<PAGE> 1
THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ------------------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
Commission File No. 1-11121
T F C E N T E R P R I S E S, I N C.
(Exact name of registrant as specified in its charter)
Delaware 54-1306895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5425 Robin Hood Road
Suite 101B
Norfolk, Virginia 23513
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (757) 858-1400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of November 13, 1996, there were 11,290,308 outstanding shares of the
registrant's $.01 par value per share common stock.
<PAGE> 2
TFC ENTERPRISES, INC.
REPORT ON FORM 10-Q FOR THE THREE MONTHS
AND NINE MONTHS ENDED SEPTEMBER 30, 1996
Table of Contents and 10-Q Cross Reference Index
Part I - Financial Information Page No.
- ------------------------------ --------
Financial Highlights 3
Financial Statements (Item 1)
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Changes in Shareholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2) 13
Part II - Other Information
- ---------------------------
Exhibits and Reports on Form 8-K (Item 6) 20
Signatures 21
Index to Exhibits 22
2
<PAGE> 3
TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Three months Nine months
(dollar amounts in thousands, ended September 30, ended September 30,
except per share amounts) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (916) $ 2,070 $ (540) $ 5,845
Net income (loss) per common share (.08) $ .18 (.05) $ .52
Average common and common equivalent
shares outstanding (in thousands) 11,290 11,466 11,288 11,320
- ---------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS: (ANNUALIZED, AS
APPROPRIATE)
Return on average common equity NM 17.37% NM 17.05%
Return on average assets NM 3.76 NM 3.96
Yield on interest-earning assets 21.49% 23.35% 21.71% 23.17%
Cost of interest-bearing liabilities 9.68 8.56 9.54 8.46
Net interest margin 14.24 17.54 14.56 17.49
Operating expense as a percentage of average
interest earning assets (a) 14.53 10.41 12.90 11.30
Total net charge-offs to average gross contract
receivables net of unearned interest 19.11 15.93 22.52 13.54
60-day delinquencies to period end gross
contract receivables 7.94 7.76 7.94 7.76
Total allowance and nonrefundable reserve to
period end gross contract receivables net of
unearned interest 15.71 15.46 15.71 15.46
Equity to assets, period end 21.14 21.29 21.14 21.29
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES:
Interest-earning assets (b) $176,097 $229,895 $194,699 $205,803
Total assets 174,952 220,221 189,920 196,579
Interest-bearing liabilities 131,723 156,023 145,841 138,406
Equity 36,909 47,686 37,041 45,715
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Throughout this report, ratios are based on unrounded numbers.
NM - Not meaningful.
(a) Excludes a $1.8 million charge for severance benefits recognized in the
third quarter of 1996.
(b) Average interest-bearing deposits and gross contract receivables net
of unearned interest revenue and unearned discount.
3
<PAGE> 4
TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
(dollars in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 8,929 $ 12,507 $ 3,617
Net contract receivables 139,082 171,051 197,413
Recoverable income taxes 3,126 3,904 219
Property and equipment, net 3,171 2,256 2,303
Goodwill, net 11,046 11,656 11,860
Other intangible assets, net 2,388 2,596 2,666
Deferred income taxes 2,178 6,911 8,083
Other assets 2,128 4,265 2,588
-------- -------- --------
Total assets $172,048 $215,146 $228,749
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Revolving line of credit $ 68,757 $ 59,475 $98,234
Term notes 25,000 50,000 50,000
Automobile Receivables-Backed notes 21,569 47,252 --
Subordinated notes, net 13,780 13,732 14,961
Accounts payable and accrued expenses 4,525 4,146 6,880
Income taxes payable -- -- 5,031
Refundable dealer reserve 1,818 3,250 4,232
Other liabilities 104 887 703
-------- -------- --------
Total liabilities 135,553 178,742 180,041
------- ------- -------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none outstanding -- -- --
Common stock, $.01 par value, 40,000,000 shares
authorized; 11,290,308; 11,283,954 and 11,282,719
shares outstanding, respectively 49 49 49
Additional paid-in capital 54,910 54,279 54,277
Retained deficit (18,464) (17,924) (5,618)
-------- -------- --------
Total shareholders' equity 36,495 36,404 48,708
-------- -------- --------
Total liabilities and shareholders' equity $172,048 $215,146 $228,749
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
----------------------------
Sept. 30, Sept. 30,
(in thousands, except per share amounts) 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and other finance revenue $ 31,707 $35,770
Interest expense 10,440 8,780
- --------------------------------------------------------------------------------------------------------
Net interest revenue 21,267 26,990
Provision for credit losses 2,500 1,500
- --------------------------------------------------------------------------------------------------------
Net interest revenue after provision for credit losses 18,767 25,490
Other revenue:
Commission on ancillary products 1,280 1,696
Other 103 82
Total other revenue 1,383 1,778
- --------------------------------------------------------------------------------------------------------
Operating expense:
Salaries 9,634 9,613
Employee benefits 1,465 1,519
Occupancy 752 504
Equipment 945 842
Amortization of intangibles 819 819
Severance benefits 1,804 --
Other 5,228 4,138
- --------------------------------------------------------------------------------------------------------
Total operating expense 20,647 17,435
- --------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (497) 9,833
Provision for (benefit from) income taxes 43 3,988
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ (540) $ 5,845
- --------------------------------------------------------------------------------------------------------
Primary net income (loss) per common share $ (.05) $ .52
Fully diluted net income (loss) per common share (.05) .52
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
Three months ended
- ------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1996 1996 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 9,459 $10,233 $12,015 $ 13,588 $13,420
3,189 3,393 3,858 3,753 3,341
- ------------------------------------------------------------------------------------------------------------------------
6,270 6,840 8,157 9,835 10,079
-- 1,500 1,000 25,000 1,250
- ------------------------------------------------------------------------------------------------------------------------
6,270 5,340 7,157 (15,165) 8,829
345 425 510 428 602
30 29 44 86 31
375 454 554 514 633
- ------------------------------------------------------------------------------------------------------------------------
3,318 2,998 3,318 2,460 3,270
457 461 547 488 485
271 262 220 208 199
326 358 262 275 348
273 273 273 272 273
1,804 -- -- -- --
1,750 1,810 1,666 1,504 1,408
- ------------------------------------------------------------------------------------------------------------------------
8,199 6,162 6,286 5,207 5,983
- ------------------------------------------------------------------------------------------------------------------------
(1,554) (368) 1,425 (19,858) 3,479
(638) (4) 685 (7,552) 1,409
$ (916) $ (364) $ 740 $(12,306) $ 2,070
- ------------------------------------------------------------------------------------------------------------------------
$ (.08) $ (.03) $ .07 $ (1.09) $ .18
(.08) (.03) .07 (1.09) .18
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
Sept. 30,
----------------------------
(in thousands) 1996 1995
---- ----
<S> <C> <C>
COMMON STOCK
Balance at end of period $ 49 $ 49
-------- --------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $ 54,279 $ 54,259
Stock options exercised 11 18
Deferred compensation termination, net of taxes 620 --
-------- ---------
Balance at end of period $ 54,910 $ 54,277
======== ========
RETAINED DEFICIT
Balance at beginning of period $(17,924) $(11,463)
Net income (loss) (540) 5,845
-------- --------
Balance at end of period $(18,464) $ (5,618)
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
Sept 30,
--------------------------
(In thousands) 1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (540) $ 5,845
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of intangible assets 819 819
Depreciation and other amortization 1,306 873
Provision for (benefit from) deferred income taxes 4,895 (3,226)
Provision for credit losses 2,500 1,500
Changes in operating assets and liabilities:
Decrease in recoverable income taxes 778 122
Decrease (increase) in other assets 1,566 (1,112)
Increase in accounts payable and accrued expenses 379 3,433
Increase in income taxes payable -- 3,063
(Decrease) increase in refundable dealer reserve (1,432) 2,028
(Decrease) increase in other liabilities (196) 146
-------- --------
Net cash provided by operating activities 10,075 13,491
INVESTING ACTIVITIES
Repayment on (net cost of acquiring) contract receivables 29,339 (59,736)
Purchase of property and equipment (1,602) (1,040)
Proceeds on disposal of assets -- 6
-------- --------
Net cash provided by (used in) investing activities 27,737 (60,770)
FINANCING ACTIVITIES
Net borrowings on revolving line of credit 9,282 13,442
(Payments) borrowings on Term notes (25,000) 25,000
Payments on Automobile Receivables-backed notes (25,683) --
Net borrowings on Subordinated notes -- 9,148
Proceeds from stock options exercised 11 18
-- --
Net cash (used in) provided by financing activities (41,390) 47,608
-------- --------
(Decrease) increase in cash and cash equivalents (3,578) 329
Cash and cash equivalents at beginning of period 12,507 3,288
-------- --------
Cash and cash equivalents at end of period $ 8,929 $ 3,617
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
8
<PAGE> 9
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business. TFC Enterprises, Inc., through its wholly-owned
subsidiary, The Finance Company, specializes in purchasing and servicing
installment sales contracts originated by automobile and motorcycle dealers.
Through First Community Finance, Inc., another wholly-owned subsidiary, TFC
Enterprises, Inc. is involved in the direct origination and servicing of small
consumer loans. Based in Norfolk, Virginia, TFC Enterprises, Inc. also has
offices in Jacksonville, Florida; Dallas, Texas; San Diego, California and
throughout Virginia and North Carolina.
Basis of presentation. The unaudited consolidated financial statements of the
Company are prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. These financial statements should be
read in conjunction with the Company's 1995 Annual Report on Form 10-K. In the
opinion of management, all normal recurring adjustments which management of the
Company considers necessary for a fair presentation of the financial position
and results of operations for the periods are reflected in the financial
statements. Operating results for the three and nine months ended September
30, 1996, are not necessarily indicative of the results that may be expected
for the entire year ending December 31, 1996. The balance sheet at December 31,
1995 has been derived from the audited financial statements at that date, but
does not include all information and financial notes required by Generally
Accepted Accounting Principles for complete statements.
2. CONTRACT RECEIVABLES
The following is a summary of contract receivables as of September 30, 1996,
December 31, 1995, and September 30, 1995:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
(in thousands) 1996 1995 1995
-------- -------- ---------
<S> <C> <C> <C>
Gross contract receivables $198,455 $271,039 $299,744
Less:
Unearned interest revenue 30,489 49,878 56,810
Unearned discount 567 1,320 1,704
Unearned commissions 1,243 2,193 2,057
Unearned service fees 179 (210) 12
Payments in process (2) 2,906 3,571
Escrow for pending acquisitions 503 419 620
Allowance for credit losses 12,504 23,046 4,401
Nonrefundable reserve 13,890 20,436 33,156
-------- -------- --------
Net contract receivables $139,082 $171,051 $197,413
======== ======== ========
</TABLE>
9
<PAGE> 10
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CONTRACT RECEIVABLES (CONTINUED)
Changes in the allowance for credit losses and nonrefundable reserve for the
three and nine months ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- -----------------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period $ 17,262 $ 4,714 $ 23,046 $ 5,492
Provision for credit losses -- 1,250 2,500 1,500
Charge-offs (6,109) (2,308) (18,573) (4,708)
Recoveries 1,351 745 5,531 2,117
-------- ------- -------- --------
Balance at end of period $ 12,504 $ 4,401 $ 12,504 $ 4,401
======== ======= ======== ========
NONREFUNDABLE RESERVE
Balance at beginning of period $ 12,027 $29,796 $ 20,436 $ 24,348
Allocation for credit losses 5,076 11,005 11,816 27,318
Charge-offs (3,213) (7,645) (18,362) (18,510)
-------- ------- -------- --------
Balance at end of period $13,890 $33,156 $ 13,890 $ 33,156
======== ======= ======== ========
</TABLE>
10
<PAGE> 11
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE
Primary and fully diluted net income (loss) per common share for the three and
nine months ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ -----------------------
(in thousands, except per share amounts) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER COMMON SHARE:
Net income (loss) $ (916) $ 2,070 $ (540) $ 5,845
Stock and stock equivalents (average shares):
Common shares outstanding 11,290 11,283 11,288 11,283
Stock options (a) -- 183 -- 37
------- ------- ------- -------
Total stock and stock equivalents 11,290 11,466 11,288 11,320
------- ------- ------- -------
Primary net income (loss) per common share (b) $ (.08) $ .18 $ (.05) $ .52
======= ======= ======= =======
FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) $ (916) $ 2,070 $ (540) $ 5,845
Stock and stock equivalents (average shares):
Common shares outstanding 11,290 11,283 11,288 11,283
Stock options (c) -- 189 -- 49
------- ------- ------- -------
Total stock and stock equivalents 11,290 11,472 11,288 11,332
------- ------- ------- -------
Fully diluted net income (loss) per common share (b) $ (.08) $ .18 $ (.05) $ .52
======= ======= ======= =======
</TABLE>
(a) Shares were assumed to be repurchased at the average closing common stock
price of $13.42 and $10.55 in the third quarter and first nine months
of 1995, respectively.
(b) Calculation based on unrounded numbers.
(c) Shares were assumed to be repurchased at the closing common stock
price of $13.50 per common share at September 30, 1995.
11
<PAGE> 12
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. OTHER MATTERS
Defaults under forbearance agreements. As a result of the net losses in the
second and third quarters of 1996, the Company, at September 30, 1996, was not
in compliance with certain aspects of forbearance agreements with lenders. The
Company is currently in discussions with its lenders to resolve the out-of-
compliance situations. Although the Company is not able to predict what the
ultimate resolution of the discussions will be, certain of the remedies
available to the lenders as a result of the defaults include repricing and/or
foreclosure of the loans, which could have a material adverse effect on the
Company's business, financial condition and results of operations, as well as
its ability to continue as a going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
Restructuring of senior management. Effective September 30, 1996, the Company
restructured its senior management as part of its plan to reduce operating
expenses. The restructuring involved the termination of the employment
agreements of four key executives in exchange for approximately $1.8 million in
combined cash payments of $1.4 million and cancellation of certain notes
receivable from these executives in the amount of $0.4 million. The notes
receivable were related to 1995 profit sharing amounts owed to the Company. The
primary purpose of the restructuring was to reduce salary and benefit expense
in the future, and management estimates that the Company will eliminate
approximately $1.0 million in salary and benefit expense each year for the next
three years as a result of the restructuring.
Termination of deferred compensation agreement. In August 1996, the Company and
Robert S. Raley, Jr., the Company's Chairman of the Board, President and Chief
Executive Officer, agreed to terminate all of Mr. Raley's rights to the twenty
year deferred compensation agreement contained in his employment agreement.
Since Mr. Raley is considered a "principal shareholder" of the Company, the
voluntary termination of his deferred compensation agreement and the resultant
elimination of the Company's obligation with respect thereto, aggregating $1.0
million, ($0.62 million after taxes), has been reported as an equity
contribution in the third quarter of 1996.
Service Center Closing. The Company closed its Southwest Regional Service
Center, located in Dallas, Texas, effective the first week of November 1996, as
part of the previously announced plan to reduce operating expenses. Receivables
serviced from this service center were moved to the Company's Norfolk,
Virginia, and Jacksonville, Florida, service centers. The Company estimates the
reduction of salaries and rent associated with the closing of the Dallas
service center to be approximately $3.2 million on an annualized basis. This
reduction will be offset, in part, by the salaries and costs associated with
hiring additional employees in the Norfolk and Jacksonville service centers of
approximately $1.3 million, for a net expense reduction of approximately $1.9
million annually. The Company will continue to maintain a Loan Production
Office in the Dallas area to serve its dealers in the Southwest Region.
Closing of Manassas Corporate Accounting Office. The Company announced the
closing of its Corporate Finance and Accounting Office in Manassas, Virginia
and the transfer of those duties to its Norfolk Corporate Finance and
Administrative Offices effective November 22, 1996. This move will have no
significant impact on expenses; however the move will improve efficiencies in
daily operations.
12
<PAGE> 13
TFC ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In addition to historical information, this report contains forward looking
statements that are subject to risks and uncertainties that could cause the
Company's actual results to differ materially from those anticipated in these
forward looking statements as a result of certain factors, including, but not
limited to, those factors set forth elsewhere in this report. Readers are
cautioned not to place undue reliance on these forward looking statements,
which reflect management's analysis only as of the date hereof.
SIGNIFICANT EVENTS
Service Center Closing. The Company closed its Southwest Regional Service
Center, located in Dallas, Texas, effective the first week of November 1996, as
part of the previously announced plan to reduce operating expenses. Receivables
serviced from this service center were moved to the Company's Norfolk,
Virginia, and Jacksonville, Florida, service centers. The Company estimates the
reduction of salaries and rent associated with the closing of the Dallas
service center to be approximately $3.2 million on an annualized basis. This
reduction will be offset, in part, by the salaries and costs associated with
hiring additional employees in the Norfolk and Jacksonville service centers of
approximately $1.3 million, for a net expense reduction of approximately $1.9
million annually. The Company will continue to maintain a Loan Production
Office in the Dallas area to serve its dealers in the Southwest Region.
Closing of Manassas Corporate Accounting Office. The Company announced the
closing of its Corporate Finance and Accounting Office in Manassas, Virginia
and the transfer of those duties to its Norfolk Corporate Finance and
Administrative Offices effective November 22, 1996. This move will have no
significant impact on expenses; however the move will improve efficiencies in
daily operations.
Other Significant Events. The Company's defaults under its forbearance
agreements, with its lenders, the restructuring of senior management, and
termination of a deferred compensation agreement are discussed in Note 4 of the
Notes to Consolidated Financial Statements on page 12 of this Form 10-Q
Quarterly Report.
RESULTS OF OPERATIONS
Volume. Gross contracts purchased or originated totaled $42.6 million in the
third quarter of 1996, 51% below the $87.7 million purchased in the third
quarter of 1995. For the first nine months of 1996, gross contracts purchased
or originated totaled $98.0 million, or 61% below the $250.7 million purchased
during the first nine months of 1995. The decrease in gross contract purchases
in the third quarter and first nine months was primarily attributable to a
significant reduction in point of sale purchases resulting from adjustments to
the Company's credit and pricing guidelines in late 1995, and to increased
competition from other lenders. These adjustments to the Company's credit and
pricing guidelines were directed toward reducing the rate of future charge-offs
and delinquencies. Management Expects that contract purchase volume for the
remainder of 1996 will continue to be well below the corresponding levels in
1995, and accordingly, this could have a material adverse effect on the
Company's future profitability.
As discussed in the TFC Enterprises, Inc, 1995 Annual Report and Form 10-K,
management's focus in 1996 has been to redirect the Company toward its
traditional military point of sale and civilian portfolio purchase business
lines. In addition, at the beginning of 1996, management also focused on an
expanded "D" paper program referred to as the "Credit Builder" program. In the
first nine months of 1996, gross contract purchase volume for the Credit
Builder program totaled $2.3 million. Purchase volume for the Credit Builder
program in the first nine months of 1996 has not met management's expectations;
accordingly management began to de-emphasize the Credit Builder program in the
second quarter of 1996. This de-emphasis continued into the third quarter of
1996 and is expected to continue. Management continues to focus the Company on
its traditional military point of sale and civilian portfolio purchase business
lines.
13
<PAGE> 14
TFC ENTERPRISES, INC.
Volume. (continued)
Gross contracts purchased or originated were as follows for the three and nine
months ended September 30, 1996, and September 30, 1995:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
GROSS CONTRACT VOLUME --------------------------- ---------------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contracts purchased or originated:
Point of sale $ 19,150 $ 68,274 $ 52,215 $ 197,746
Portfolio 23,472 19,385 45,755 52,983
-------- -------- -------- ---------
Total $ 42,622 $ 87,659 $ 97,970 $ 250,729
======== ======== ======== =========
Number of contracts purchased or originated:
Point of sale 3,338 7,669 8,939 21,440
Portfolio 4,458 4,532 8,657 12,275
-------- -------- -------- ---------
Total 7,796 12,201 17,596 33,715
======== ======== ======== =========
</TABLE>
The decrease in gross contracts purchased or originated in the first nine
months of 1996 reflected reductions in each of the Company's three Regional
Service Centers located in Norfolk, Virginia (Mid-Atlantic), Dallas, Texas
(Southwest), and Jacksonville, Florida (Southern) offset, in part, by an
increase in First Community Finance, Inc. originations. As discussed
previously, the Company closed its Southwest Regional Service Center effective
the first week of November 1996, but maintained a Loan Production Office in the
Dallas area to serve its dealers in the Southwest region.
Gross contract purchase and origination volume for each of the Company's
Regional Service Centers, as well as First Community Finance, was as follows
for the three and nine months ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
GROSS CONTRACT VOLUME BY LOCATION --------------------------- ---------------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service Center:
Mid-Atlantic $ 8,539 $30,356 $28,109 $ 74,990
Southern 15,179 28,717 15,681 98,489
Southwest 15,290 27,251 45,937 74,735
-------- ------- ------- --------
Subtotal 39,008 86,324 89,727 248,214
First Community Finance 3,614 1,335 8,243 2,515
-------- ------- ------- --------
Total $ 42,622 $87,659 $97,970 $250,729
======== ======= ======= ========
</TABLE>
As discussed in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K, the
Company, in the first quarter of 1996, temporarily transferred the underwriting
functions of the Southern Regional Service Center to the Mid- Atlantic Regional
Service Center. This action was taken to improve control over the underwriting
process by reducing the number of locations at which contracts are purchased.
As a result, the Southern Regional Service Center's contract purchase volume
decreased significantly in the first half of 1996. The Company resumed contract
purchases by the Southern Regional Service Center in the third quarter of 1996.
14
<PAGE> 15
TFC ENTERPRISES, INC.
Net interest revenue. Net interest revenue for the third quarter of 1996
totaled $6.3 million, a decrease of 38% compared with $10.1 million in the
prior year period. The decrease was attributable to a reduction in interest
earning assets and a decrease in the net interest margin. For the nine months
of 1996, net interest revenue was $21.3 million, down 21% from $27.0 million in
the first nine months of 1995. The decrease was attributable to a decrease in
the net interest margin and a decrease in net interest earning assets.
The net interest margin was 14.24% in the third quarter of 1996, compared to
17.54% in the third quarter of 1995. For the first nine months of 1996, the net
interest margin was 14.56%, compared to 17.49% in the first nine months of
1995. The decreases were attributable to a reduction in the yield on interest
earning assets and an increase in the cost of interest bearing liabilities.
The yield on interest earning assets was 21.49% for the third quarter of 1996,
compared with 23.35% in the prior year period. For the first nine months of
1996, the yield on interest earning assets was 21.71%, compared with 23.17% in
the first nine months of 1995. The decrease in yield in the third quarter and
first nine months of 1996 was attributable primarily to reductions in the
amount of contract purchase discount accreted to interest revenue as a yield
enhancement.
The cost of interest bearing liabilities was 9.68% and 9.54% in the third
quarter and first nine months of 1996. For the comparable periods last year,
the cost of interest bearing liabilities was 8.56% and 8.46%, respectively.
Relative to the prior year periods, the cost of interest bearing liabilities in
the third quarter and first nine months of 1996 reflected higher interest rates
charged to the Company by its lenders.
The following table summarizes net interest revenue and the net interest margin
for the three and nine months ended September 30, 1996, and September 30, 1995:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
NET INTEREST REVENUE -------------------------- ---------------------------
(dollars in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average interest earning assets (a) $176,097 $229,895 $194,699 $205,803
Average interest bearing liabilities 131,723 156,023 145,841 138,406
-------- -------- -------- --------
Net interest earning assets $ 44,374 $ 73,872 $ 48,858 $ 67,397
======== ======== ======== ========
Interest and other finance revenue $ 9,459 $ 13,420 $ 31,707 $ 35,770
Interest expense 3,189 3,341 10,440 8,780
-------- -------- -------- --------
Net interest revenue $ 6,270 $ 10,079 $ 21,267 $ 26,990
======== ======== ======== ========
Yield on interest earning assets 21.49% 23.35% 21.71% 23.17%
Cost of interest bearing liabilities 9.68 8.56 9.54 8.46
----- ----- ----- -----
Net interest spread 11.81% 14.79% 12.17% 14.71%
===== ===== ===== =====
Net interest margin (b) 14.24% 17.54% 14.56% 17.49%
===== ===== ===== =====
</TABLE>
(a) Average gross contract receivables net of unearned interest revenue and
unearned discount.
(b) Net interest margin is annualized net interest revenue divided by average
interest earning assets.
Operating expense. Operating expense for the third quarter and first nine
months of 1996 was $8.2 million and $20.6 million, respectively, compared with
$6.0 million and $17.4 million in the third quarter and first nine months of
1995. The increase in operating expense was primarily attributable to the
severance benefits of $1.8 million incurred in the third quarter of 1996 and
higher repossession expense. Operating expense as an annualized percentage of
average interest earning assets increased from 10.4% in the third quarter of
1995 to 14.5% in the third quarter of 1996. For the first nine months of 1996,
15
<PAGE> 16
TFC ENTERPRISES, INC.
Operating expense. (continued)
operating expense represented 12.9% of average interest earning assets,
compared to 11.3% in the first nine months of 1995. The increase in the
operating expense ratio in the third quarter and first nine months of 1996,
compared to the respective prior year periods, reflected a significantly lower
level of net contract receivables in 1996. Severance benefits incurred in the
third quarter of 1996 have been excluded from these ratio calculations.
FINANCIAL CONDITION
Assets. Total assets decreased by $43.1 million, or 20.1%, to $172.0 million at
September 30, 1996, from $215.1 million at December 31, 1995, primarily as a
result of a decrease in net contract receivables caused by reduced gross
contract volume.
Net contract receivables. Net contract receivables were $139.1 million, or 80.9%
of total assets at September 30, 1996; $171.1 million, or 80% of total assets
at year-end 1995; and $197.4 million, or 86% of total assets at September 30,
1995. The decrease in net contract receivables at September 30, 1996, compared
with December 31, 1995, and September 30, 1995, primarily reflected the
decrease in gross contract volume in each of the Company's three Regional
Service Centers.
The following table summarizes net contract receivables at September 30, 1996;
December 31, 1995; and September 30, 1995:
<TABLE>
<CAPTION>
NET CONTRACT RECEIVABLES Sept. 30, Dec. 31, Sept. 30,
(in thousands) 1996 1995 1995
-------- -------- ---------
<S> <C> <C> <C>
Service Center:
Mid-Atlantic $ 41,407 $58,406 $ 59,495
Southern 41,581 56,860 74,998
Southwest 48,566 51,393 61,070
-------- -------- --------
Subtotal 131,554 166,659 195,563
First Community Finance 7,528 4,392 1,850
-------- -------- --------
Total $139,082 $171,051 $197,413
======== ======== ========
</TABLE>
Liabilities. Total liabilities were $135.6 million at September 30, 1996, a
decrease of $43.2 million, or 24%, from December 31, 1995 and $44.5 million, or
25%, compared with September 30, 1995. The decrease in liabilities compared to
year-end 1995 and September 30, 1995, primarily reflected decreased borrowings
under the Company's credit facilities which, in turn, resulted from a
contraction in gross contract volume. As a percentage of total liabilities and
equity, liabilities represented 79%, 83% and 79%, respectively, at September
30, 1996; December 31, 1995; and September 30, 1995.
Equity. Equity decreased to $36.3 million at September 30, 1996, from $36.4
million at December 31, 1995, and $48.7 million at September 30, 1995. The
decrease in equity at September 30, 1996, compared with year-end 1995 and
September 30, 1995, was attributable to net operating losses.
16
<PAGE> 17
TFC ENTERPRISES, INC.
CREDIT QUALITY AND RESERVES
Net charge-offs. Net charge-offs to the allowance for credit losses and
nonrefundable dealer reserve were $8.0 million in the third quarter of 1996,
representing an annualized rate of 18.8% of average contract receivables net of
unearned interest revenue. This compares to $9.2 million, or 15.9%, in the
third quarter of 1995. For the first nine months of 1996, net charge-offs were
$31.4 million, or 22.4%, of average contract receivables net of unearned
interest revenue. This compares to $21.1 million, or 13.5%, of average net
contract receivables net of unearned interest revenue in the first nine months
of 1995.
The increase in net charge-offs in the third quarter and first nine months of
1996, relative to the comparable periods in 1995, was due primarily to higher
net charge-offs relating to assets purchased prior to 1996. This increase in
charge-offs was offset, in part, by an increase in recoveries. Recoveries
increased to $1.4 million in the third quarter of 1996 and $5.5 million in the
first nine months of 1996 compared to $.7 million in the third quarter of 1995
and $2.1 million in the first nine months of 1995.
Also contributing to the increase in net charge-offs in the first nine months
of 1996 was a modest tightening of the Company's charge-off guidelines. Prior
to the third quarter of 1995, credits on which no payments had been received
for 120 days were generally charged-off when they became 180 days contractually
past due. In the third quarter of 1995, the payment recency guideline was
reduced from 120 days to 90 days.
Net charge-offs by Regional Service Center for the three and nine months ended
September 30, 1996, and 1995 were as follows:
<TABLE>
<CAPTION>
NET CHARGE-OFFS BY LOCATION Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service Center:
Mid-Atlantic $ 2,282 $2,374 $ 9,740 $ 6,622
Southern 3,296 4,074 13,085 8,645
Southwest 2,342 2,760 8,478 5,834
------- ------ ------- -------
Subtotal 7,920 9,208 31,303 21,101
First Community Finance, Inc. 51 -- 101 --
------- ------ ------- -------
Total $ 7,971 $9,208 $31,404 $21,101
======= ====== ======= =======
</TABLE>
17
<PAGE> 18
TFC ENTERPRISES, INC.
Net charge-offs. (continued)
Gross contract receivables that were 60 days or more delinquent at September
30, 1996; December 31, 1995; and September 30, 1995, were as follows:
<TABLE>
<CAPTION>
DELINQUENCY Sept. 30, Dec. 31, Sept. 30,
(dollars in thousands) 1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Gross contract receivables
60 days and over delinquent $ 15,753 $ 18,441 $ 23,271
Gross contract receivables 198,455 271,039 299,744
60 days and over delinquency
to gross contract receivables 7.94% 6.80% 7.76%
</TABLE>
Provision for credit losses. The provision for credit losses was zero and $2.5
million in the third quarter and first nine months of 1996, respectively.
Provision for credit losses of 1.3 million was recorded in the third quarter of
1995, and $1.5 million was recorded in the first nine months of 1995. It is
management's estimation that the reserve balance of $26.4 million is adequate.
The Company's primary business involves purchasing installment sales contracts
at a discount to the remaining principal balance. A portion of the discount is
generally held in a nonrefundable dealer reserve against which credit losses
are first applied. Additional provisions for credit losses, if necessary, are
charged to income in amounts sufficient to maintain the combined allowance for
credit losses and nonrefundable reserve at an amount considered by management
to be adequate to absorb future credit losses.
Provision for credit losses is dependent on a number of factors, including but
not limited to the level and trend of net charge-offs, the amount of
nonrefundable and refundable dealer reserves, and the overall economic
conditions in the markets in which the Company operates. Because of the
inherent uncertainty involved in predicting the future performance of these
factors, there can be no assurance regarding the future level of provision for
credit losses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management. As shown in the Consolidated Statements of Cash Flows,
cash and cash equivalents decreased by $3.6 million in the first nine months of
1996, to $8.9 million at September 30, 1996. The decrease reflected primarily
$27.7 million of net cash provided by investing activities and $10.1 million of
net cash provided by operating activities, offset by $41.4 million in net cash
used in financing activities. Net cash used in financing activities principally
reflected $25 million in payments on Term notes and $25.7 million in payments
on Automobile Receivables-backed notes. For the first nine months of 1996, net
cash provided by investing activities totaled $27.7 million, primarily
reflecting $29.3 million in net repayment on contract receivables. In both
periods presented, the combination of cash on hand and net cash provided by
financing activities was sufficient to fund the business volume.
Credit and forbearance agreements with lenders. The Company reported a net
loss of $6.5 million for the full year 1995, which reflected a substantial
increase in the provision for credit losses resulting from a significant
increase in delinquencies and credit losses in the Company's portfolio of
contract receivables.
18
<PAGE> 19
TFC ENTERPRISES, INC.
Credit and forbearance agreements with lenders. (continued)
As a result of the reported loss and the increase in delinquencies and credit
losses, the Company was not in compliance at December 31, 1995, with certain
aspects of the credit agreements relating to its revolving line of credit, term
notes and subordinated notes. In March 1996, the Company's lenders agreed to
forbear in the exercise of their rights and remedies under the credit
agreements, provided the Company continues to meet certain terms and
conditions.
As a result of the net losses in the second and third quarters of 1996, the
Company, at September 30, 1996, was not in compliance with certain aspects of
the forbearance agreements with its lenders. The Company is currently in
discussions with its lenders to resolve the out-of-compliance situations.
Although the Company is not able to predict what the ultimate resolution of the
discussions will be, certain of the remedies available to the lenders as a
result of the defaults include repricing and/or foreclosure of the loans, which
could have a material adverse effect on the Company's business, financial
condition and results of operations, as well as its ability to continue as a
going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
19
<PAGE> 20
TFC ENTERPRISES, INC.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the accompanying Index to
Exhibits are filed or incorporated by reference
as part of this Form 10-Q and such Index to
Exhibits is incorporated herein by reference.
(b) Reports on Form 8-K
On August 14 1996, the Company filed a report on
Form 8-K, under Item 7, regarding the Company's
second quarter and first six months 1996 results.
On September 25, 1996, the Company filed a report
on Form 8-K,under Item 5, regarding the early
retirement of certain of the Company's senior
executives.
On October 11, 1996, the Company filed a report
on Form 8-K, under Item 5, regarding the closing
of the Company's Southwest Regional Service
Center located in Dallas, Texas.
20
<PAGE> 21
TFC ENTERPRISES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TFC ENTERPRISES, INC.
(Registrant)
Date: November 13, 1996 By: /s/ Robert S. Raley, Jr.
----------------------------
Robert S. Raley, Jr.
Chairman, President and
Chief Executive Officer and
Director
Date: November 13, 1996 By: /s/ David W. Karsten
---------------------------
David W. Karsten
Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer
of the Registrant)
21
<PAGE> 22
TFC ENTERPRISES, INC.
INDEX TO EXHIBITS
Exhibit
Sequential
No. Description
- ---------- ----------------------------------------------------
10.1 Early retirement agreement of George R. Kouri
10.2 Severance agreement of Preston K. Gnagey
10.3 Early retirement agreement and Independent Contractor
agreement of Joseph R. Becka
10.4 Severance agreement of Charles M. Johnston
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
22
<PAGE> 1
Exhibit 10.1
EARLY RETIREMENT AGREEMENT, WAIVER
AND RELEASE OF CLAIMS
This Early Retirement Agreement, Waiver and Release of Claims ("Agreement") is
made as of September 30, 1996, by and between TFC ENTERPRISES, INC., THE
FINANCE COMPANY ("Employer") and GEORGE R. KOURI ("Employee").
R E C I T A T I O N S
A. Employee has been employed by Employer pursuant to a written Employment
Agreement made as of January 1, 1995, as amended ("Employment Agreement"), and
has most recently held the position of President and Chief Executive Officer.
B. The employment relationship between the parties will be ending pursuant
to Employee's early retirement effective September 30, 1996.
C. The parties desire a smooth transition and severance of the employment
relationship consistent with the terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, and in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
1. a. Employee shall continue to perform his regular duties and receive
his regular salary and benefits through September 30, 1996, provided however
that
<PAGE> 2
notwithstanding paragraph 11 hereof, the termination provisions of the
first and second sentences of paragraph 10 of the Employment Agreement
("Termination Provisions") shall continue in effect. Unless Employee is
terminated prior to September 30, 1996, pursuant to subsection (i) of the
Termination Provisions, this Agreement shall remain in full force and effect.
The Company may, at any time prior to September 30, 1996, decide to relieve
Employee of the obligation to perform his duties through September 30, 1996, by
providing written notice to Employee to that effect.
b. (1) Employer agrees that provided that (i) at least seven (7) days have
passed since Employee signed this Agreement and (ii) Employer has received
Employee's written notice of early retirement, Employer shall immediately
forward to Employee, as a payment for cancellation of Employee's Employment
Agreement, the sum of $780,064.20 less mandatory withholdings as required by
federal and state law. The parties agree that no FICA need be withheld because
of Employee's satisfaction of this requirement through earlier 1996
withholdings and also under Revenue Rulings 55-520 and 58-301.
(2) Employee agrees that $180,064.20 shall be offset from the payment
described in subsection 1(b)(1) to accomplish the repayment required in
subsection 1(d).
c. Employee shall retain all such stock options in the TFC Enterprises,
Inc. 1995 Long-Term Incentive Plan ("Plan") as are vested as of September 30,
1996 (i.e. options for 211,376 shares), but no further stock options in the
Plan shall vest. Pursuant to
2
<PAGE> 3
the Plan and that certain Stock Option Award Agreement dated as of
October 27, 1994, by and between TFC Enterprises, Inc., and Employee,
Employee's separation shall be an early retirement and thus such options
as are vested shall be exercisable on or before December 31, 1999
without lapse on account of Employee's early retirement hereunder. TFC
Enterprises, Inc., agrees to take all further action necessary to carry
out the intent of this paragraph.
d. The entire sum remaining to be paid on Employee's promissory note to
Employer in the amount of $180,064.20 shall be repaid by Employee through the
offset described in subsection 1(b)(2) above. Conditioned upon the receipt of
said offset, Employer and TFC Enterprises, Inc., hereby release Employee for
all amounts owed by Employee under the promissory note or any bonus
arrangement.
e. Employee hereby waives any claim to a 1996 bonus pursuant to section 3.2
of his Employment Agreement.
f. TFC Enterprises, Inc., agrees (and agrees to cause the related companies
as defined in subparagraph 1(g) hereof) to indemnify Employee to the maximum
extent permitted by each such corporation's existing certificate of
incorporation or by-laws against any and all loss, damage, liability, costs or
expense (including without limitation reasonable expense of investigation and
defense and reasonable attorneys' fees)("Expense") arising from any threatened,
pending or completed action, suit or proceeding, whether presently known or
unknown, whether civil, criminal, administrative or investigative and whether
formal or informal ("Proceeding"), to which Employee is made a party because
3
<PAGE> 4
Employee (i) is or was a director or officer of TFC Enterprises, Inc.,
or (ii) is or was serving at the request of TFC Enterprises, Inc., as a
director, officer, trustee, employee or agent of another corporation or
of a partnership or trust or other enterprise (including service with
respect to an employee benefit plan).
Employer agrees to indemnify Employee to the maximum extent permitted by
its existing bylaws (whose stated intent and purpose is to provide such
indemnity to the fullest extent permissible under the Virginia Stock
Corporation Act) against any and all Expenses arising from Proceedings to which
Employee is made a party because Employee is or was a director or officer of
Employer.
TFC Enterprises, Inc., and Employer agree to pay for or reimburse, without
duplication, Expenses incurred by Employee in advance of final disposition of
any Proceeding to the maximum extent permitted by each such corporation's
articles or certificate of in corporation and/or bylaws.
g. Employee agrees to and hereby does resign all directorships and offices
he holds in the following companies: TFC Enterprises, Inc., First Community
Finance, Inc., The Finance Company, TFC Receivables Corporation and The
Insurance Agency, Inc. ("affiliated or related companies").
2. a. Following Employee's last date of employment, Employee shall be given
the opportunity to continue in Employer's group health insurance, dental
insurance and life insurance plans, at Employer's expense, for up to eighteen
(18) months, provided however
4
<PAGE> 5
that should Employee obtain similar coverage from a new employer, he shall
report this to Employer immediately, and such coverage will no longer be paid
by Employer.
b. Because Employer's disability insurance plan will not permit Employee's
continuation thereon, Employer shall, contemporaneous with the payment provided
in subparagraph 1(b)(1) hereof pay employee $1,391.94, less required
withholdings, such payment representing the equivalent of the disability
insurance premium which would have been paid on his behalf ($77.33 for 18
months) had he remained employed for that time.
3. Employee shall not be entitled to any compensation or benefits other than
those described in the above paragraphs.
4. a. Employee recognizes and acknowledges that the identities of
Employer's customers, business or financial contacts, agreements, techniques,
practices, business plans or other trade secrets, which are not of public
record or generally otherwise known, (hereinafter collectively "Trade
Secrets"), as such may exist from time to time, are a valuable, special and
unique asset of Employer's business. Employee hereby agrees that following the
end of his employment he will not disclose Employer's Trade Secrets or any part
thereof, to any person, firm, corporation, association or other entity without
Employer's prior consent unless such disclosure is required by law or
governmental regulations. Employee hereby further agrees that for a period of
two (2) years after the effective date of this Agreement, he will not use any
of Employer's Trade Secrets, directly or indirectly, for his or any third
party's benefit or use in any business endeavor not affiliated with Employer.
In the
5
<PAGE> 6
event of a breach or threatened breach by Employee of the provisions of
this Section, Employer shall be entitled to an injunction restraining Employee
from disclosing, in whole or in part, Employer's Trade Secrets, or from
utilizing them for his benefit or that of any unaffiliated person, firm,
corporation, association or other entity to whom such information, in whole or
in part, has been disclosed or is threatened to be disclosed. Nothing herein
shall be construed as prohibiting Employer from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery of
damages.
b. Employee acknowledges that during the course of his employment he
acquired confidential information of the types described in subparagraph 4(a)
above and also that he had contacts with and was responsible for developing,
increasing and maintaining relationships with Employer's customers.
Accordingly:
(1) Upon the separation from Employment contemplated herein and for a
period of two years thereafter, Employee will not, directly or indirectly, for
his own or any third party's benefit, solicit the business of any of Employer's
present or former customers listed on Exhibit A attached hereto for business
similar to that which the customer did with Employer.
(2) Employee agrees that the prohibition on soliciting the business of
Employer's customers and former customers listed on Exhibit A shall include,
but not be limited to, doing so either as an individual, a partner, a joint
venturer, an employee, a consultant, an agent or in any other business capacity
whatsoever.
6
<PAGE> 7
(3) Employer and Employee have examined in detail this non-solicitation of
business covenant and agree that the restraint imposed upon Employee is
reasonable in light of the legitimate interests of Employer, and it is not
unduly harsh upon employee's ability to earn a living.
(4) In the event of a breach or threatened breach of this non-solicitation
of business covenant, Employer shall be entitled to an injunction restraining
Employee's actions in violation hereof in addition to any other remedy which
may be available including the recovery of damages.
(5) This non-solicitation provision is of the essence of this Agreement.
It shall be construed as independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Employee against
Employer, whether based upon this Agreement or not, shall not constitute a
defense to enforcement of the non-solicitation provision hereof.
5. Employee hereby releases and discharges TFC Enterprises, Inc., Employer,
any affiliated or related companies, and their officers, stockholders,
directors, employees and agents and their successors, heirs and assigns, of and
from all claims, causes of action or demands of every kind or character
whatsoever, whether presently known or unknown, suspected or unsuspected,
existing at the time hereof, under state or federal laws. Specifically
included in this release are any claims, causes of action or demands in
connection with Employee's Employment Agreement and the past employment
relationship between the
7
<PAGE> 8
parties, including, but not limited to, claims, causes of action or
demands due to alleged breach of contract, libel, slander, wrongful
discharge, intentional infliction of emotional harm, or any other tort,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, and/or any other federal or state laws relating to
employment rights. The parties recognize, however, that nothing
contained in this release shall prohibit either party from instituting
legal action to enforce any of the provisions of this Agreement.
6. Employee agrees that for two years following the execution of this
Agreement, he will not, in any way, do or say anything at any time which might
reasonably be expected to materially harm the business interests of Employer,
or any related or affiliated companies, or any of their employees, officers,
directors, shareholders or agents, unless required to do so by legal process.
7. Employee represents and warrants that he has chosen to execute this
Agreement of his own volition after fully reviewing the Agreement and seeking
the advice of an attorney or if not, anyone else he determines to be
appropriate in this regard.
8. The parties represent and warrant that by this writing Employer has advised
Employee that he may wish to consult an attorney before signing this Agreement
and that Employer has given Employee a period of at least twenty-one (21) days
within which to consider this Agreement, which period may be waived at
Employee's option.
9. The parties agree that Employee shall have seven (7) days after his
execution of this Agreement within which to revoke his signature and consent to
this Agreement. This
8
<PAGE> 9
Agreement will not become effective and enforceable until seven (7) days after
Employee has signed this Agreement.
10. This Agreement and the obligations of Employer and Employee hereunder in
no way constitute an admission, agreement, consent, statement, acquiescence or
declaration on the part of Employer or Employee as to any wrongdoing, breach of
contract, or violation of any law.
11. Subject to the provisions of subparagraph 1(a) hereof, this Agreement
constitutes the entire agreement between the parties pertaining to the matters
with which it deals, and supersedes all prior agreements pertaining to those
matters. No such prior agreement, or understanding in writing or otherwise,
shall be valid or of any force or effect, and this Agreement and the
obligations of the parties hereunder may not be altered or modified in any
respect except by a writing duly executed by the parties to be bound.
12. If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or
provision of this Agreement which is illegal, invalid, or unenforceable, there
shall be added, as part of this Agreement, a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and as may be legal, valid and enforceable.
13. This Agreement shall be binding upon and inure to the benefit of any
successor or assigns of the parties hereto.
9
<PAGE> 10
14. The contents of this Agreement shall remain confidential. Employee shall
not disclose any term or condition hereof, which is not a matter of public
record or has not been previously disclosed, to anyone other than his spouse,
attorney and/or accountant without Employer's prior written consent unless
required by law or government regulation. Any disclosure by Employee other
than those permitted herein, or further disclosure by a person permitted to
receive a disclosure hereunder, shall be a breach hereof, and entitle Employer
to seek injunctive relief and damages. In any action brought by Employer under
this paragraph 14, the prevailing party shall be entitled to its costs and
reasonable attorneys' fees.
15. This Agreement shall be governed by and construed in accordance with the
laws of Virginia. The parties hereby agree that the Circuit Court of the City
of Norfolk, Virginia, shall have jurisdiction and be an appropriate venue to
determine any rights or claims arising hereunder.
10
<PAGE> 11
THE UNDERSIGNED HAVE CAREFULLY READ THE FOREGOING EARLY RETIREMENT AGREEMENT,
WAIVER AND RELEASE OF CLAIMS, UNDERSTAND THE CONTENTS, FREELY AND VOLUNTARILY
AGREE TO ALL THE TERMS AND CONDITIONS AND SIGN THIS AGREEMENT ON THEIR OWN
VOLITION.
WITNESS the following signatures:
______________________________ _______________________________
Date GEORGE R. KOURI
THE FINANCE COMPANY
______________________________ By_____________________________
Date
TFC ENTERPRISES, INC.
______________________________ By_____________________________
Date
I am aware that I have the right to consider this Early Retirement Agreement,
Waiver and Release of Claims for twenty-one (21) days before making my
decision. I have considered this right and choose to waive it as indicated by
my signature below.
______________________________ _______________________________
Date GEORGE R. KOURI
11
<PAGE> 12
EXHIBIT A
12
<PAGE> 1
Exhibit 10.2
SEVERANCE AGREEMENT, WAIVER
AND RELEASE OF CLAIMS
This Severance Agreement, Waiver and Release of Claims ("Agreement") is made
as of September 30, 1996, by and between TFC ENTERPRISES, INC., THE FINANCE
COMPANY ("Employer") and PRESTON K. GNAGEY ("Employee").
R E C I T A T I O N S
A. Employee has been employed by Employer pursuant to a written Employment
Agreement made as of January 1, 1995, as amended ("Employment Agreement"), and
has most recently held the position of Executive Vice President and Chief
Operating Officer.
B. The employment relationship between the parties will be ending pursuant
to Employee's retirement effective September 30, 1996.
C. The parties desire a smooth transition and severance of the employment
relationship consistent with the terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, and in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
1. a. Employee shall continue to perform his regular duties and receive
his regular salary and benefits through September 30, 1996, provided however
that notwithstanding paragraph 11 hereof, the termination provisions of the
first and second sentences of paragraph 10 of the Employment Agreement shall
continue in effect. The
<PAGE> 2
Company may, at any time prior to September 30, 1996, decide to relieve
Employee of the obligation to perform his duties through September 30, 1996, by
providing written notice to Employee to that effect.
b. Employer agrees that provided (i) at least seven (7) days have passed
since Employee signed this Agreement and (ii) Employer has received Employee's
written notice of retirement, Employer shall immediately forward to Employee,
as a severance payment, the sum of $300,000 less mandatory withholdings as
required by federal and state law. The parties agree that no FICA need be
withheld because of Employee's satisfaction of this requirement through earlier
1996 withholding and also under Revenue Rulings 55-520 and 58-301.
c. Employee shall retain all such stock options in the TFC Enterprises,
Inc. 1995 Long-Term Incentive Plan ("Plan") as are vested as of September 30,
1996, but no further stock options in the Plan shall vest. Pursuant to the
Plan and that certain Stock Option Award Agreement dated as of October 27,
1994, by and between TFC Enterprises, Inc., and Employee, Employee's separation
shall be a retirement and thus such options as are vested shall be exercisable
on or before December 31, 1999.
d. The principal and interest amount remaining to be paid on Employee's
promissory note to Employer on his final day of his employment shall be
forgiven by Employer. The parties acknowledge that certain amounts
provisionally credited to Employee from his 1996 bonus earnings have been
applied to reduce his remaining repayment obligation
2
<PAGE> 3
under his promissory note. The parties agree that in the event the Company's
year-end accounting shall determine that such amounts as were provisionally
credited were not actually earned resulting in a 1996 bonus overpayment, the
Company shall also forgive such 1996 bonus overpayment and treat the amount
provisionally credited as if fully earned.
e. Employee agrees to and hereby does resign as an officer and as a
director of TFC Receivables Corporation, and as an officer of Employer.
2. Following Employee's last date of employment, Employee shall be given the
opportunity to continue in Employer's group health insurance plan, at his own
expense, for the maximum period allowable pursuant to C.O.B.R.A.
3. Employee shall not be entitled to any compensation or benefits other than
those described in the above paragraphs.
4. Employee recognizes and acknowledges that the identities of Employer's
customers, business or financial contacts, agreements, sales techniques and
practices, business plans or other trade secrets, not of public record or
generally known otherwise (hereinafter collectively "Trade Secrets"), as such
may exist from time to time, are a valuable, special and unique asset of
Employer's business. Employee hereby agrees that following the end of his
employment he will not disclose Employer's Trade Secrets or any part thereof to
any person, firm, corporation, association or other entity without
Employer's prior consent unless such disclosure is required by law or
governmental regulations. Employee hereby further agrees that for a period of
two (2) years after the effective date of this Agreement, he will not use
3
<PAGE> 4
any of Employer's Trade Secrets, directly or indirectly, for his or any third
party's benefit or use in any business endeavor not affiliated with Employer.
In the event of a breach or threatened breach by Employee of the provisions of
this Section, Employer shall be entitled to an injunction restraining Employee
from disclosing, in whole or in part, Employer's Trade Secrets, or from
utilizing them for his benefit or that of any unaffiliated person, firm,
corporation, association or other entity to whom such information, in whole or
in part, has been disclosed or is threatened to be disclosed. Nothing herein
shall be construed as prohibiting Employer from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery of
damages. Nothing herein shall be construed as prohibiting Employee from being
employed or retained by any person or firm in the consumer finance industry for
any purpose that does not require Employee to disclose Trade Secrets in
violation of this paragraph.
5. Employee hereby releases and discharges TFC Enterprises, Inc., Employer,
any affiliated or related companies, and their officers, stockholders,
directors, employees and agents and their successors, heirs and assigns, of and
from all claims, causes of action or demands of every kind or character
whatsoever, whether presently known or unknown, suspected or unsuspected,
existing at the time hereof, under state or federal laws.
Specifically included in this release are any claims, causes of action or
demands in connection with Employee's Employment Agreement and the past
employment relationship between the parties, including, but not limited to,
claims, causes of action or demands due to alleged
4
<PAGE> 5
breach of contract, libel, slander, wrongful discharge, intentional
infliction of emotional harm, or any other tort, Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, and/or any
other federal or state laws relating to employment rights. The parties
recognize, however, that nothing contained in this release shall
prohibit either party from instituting legal action to enforce any of
the provisions of this Agreement.
6. Employee and Employer agree that they will not do or say anything at any
time that might reasonably be expected to harm the interests of each other, or,
in the case of Employer, any related or affiliated companies, or any of their
employees, officers, directors, shareholders or agents, unless required to do
so by legal process. Nothing herein shall be construed as prohibiting Employee
from being employed or retained by any person or firm in the consumer finance
industry.
7. Employee represents and warrants that he has chosen to execute this
Agreement of his own volition after fully reviewing the Agreement and seeking
the advice of an attorney or if not, anyone else he determines to be
appropriate in this regard.
8. The parties represent and warrant that by this writing Employer has advised
Employee that he may wish to consult an attorney before signing this Agreement
and that Employer has given Employee a period of at least twenty-one (21) days
within which to consider this Agreement, which period may be waived at
Employee's option.
9. The parties agree that Employee shall have seven (7) days after his
execution of this Agreement within which to revoke his signature and consent to
this Agreement. This
5
<PAGE> 6
Agreement will not become effective and enforceable until seven (7) days
after Employee has signed this Agreement.
10. This Agreement and the obligations of Employer hereunder in no way
constitute an admission, agreement, consent, statement, acquiescence or
declaration on the part of Employer as to any wrongdoing, breach of contract,
or violation of any law.
11. Subject to the provisions of subparagraph 1(a) hereof, this Agreement
constitutes the entire agreement between the parties pertaining to the matters
with which it deals, and supersedes all prior agreements pertaining to those
matters. No such prior agreement, or understanding in writing or otherwise,
shall be valid or of any force or effect, and this Agreement and the
obligations of the parties hereunder may not be altered or modified in any
respect except by a writing duly executed by the parties to be bound. Nothing
herein shall be construed as affecting Employee's rights, if any, as a
participant in or beneficiary of any pension or benefit plan or program during
his employment by Employer.
12. If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or
provision of this Agreement which is illegal, invalid, or unenforceable, there
shall be added, as part of this Agreement, a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and as may be legal, valid and enforceable.
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<PAGE> 7
13. This Agreement shall be binding upon and inure to the benefit of any
successor or assigns of the parties hereto.
14. The contents of this Agreement shall remain confidential. Employee shall
not disclose any term or condition hereof to anyone other than his spouse,
attorney, tax advisor, accountant, and/or to the government for tax purposes
without Employer's prior written consent or as otherwise required by law. Any
disclosure by Employee other than those permitted herein or further disclosure
by a person permitted to receive disclosure hereof shall be a breach of this
Agreement and shall entitle Employer to seek damages and injunctive relief. In
any action to enforce this paragraph 14, either party shall be entitled to its
costs and reasonable attorneys' fees if it should substantially prevail.
15. This Agreement shall be governed by and construed in accordance with the
laws of Virginia. The parties hereby agree that the Circuit Court of the City
of Norfolk, Virginia, shall have jurisdiction and be an appropriate venue to
determine any rights or claims arising hereunder.
7
<PAGE> 8
THE UNDERSIGNED HAVE CAREFULLY READ THE FOREGOING SEVERANCE AGREEMENT, WAIVER
AND RELEASE OF CLAIMS, UNDERSTAND THE CONTENTS, FREELY AND VOLUNTARILY AGREE TO
ALL THE TERMS AND CONDITIONS AND SIGN THIS AGREEMENT ON THEIR OWN VOLITION.
WITNESS the following signatures:
______________________________ _______________________________
Date PRESTON K. GNAGEY
THE FINANCE COMPANY
______________________________ By_____________________________
Date
TFC ENTERPRISES, INC.
______________________________ By_____________________________
Date
I am aware that I have the right to consider this Severance Agreement, Waiver
and Release of Claims for twenty-one (21) days before making my decision. I
have considered this right and choose to waive it as indicated by my signature
below.
______________________________ _______________________________
Date PRESTON K. GNAGEY
8
<PAGE> 1
Exhibit 10.3
EARLY RETIREMENT AGREEMENT, WAIVER
AND RELEASE OF CLAIMS
This Early Retirement Agreement, Waiver and Release of Claims ("Agreement") is
made as of September 30, 1996, by and between TFC ENTERPRISES, INC., THE
FINANCE COMPANY ("Employer") and JOSEPH R. BECKA ("Employee").
R E C I T A T I O N S
A. Employee has been employed by Employer pursuant to a written
Employment Agreement made as of January 1, 1995, as amended ("Employment
Agreement"), and has most recently held the position of Senior Executive
Vice President and Chief Marketing Officer.
B. The employment relationship between the parties will be ending
pursuant to Employee's retirement effective September 30, 1996.
C. The parties desire a smooth transition and severance of the employment
relationship consistent with the terms of this Agreement.
D. Employer is in the business of purchasing motor vehicle retail
installment sales contracts, individually and in portfolios, on a third- party
basis from its customers.
<PAGE> 2
A G R E E M E N T
NOW, THEREFORE, and in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
1. a. Employee shall continue to perform his regular duties and receive
his regular salary and benefits through September 30, 1996, provided however
that notwithstanding paragraph 11 hereof, the termination provisions of the
first and second sentences of paragraph 10 of the Employment Agreement shall
continue in effect. The Company may, at any time prior to September 30, 1996,
decide to relieve Employee of the obligation to perform his duties through
September 30, 1996, by providing written notice to Employee to that effect.
b. Employer agrees that provided seven (7) days have passed since Employee
signed this Agreement, Employer shall immediately forward to Employee, as a
severance payment, the sum of $300,000 less mandatory withholdings as required
by federal and state law. The parties agree that no FICA need be withheld
because of Employee's satisfaction of this requirement through earlier 1996
withholding and also under Revenue Rulings 55-520 and 58-301.
c. Employee shall retain all such stock options in the TFC Enterprises,
Inc. 1995 Long-Term Incentive Plan ("Plan") as are vested as of September 30,
1996, but no further stock options in the Plan shall vest. Pursuant to the
Plan and that certain Stock Option Award Agreement dated as of October 27,
1994, by and between TFC Enterprises, Inc., and Employee, Employee's separation
shall be a retirement and thus such options as are
2
<PAGE> 3
vested shall be exercisable on or before December 31, 1999, and offers to
retire on the effective date of this Agreement.
d. The principal and interest amount remaining to be paid on Employee's
promissory note to Employer on his final day of his employment shall be
forgiven by Employer. The parties acknowledge that certain amounts
provisionally credited to Employee from his 1996 bonus earnings have been
applied to reduce his remaining repayment obligation under his promissory note.
The parties agree that in the event the Company's year-end accounting shall
determine that such amounts as were provisionally credited were not actually
earned resulting in a 1996 bonus overpayment, the Company shall also forgive
such 1996 bonus overpayment and treat the amount provisionally credited as if
fully earned.
e. Employee agrees to and hereby does resign all directorships and offices
he holds in the following companies: TFC Enterprises, Inc., First Community
Finance, Inc., The Finance Company, TFC Receivables Corporation, and The
Insurance Agency, Inc. ("affiliated or related companies").
2. Employee shall have the opportunity to continue in Employer's group
health insurance plan, at his own expense, up to eighteen (18) months pursuant
to C.O.B.R.A.
3. Employee shall not be entitled to any compensation or benefits other than
those described in the above paragraphs.
4. a. Employee recognizes and acknowledges that the identities of
Employer's customers, business or financial contacts, agreements, techniques,
practices,
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<PAGE> 4
business plans or other trade secrets, which are not of public record or
generally known otherwise, (hereinafter collectively "Trade Secrets"),
as such may exist from time to time, are a valuable, special and unique
asset of Employer's business. Employee hereby agrees that following the
end of his employment he will not disclose Employer's Trade Secrets or
any part thereof, to any person, firm, corporation, association or other
entity without Employer's prior consent unless such disclosure is
required by law or governmental regulations. Employee hereby further
agrees that for a period of two (2) years after the effective date of
this Agreement, he will not use any of Employer's Trade Secrets,
directly or indirectly, for his or any third party's benefit or use in
any business endeavor not affiliated with Employer. In the event of a
breach or threatened breach by Employee of the provisions of this
Section, Employer shall be entitled to an injunction restraining
Employee from disclosing, in whole or in part, Employer's Trade Secrets,
or from utilizing them for his benefit or that of any unaffiliated
person, firm, corporation, association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing herein shall be construed as prohibiting Employer
from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages.
b. Employee acknowledges that during the course of his employment he
acquired confidential information of the types described in subparagraph 4(a)
above and also that he had contacts with and was responsible for developing,
increasing and maintaining relationships with Employer's customers.
Accordingly:
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<PAGE> 5
(1) Upon the separation from employment contemplated herein and for a
period of two years thereafter, Employee will not, directly or indirectly, for
his own or any third party's benefit, solicit the business of any of Employer's
present or former customers listed on Exhibit A attached hereto for business
similar to that which the customer did with Employer.
(2) Employee agrees that the prohibition on soliciting the business of
Employer's customers and former customers listed on Exhibit A shall include,
but not be limited to, doing so either as an individual, a partner, a joint
venturer, an employee, a consultant, an agent or in any other business capacity
whatsoever.
(3) Employer and Employee have examined in detail this non-solicitation of
business covenant and agree that the restraint imposed upon Employee is
reasonable in light of the legitimate interests of Employer, and it is not
unduly harsh upon employee's ability to earn a living.
(4) In the event of a breach or threatened breach of this non-solicitation
of business covenant, Employer shall be entitled to an injunction restraining
Employee's actions in violation hereof in addition to any other remedy which
may be available including the recovery of damages.
(5) This non-solicitation provision is of the essence of this Agreement.
It shall be construed as independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Employee against Employer,
whether
5
<PAGE> 6
based upon this Agreement or not, shall not constitute a defense to enforcement
of the non-solicitation provision hereof.
5. Employee hereby releases and discharges TFC Enterprises, Inc., Employer,
any affiliated or related companies, and their officers, stockholders,
directors, employees and agents and their successors, heirs and assigns, of and
from all claims, causes of action or demands of every kind or character
whatsoever, whether presently known or unknown, suspected or unsuspected,
existing at the time hereof, under state or federal laws. Specifically
included in this release are any claims, causes of action or demands in
connection with Employee's Employment Agreement and the past employment
relationship between the parties, including, but not limited to, claims, causes
of action or demands due to alleged breach of contract, libel, slander,
wrongful discharge, intentional infliction of emotional harm, or any other
tort, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, and/or any other federal or state laws relating to employment
rights. The parties recognize, however, that nothing contained in this release
shall prohibit either party from instituting legal action to enforce any of
the provisions of this Agreement.
6. Employee agrees that he will not, in any way, do or say anything at any
time to harm the business interests of Employer, or any related or affiliated
companies, or any of their employees, officers, directors, shareholders or
agents, unless required to do so by legal process.
6
<PAGE> 7
7. Employee represents and warrants that he has chosen to execute this
Agreement of his own volition after fully reviewing the Agreement and seeking
the advice of an attorney or if not, anyone else he determines to be
appropriate in this regard.
8. The parties represent and warrant that by this writing Employer has
advised Employee that he may wish to consult an attorney before signing this
Agreement and that Employer has given Employee a period of at least twenty-one
(21) days within which to consider this Agreement, which period may be waived
at Employee's option.
9. The parties agree that Employee shall have seven (7) days after his
execution of this Agreement within which to revoke his signature and consent to
this Agreement. This Agreement will not become effective and enforceable until
seven (7) days after Employee has signed this Agreement.
10. This Agreement and the obligations of Employer hereunder in no way
constitute an admission, agreement, consent, statement, acquiescence or
declaration on the part of Employer as to any wrongdoing, breach of contract,
or violation of any law.
11. The parties hereto anticipate that Employer and Employee will be entering
an Independent Contractor Agreement ("Contractor Agreement") anticipated to be
effective as of October 1, 1996. Such Contractor Agreement shall establish a
new relationship between the Employer and Employee which shall in no way be
regarded as employment. Should there be any conflict between this Agreement
and the Contractor Agreement (assuming execution of the Contractor Agreement)
the terms of this Agreement shall control. Subject to the
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<PAGE> 8
provisions of subparagraph 1(a) hereof, this Agreement and the
Contractor Agreement constitute the entire agreement between the parties
pertaining to the matters with which they deal, and supersede all prior
agreements pertaining to those matters. No prior agreement or
understanding, in writing or otherwise, shall be valid or of any force
or effect, and the obligations of the parties thereunder and hereunder
may not be altered or modified in any respect except by a writing duly
executed by the parties to be bound.
12. This Agreement and the rights granted to the parties herein are
contingent upon presentation to and approval by any of Employer's lenders which
hold covenants restricting or limiting any of Employer's obligations herein.
In the event that such approvals or modification of covenants as may be
necessary to permit Employer's performance of its obligations hereunder are not
obtained prior to September 30, 1996, no party shall have any obligation
hereunder.
13. If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or
provision of this Agreement which is illegal, invalid, or unenforceable, there
shall be added, as part of this Agreement, a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and as may be legal, valid and enforceable.
14. This Agreement shall be binding upon and inure to the benefit of any
successor or assigns of the parties hereto.
8
<PAGE> 9
15. a. The contents of this Agreement shall remain confidential. Employee
shall not disclose any term or condition hereof to anyone other than his
spouse, attorney, insurance agent and/or accountant without Employer's prior
written consent. Moreover, Employee shall obtain written assurance from anyone
to whom he makes a disclosure that he or she will make no further disclosure.
Any disclosure by Employee other than those permitted herein, or further
disclosure by a person permitted to receive a disclosure hereunder shall be a
breach of this Agreement which may result in injunctive relief to address any
harm resulting from such breach and damages. If Employer prevails in any
action based upon a violation of this paragraph 15, it shall be entitled to its
costs and reasonable attorneys' fees.
b. In the event Employee seeks new employment in any period during which he
is restricted from soliciting by this Agreement and a potential employer
initiates inquiry as to whether Employer has any restriction on his ability to
sell or solicit, Employee may respond that certain restrictions do exist and
may request Employer to consent to the disclosure of any restrictions and such
consent shall not be unreasonably withheld.
16. This Agreement shall be governed by and construed in accordance with the
laws of Virginia. The parties hereby agree that the Circuit Court of the City
of Norfolk, Virginia, shall have jurisdiction and be an appropriate venue to
determine any rights or claims arising hereunder.
9
<PAGE> 10
THE UNDERSIGNED HAVE CAREFULLY READ THE FOREGOING EARLY RETIREMENT AGREEMENT,
WAIVER AND RELEASE OF CLAIMS, UNDERSTAND THE CONTENTS, FREELY AND VOLUNTARILY
AGREE TO ALL THE TERMS AND CONDITIONS AND SIGN THIS AGREEMENT ON THEIR OWN
VOLITION.
WITNESS the following signatures:
______________________________ _______________________________
Date JOSEPH R. BECKA
THE FINANCE COMPANY
______________________________ By_____________________________
Date
TFC ENTERPRISES, INC.
______________________________ By_____________________________
Date
I am aware that I have the right to consider this Early Retirement Agreement,
Waiver and Release of Claims for twenty-one (21) days before making my
decision. I have considered this right and choose to waive it as indicated by
my signature below.
______________________________ _______________________________
Date JOSEPH R. BECKA
10
<PAGE> 11
EXHIBIT A
11
<PAGE> 12
INDEPENDENT CONTRACTOR AGREEMENT
THIS INDEPENDENT CONTRACTOR AGREEMENT ("Agreement") is entered into as
of October 1, 1996, by and between THE FINANCE COMPANY, a Virginia corporation
(hereinafter referred to as "TFC") and Joseph R. Becka (hereinafter referred to
as "Contractor").
I. RECITALS
A. Contractor has certain skills and abilities that may be useful to TFC
from time to time.
B. TFC, having been organized for the primary purpose of financing motor
vehicle purchases and other commercial transactions, is willing to enter into
this Agreement with Contractor as an independent contractor to assist in the
fulfillment of its business purposes.
C. Contractor has offered to perform contractual services for TFC.
II. TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereby agree as follows:
A. GENERAL
1. VIRGINIA AND FEDERAL LAW. The parties agree that this Agreement shall
be governed by the laws of the Commonwealth of Virginia. Contractor agrees to
conduct all his activities and services under this Agreement in accordance to
all applicable federal and state laws.
2. INTEGRATION OF AGREEMENTS. This Agreement shall be read together with
that certain Early Retirement Agreement, Waiver and Release of Claims entered
into between TFC Enterprises, Inc., TFC and Contractor as of September 30, 1996
("Early Retirement Agreement"). This Agreement and the Early Retirement
Agreement contain the entire agreement of the parties hereto and supersede all
prior and contemporaneous agreements, negotiations and understandings relating
to the subject matter thereof and hereof. There are no other understandings,
promises or inducements contrary to the terms of the Early Retirement Agreement
or this Agreement. Should there be any conflict between the terms of the Early
Retirement Agreement and this Agreement, the terms of the Early Retirement
Agreement shall control.
<PAGE> 13
3. TERMINATION. TFC or Contractor may terminate this Agreement at any
time by giving written notice to the other party, with or without cause, and
such termination will not constitute a breach of this Agreement.
a. If terminated by TFC:
(1) Contractor will be paid for contracts purchased from point of
sale dealers, if brought to TFC by Contractor at least 60 days
prior to termination, for a period of 180 days after date of
termination.
(2) Contractor will be paid for contracts purchased from point of
sale dealers, if brought to TFC by Contractor within 60 days of
termination date, for a period of 30 days after date of
termination.
(3) Contractor will be paid for contracts purchased under TFC's
portfolio acquisition program, from dealers brought to TFC by
Contractor, for a period of 90 days from date of termination.
b. If terminated by Contractor:
Contractor will not be paid on any contracts approved by TFC after
date of termination.
c. Termination due to low sales:
If contractor fails to provide any new dealer sign ups in any two
consecutive calendar months, this may, at TFC's sole option, be
considered and treated as termination. Under such circumstances,
Contractor would not be paid on any contracts approved by TFC after
the date of termination.
4. OFFSET. Any monies due TFC from Contractor may be offset by TFC
against any contract fees or pre-approved expenses due Contractor from TFC.
5. NOTICES. All notices given under this Agreement will be sent via hand
delivery or certified mail, return receipt requested, to the addresses below
unless otherwise directed:
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<PAGE> 14
a. If to TFC:
Robert S. Raley, Jr., Chairman
The Finance Company
5425 Robin Hood Road, Suite 101 B
Norfolk, VA 2353
b. If to Contractor:
His residence address reflected in TFC's
records or the most recent address
provided by Contractor in writing to TFC.
6. AMENDMENTS. No supplement, modification or amendment of any term,
provision or condition of this Agreement shall be binding or enforceable unless
executed in writing by the parties hereto.
7. SEVERABILITY. If any clause or provision of this Agreement is illegal,
invalid or unenforceable under present or future law, such clause or provision
shall be severable and all other provisions shall remain in full force and
effect.
8. ENFORCEMENT OF AGREEMENT. Contractor shall pay, indemnify and save TFC
harmless against all costs and expenses, including reasonable attorney's fees,
incurred by TFC with respect to enforcement of TFC's rights under this
Agreement.
9. ASSIGNMENT. TFC is relying upon Contractor's special skills in
performance hereunder. Accordingly this Agreement shall not be assigned by
Contractor without TFC's prior written consent but is assignable by TFC.
10. NO WAIVERS. The waiver by either party hereto of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision of this
Agreement. Any failure by TFC to enforce similar provisions in an agreement
with other independent contractors shall also not create or be construed as a
waiver of any rights which may be enforced hereunder.
B. DUTIES OF CONTRACTOR
1. SERVICES AND RESTRICTIONS. Contractor shall devote such time,
attention and energies to the performance of the contract as is required.
Contractor shall not be precluded from engaging in other business activity,
whether or not such business activity is pursued for gain, profit, or other
pecuniary advantage; provided however that Contractor shall observe the
non-solicitation provisions of that certain Early Retirement Agreement, Waiver
and Release of Claims entered into by him with TFC Enterprises, Inc. and TFC as
of September
<PAGE> 15
30, 1996, which terms are incorporated herein by this reference as if fully set
forth herein, and provided further that for the duration of this Agreement,
Contractor shall not hire or attempt to hire TFC's employees or former
employees, on behalf of himself or any other person or business entity. For
purposes of this section IIBI, former employees of TFC shall mean persons who
were employed by TFC within 90 days of any hiring or attempt to hire by
Contractor. Contractor also agrees that he shall not provide any other person
or business entity with information regarding the operations of TFC, including,
without limitation TFC's contracts, customers and employees.
2. EXPENSES. Contractor is not authorized to incur expenses of any kind
unless pre-approved by a senior vice president or higher authority of TFC on
behalf of TFC. Contractor is responsible for all of his own expenses and for
all compensation or expenses of any kind of any subcontractor, employee, or
associate engaged by Contractor to assist in the performance of services for
TFC under this Agreement.
3 . STATUS OF CONTRACTOR. Neither Contractor nor any of his employees,
associates, or agents shall be deemed or referred to as an employee and no such
reference, whether inadvertent, intended or otherwise, shall alter Contractor's
status as an independent contractor. Contractor agrees that he shall not
represent himself or any of his employees as an employee of TFC.
4. INDEMNIFICATION. TFC shall not be responsible for, nor have any
liability to third parties, based upon the tortious conduct of Contractor
and/or his employees, associates or agents. In the event that TFC is finally
held liable by a court of competent jurisdiction because of Contractor's acts
or omissions, then, in that event, Contractor shall have the duty to indemnify
and hold harmless TFC from any and all such liability. Such indemnity shall
include TFC's reasonable legal expenses incurred in defense of any such action.
5. TAXES. Throughout the performance of the contract period, Contractor
shall have the obligation to comply, on and for his own behalf, with such
requirements as may be imposed by the Internal Revenue Service, Virginia
Department of Taxation, Social Security Administration, state workers'
compensation agency, state unemployment compensation agency, and any such other
incidents of employment as may pertain, none of which shall be the
responsibility of TFC.
6. INSURANCE. Contractor shall not be covered by workers' compensation,
unemployment compensation, or any other policy of insurance maintained by TFC
unless specifically named therein.
7. IDENTIFICATION OF DEALERS. Contractor agrees to use TFC's Dealer
Source Identification Acknowledgement forms, or a form of his own making with
equivalent information, and to identify; on these forms prospective dealers,
which Contractor is
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<PAGE> 16
submitting to TFC as a dealer who wishes to do business with TFC through
Contractor's efforts. Contractor acknowledges that TFC employs its own
marketing personnel and that Contractor and TFC marketing personnel could
independently be seeking the same referral from a dealer. In such cases, TFC
shall determine, in its sole and absolute discretion, the role Contractor
played in a qualified dealer entering into a business relationship with TFC and
prorate Contractor's contract fees accordingly, if warranted. TFC shall notify
Contractor in writing of any such prorated fees.
C. DUTIES OF TFC
1. MARKETING SUPPLIES. TFC will provide such available marketing
materials describing TFC's current purchasing programs as TFC determines is
necessary or advisable for Contractor to perform the services required under
this contract.
2. TRAINING. If requested, TFC will assist in training Contractor and/or
Contractor's employees, with regard to certain benefits of TFC's financial
services and programs and required documentation needed for qualified dealers
to enter into a business relationship with TFC.
3. CONTRACT FEES. TFC agrees to pay Contractor based on qualified
contracts due to efforts of Contractor. The Regional Service Center General
Manager, LPO Manager, or higher TFC authority must approve all qualified fees
generated in the following manner:
a. POINT OF SALE CONTRACTS: Contractor will be paid $50 for each
contract purchased by TFC from dealers developed by Contractor
until termination of agreement, when Section IIA3a(1) and (2) or
IIA3b will apply.
b. PORTFOLIO ACQUISITIONS: Contractor will be paid $25 per contract
purchased by TFC from dealers developed by Contractor until
termination of agreement, when Section IIA3a(3) or IIA3b will
apply.
c. TIMING OF PAYMENTS: The contract fees earned will be paid to
Contractor as follows:
Contract fees earned for all qualified transactions identified in
Section IIC3a and b in any calendar month will be paid within 30
days of the end of the calendar month during which the contract
fees were earned by the Contractor.
4. CONTRACTOR STATUS. TFC acknowledges and agrees that Contractor has
been retained in reliance upon his particular skills, training and experience
and that throughout the performance of the contractual duties under this
Agreement, Contractor shall be free from the
5
<PAGE> 17
direction and control of TFC. Further, Contractor shall be free to determine
the methods, means, and work schedule of Contractor's performance, but shall,
at all times, remain accountable for the proper and timely completion of the
contractual services specified herein and as may be further agreed upon from
time to time, but the sole remedy of TFC shall be termination of this Agreement
under the provisions related thereto.
5. CONTRACTOR'S BUSINESS AND LICENSE. TFC and Contractor agree that in
the performance of his duties hereunder, Contractor shall be engaging in his
own independently established business and that Contractor has obtained or will
obtain any business licenses necessary thereto.
6. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or any breach thereof, shall be settled by arbitration in
accordance with the rules then pertaining of the American Arbitration
Association or other alternative dispute resolution means the parties may then
agree upon, and judgment upon the award rendered may be entered in any court
having jurisdiction hereof.
INDEPENDENT CONTRACTOR:
- --------------------- ---------------------------------
Date
SS#: or
----------------------
Fed I.D. #:
----------------------
THE FINANCE COMPANY
By:
- --------------------- ------------------------------
Date
6
<PAGE> 1
Exhibit 10.4
SEVERANCE AGREEMENT, WAIVER
AND RELEASE OF CLAIMS
This Severance Agreement, Waiver and Release of Claims ("Agreement") is made
as of September 30, 1996, by and between TFC ENTERPRISES, INC., THE FINANCE
COMPANY ("Employer") and CHARLES M. JOHNSTON ("Employee").
R E C I T A T I O N S
A. Employee has been employed by Employer pursuant to a written Employment
Agreement made as of January 1, 1995, as amended ("Employment Agreement"), and
has most recently held the position of Executive Vice President and Chief
Financial Officer.
B. The employment relationship between the parties will be ending pursuant
to Employee's retirement effective September 30, 1996.
C. The parties desire a smooth transition and severance of the employment
relationship consistent with the terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, and in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
1. (a) Employee shall continue to perform his regular duties and receive
his regular salary and benefits through September 30, 1996, provided however
that notwithstanding paragraph 11 hereof, the termination provisions of the
first and second sentences of paragraph 10 of the Employment Agreement shall
continue in effect. The
<PAGE> 2
Company may, at any time prior to September 30, 1996, decide to relieve
Employee of the obligation to perform his duties through September 30,
1996, by providing written notice to Employee to that effect, but such
decision shall not relieve the Company of its obligations under this
Agreement, including, without limitation, the obligation to pay Employee
his regular salary and benefits through September 30, 1996.
(b) Employer agrees that provided that (i) at least seven (7) days have
passed since Employee signed this Agreement and (ii) Employer has received
Employee's written notice of retirement, Employer shall immediately deliver to
Employee, as a severance payment, the sum of $200,000 less mandatory
withholdings as required by federal and state law. The parties agree that no
FICA need be withheld because of Employee's satisfaction of this requirement
through earlier 1996 withholdings and also under Revenue Ruling 55-520 and
58-301.
(c) Employee shall retain all such stock options in the TFC Enterprises,
Inc. 1995 Long-Term Incentive Plan ("Plan") as are vested as of September 30,
1996, but no further stock options in the Plan shall vest. Pursuant to the
Plan and that certain Stock Option Award Agreement dated as of October 27, 1994
("Option Agreement"), by and between TFC Enterprises, Inc., and Employee,
Employee's separation shall be a retirement and thus such options as are vested
shall be exercisable on or before December 31, 1999.
(d) The principal and interest amount remaining to be paid on Employee's
promissory note to Employer on his final day of his employment shall be
forgiven by
2
<PAGE> 3
Employer. The parties acknowledge that certain amounts provisionally
credited to Employee from his 1996 bonus earnings have been applied to
reduce his remaining repayment obligation under his promissory note. The
parties agree that in the event the Company's year-end accounting shall
determine that such amounts as were provisionally credited were not
actually earned resulting in a 1996 bonus overpayment, the Company shall
also forgive such 1996 bonus overpayment and treat the amount
provisionally credited as if fully earned.
(e) Employee agrees to and hereby does resign all directorships and offices
he holds in the following companies: TFC Enterprises, Inc., First Community
Finance, Inc., The Finance Company, TFC Receivables Corporation, and The
Insurance Agency, Inc. ("affiliated or related companies").
2. Following Employee's last date of employment, Employee shall be given the
opportunity to continue in Employer's group health insurance plan, at his own
expense, for up to eighteen (18) months pursuant to C.O.B.R.A.
3. Employee shall not be entitled to any compensation or benefits other than
those described in the above paragraphs. Employer will not oppose any claim by
Employee for unemployment compensation from the applicable state agency.
4. Employee recognizes and acknowledges that any list or identifying
information on or about Employer's customers, as well as any agreements,
techniques, practices, business plans or other trade secrets (hereinafter
collectively "Trade Secrets"), as such may exist from time to time, are a
valuable, special and unique asset of Employer's business. Employee
2
<PAGE> 4
hereby agrees that following the end of his employment he will not
disclose Employer's Trade Secrets or any part thereof, not of public
record or generally known otherwise, to any person, firm, corporation,
association or other entity without Employer's prior consent unless such
disclosure is required by law or governmental regulations. Employee
hereby further agrees that for a period of two (2) years after the
effective date of this Agreement, he will not use any of Employer's
Trade Secrets, directly or indirectly, for his or any third party's
benefit or use in any business endeavor not affiliated with Employer. In
the event of a breach or threatened breach by Employee of the provisions
of this Section, Employer shall be entitled to an injunction restraining
Employee from disclosing, in whole or in part, Employer's Trade Secrets,
or from utilizing them for his benefit or that of any unaffiliated
person, firm, corporation, association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing herein shall be construed as prohibiting Employer
from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages.
5. (a) Employee hereby releases TFC Enterprises, Inc., Employer, any
affiliated or related companies, and their officers, stockholders, and
directors and their respective successors, heirs and assigns, and Employer,
together with its affiliated or related companies, and their respective
officers, stockholders, and directors and their respective successors and
assigns, hereby release Employee and his heirs, representatives, estate and
assigns, of and from all claims, causes of action or demands of every kind or
character
4
<PAGE> 5
whatsoever, whether presently known or unknown, suspected or
unsuspected, existing at the time hereof, except for willful or
fraudulent acts which are subsequently proven to have been committed by
Employee either with reckless disregard of or with the intent to cause
harm to the Employer's legitimate business interests. Acts which were
undertaken by Employee in the exercise of his reasonable judgment shall
not be deemed to be reckless for purposes hereof. Employer represents
that it is aware of no pending or threatened claims which arise from any
act or omission of Employee and further acknowledges that it has no
present intention of asserting any type of claim against Employee with
respect to any such act. Employer and Employee expressly agree that the
alleged actions or omissions of Employee which prompted the memorandum
dated July 23, 1996, from Robert Raley to Employee with the heading
"Subject: Inappropriate Communication with TFC Business Relationships"
shall not constitute willful, fraudulent or reckless acts on the part of
Employee.
(b) The parties acknowledge that they have agreed to payment of a negotiated
sum by Employer to Employee, which fully satisfies Employer's payment
obligations under the Employment Agreement and which Employee shall receive.
Nothing in this release shall affect Employee's rights under the Plan or the
Option Agreement.
(c) The parties recognize, however, that nothing contained in this release
shall prohibit either party from instituting legal action to enforce any of the
provisions of this Agreement.
5
<PAGE> 6
6. (a) Employee agrees that he will not make any derogatory statements
concerning Employer which could reasonably be expected to materially harm the
business interests of Employer, or any related or affiliated companies, or any
of their employees, officers, directors, shareholders or agents, unless
required to do so by legal process.
(b) Employer agrees to provide favorable recommendations regarding
Employee's job performance and conduct to prospective employers of Employee.
The parties agree that each such recommendation shall be in the form of Annex A
attached hereto.
7. Employee represents and warrants that he has chosen to execute this
Agreement of his own volition after fully reviewing the Agreement and seeking
the advice of an attorney or if not, anyone else he determines to be
appropriate in this regard.
8. The parties represent and warrant that by this writing Employer has advised
Employee that he may wish to consult an attorney before signing this Agreement
and that Employer has given Employee a period of at least twenty-one (21) days
within which to consider this Agreement, which period may be waived at
Employee's option.
9. The parties agree that Employee shall have seven (7) days after his
execution of this Agreement within which to revoke his signature and consent to
this Agreement. This Agreement will not become effective and enforceable until
seven (7) days after Employee has signed this Agreement.
10. This Agreement and the obligations of Employer and Employee hereunder in
no way constitute an admission, agreement, consent, statement, acquiescence or
declaration
6
<PAGE> 7
on the part of Employer or Employee as to any wrongdoing, breach of
contract, or violation of any law.
11. Subject to the provisions of subparagraph 1(a) hereof, this Agreement
constitutes the entire agreement between the parties pertaining to the matters
with which it deals, and supersedes all prior agreements pertaining to those
matters other than the Plan and the Option Agreement. No such prior agreement,
or understanding in writing or otherwise, shall be valid or of any force or
effect, and this Agreement and the obligations of the parties hereunder may not
be altered or modified in any respect except by a writing duly executed by the
parties to be bound.
12. If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or
provision of this Agreement which is illegal, invalid, or unenforceable, there
shall be added, as part of this Agreement, a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and as may be legal, valid and enforceable.
13. This Agreement shall be binding upon and inure to the benefit of any
successor or assigns of the parties hereto.
14. The contents of this Agreement shall remain confidential, except as
required by law. Employee shall not disclose any term or condition hereof to
anyone other than his spouse, attorney and/or accountant without Employer's
prior written consent. Any disclosure
7
<PAGE> 8
by Employee other than those permitted herein or further disclosure by a
person permitted to receive disclosure hereunder shall be a breach
hereof. In any action brought by Employer under this paragraph 14, the
prevailing party will be entitled to its costs and reasonable attorneys'
fees. This paragraph 14 shall be of no further effect at any time
following any disclosure of this Agreement by Employer or any related or
affiliated company.
15. This Agreement shall be governed by and construed in accordance with the
laws of Virginia. The parties hereby agree that the Circuit Court of the City
of Norfolk, Virginia, shall have jurisdiction and be an appropriate venue to
determine any rights or claims arising hereunder.
8
<PAGE> 9
THE UNDERSIGNED HAVE CAREFULLY READ THE FOREGOING SEVERANCE AGREEMENT, WAIVER
AND RELEASE OF CLAIMS, UNDERSTAND THE CONTENTS, FREELY AND VOLUNTARILY AGREE TO
ALL THE TERMS AND CONDITIONS AND SIGN THIS AGREEMENT ON THEIR OWN VOLITION.
WITNESS the following signatures:
______________________________ _______________________________
Date CHARLES M. JOHNSTON
THE FINANCE COMPANY
______________________________ By_____________________________
Date
TFC ENTERPRISES, INC.
______________________________ By_____________________________
Date
I am aware that I have the right to consider this Severance Agreement, Waiver
and Release of Claims for twenty-one (21) days before making my decision. I
have considered this right and choose to waive it as indicated by my signature
below.
______________________________ _______________________________
Date CHARLES M. JOHNSTON
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TFC
ENTERPRISES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,929
<SECURITIES> 0
<RECEIVABLES> 165,476
<ALLOWANCES> 26,394
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,306
<DEPRECIATION> (3,135)
<TOTAL-ASSETS> 172,048
<CURRENT-LIABILITIES> 135,553
<BONDS> 129,106
0
0
<COMMON> 49
<OTHER-SE> 36,446
<TOTAL-LIABILITY-AND-EQUITY> 172,048
<SALES> 31,707
<TOTAL-REVENUES> 33,090
<CGS> 0
<TOTAL-COSTS> 20,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,500
<INTEREST-EXPENSE> 10,440
<INCOME-PRETAX> (497)
<INCOME-TAX> 43
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (540)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
