated Damages" shall be an
amount equal to one percent (1.00%) multiplied by the Amount
of the Revolving Credit Facility, or (ii) if after July 31,
1997, but on or before January 31, 1998, the amount of
"Liquidated Damages" shall be one-half percent (.50%)
multiplied by the Amount of the Revolving Credit Facility.
29
<PAGE>
2.7. MAXIMUM INTEREST; CONTROLLING AGREEMENT (SECTION 2.7)
Section 2.7 of the Agreement is hereby deleted and the following is
substituted in lieu thereof:
"2.7 MAXIMUM INTEREST; CONTROLLING AGREEMENT. If a court of
competent jurisdiction determines that the laws of any state
other than the State of Arizona apply to this Agreement then
the following paragraph A. shall be applicable to this
Agreement and paragraph 2.7.B. hereinbelow shall be of no
force or effect.
A. It is the intent of the parties hereto to conform
strictly to the usury laws in force that apply to this
transaction. Accordingly, all agreements between Lender and
Borrower, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of
the maturity of the Indebtedness or otherwise, shall the
interest (and all other sums that are deemed to be interest)
contracted for, charged, received, paid or agreed to be paid
to Lender exceed interest computed at the Maximum Rate. If,
from any circumstance whatsoever, interest would otherwise be
payable to Lender in excess of interest computed at the
Maximum Rate and, if from any circumstance Lender shall ever
receive anything of value deemed interest by applicable law in
excess of interest computed at the Maximum Rate, then Lender's
receipt of the same shall be deemed unintentional, the
interest payable to Lender shall be reduced to interest
computed at the Maximum Rate; and so long as no Event of
Default shall be continuing, such excess interest received by
Lender shall, at the option of Lender, be repaid to Borrower
or credited to the unpaid principal balance of the
Indebtedness. If the Indebtedness is prepaid or the maturity
of the Indebtedness is accelerated by reason of an election of
Lender, then the unearned interest, if any, shall be canceled
and, if theretofore paid, shall be either refunded to Borrower
or credited on the Indebtedness as the Lender elects. All
interest paid or agreed to be paid to Lender shall, to the
extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment
in full of the principal (including the period of any renewal
and extension thereof) so that the interest so computed shall
not exceed the Maximum Rate. Notwithstanding that the parties
hereto in good faith deem each and every fee provided by this
Agreement or paid to Lender in connection with this Agreement
to be a bona fide fee for services rendered and to be rendered
separate and apart from the lending of money or the provision
of credit, if any such fee is ever determined by a court of
competent jurisdiction or other tribunal or by Lender to
constitute interest, then the treatment of such fee for usury
purposes shall be controlled by the provisions of this Section
2.7. This paragraph shall control all agreements between
Borrower and Lender.
If a court of competent jurisdiction determines that
the laws of the State of Arizona apply to this Agreement then
the following paragraph B. shall be applicable to this
Agreement and paragraph 2.7.A. hereinabove shall be of no
force or effect.
B. The contracted for rate of interest of the Loan without
limitation, shall consist of the following: (i) the Tranche
"A" Credit Facility Stated Interest Rate and the Tranche "B"
Credit Facility Stated Interest Rate, calculated and applied
to the principal balance of the Note in accordance with the
provisions of the Note and this Agreement; (ii) all interest
after an Event of Default or due date hereof, if any,
calculated and applied to the amounts due under the Note in
accordance with the provisions thereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees
to pay an effective contracted for rate of interest which is
the sum of the above-referenced elements.
All fees, charges, goods, things in action or any other sums
or things of value (other than amounts described in the
immediately previous paragraph), paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to the
Note, this Agreement or any other documents or instruments in
any way pertaining to this lending transaction, or otherwise
with respect to this lending transaction, that under any
applicable law may be deemed to be interest with respect to
this lending transaction, for the purpose of any applicable
law that may limit the maximum amount of interest to be
charged with respect to this lending transaction, shall be
payable by Borrower as, and shall be deemed to be, additional
interest and for such purposes only, the agreed upon and
"contracted for rate of interest" of this lending transaction
shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
30
<PAGE>
It is the intent of the parties to comply with the usury law
("Applicable Usury Law") applicable pursuant to the terms of
the preceding paragraph or such other usury law which is
applicable if the law chosen by the parties is not applicable.
Accordingly, it is agreed that notwithstanding any provisions
to the contrary in the Loan Documents, or in any of the
documents securing payment hereof or otherwise relating
hereto, in no event shall the Loan Documents or such documents
require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the
Applicable Usury Law. In the event (a) any such excess of
interest otherwise would be contracted for, charged or
received from Borrower or otherwise in connection with the
loan evidenced hereby, or (b) the maturity of the indebtedness
evidenced by the Loan Documents is accelerated in whole or in
part, or (c) all or part of the principal or interest of the
Loan Documents shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or
received in connection with the loan evidenced hereby, would
exceed the maximum contract rate permitted by the Applicable
Usury Law, then in any such event (1) the provisions of this
paragraph shall govern and control, (2) neither Borrower nor
any other person or entity now or hereafter liable for the
payment hereof will be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum
contract rate permitted by the Applicable Usury Law, (3) any
such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount
hereof or refunded to Borrower, at Lender's option, and (4)
the effective rate of interest will be automatically reduced
to the maximum amount of interest permitted by the Applicable
Usury Law. It is further agreed, without limiting the
generality of the foregoing, that to the extent permitted by
the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such
rate would exceed the maximum contract rate permitted by the
Applicable Usury Law shall be made by amortizing, prorating,
allocating and spreading during the period of the full stated
term of the loan evidenced hereby, all interest at any time
contracted for, charged or received from Borrower or otherwise
in connection with such loan; and (y) in the event that the
effective rate of interest on the loan should at any time
exceed the maximum contract rate allowed under the Applicable
Usury Law, such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable
Usury Law shall be paid to Lender from time to time, if and
when the effective interest rate on the loan otherwise falls
below the maximum amount permitted by the Applicable Usury
Law, to the extent that interest paid to the date of
calculation does not exceed the maximum contract rate
permitted by the Applicable Usury Law, until the entire amount
of interest which would have otherwise been collected had
there been no ceiling imposed by the Applicable Usury Law has
been paid in full. Borrower further agrees that should the
maximum contract rate permitted by the Applicable Usury Law be
increased at any time hereafter because of a change in the
law, then to the extent not prohibited by the Applicable Usury
Law, such increases shall apply to all indebtedness evidenced
hereby regardless of when incurred; but, again to the extent
not prohibited by the Applicable Usury Law, should the maximum
contract rate permitted by the Applicable Usury Law be
decreased because of a change in the law, such decreases shall
not apply to the indebtedness evidenced hereby regardless of
when incurred.
2.15 UNUSED CREDIT LINE FEE (SECTION 2.15)
The following Section 2.15 is hereby added to the Agreement, in its
entirety:
"2.15 UNUSED CREDIT LINE FEE. Borrower hereby agrees to pay to
Lender monthly, on the fifteenth (15th) day of each month
during the term hereof, for the immediately preceding month,
an amount equal to (i) the outstanding balance of the
Indebtedness subtracted from the Amount of the Revolving
Credit Line multiplied by one-eighth percent (0.125%) per
annum (0.0104% per month)."
31
<PAGE>
2.16 TRANCHE "A" CREDIT FACILITY (SECTION 2.16)
The following Section 2.16 is hereby added to the Agreement:
"2.16 TRANCHE "A" CREDIT FACILITY. The "Tranche "A" Credit
Facility" shall be that portion of the outstanding balance of
the Indebtedness as designated by Borrower as allocated to
Tranche "A" Credit Facility, pursuant to the most current
Request for Advance Form received by Lender, up to and
including an amount, on any date of determination, equal to
the "Tranche "A" Credit Facility Availability" (Schedule
Section 2.1.B.), but shall not exceed the Amount of the
Tranche "A" Credit Facility (Schedule Section 2.1.A.).
2.17 TRANCHE "B" CREDIT FACILITY (SECTION 2.17)
The following Section 2.17 is hereby added to the Agreement:
"2.17 TRANCHE "B" CREDIT FACILITY. The "Tranche "B" Credit
Facility" shall be that portion of the outstanding balance of
the Indebtedness as designated by Borrower as allocated to
Tranche "B" Credit Facility, pursuant to the most current
Request for Advance Form received by Lender, up to and
including an amount, on any date of determination, equal to
the "Tranche "B" Credit Facility Availability" (Schedule
Section 2.1.B.), but shall not exceed the Amount of the
Tranche "B" Credit Facility (Schedule Section 2.1.A.).
3.2. BUSINESS LOCATIONS OF BORROWER (SECTIONS 3.2, 3.6 and 5.1.N.).
All locations are as set forth on a list of locations attached
hereto.
4.4. ANNUAL FINANCIAL STATEMENTS (SECTION 4.4).
Annual audited financial statements to be prepared by a
independent certified public accountant, satisfactory
to Lender.
4.5. GUARANTOR (whether one or more) (SECTION 4.5).
James D. Thaxton (Validity and Support Agreement)
5.1. BORROWER'S TRADENAMES (whether one or more)(SECTION 5.1.B.)
TICO Credit Company
Eagle Premium Finance Company
TICO Premium Finance Company
32
<PAGE>
6.2.A. LEVERAGE RATIO LIMIT (SECTION 6.2.J).
The term "Leverage Ratio Limit" shall mean 7.00 to 1.00.
6.2.B. MINIMUM NET INCOME (SECTION 6.2.K).
The Minimum Net Income shall be One Dollar ($1.00) for any
fiscal year of Borrower.
6.2.C. DISTRIBUTIONS LIMITATION (SECTION 6.2.L).
The Distributions shall not exceed fifty percent (50%) of Net
Income for each fiscal year of Borrower based upon Borrower's
annual audited financial.
6.2.D. MINIMUM TANGIBLE NET WORTH (SECTION 6.2.M.)
The Minimum Tangible Net Worth shall not be less than Six
Million Dollars ($6,000,000.00) during the term hereof.
6.2.E. MODIFICATION TO NEGATIVE COVENANT (SECTION 6.2.C.)
Section 6.2.C. and 6.2.F. are hereby deleted in their entirety
and the following are substituted in lieu thereof:
"C. Be a party to or participate in: (i) any merger
or consolidation; (ii) any purchase or other acquisition of
all or substantially all of the assets or properties or shares
of any class of, or any partnership or joint venture interest
in, any other corporation or entity with an aggregate purchase
price for any acquisition in excess of One Million Dollars
($1,000,000.00), without Lender's prior written consent; (iii)
any sale, transfer, conveyance or lease of all or
substantially all of Borrower's assets or properties; or (iv)
any sale or assignment with or without recourse of any
Receivables. With respect to any acquisition with a purchase
price in excess of One Million Dollars ($1,000,000.00), Lender
shall have the right, but not the obligation to perform its
own audit of the assets or entity to be acquired by Borrower."
"F. Incur, assume or suffer to exist any debt
(including capitalized leases) other than (i) the
Indebtedness, (ii) accounts payable incurred in the ordinary
course of business, (iii) Subordinated Debt, (iv) debt secured
solely by the Premium Finance Receivables, which shall include
an intercreditor agreement between such secured creditor and
Lender in a form and substance acceptable to Lender or (iv)
other Debt consented to in writing by Lender.
8.1. REIMBURSEMENT OF EXPENSES (SECTION 8.1).
Borrower's shall reimburse Lender for Lender expenses incurred
in Lender's attorneys fees and expenses incurred in the
negotiation, preparation and execution of this Schedule and
the other Loan Documents executed in conjunction therewith.
33
<PAGE>
8.2. NOTICES (SECTION 8.2).
Lender: FINOVA Capital Corporation
(copy each office below with all notices)
Corporate Finance Office:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, CA 90071
Attn: John J. Bonano, Senior Vice President
Telephone: (213) 253-1600
Telecopy No.: (213) 625-0268
Corporate Office:
FINOVA Capital Corporation
Dial Tower
Dial Corporate Center
Phoenix, AZ 85077
Attn: Joseph R. D'Amore, Senior Counsel
Telephone: (602) 207-4900
Telecopy No.: (602) 207-5543
Rediscount Finance Office:
FINOVA Capital Corporation
13355 Noel Road, Suite 800
Dallas, TX 75240
Attn: Cash Rohrbough
Telephone: (214) 458-5600
Telecopy No.: (214) 458-5650
Borrower: The Thaxton Group, Inc.
1345 East Arch Street
Lancaster, South Carolina 29721
Telephone:
Telecopy No.:
Guarantor: James D. Thaxton
413 E. Pigg
P. O. Box 338
Pageland, South Carolina 29728
Telephone:
Telecopy No.:
8.17. AGENT FOR SERVICE OF PROCESS (SECTION 8.17).
James D. Thaxton, whose address is 1345 East Arch Street,
Lancaster, South Carolina 29721.
(Agent)
34
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Schedule on the day and
year first set forth above.
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
-------------------------------------------------
(Signature)
-------------------------------------------------
(Printed Name and Title) (Date)
BORROWER:
THE THAXTON GROUP, INC.
a South Carolina corporation
By:
-------------------------------------------------
James D. Thaxton, President (Date)
GUARANTORS:
-------------------------------------------------
James D. Thaxton
35
<PAGE>
PURCHASE AGREEMENT
EXHIBIT "A"
Purchasing: 1995/1982 Silver Eagle $665,000
Trade: None ($ n/a)
Sales Tax: $ n/a
Sub-Total: $665,000
Deposit: ($99,750)
Sub-Total: $565,250
Total Funds Due at Delivery: $565,250
SELLER: BUYER:
Corporate Aircraft Marketing, Inc. Name: The Thaxton Group
2104 Stoney Run Trail Address: 1524 Pageland Highway
Cleveland, Ohio 44147 City, State Lancaster, S.C. 29721
(216) 526-7371
By: /s/ A.J. Mertik By: /s/ Bob Wilson
------------------------------ --------------------------
A.J. Mertik Bob Wilson
TITLE: President TITLE:
----------------------
Executive Vice President
DATED: July 16, 1996 DATED: July 16, 1996
36
<PAGE>
AIRCRAFT SALES AGREEMENT
THIS AGREEMENT, entered into as of this 16th day of July, 1996, by and
between, The Thaxton Group, a company with a place of business that is located
in the State of South Carolina, hereafter referred to as "BUYER"; and CORPORATE
AIRCRAFT MARKETING, INC., a company with a place of business at Cleveland, Ohio,
is hereafter referred to as "SELLER".
WITNESSETH:
WHEREAS, SELLER agrees to sell, and BUYER agrees to purchase, the
AIRCRAFT and/or parts and equipment hereafter described. NOW, THEREFORE, in
consideration of the premises and of the mutual promises herein contained, the
PARTIES hereto do hereby agree as follows:
ARTICLE I -- SUBJECT MATTER OF SALE
SELLER shall sell to BUYER, and BUYER shall purchase from SELLER, any
and all equipment and parts hereafter collectively referred to as "AIRCRAFT".
ARTICLE II -- DELIVERY
SELLER agrees to make AIRCRAFT available to BUYER at the location of
Lancaster, South Carolina, on the date of July 16, 1996, or any such other date
and time that both BUYER and SELLER may agree. SELLER further agrees to assume,
for purposes of this Agreement, all risk of loss or damage to the AIRCRAFT until
the AIRCRAFT shall have been delivered to BUYER. All risks of loss or damage
thereafter shall be borne by BUYER. Upon acceptance of the AIRCRAFT by BUYER, as
evidenced by payment of the purchase price, and the execution and delivery of a
Certificate of Acceptance of the AIRCRAFT by BUYER, Title to the AIRCRAFT shall
pass to BUYER.
37
<PAGE>
ARTICLE III - PURCHASE PRICE AND PAYMENT:
The purchase price of the AIRCRAFT shall be "EXHIBIT A", USD. BUYER shall pay
all taxes, fees and other charges applicable to the sale, transfer, use or
possession of the AIRCRAFT sold and delivered hereunder. Reference is hereby
made to EXHIBIT A for an itemization of all charges in connection with the
purchase of the AIRCRAFT.
ARTICLE IV - DOCUMENTS
A. At the time of acceptance by BUYER of the AIRCRAFT
hereunder as evidence by payment of the purchase price, SELLER shall deliver to
BUYER a Bill of Sale for the AIRCRAFT on a form approved by the Federal Aviation
Administration, conveying good and marketable Title, free and clear of all liens
and encumbrances.
B. At the time of acceptance by BUYER of the AIRCRAFT
hereunder, BUYER shall deliver to SELLER a Certificate of Acceptance of the
AIRCRAFT by BUYER in a form satisfactory to SELLER.
ARTICLE V - WARRANTY OF TITLE
ARTICLES PRODUCT SUITABILITY
Determination of the suitability of the AIRCRAFT for uses and
applications contemplated by BUYER and others shall be the sole responsibility
of BUYER. BUYER assumes all risks and liabilities for results obtained by the
use of the AIRCRAFT.
ARTICLE VI - WARRANTY OF TITLE
DISCLAIMER OF WARRANTIES
SELLER warrants that it has good Title to the AIRCRAFT and
that Title will be transferred to BUYER free and clear of any liens, claims,
charges, mortgages, or encumbrances of any kind whatsoever. Except for the
aforesaid Warranty, the AIRCRAFT is sold by SELLER to BUYER "as is, where is"
and THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE, TYPE OR KIND,
INCLUDING WITHOUT LIMITATION AND IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE. SELLER has not made any statements or
representations to BUYER regarding the fitness of the AIRCRAFT for any specific
application. BUYER has been afforded the opportunity to inspect and has
inspected the AIRCRAFT, at BUYERS sole expense, is familiar with, and is
satisfied with the condition thereof, and acceptance of AIRCRAFT in an "as
is" condition.
38
<PAGE>
ARTICLE VII - CLAIMS, EXCLUSION OF DAMAGES
No claim of any kind, whether as to goods delivered or for
non-delivery of goods, and whether based on Contract, breach of Warranty,
negligence, or otherwise, shall be greater in amount than price of the goods in
respect of which such damages are claimed; and failure to give notice of any
claim within thirty (30) days from date of sale shall constitute an absolute and
unconditional waiver by BUYER of goods. The remedy hereby provided shall be the
exclusive and sole remedy of the BUYER. NO CLAIM OF ANY KIND, WHETHER AS TO
GOODS DELIVERED OR FOR NON-DELIVERY OF GOODS, AND WHETHER OR NOT BASED ON
CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, OR OTHERWISE, SHALL RENDER SELLER
LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
ARTICLE VIII - SEVERABILITY
In the event that any court of competent jurisdiction determines that
any provisions of this contract are void or voidable, that shall not in any
way affect the enforceability or the remaining provisions of this contract.
ARTICLE IX - FORCE MAJEURE
SELLER shall not be responsible or liable for any delay or failure to
deliver any or all of the product if occasioned by: act of God, war, riot,
insurrection, fire, flood, embargo, explosion, accident, breakdown of machinery
or equipment; shortage of or inability obtain fuel, power, raw materials,
equipment, transportation, or the product itself, without litigation and at
usual prices or from usual sources; good faith compliance with any law,
regulation, standard, order, rule or recommendation made by any governmental
authority; strike or labor controversy (SELLER shall not be required to settle
any labor matter against its own best judgment); any cause or circumstance
beyond SELLER'S reasonable control or any other cause or circumstance, whether
similar or dissimilar to the foregoing; which makes impracticable the
production, transportation or delivery of the product or any material used in or
in connection with its production; and the contracted quantity shall be reduced
to the extent of the quantities not delivered due to any such cause or
circumstance. In no event shall SELLER be obligated to purchase product, or to
deliver from any plant or facility other than the shipping point specified
herein, to replace the quantities not delivered due to any such cause or
circumstance.
39
<PAGE>
ARTICLE X - MISCELLANEOUS
A. SPECIAL CONDITIONS. Any special conditions contained on Exhibit A
attached hereto are incorporated herein by reference as part of this Agreement.
B. The terms and conditions contained herein constitute the entire
agreement between the parties hereto with respect to the purchase and sale of
the AIRCRAFT, and shall supersede all other communications, representations or
agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof, and no agreement or understanding varying the terms
and conditions hereof shall be binding upon either party hereto unless executed
after the date hereof in writing and signed by duly authorized representatives
of both parties.
C. This Agreement shall inure to the benefit of and be biding upon each
of the parties hereto and their respective officers, assigns, but this Agreement
may not be assigned by either party without the prior written consent of the
other party.
D. Any notice to be given hereunder shall be deemed sufficiently given
if sent by registered or certified mail or by telegram to the party to which
said notice is to be given at its address as shown below.
E. This Agreement and any transaction or controversy arising herefrom
or relating hereto shall in all respects be governed by and construed in
accordance with the laws of the State of Ohio. BUYER and SELLER hereby submit to
jurisdiction in both the State and Federal courts in Ohio in any dispute arising
out of this Agreement and specifically submit to venue in Cuyahoga County, Ohio.
No waiver by either party of any breach of any of the terms or
conditions contained herein shall be construed as a waiver of any succeeding
breach of the same or any other term or conditon containted herein shall limit
the remedies of SELLER in the event of BUYER'S breach of any term or condition
contained herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their duly authorized representatives as of the date first above written.
SELLER: BUYER:
Corporate Aircraft Marketing, Inc. Name The Thaxton Group
2104 Stoney Run Trail Address 1524 Pageland Highway
Cleveland, Ohio 44147 City, State Lancaster, South Carolina
29721
(216) 526-7371 Phone (803) 415-5101
BY: /s/ A. J. Mertik BY: /s/ Bob Wilson
-------------------------- ---------------------------------------
A. J. Mertik Bob Wilson
TITLE: President TITLE: Executive Vice President
---------------------------------
40
<PAGE>
TO WHOM IT MAY CONCERN:
The Undersigned hereby certifies that We (or They) are the Purchasers of the
below listed Aircraft and that:
- -- The Aircraft was Purchased for Resale by
-----------------------------------
- --------------------------------------------------------------------------------
and our Sales Tax Number is #______________ as in then the State of ___________.
X The Aircraft was purchased for use outside the State of Ohio, and Purchaser is
responsible for all State, Local and Federal Taxes associated with this
transaction.
- -- The Aircraft was purchased for use in the State of Ohio, and Purchaser
assumes responsibility for all State, Local, and Federal Taxes associated with
this transaction.
- -- The Aircraft was purchased for use in the State of Ohio, and Seller
collected Sales Tax as required in the amount of $_______________.
AIRCRAFT 1995/1982 Silver Eagle BUYER The Thaxton Group
REGISTRATION # N67Y Address 1524 Pageland Highway
SERIAL # P210-00772 City, State Lancaster, South Carolina
29721
Phone (803) 415-5101
BY: /s/ Bob Wilson
---------------------------------------
Bob Wilson
TITLE: Executive Vice President
-------------------------------------
PURCHASE DATE July 16, 1996
-----------------------------
41
<PAGE>
AIRCRAFT DELIVERY CERTIFICATE
BUYER: The Thaxton Group
------------------------------------------------------------------
AIRCRAFT: 1995/1982 Silver Eagle
-----------------------------------------------------------------
REGISTRATION #: N67Y
-----------------------------------------------------------------
SERIAL #: P210-00772
-----------------------------------------------------------------
I hereby accept delivery of the above mentioned Aircraft "as is, where is"
except as noted below.
BY: /s/ Bob Wilson
--------------------------------------------------------
Bob Wilson
TITLE: Executive Vice President
--------------------------------------------------------
DATED: July 16, 1996
--------------------------------------------------------
42
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001430
<NAME> THE THAXTON GROUP, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 254,286
<SECURITIES> 0
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</TABLE>
